Myth #8: People in rural areas should pay the same for broadband as do people in cities.

Myth

There should be one price for broadband for everyone.

 

Where this notion comes from

It’s easy to compare prices in different locations using the internet.  People like to think of broadband as a commodity and assume that they should simply have the lowest price without any regard the characteristics of their location. The inputs of a modern telecom infrastructure are highly complex as are the economics of broadband deployment.[1]

Data

The United State Department of Agriculture published a report “Broadband Internet’s Value for Rural America” in 2009. It provides a helpful summary of the economics of broadband deployment in rural areas.  Naturally the USDA is interested in the agricultural sector staying competitive. “The more multifaceted the farm business, the more the farm used the Internet,” notes the report.  They also look at other regions which are not farms.

In summary the features of rural broadband deployment include

  • Rural areas are less populous than urban areas. There are fewer people to spread the costs of network equipment.
  • Rural areas also have fewer businesses and government operations. In practice, these entities subsidize network development for consumers by purchasing larger amounts of network service. Corporate entitites may also pay higher rates for certain kinds of network service.
  • Rural broadband customers have higher maintenance costs than urban customers, as the infrastructure is spread over longer distances.

Analysis

There are trade offs to living in the city versus a rural area.  I live in the city.  I sold my car.  I walk or bicycle to my destination.  If the weather is inclement, I take a public transportation or a taxi. Living in the city, I have a higher cost of housing, but I have lowered my costs in other ways.  I save time not commuting, and I don’t spend money on gasoline or car upkeep. I also take advantage of broadband internet at a competitive price.

Many people chose to live in rural areas. They don’t like city life. They find the cost of living significantly lower.  Rural areas have less build out of internet infrastructure, but also fewer job opportunities, shopping malls, restaurants, cultural attractions, sporting events and other things.  In any case, people who move to the country certainly save more than enough on housing to pay for any increase in monthly broadband fees.

But there is one thing for which 99% of Americans have access, and it has an egalitarian price:  satellite broadband.  Prices start at $40-$50/month for 10-15 Mbps download.  There is a $10/month equipment fee or you can buy the equipment outright.

Satellite broadband is more than adequate for web browsing and email, what people need to look for jobs as well as housing.[2]  It also works for video streaming.  In fact the only real downside is that it gives latency on video games.

I can accept that my taxes go to education, both in the cities and in rural areas. Indeed, I am willing to invest even more for education of the poor in rural areas.  It will help them increase their adoption of broadband.  But as for my taxes to deploy wire line infrastructure so that people in rural areas gets to play massive multiplayer online games–not with my money, thank you very much.

Reality

The price of wire line broadband varies with the economics of deployment and the demographics in America.  Satellite broadband is available to 99% of Americans.


[1] Deployment is how a network provider builds and delivers infrastructure and services to end users. Adoption is how end users consume network services. They may require purchasing of equipment such as computers, laptops, smartphone or tablets, as well as a subscription. This also requires that end users have a minimum level of income, education, literacy and interest to subscribe.

[2] One’s experience of an broadband internet will be impacted by the kinds and number of devices a person uses, how those devices are configured, how many concurrent users on the same subscription, as well as the type of websites and applications that a person accesses. Finally the packages one buys needs to be adequate for one’s needs.