Broadband internet is often inaccessible or unaffordable in rural America. Further government subsidies for rural broadband internet expansion and open-access cable mandates are crucial to promoting economic development in rural America.
The explosive spread of the Internet and its ubiquity has no precedent in human history. Yet, broadband internet access is not universal in the United States, especially in rural areas.
2020 estimates by the Federal Communications Commission (FCC) indicate that while only about 5 or 6% of urban residents do not have broadband internet access, at least 22% of rural Americans lack broadband, if not higher. Those rural Americans with broadband often pay higher prices. In general, this rural-urban divide is due to the lower profitability and higher costs of creating broadband infrastructure in less densely populated rural areas.
Broadband internet access is crucial for full access to economic life and economic development. Empirical evidence suggests that increased broadband adoption in rural areas can cause economic benefits such as increased employment, economic growth, entrepreneurship and educational opportunities. Furthermore, some evidence indicates that rising rates of remote work, which requires broadband internet access, raise local incomes.
Considering long–term trends of rural population decline, the economic development broadband internet can provide will be an important tool in maintaining the viability of rural American communities. The COVID-19 pandemic laid bare the need for broadband internet access, as millions of Americans without it found themselves unable to fully participate in work and education in a suddenly totally digitized world.
Expansion of broadband into rural areas requires government subsidies to make it economically feasible for internet service providers without high prices for rural internet users. Government subsidies for rural broadband have been in place for some years and have made remarkable strides in closing the urban-rural digital divide.
The goal of universal service, which is universal access to broadband internet, was enshrined in federal law in the 1996 Telecommunications Act. The FCC estimated in 2018 that $80 billion would be required to achieve universal service and strong progress is being made towards that goal, as $42.25 billion in federal funds was appropriated for the Broadband Equity, Access, and Deployment (BEAD) Program in 2021.
However, access to broadband alone is not enough. Empirical studies differentiating between broadband access and broadband adoption have also found that broadband adoption is a more important predictor of economic benefits.
Artificially high prices from the unique structure of the internet market as a natural monopoly is an important factor in why rural residents may find broadband unaffordable, even if available. Internet service is a natural monopoly, which is a market where high entry costs mean that the market naturally tends towards a monopoly. Because of the exorbitant costs of establishing infrastructure, internet service providers (ISPs) face much greater difficulties entering into new markets and competing against established firms than new firms in other industries. The resulting lack of choice for consumers allows ISPs to inflate prices.
Open access cable could substantially lower prices and reduce barriers to broadband cable adoption by enabling greater ISP competition. Open access cable is the idea that broadband internet cable networks should be open to all ISPs to use, rather than a single ISP controlling certain cables, and preventing other ISPs from offering alternatives to consumers served by those cables.
For an analogy, imagine if delivery companies like UPS and FedEx built their own roads and only allowed their own delivery services to use those roads. Delivery prices would rise as customers would have no freedom of choice between services. Instead, because roads are managed separately from delivery companies, roads are a common infrastructure network that any delivery company can use to compete with their rivals and drive down prices for customers. Under an open access framework, the business of cable management and the business of providing internet service is separated, so ISPs cannot use control of cables as a shield against competition. Open access cable will be an important step towards lowering internet prices and thereby opening up new economic possibilities for rural America.
Moving towards open access networks and continuing government subsidies for rural broadband should be government priorities. As access to broadband internet becomes increasingly important for full economic development and access to economic opportunities, government subsidies targeted toward the expansion of open-access broadband networks in rural areas are the key to spreading the prosperity of high-speed internet to the entire country.
(The opinions expressed in this article are those of the individual author.)
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