US$11B Needed for Rural Broadband Upgrade

WASHINGTON (06/21/2000) - The National Exchange Carrier Association (NECA) on Wednesday released a survey showing it would cost nearly US$11 billion to upgrade U.S. rural telephone lines to broadband DSL (digital subscriber line) capability.

The results of the survey of NECA member companies were released at a news conference at which officials also said a search had begun for funding to help companies serving the rural areas pay for the upgrade.

The 244 companies that participated in the survey serve sparsely populated regions of the U.S. from the bayous of Louisiana to the mountains ranges of Alaska, said Victor Glass, director of demand forecasting and rate development at NECA. Typically, there are about five households per square mile in their coverage area. That figure compares with the typical 50 households per square mile in the coverage area of carriers that serve urban areas.

The U.S. Federal Communications Commission (FCC) defines broadband as the ability to support a data rate of at least 200K bps (bits per second), both upstream and downstream. NECA officials said alternative technologies exist for delivering broadband to remote areas, however the study only produced estimates related to DSL.

The $11 billion upgrade price tag would cover 3.3 million lines, which is equivalent to an average cost of about $3,300 per line. However, Glass said that estimate is deceptive because the more remotely situated a customer is, the higher the price to upgrade the line. For example, in a town the upgrade cost per line is about $500, but upgrading a telephone line that runs to a farm, mine or other rural enterprise can run well into the thousands of dollars, he explained.

"There is a large chunk of lines that are very expensive to upgrade for customers who are not easy to access, but those are the customers who are vital to the rural economy and to the American economy," Glass said.

He also noted that the $11 billion estimate covers only upgrades to equipment from a customer's home to the local exchange carrier's switch. It will actually cost an additional undetermined amount for DSL equipment, switches between a carrier and an ISP (Internet service provider) and backbone costs -- all not factored into the survey.

The survey also concluded that a portion of the required upgrades are already being planned by the respondents. About 65 percent of the lines owned by those polled by the survey will be capable of providing broadband service by 2002.

That finding shows that the companies serving rural areas are deploying services, but Gerry Anderson, general manager, Mid-Rivers Telephone Cooperative Inc., serving eastern Montana, said his company doesn't have the money to extend broadband throughout its coverage area. He suggests financial support through grants, low interest loans or tax incentive programs.

"We certainly can't go out on the market and pay 8 or 9 percent (interest) to provide that type of service to 300-some people," Anderson said. "The folks who are making the rules have to understand what the situation is, and I think that's the purpose of the study."

Anderson also pointed out that the U.S. Telecommunications Act of 1996 mandates the extension of broadband services to rural areas. To help in the policy making process, NECA plans to file the study with the FCC and share it with members of U.S. Congress, who have said they need more data on the status of rural broadband in order to draft legislation that would assist carriers serving rural areas.

The NECA, in Whippany, New Jersey, can be reached at +1-973-884-8207 or found on the Web at http://www.neca.org/.

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