The USDA has announced plans for a pilot program to bring broadband internet to all of rural America.
The plan, which Secretary of Agriculture Sonny Perdue calls a “proof of concept,” will provide $600 million dollars in grants and loans to internet service providers to bring connection to parts of the country that are too remote, underpopulated or expensive to serve.
“I absolutely, unequivocally believe that broadband connectivity is part of rural prosperity,” said Perdue in a press conference on December 13. “We don’t want an urban rural divide in this country. We can’t afford that.”
As the agency was finalizing rules for the pilot program, it was also funding other programs for rural broadband expansion. But the pilot program includes language that requires providers to connect everyone.
“Every farm, every household, every facility, every hospital that is located inside the service area of that project will receive a speed of 25/3 mbps,” said Chad Parker, assistant administrator for telecommunications policy at USDA.
The USDA had originally considered providing funding to projects promising slower speeds, but after a public comment period this summer, increased the minimums. Parker said projects bringing even faster speeds to rural America will be given higher priority.
Projects funded through this program will be awarded sometime next summer, and likely won’t begin construction until late 2019. Some broadband expansions take as long as five years to complete, meaning rural internet is still a long way off for some remote Americans.
But 36 rural projects received funding from the USDA for high speed internet in 2018. The agency invested more than $228 million last year to improve rural internet access in 22 states. The grants and loans are mostly to telephone and electric cooperatives that have expanded to provide internet services and nearly all of the projects funded are promising to bring high speed internet to customers via fiber optic technology.
On November 13, the USDA announced $91 million in awards to projects in a dozen states. This follows $97 million in awards in August. The grants and loans are funded through the USDA’s Community Connect Grants, Telecommunications Infrastructure Loan and Rural Broadband Access Loan programs. The USDA said this second round of funding will connect 27,000 households and businesses.
But adding up these awards and the USDA’s $600 million pilot program still just scratches the surface of what is needed to connect all of rural America. These funds represent 1 percent of what’s needed to connect the entire nation.
The Federal Communications Commission estimates it will take $40 billion to bring broadband internet to 98 percent of Americans. To connect that final 2 percent of Americans, it will cost an additional $40 billion. Bringing high speed broadband internet to all rural Americans is expensive and time consuming.
One North Dakota project is receiving $2.8 million to bring service to just 126 households. Most internet providers don’t see it as cost effective without government assistance.
In northwest Minnesota, Garden Valley Telephone Company is using a USDA loan to finish building a fiber optic network that serves 12,000 customers. The cooperative already offers high speed internet via fiber to 78 percent of its subscribers. Tim Brinkman, CEO of the cooperative, said bringing fiber to the last 2,000 customers wouldn’t be possible without the $20.3 million loan from the USDA.
“When you’re talking customer counts of one to two customers per square mile, it gets rather cost prohibitive,” Brinkman said. “But being a cooperative, we’re committed to making sure our area is economically viable and we view that as good economic development.”
Where the money’s going
South Dakota received $41.5 million in grants and loans from the USDA for rural broadband last year, the most of any state.
While South Dakota is receiving the most money, Oklahoma won the most number of bids. Four companies received six grants and loans for expanding broadband coverage across the state. Two of the recipients are native tribes; the Choctaw Nation and Osage Innovative Solutions, which is owned by the Osage Nation. In total, Oklahoma will receive nearly $14.3 million in funding, serving 1,000 homes and businesses.
While most of the projects will bring internet connection to paying customers at homes or businesses, 19 proposals have laid out plans to build community centers where residents could access the internet free of charge. Perdue acknowledged the need for open access when he announced the pilot program.
“When are we going stop having to drive rural kids to the local community to skim off the broadband there at quick service restaurants to do their homework?” asked Perdue. “They don’t have that access. They are at a disadvantage educationally.”
Map: 2018 USDA rural broadband grants and loans. The blue circles represent the amount awarded. Click the blue icon to read about the company’s plans.
The right technology for the job
The USDA’s programs are open to state and local governments, federally-recognized tribes, non-profit organizations and for-profit corporations. Of the 27 companies that received money in 2018, 23 were electric coops and telephone companies.
The USDA says the awards were selected based on the strength of the applications, not on the type of provider or technology.
Of the 36 project proposals, 26 mention fiber optic technology. Fiber is currently the most reliable method of bringing internet to rural Americans at download speeds at or above 25 mbps and 3 mbps up, the Federal Communications Commission’s definition of “broadband.” But it’s also more costly to build than other technologies.
Some internet service providers say federal subsidies might actually be making it harder to connect rural America.
Tristan Johnson, owner of Wireless Data Net LLC, a wireless internet service provider serving just under 1,000 customers around Saybrook, Illinois, said companies like his can provide internet to rural America more efficiently than traditional internet service providers. But he doesn’t apply for government funding.
“There is a lot of red tape. You almost have to hire a lawyer to fill out your application,” said Johnson. “We just don’t have the means, funds, personnel or the time to handle that kind of workload.”
Johnson said he feels these grants and loans are counterintuitive, often encouraging providers to wait to expand into underserved areas.
“Giant companies aren’t going to go into a small, middle of nowhere area until they get free money for it,” Johnson said. He said small wireless internet service providers are already reaching the most remote customers. “We’re the companies that are out here in the rural areas, doing what the other companies have been paid to do, but aren’t doing. We wouldn’t exist if the big guys were doing what they’re supposed to be doing.”
Brian Whitacre, economist at Oklahoma State University, speaking at a November 27 agricultural conference at the Chicago Federal Reserve Bank, said private companies have led broadband expansion.
“There’s been a significant amount of private investment,” Whitacre said, noting private internet service providers have spent $1.6 trillion on broadband over the last 20 years. But he said that money was mostly invested in cities.
Brinkman said there’s a reason cooperatives like Garden Valley are leading the way in high speed broadband via fiber.
“We’re here to serve our members, who are our owners. Therefore we reinvest our earnings into more infrastructure,” he said.
Subsidies play an important role in keeping costs down for consumers.
“We wouldn’t be able to do it without access to those loan funds,” said Brinkman.
Whitacre said the conversation needs to be about more than just building the infrastructure.
“Not only is there a rural-urban divide in terms of availability, there is a rural-urban adoption gap,” said Whitacre. “It’s not just availability that has an impact on the local economy, it’s the adoption of the broadband connection. It’s actually having it in your house, taking advantage of it.”
Timeline of rollout
The USDA awarded 2018 funds in August and November. But some of the residents of these areas won’t see results for years. And recipients of the $600 million from the USDA's pilot program likely won’t break ground until late 2019 at the earliest.
Brinkman said it will take four more years to complete Garden Valley’s fiber buildout. Winter weather, natural impediments such as lakes and trees and far distances between customers makes reaching those final 2,000 customers even more challenging.
Deadlines to apply for grants and loans under the pilot program begin in April.