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Written by Ravi Jesupaul
on 05 Jan 2017

Network upgrades to expand high-speed Internet to hard-to-reach rural areas is a considerable challenge facing the telecom industry, particularly in the U.S., where the population is spread between coasts more than 2,500 miles apart. Government incentives to upgrade network infrastructure are an essential part of ensuring that all Americans get access to the communications infrastructure they need.

Internet access is fast becoming the infrastructure challenge of the 21st century. Much like access to telephone services at the beginning of the 20th century, being able to get online has transitioned quickly from a nice-to-have service to a must-have capability. But expanding network infrastructure to rural areas in a country with the geographic size of America is a monumental task.

Millions of Americans still have limited access to broadband-and many have no access at all. The challenge is that there is no business case for expanding, maintaining, and upgrading networks in rural areas, where the service often has to traverse great distances across difficult terrain to reach a sparse population. To create a business case that justifies the necessary expensive investment, the government must provide subsidies to the telecoms industry.

 

Americans Need Broadband

Next year, phase II of the Federal Communications Commission's (FCC) Connect America Fund (CAF) will start. The CAF is part of the FCC's National Broadband Plan to improve Internet access across the U.S.

The goals of that plan, according to the FCC, includes positioning the U.S. as a global leader in mobile innovation, enabling 100 million U.S. homes to access affordable, reliable, and fast download speeds. It will also deploy a nationwide wireless public safety network and provide a clean energy economy, where every American can use broadband to track and manage their real-time energy consumption.

But the implementation of infrastructure to support these goals presents some challenges, including the logistical challenge of servicing a geographical region the size of America, with a relatively low population density, at a reasonable cost.

Some operators are considering how fixed wireless technology can provide a cost-effective solution. AT&T's Fixed Wireless Internet, for example, is using separate LTE base stations, tower antennas, and spectrum to avoid interference with its mobility services.

 

CAF Is Good News for Carriers

The CAF is aimed explicitly at the broadband elements of that goal and particularly towards connecting rural Americans to affordable, high-speed Internet. The program will give around $1.7 billion annually to carriers for six years in exchange for their commitment to expanding broadband service to rural areas that are poorly served today.

Most of the nation's seven largest price cap carriers are already signed up, although they were able to accept or decline funding on a state-by-state basis. The FCC hopes to cover any shortfall in service by offering aid to local telephone companies as well, and addressing any areas that remain unserved when the program completes in 2020.

For telecoms, the fund is a significant windfall. Many carriers stand to add large numbers of customers, increasing their revenue, without having to invest much of their own money into the rollout of networks in rural areas. According to a research note from Bernstein analysts, carriers including AT&T, Verizon, CenturyLink, Frontier, and Windstream could see revenues climb by more than $700 million annually by 2020 as a result of the CAF program, without any major increases to their CAPEX.

Regardless of the cost implications to governments, addressing the digital divide and staying at the cutting edge of connectivity has become of paramount importance to countries across the world. Individually, countries in Europe are all working on their rural broadband challenges, while the European Union also has rolling targets, policy measures, and financial instruments to boost connectivity.

Access to high-speed Internet is not just critical for innovation and entrepreneurship; it has become a fundamental part of doing business and partaking in human society. It is how a significant number of people communicate, pay bills, and even access government, education, and health services. And subsidies like the Connect America Fund are an essential part of providing access to all.

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