The Cost of High-Speed Internet in Rural America

The Cost of High-Speed Internet in Rural America
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The current administration has taken the idea of providing high-speed internet service to all Americans to a new level with a number of programs that extend that coverage to rural locations that are typically too expensive for carriers to connect.  One such program is the Telecommunications Infrastructure Loan & Loan Guarantee Program administered by the US Department of Agriculture.  This program funds the “Reconnect” broadband deployment program[1], which received $167m in August of last year, a 2nd round in July of this year for $401m, and the most recent funding this month for $502m.  The capital, which is comprised of grants and/or loans, is made to applicants (surprisingly only 22 states were represented in the most recent funding) through local providers, which range from local telephone cooperatives to rural carriers.
We looked at the most recent funding details to get some idea of for whom these services were being provided and the cost.  On an overall basis the $501m funding was made up of $360.4m in grants and $141.4m in loans to 32 entities in 22 states, with the grants ranging from $884 thousand to $33.0m and the loans ranging from $2.8m to $25.3m.  The individual entity funding was broken down into the number of individual customers, the number of businesses, the number of schools, and the number of farms (remember, this is rural America) being served by the funding, which is used to lay fiber to that customer base.  The total rural population being covered by the $501m includes 89,394 individual customers, 2,428 businesses, 156 schools, and 4,784 farms.  With the typical cost/entity of more populated areas running between $900 and $1400, one can see why grants and loans are necessary in all of the cases shown in the table below.
When totaled, using each entity as a single customer, the cost to run that fiber to each customer is $5,186 and at a US average of $56/month for typical high-speed broadband service, the break-even period, if the companies had financed the expansion themselves, would have averaged 93 months or 7 years and 8 months.  That doesn’t really tell the story however, as the local grants and loans vary considerably as to payback period, with the longest being 343 years and 8 months, where the Big Bend Telephone Co.(Alpine, TX) was granted $24.02m to cover 98 individual customers, 1 business, and 5 farms, and the shortest being an $11.7m grant to the Dekalb Telephone Company (Alexandria, TN) that will serve 6,056 individuals, 74 businesses, 5 schools, and 374 farms, with a payback period of 2 years and 8 months.
While these projects might seem a waste of taxpayer money they are essential to those who fall outside of areas where a reasonable return can be made on FTTH investments.  According to the FCC 22.3% of Americans in rural areas (27.7% on Tribal lands) lack coverage from fixed broadband of a least 25Mbps, as compared to only 1.5% in urban areas.  The goal is to provide a number of services and opportunities to the rural community, with a focus on healthcare, particularly opioid addiction, digital connectivity for rural schools and students, and improved operations for farms, including real-time farm management and connection to international markets to manage production.  All in, the cost of a~$500m program is .0086% of the total federal budget for 2022, and until wireless broadband services become viable for rural customers there is little alternative but to offer fiber connectivity to those that are still working with the limitations of aging copper wire installations or none at all.


[1] Created by Congress under the Consolidated Appropriations Act of 2018, which funded $600m.  $500m was added in 2019, $550m in 2020, and $635m in 2021.