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Rural Broadband Programs and Community Anchor Institutions

Benton Foundation Blog | December 12, 2016

The SHLB Coalition developed Connecting Anchor Institutions: A Broadband Action Plan to provide ideas and actionable policy recommendations for government leaders at the federal, state, and local levels to address the broadband needs of anchor institutions. The ten policy papers highlight connectivity gaps and explain why broadband access is vital to communities nationwide. In the coming weeks, the Benton Foundation will be highlighting each of the Action Plan policy papers. The following is an excerpt of the second paper. In January, we’ll be looking at Partnerships and Broadband Adoption. To read the complete Broadband Action Plan, visit www.shlb.org/action-plan

Rural Broadband Programs and Community Anchor Institutions

Introduction

In thinly-populated rural and tribal areas, community anchor institutions (CAIs) can be vitally important to connecting residents to the rest of the world. Schools, libraries, health clinics, and many other anchor institutions rely upon high-capacity broadband to provide education, health, and information services to rural consumers. Unfortunately, because of the economic factors described below, anchor institutions in rural and tribal areas have an especially difficult time obtaining high-capacity broadband connections at affordable rates.

Ensuring every rural community has access to high-capacity Internet access through their anchor institutions will often require financial support and other government initiatives to stimulate deployment and promote competition. Connecting rural CAIs to high-capacity broadband can be a catalyst for further investment; when CAIs serve as the “anchor tenant” on a rural network, they improve the business case for community-wide network upgrades or further network expansion. When implementing programs designed to increase access to broadband service in rural areas, federal, state, and local efforts should give high priority to the broadband needs of rural community anchor institutions.

The Economics of Deploying High-Capacity Broadband Networks in Rural Areas

According to the Federal Communications Commission (FCC), Americans who live in rural areas are ten times more likely to be unserved than their urban counterparts.(1) Thirty-nine percent of rural Americans (23 million people) lack access to 25 Mbps broadband service (41 percent on Tribal lands), compared to only 4 percent of urban residents.

There are two reasons for this disparity between rural and urban areas. First, the cost of deploying broadband networks in rural areas is higher than in urban areas. Second, because of low population density in rural areas, the costs of deploying broadband in rural areas must be recovered from a smaller user base. As a result, the private sector business case for building high-speed network connections in many rural, sparsely-populated areas simply does not exist without governmental assistance.

Policy Approaches to Narrowing the Rural Broadband Gap for Anchor Institutions

In the absence of a private business model for broadband deployment,(2) public policies need to respond to the challenge of connecting anchor institutions in rural areas. Here are some examples of policies to promote rural broadband deployment to, and use by, anchor institutions in rural areas:

  • The FCC has been trying to address the growing broadband needs of rural health clinics for greater broadband access through its RHC program, but annual RHC funding is small (only $400 million per year, compared to about $4 billion per year for the E-rate program). The FCC created a new Healthcare Connect Fund (HCF) program in 2012 to supplement the traditional telecommunications program. The HCF was intended to drive fiber deployment to rural health clinics, but the HCF rules require applicants to provide 35 percent of the funding on their own, and the program’s restrictive rules on eligible health care providers and expenses have made it difficult for applicants. Disbursements from the RHC program have been consistently much lower than the $400 million allocated to the program each year.(3)
  • Some states have utilized joint purchasing and consortia arrangements to lower the costs of broadband connectivity. The University of Maine System structured a request for proposals in 2014-15 for connections to K-12 schools, libraries, state and local government offices, and research institutions in the state, setting a minimum target of 100 Mbps per location.(4) As a result, the average bandwidth in Maine schools increased from 187 Mbps to 515 Mbps with near-ubiquitous fiber access—all with no increase in overall cost.(5)
  • The E-rate program provides significant financial support for schools and libraries and additional annual funding was added to the program beginning in 2015. The program includes additional supplemental funding of 5-10 percent for some rural schools and libraries, but, oddly enough, there is no additional rural discount in the two largest and highest poverty categories.(6) The rural discount could be increased and expanded to include more schools and libraries, thereby reducing rural applicants’ match and incentivizing greater broadband investment in rural communities.
  • The 2014 E-rate changes also gave schools and libraries the option to self-construct their own broadband network, rather than purchasing “lit” service from an established broadband provider. Some rural school and libraries are considering this option in order to control their own destiny and save costs. The FCC received applications from over 500 applicants exploring dark fiber in 2016 – the first year dark fiber was eligible – and this option is expected to grow in future years.
  • To address the concern that there is too little competition to constrain prices in rural areas, the FCC recently required recipients of Connect America Fund (CAF) support to bid on E-rate requests for service. But the recipient of CAF support may still be the only provider in the area, so it is not clear whether this obligation will truly succeed in increasing broadband options for rural schools and libraries. This requirement may also cause challenges in areas where there is a consortium, state network or research and education network who is partnering with a CAF recipient, as it is not clear whether the recipient must independently submit its own bid for services in addition to its participation with the consortium. Some other ways to promote greater competition in rural areas are to promote policies such as open interconnection and lowering special access prices among rural providers.(7)
  • The US Department of Agriculture awarded over $3.2 billion for 320 projects under the Broadband Initiatives Program (BIP), primarily for “last mile” projects to provide broadband service directly to end users in rural areas. While the program allowed funds to connect anchor institutions, most of the BIP grants and loans focused on connecting residential consumers. GAO issued a report in June 2014 that criticized the BIP program for failing to monitor and report on the impact of the program on broadband availability and use.(8) The statutory language creating the Rural Utility Service gives a preference to award funding to existing RUS borrowers, which are often incumbent telephone companies. This practice has made it difficult for new entrants to compete for this funding. The Broadband Opportunity Council recommended that the RUS change its regulations by the fourth quarter of 2016 to open funding opportunities to alternative providers.
  • Some states are designing rural broadband build-out programs to address the needs of anchor institutions. Unfortunately, many of these programs focus only on levels of service appropriate for residences and small businesses, not the high-capacity services needed by CAIs. Minnesota, however, has instituted a Border-to-Border Broadband Development Grant Program, a project that initially provided over $10 million to fund broadband construction in unserved and underserved regions throughout the state. The program specifically included service to community anchors as a key criterion for awarding broadband infrastructure grants.(9) The program will be expanded to $35 million for fiscal year 2017.
  • Congress has embraced network sharing for FirstNet, a newly-created, quasi-governmental agency that is charged with building and operating a national public safety wireless broadband network for first responders. Created by Congress in the Middle Class Tax Relief and Job Creation Act of 2012, FirstNet is required to develop network construction sharing agreements with commercial mobile providers as an important means of lowering the overall cost of building the network.(10)
  • Rural broadband policy does not always adequately address the needs of anchor institutions. For example, the FCC’s Connect America Fund invests $4 billion per year into supporting networks in rural, high-cost parts of the country, but the FCC has set no specific benchmark or service standard for service to community anchors in those rural areas. Instead, the FCC only requires Connect America Fund subsidy recipients to consult with community anchor institutions when making network upgrade plans. These consultation and bidding requirements are supposed to happen on a case-by-case basis, but there is little oversight to ensure this FCC requirement is being enforced. Increased oversight would create greater incentives for the recipients of funding to comply with the obligation to consult with anchor institutions regarding their broadband needs.

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