Ryan Radia

Debunking Rural Broadband Myths

The rural broadband debate has been in the news a lot lately. Yesterday, DSL Reports ran a story sharply criticizing a report released by the US Internet Industry Association (an ISP lobbyist firm). But as Ars pointed out, the report actually offers some facts revealing that broadband availability in the U.S. isn’t nearly as bad some have suggested.

79 % of homes with a phone line can now get DSL, and 96 % of homes with cable can get broadband. Considering just about every home has a phone line, and most people have cable, these numbers suggest the main reason for the lack of rural broadband users isn’t the lack of availability, but the lack of adoption. Of course, rural areas have slower speeds and higher prices than urban areas. This makes sense, because building out a network in low-density areas costs more per subscriber versus urban areas, where a single apartment complex can house hundreds of users.

Still, groups argue that massive government subsidies are needed to promote broadband deployment in rural areas. ConnectedNation (a Washington-based non-profit) released a report a couple weeks ago, “The Economic Impact of Stimulating Broadband Nationally”, which concluded that accelerating broadband could pump $134 billion into the U.S. economy.


According to the report, high-speed web access is massively beneficial to subscribers. The report, which obtained most of its data from surveys of broadband subscribers, found that the average broadband user reports savings of $217 a year “as a direct result of becoming healthier through obtaining healthcare information online.” On top of this, the average user reports driving 102 fewer miles per month on account of shopping online.

These figures strike me as quite unrealistic. No surprises there—economists find that when responding to surveys, consumers notoriously overestimate their true reservation price. To be sure, web access can reduce the frequency of trips to the doctor or the store. But annual savings of $217 in medical costs, and 102 fewer miles driven per month, are inconceivable to me—and I visit WebMD and shop online all the time.

If consumers value broadband so much, why are so few of them willing to pay the premium for living in rural areas? You’d think that if signing up for broadband lets people cut back on mileage, save time, and reduce medical bills, that even at $75 or $100 a month broadband should be a real bargain for consumers living in the countryside. Yet many rural residents still decide not to get broadband.

In reality, subscribers probably vastly overestimate the value of high-speed Internet access. Actions speak louder than words, and actual broadband statistics suggest that people living in the countryside value broadband a lot more when somebody else is paying for it.

March 7, 2008 | Comments |

Viewing 3 Comments

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    Those numbers aren't very compelling to me. Clearly phone penetration is much better than cable (incidentally, why might this be? could it be... big government meddling?). The number of homes that can get cable but not a phone line is almost certainly vanishingly small, making the cable number meaningless.

    And 80% doesn't strike me as a particularly great number for penetration -- are we really ready to leave 1 in 5 citizens out of the broadband revolution that's now, what, a decade old? When you consider that those first four quintiles were doubtless from denser areas, allowing for investments to pay off in large numbers of connected customers, it's clear that we still have a lot of work ahead of us.
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    Tom, your post says it all. I've been after my local wireless ISP to mesh me in for over 4 years. He wants me to round up another 19 subscribers to make it worth his while. His primary tower is invisible to me. Qwest representatives actually laugh when I ask about DSL. I live up a gulch, in an electronic black hole -- no radio, TV or cell coverage. MCI cable goes by our feed road about 7 miles away. My only connection out is an analog phone line dialup that often gets up to 26kbps. Statistics aren't the way to describe the problem; 100% of folks who ate green beans prior to 1918 are dead. Satellite hookups average $1800 to $2000 for the first year. Nobody in the area is even looking at BPL or other technologies. The most frequent reason given is insufficient subscribers per mile.
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    Rik, I see where you're coming from. Fortunately, I've never been completely without broadband choices, but I do know how miserable it is to be stuck with subpar service.

    Yet I must ask, why do you live in an "electronic black hole" if you care about high speed internet? The vast majority of people aren't in the same boat as you. Obviously that's not comforting given your situation, but you could to any of the places where 79% of Americans live and have at least some residential broadband availability. Presumably, in deciding where to live, you considered a variety of factors, including broadband availability. (I know it can be tough to figure out for sure whether you can get DSL without actually scheduling an install. It grinds my gears.)

    Maybe evolving wireless technologies will be able to give you a signal someday. As more spectrum is auctioned off, frequencies with better propagation characteristics might be utilized for broadband internet. And satellite should be an option as well; I don't think your numbers are right about the cost. WildBlue is just $249 startup and $50 to $90 a month depending on speed. Not cheap, but 512kpbs for $850 in the first year isn't that bad for a rural area.
 

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