How Do You Build a Communications Network at Population Density of 6 People Per Square Mile?

As rural areas have the lowest population density, and since communications network costs are density related, American Indian reservations are tough places to finance communication networks. By some estimates, the most-difficult places to connect are homes in the last two percent of locations, representing the most-isolated areas. 

The average population density for the U.S. is approximately 345 persons per square mile. The Navajo Nation has a population density of 6.33 persons per square mile. That means the business model is not only astoundingly difficult, it likely can be characterized as non-existent. In other words, service can only be provided if subsidies are provided, since there actually is no positive business case. 

Assume 55 locations per square mile, and two fixed network suppliers in each area. That means a theoretical maximum of 27 customers per square mile, if buying is at 100 percent. Assume for the moment that buying rates really are at 100 percent. Two equally skilled competitors might expect to split the market, so each provider, theoretically, gets 27 accounts per square mile.

At average revenue of perhaps $75 a month, that means total revenue of about $2025 a month, per square mile, or $24,300 per year, for all the customers in a square mile.

The network reaching all homes in that square mile might cost an average of $23,500 per home, or about $1.3 million.

At 50 percent adoption, that works out to roughly $47,000 per account in a square mile, against revenue of $900 per account, per year. Over 10 years, revenue per account amounts to $9,000.

The business case does not exist, without subsidies. The business case is, of course, far worse at densities of 6.33 persons per square mile. As one engineering analysis noted, “areas with a density density of less than 10 households per square mile (survey areas C, D, and F) are unlikely to see investment from the private sector.”

In rural areas everywhere, there are two fundamental reasons mobile networks have a better business case than fixed networks: customers want service and network costs are lower than for fixed networks.