Broadband Stimulus: Too Much Optimism About What Can Be Done

Hype is running far ahead of what can be done even when all of the broadband stimulus funds are awarded and projects deployed. Broadband access is a hugely capital-intensive process, especially for the last couple of percent of locations that are so remote, in areas so thinly settled, that nearly all the cost must be recovered from such a small number of potential customers.

Physics and demography, not lack of will, are the key problems. In an urban area, some forms of broadband can be deployed for less than $2,000 a location, and often for as little as $1,000 a location.

In remote areas, serving one location can cost $10,000 to $50,000. You can build your own spreadsheet to figure out how long it would take to break even on that sort of investment, when the customer is expected to pay $40 to $50 a month. Don't forget the cost of interest on borrowed money, operating costs, maintenance and repairs, as well as the need, at some point, to replace the entire infrastructure because of age.

There likely will be some incremental benefits. But the "problem" of access in rural areas, or the quite-different problem of "under-used" broadband, will not be solved. Not by a long shot.

http://ow.ly/1dPd