Wiring Rural America: Which Technology Is Best?

Government agencies are investigating broadband technologies and the true cost of bringing high-speed Internet to the rural U.S.

By Rachael King

SPECIAL REPORT

CEO Guide to Broadband Stimulus

• Telecom Companies Scramble for Funding
• Wiring Rural America: Which Technology Is Best?
• Slide Show: World's Fastest Broadband
• Podcast: Rural Broadband
• To Spread Broadband, $7.2 Billion Isn't Enough

The idea for this story came from BW reader David Hanna, 2009 president of the Chicago Association of REALTORS and managing partner of Prudential SourceOne Realty in Chicago

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Reaching the most remote rural customers with high-speed Internet access can be prohibitively expensive. Consider the case of Hill Country Telephone Cooperative in Ingram, Tex. The small provider is undertaking a $57 million effort to install fiber and bring broadband service to a substantial part of its market, which covers 2,900 square miles, roughly twice the size of Rhode Island. Yet even with this effort, the provider will not be able to serve 543 remote households, about 5% of its market area, because it's simply too expensive. To do so would involve laying 522 miles of fiber optic cable at a cost of $20 million—an average cost of $37,000 per subscriber, according to Delbert Wilson, general manager of the provider, who testified in July before the House Agriculture Committee.

Government agencies are now considering the costs of providing high-speed Internet access to rural areas and which technologies might be the most cost-effective. The economic stimulus legislation has set aside $7.2 billion in grants and loans to encourage the installation of broadband networks, especially in rural regions that currently lack access. The applications for the first round of funding are due on Aug. 14. The Agriculture Dept.'s Rural Utilities Service and the Commerce Dept.'s National Telecommunications Information Administration will be vetting those submissions.

Service providers are expected to propose a range of schemes to deliver high-speed Internet through both existing infrastructure—such as telephone lines, cable-TV networks, or electric power lines—and through the installation of new fiber-optic cables going directly to residences, new wireless networks, or by using satellites. While the Federal Communications Commission has remained neutral on which technology is best for rural markets, it did say in a May report on rural broadband that it needed to be cost-effective to install, provide consistent performance at an affordable price, and be able to upgrade to higher speeds over time.

Going the Wireless Route

RidgeviewTel, a broadband service provider based in Longmont, Colo., has chosen wireless technologies, including so-called Wi-Fi and WiMax, to serve 54 rural markets in three states including Colorado, Illinois, and New York. One of the problems in rural markets is that existing broadband services are too expensive for the consumers there, says RidgeviewTel CEO Vince Jordan. RidgeviewTel offers service starting at $29.95 per month for 512 kilobits per second and $59.95 for 1 megabit per second. An antenna is installed on the roof of the house, directed at one of RidgeviewTel's towers, which receives the service and transmits that through a wire to the resident's computer or router. Jordan says his company has received an enthusiastic response to the offering.

Yet wireless technologies do pose limitations. Some wireless technologies can be easily blocked by mountains or forests and may not work well in some parts of the country, the FCC notes. And while wireless is often well suited for Internet access, it is not a great match for certain applications such as video services, says Teresa Mastrangelo, principal analyst at the Windsor Oaks Group, a market research and consulting firm specializing in telecommunications. "The bandwidth and the quality of the service can't be guaranteed," she says.

Mastrangelo says the agencies are giving applicants higher scores for technologies with faster speeds, but they also want services that can be installed relatively quickly. A good guide for the future, she says, is to look at the past loans the Rural Utilities Service has issued to service providers to build broadband networks.

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