Text: Rural Areas Lag Behind Cities in Gaining Broadband Access

04 May 2000

Rural Areas Lag Behind Cities in Gaining Broadband Access

Washington, D.C -- Rural America lags well behind urban America in its access to broadband technologies that allow faster connections to the Internet and greater data capacity, according to an April report compiled by two U.S. government agencies.

"Advanced Telecommunications in Rural America: The Challenge of Bringing Broadband Service to All Americans" finds that only 5 percent of towns with populations of 10,000 or fewer have high-speed cable modem access while 65 percent of cities with populations of 250,000 or greater have these services.

The high cost of deploying the more sophisticated service is the main obstacle, according to the report issued jointly by the U.S. Department of Commerce and the U.S. Department of Agriculture. New, less expensive technologies might help boost rural access to broadband, the report finds, along with continued government policies that support competition.

The report underscores the high level of Internet use in the United States -- an estimated 100 million people -- and attributes that usage in part to "the wisdom of public policies that encourage private sector investment, competition and technological innovation."

In order to allow rural Americans the opportunity to participate in the Information Age, the report makes a number of policy recommendations. They include continued government investment in loan and grant programs to expand Internet availability for low-income families, educational facilities and rural medical facilities. Further, the report recommends government policies that will stimulate private sector investment in rural broadband, and development of technologies that may hasten the growth of rural broadband.

Following are excerpts from the report:

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Advanced Telecommunications in Rural America:
The Challenge of Bringing Broadband Service to All Americans

U.S. Department of Commerce:
National Telecommunications and Information Administration
U.S. Department of Agriculture:
Rural Development & Rural Utilities Service
April, 2000

EXECUTIVE SUMMARY

"Advanced Telecommunications in Rural America" is a response by the National Telecommunications and Information Administration (NTIA) and the Rural Utilities Service (RUS) to a request by ten U.S. Senators on the status of broadband deployment in rural versus non-rural areas in the United States. This report also responds to a call by President Clinton and Vice President Gore to bridge the digital divide and create digital opportunities for more Americans. The rate of deployment of broadband services will be key to the future economic growth of every region, particularly in rural areas that can benefit from high-speed connections to urban and world markets.

This report finds that rural areas are currently lagging far behind urban areas in broadband availability. Deployment in rural towns (populations of fewer than 2,500) is more likely to occur than in remote areas outside of towns. These latter areas present a special challenge for broadband deployment.

Only two technologies, cable modem and digital subscriber line (DSL), are being deployed at a high rate, but the deployment is occurring primarily in urban markets. Broadband over cable, which provides most broadband service, has been deployed in large cities, suburban areas, and towns. One survey found that, while less than five percent of towns of 10,000 or less have cable modem service, more than 65 percent of all cities with populations over 250,000 have such service.

DSL technology also has been deployed primarily in urban areas. The Regional Bell Operating Companies (RBOCs) are providing DSL service primarily in cities with populations above 25,000 according to public RBOC data. While more than 56 percent of all cities with populations exceeding 100,000 had DSL available, less than five percent of cities with populations less than 10,000 had such service. Deployment of both cable modems and DSL service in remote rural areas is far lower.

The primary reason for the slower deployment rate in rural areas is economic. For wireline construction, the cost to serve a customer increases the greater the distance among customers. Broadband service over cable and DSL is also limited by technical problems incurred with distance and service to a smaller number of customers. Both technologies, however, promise to serve certain portions of rural areas. Cable operators promise to serve smaller rural towns, and smaller, independent telecommunications companies and competitive providers may soon be able to offer DSL to remote rural customers on a broader scale.

Advanced services in rural areas are likely also to be provided through new technologies, which are still in the early stages of deployment or are in a testing and trial phase. Satellite broadband service has particular potential for rural areas as the geographic location of the customer has virtually no effect on the cost of providing service. Several broadband satellite services are planned. Their actual deployment remains uncertain, especially in light of the recent entry into Chapter 11 bankruptcy of two satellite service companies.

Wireless broadband services are also planned for rural areas. More immediately, multipoint-multichannel distribution system (and potentially local-multipoint distribution system) fixed service capabilities may provide a solution for some rural areas. In as little as five years, third generation mobile wireless services providing data rates as high as two megabits/second may be operational.

Policymakers should promote competition, where possible. Using the pro-competitive provisions of the Telecommunications Act, some competitive local exchange carriers have deployed advanced services in rural areas of the country. Some wireless carriers have also indicated an interest in providing voice and high rate data, especially if universal service policies can be reformed.

Competition leads to lower prices, more customer choice, rapid technological advances, and faster deployment of new services. Given unique challenges faced by rural Americans, however, other government policies must be considered as well.

In order to support advanced services in rural areas, NTIA and RUS recommend a number of actions. We recommend the continued support and expansion of those government programs, such as the E-rate program, that ensure access to new technologies including broadband services. We also urge the Federal Communications Commission to consider a definition of universal service and new funding mechanisms to ensure that residents in rural areas have access to telecommunications and information services comparable to those available to residents of urban areas.

Support for alternative technologies will also be crucial to the deployment of advanced services in rural America. The Administration is committed to increasing investment in research and development to promote the next generation of broadband technologies. NTIA and RUS will also collect and disseminate "promising practices" that can promote private sector investment in rural broadband services.

RECOMMENDATIONS

In recent years, the United States has emerged as a leader in the Information Revolution. By some estimates, more than 100 million Americans have access to the Internet. Private sector investment in new competitive telecommunications companies has skyrocketed, and many of these companies are providing broadband telecommunications services and high-speed Internet access. Several million households have now subscribed to broadband Internet services, and that number continues to grow rapidly. Researchers are now developing networking equipment that will transmit over one trillion bits of information per second on a single strand of fiber, which will provide the infrastructure for applications that we can only dream of today.

America's success shows the wisdom of public policies that encourage private sector investment, competition, and technological innovation. But the government also has a special obligation to ensure that all Americans, including Americans living in rural communities, have the opportunity to be full participants in the Information Age. NTIA and RUS recommend the following steps be taken to expand access to broadband networks in rural America:

1. Increase support for programs that will expand broadband infrastructure and innovative applications of information and communications technologies in rural America.

This year, President Clinton and Vice President Gore have proposed new programs and increases in several existing programs that will help expand access to information technology and broadband telecommunications services for rural communities, including:

2. Adopt an evolving definition of "universal service" that will support advanced services in all regions of the nation.

The Telecommunications Act of 1996 states that "access to advanced telecommunications and information services should be provided in all regions of the Nation," and that customers in rural and high-cost areas should have access to advanced services at rates that are "reasonably comparable" to rates in urban areas. Under the Act, the Federal-State Joint Board on Universal Service and the Federal Communications Commission are charged with updating the definition of universal service to reflect the evolving nature of telecommunications services.

In the context of current supported services, NTIA and RUS commend the Commission's reexamination of the definition of voice grade access.120 Because voice grade service in rural areas is the primary path to the Internet, and is likely to remain so in the near term, it is especially important that universal service promote voice service that is comparable both in bandwidth and data rate to that available to the vast majority of Americans. For that reason, the Administration has supported both a voice grade bandwidth of 300 to 3,400 Hz and a data rate of at least 28.8 kilobits/second.

In light of the rapid changes in telecommunications services, NTIA and RUS urge that, during the next periodic review of the definition of supported services, the Federal-State Joint Board and the Commission make it a priority to adopt a definition that will advance the widespread and timely deployment of advanced services to all regions of the country.

3. Consider universal service funding mechanisms to fulfill the Act's mandate.

The Telecommunications Act of 1996 requires the FCC to base policies of universal service on the principle that consumers in rural areas should have access to advanced services that are reasonably comparable to services in urban areas, and that there should be specific, predictable and sufficient support mechanisms to advance universal service. NTIA and RUS recommend that the Commission make it a priority to fashion a comprehensive high-cost program, by identifying all necessary support mechanisms, to achieve the statutory goal established four years ago. Pending its ultimate decision on high-cost reform, the Commission should also consider measures that eliminate barriers to infrastructure investment. Among other things, the Commission should consider the need to adjust the existing cap on the universal service fund, particularly with respect to exchanges sold to a rural carrier from a non-rural carrier. Further, attention should be given to the needs of unserved areas, especially tribal communities.

4. Reform RUS lending policies to stimulate private sector investment in broadband services.

Under current regulations, RUS can lend to service providers only if, at a minimum, they meet the "basic local exchange telephone service needs of rural areas," i.e., provide wireline voice service. This prevents RUS from lending to providers that want to offer, for example, advanced telecommunications services without offering voice. Given Administration and Congressional interest in promoting the availability of broadband, RUS is proposing regulatory reforms to change these policies. This would allow RUS to use more of its $670 million in lending authority for rural telecommunications to encourage private sector investment in rural broadband services. RUS has already proposed a rule that will allow financing of mobile telecommunications providers who do not offer wireline voice service in their wireless area.

5. Ensure continued support for the E-rate.

The E-rate provides up to $2.25 billion in discounts to connect schools and libraries to the Internet. In certain cases, the E-rate program has brought broadband connections to rural areas and small non-rural towns and catalyzed market demand for those services. Continued support and funding for this program is particularly important for rural communities, which often face higher prices for advanced telecommunications services.

6. Publicize recent changes in rural health care discount program.

In 1999, the FCC adopted reforms in the rural health care discount program that make it easier for rural health care providers to purchase advanced telecommunications services for telemedicine and other health care applications. NTIA and RUS will publicize these changes so that more rural health care providers are aware of these improvements to the program.

7. Collect and disseminate "promising practices" for accelerating private sector investment in rural broadband services.

Communities around the country are experimenting with new models and new forms of public-private partnerships to promote private sector investment in advanced telecommunications services.

Programs, such as the "Berkshire Connect" initiative to aggregate demand in rural areas, are helping attract the private sector investment needed to provide advanced services. NTIA and RUS are committed to collecting and disseminating these kinds of promising practices, using mechanisms such as the "Digital Divide" web site (www.digitaldivide.gov).

8. Increase research to discover "last mile" solutions for rural America.

The Administration has proposed significant increases in federal funding for information and communications research and development (R&D), an initiative known as "Information Technology for the Twenty-First Century."

This initiative follows the recommendations of the President's Information Technology Advisory Committee (PITAC), which concluded that industry was unlikely to make investments in long-term, high-risk research. The recommendations of the PITAC enjoy strong bipartisan support, and legislation that would authorize much of the Administration's initiative (Networking and Information Technology Research and Development Act) recently passed the House.

As part of this initiative, the Administration is committed to increasing investment in R&D to address the unique "last mile" challenges of rural America. As noted in this report, the current generation of broadband technologies (satellite, wireline, fixed and mobile wireless) have shortcomings that can limit their deployment in rural areas. Agencies such as NTIA and the National Science Foundation (NSF) will increase their support of research that could result in next generation broadband technologies for rural America. The Administration has called for a budget increase for NTIA's Institute for Telecommunications Sciences to provide broadband technology research, standards development, and policy support vital to the successful commercialization and widespread deployment of broadband capabilities, particularly in rural and disadvantaged areas. Since NSF supports university-based research, this initiative will also increase the supply of undergraduate and graduate students in technical fields with insights into the challenges of providing broadband telecommunications to rural areas.

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