February 2018 Vol. 73 No. 2


Rural Broadband Faces Reductions in Federal Support

News that one of the major telecommunication carriers or cable companies is planning to bring a fiber optic network to a new city or neighborhood always attracts the attention of cable customers, especially those who are heavy internet users and stream video. The prospect of high-speed fiber internet connected directly to their homes is very attractive.

However, actually being connected to fiber may be a long time coming, and even after a new fiber network is in place, it may be months or years before direct fiber-to-the-home (FTTH) is widely available throughout a city.

While waiting for fiber to arrive, frustrated metropolitan area dwellers often are surprised to learn that family and friends living in the country already have state-of-the-art fiber service, comparable to or better than that available in metropolitan areas. Federal government support systems have enabled small rural telephone companies, small town governments and others to deploy broadband infrastructure, and provide robust and affordable broadband services to consumers and businesses in rural America. Big service providers, who also utilize federal support systems, don’t always provide the same robust service to rural areas in their service territories because there are too few potential customers to justify the investment to build networks there.


Yet, rural broadband has been expanding at a steady pace.

Earlier this year, the NTCA–The Rural Broadband Association released results of its most recent annual Broadband/Internet Availability survey. Based on 2016 data,100 percent of survey respondents were offering broadband services to some or all of its customers, compared to 58 percent of respondents in the 2000 survey who, at that time, offered the then lower-definition broadband services.

However, rural broadband faces critical challenges. Deploying broadband networks to get service in place initially is just part of the equation. Once deployed, these networks require maintenance by way of repairs from natural disasters, and upgrading of electronics to keep pace with evolving technology and consumer demand for faster speeds.

Another NTCA report, a one-time Universal Service Fund (USF) Budget Control Impact Survey, came in the wake of an announcement last summer that the average reduction in federal USF support for small, community-based broadband providers due to budget control, grew from a 4.5 percent reduction to 9.1 percent, to 12.3 percent over the previous nine months.

Overall, NTCA says this budget control is expected to reduce USF support for small rural network operators and the millions of rural consumers they serve by approximately $173 million over 12 months starting July 1, 2017. This USF support would have gone to recover costs that these small businesses incur in deploying networks and delivering services in rural areas.

Harmful budget shortfalls

These budget shortfalls harm rural communities in several ways. According to NTCA CEO Shirley Bloomfield, “The support cuts translate directly into higher broadband prices for rural consumers, and they also put at risk the sustainability of investments already made to serve small rural communities. In addition, the support reductions undermine future efforts to deploy broadband in unserved areas, as carriers cut back on construction plans – both to help pay for investments already made and because of the uncertainty that the budget control will just keep getting worse and worse.”

Respondents to the NTCA survey were expressing concern prior to the most recent USF budget adjustment. Summarizing information contained in the survey, an NTCA press release said nearly 25 percent of respondents were able to estimate impacts of the recently increased budget control on their investments and operations.

“Nearly two-thirds of responding NTCA members indicate that they intend to scale back network investments over the next 12 months in the face of a budget control that has increased several times and will now reduce their USF support by $536,000, on average, over the next year. This reduction in USF support causes a larger effect on broadband investment too.

“While many continue to evaluate specific impacts of the recently increased 12.3-percent budget control factor, those respondents that provided financial impact estimates indicated they would reduce their broadband investments over the next 12 months by $943,000, on average, due to the budget control. These estimates don’t encompass the continued adverse effects that are expected on network investment in subsequent years, until the USF support mechanisms are sufficiently funded.

“The total estimated investment impact for respondents is over $44 million in delayed or cancelled broadband investments over the next 12 months. Extrapolated across NTCA members subject to the budget control, this could equate to as much as $300 million in delayed or cancelled broadband investments.

“Respondents estimate that the delayed and declined investments will result in 34 percent fewer of their customers receiving broadband at speeds of 10 to 25 Mbps than would otherwise have been the case had the network builds proceeded.

“Respondents that could provide buildout impact estimates indicated that approximately 42,000 customer locations (or 850 customer locations per company, on average) would remain locked in at slower speeds due to the budget control.

“Extrapolated across NTCA members subject to the budget control could equate to as many as 275,000 adversely affected rural customer locations.

“Even in the wake of USF reforms intended to achieve reasonably comparable standalone broadband service rates for rural and urban consumers, the average respondent that is not currently offering standalone broadband estimates it would need to charge a customer $126 per month for such service due to the budget control – a rate that is more than twice the urban average.”

Positive info

Despite reductions in federal support and uncertainty about the future, the annual Broadband/Internet Availability survey contains positive information.

Forty-one percent of respondents’ broadband customers are served by FTTH, 36 percent via copper loops, 12 percent cable modem, 9 percent fiber-to-the node (FTTN), 1 percent licensed and unlicensed fixed wireless, and 0.2 percent by satellite.

Fifty-two percent of survey respondents currently deploying fiber, serve at least 50 percent of their customers with FTTH, while 24 percent serve 20 percent or less of their customers with fiber technology.

According to the NTCA survey report, “Eighty-two percent of survey respondents indicated they had a long-term fiber deployment strategy. Thirty-nine percent of those respondents with a fiber deployment strategy plan to offer fiber-to-the node to more than 75 percent of their customers by year-end 2019, while 66 percent plan to offer fiber to the home to at least 50 percent of their customers over the same time frame. An additional 31 percent have already completed fiber deployment to their customers.

Many of the new fiber networks are underground, but installation methods vary due to cost, geographic terrain and other factors. Methods of construction include trenching and static plowing in open areas, vibratory plowing and horizontal directional drilling in towns where it is important to limit surface damages.

Even though costs are a barrier to fiber deployment, they are considerably less than the cost to deploy the copper cable networks they are replacing. New construction materials and engineering techniques have helped reduce deployment costs in recent years. Ribbon fiber helps reduce both deployment and operational costs of fiber networks.

When determining the installation methods, both initial deployment costs and long-term operational costs are considered. In some areas, underground cable installed using cable plows is the most cost-effective method of construction. In other areas, especially where the utility pole infrastructure is suitable, aerial construction can be cost effective. New boring techniques have also made directional boring practical in a town environment and also minimizes impacts to traffic control and soil disturbance. Some companies are also using micro-trenching, where a small cut is made in the road or sidewalk and small (micro) conduits are placed in the trench, and strands of fiber are blown in later. Conduit is often placed during construction to minimize the cost of future upgrades.

Barrier to deployment

The survey concludes that deployment cost remains the most significant barrier to widespread deployment of fiber, followed by regulatory uncertainty, long loops, current regulatory rules, low customer demand, obtaining financing, fiber order fulfillment delays, and obtaining cost-effective equipment. Throughout the history of the survey, deployment cost has been respondents’ most significant concern.

“By law,” said Bloomfield, “Congress has called for a universal service mechanism that is sufficient and predictable. And in letters sent to the FCC, Congress has called for updates to universal service policies that will enable better, more affordable broadband for rural Americans.

“However, recent reforms have laid bare that an insufficient USF budget and an unpredictable budget control are chilling broadband investment and preventing rural consumers from obtaining access to reasonably priced services.

“The diagnosis of the problem is now unmistakable, and NTCA is eager to work with the FCC and Congress on a cure for the benefit of the millions of rural Americans who can’t afford broadband at these rates –and can’t afford for this system to fail.”

More Than Fast Internet

High-speed internet service to rural areas means much more to customers than fast connections and better television reception.

Rural broadband provides critically important broadband service to community anchor institutions. These small providers serve public service entities (such as police and fire), primary and secondary schools, public libraries, hospitals and medical clinics, and numerous other important anchor institutions. This makes significant contributions to the safety, health and overall well-being of their customers, helping facilitate the overall viability of rural America.

For example, broadband access makes possible telemedicine, enabling “face-to-face” consultations via the internet, and the exchange of medical records and information; connecting nursing homes to medical providers; and allowing elderly people to stay at home and have access to medical care.

Educational benefits include access to teaching programs for classrooms, and to information for students’ homework and research.

Internet access helps agricultural businesses be more efficient, and assists economic development in rural areas. With worldwide access to business partners and customers, small-town businesses can compete on a national and global level.

High-speed internet is essential to attract businesses to relocate to small, rural

Towns, where labor and living costs are lower than metropolitan areas, and rural-based companies can compete for business with larger, city-based companies.

Many rural broadband customers say their FTTH is comparable, even superior, to cable and internet services in big cities, and they generally have a positive attitude toward
local providers.

Rural broadband providers are “different,” not part of a huge corporation controlling local services from distant cities. Rural telephone companies and cooperatives are locally owned and operated, and a part of the community. They are economic partners with the community, and their employees are friends and neighbors who patronize local businesses. These factors foster a positive relationship among providers and their customers.

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