The Industry

A Brief History of Rural Broadband

Last week I lectured on the topic of digital redlining in Western North Carolina for a senior class at the University of North Carolina at Asheville. These students are tackling a senior project of developing an advocacy program to help find broadband solutions for our region. I realized when describing redlining that I was also describing how the history of rural telephony had contributed to the poor condition of rural broadband today. Following is a brief history of the key events that tell the story of why rural broadband in much of the country has fallen so far behind broadband in larger towns and cities.

Bell Builds to Cities. Within a few short years after the invention of the telephone in 1876, the well-funded American Bell telephone company, founded by Alexander Graham Bell and investors, had built telephone networks in all of the major cities in the country. Within a decade, they made it out to county seats like Asheville, here in Western North Carolina. American Bell had no interest in building to rural areas, and rural America was not offered the new telephone technology.

Expiration of the Bell Patent. In 1894 the Bell patent on the telephone expired, and telephone companies sprang up across the country. Most of these new companies were started in rural areas by farmers, businessmen, or groups of citizens that came together to bring telephone service. By 1927 there were over 6,000 local telephone companies.

Bell Becomes a Monopoly. American Bell became a monopoly in an extraordinary move where Theodore Vail asked the government to grant monopoly status to the company. This was done to fight off competitive telephone companies in cities. Regulating telephone companies was gradual as states accepted the idea and awarded franchise areas to telephone companies. A consequence of regulation was that small telephone companies also became regulated. The regulation trend culminated in the Telecommunications Act of 1934 that created the FCC.

Birth of Cooperatives. The Rural Electrification Administration, a New Deal agency, had been funding rural electric cooperatives since 1935. In 1949 the agency started making loans to create rural telephone cooperatives, and these companies filled in the remaining rural areas nobody else had built. By 1960 the U.S.was the envy of the world with a 99% landline telephone penetration.

The Growth of Long-Distance Calling. AT&T was created in 1885 to construct the long-line networks to connect cities. The first coast-to-coast call was made in 1915 between New York and San Francisco. Regulation led to low local telephone rates, and telephone companies made up for lost revenues with expensive long-distance rates. The downside of long-distance for rural America was that calls between rural areas and county seats all became long-distance. Coping with long-distance calling became a major concern for many rural families, and rural residents were at a disadvantage compared to city dwellers since they needed to use long-distance to communicate with basic services.

Massive Consolidation. Companies like General Telephone, Continental Telephone, and Citizens Telephone purchased many rural telcos. These companies were the precursors of big rural telcos like Frontier, CenturyTel, and Windstream.

Divestiture of the Bell Companies. In 1984, divestiture separated AT&T, the long-distance company, from the local Bell telcos, with the goal of introducing competition into long-distance. This worked spectacularly, and long-distance prices tumbled. The unfortunate consequence of lower long-distance rates was that the larger telcos saw lower profits in rural areas. Big telcos began to cut staff, close businesses offices, and generally neglect rural properties.

Local Competition and Deregulation. The Telecommunications Act of 1996 mandated local telephone competition. Over time, this led to the big telcos seeking and winning local deregulation, and as the big telcos were deregulated, the neglect of big telco rural properties accelerated.

The Rise of DSL Broadband. The first generation DSL that delivered 1 Mbps download got installed in most telcos. Rural speeds were not as fast as cities due to distance limitations on DSL. The technology improved rapidly in a few short years, and the DSL in towns was upgraded to faster speeds while rural properties mostly were not. When cities got DSL speeds up to 50 Mbps, rural area DSL stayed slow since the big telcos didn’t want to make rural investments.

Small Companies Did Much Better. The remaining smaller telcos and cooperatives did a great job during all of these industry transitions. They maintained copper wiring, upgraded DSL as needed, and eventually started upgrading in many places to rural fiber.

The Large Cellular Companies Shunned Rural America. Big cellular companies built close to major highways to capture roaming traffic, but rural cellular coverage rarely extended to where people live and work. It’s gotten better over a few decades, but rural cellular coverage maps are still largely fictional.

Summary. The poor state of rural broadband can be traced to the ways that the big telcos reacted to industry changes. Small telcos built rural networks, but large telcos gobbled them up over time. The big rural telcos then neglected rural properties in reaction to the changing economics from the deregulation of long-distance and local telephone service. Small telcos showed that it wasn’t necessary to abandon rural properties, but the big telcos stopped making investments in rural networks and for all practical purposes walked away from rural communities.

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