Rural America and Broadband
An article by Ken Belson in The New York Times Rural Areas Left in Slow Lane of High-Speed Data Highway is interesting, but seriously flawed.
Belson is correct that some rural areas in the U.S. are underserved. But he misses the fact that many small telephone companies are delivering broadband that exceeds what the big guys such as Verizon, AT&T and BellSouth typically offer.
This part of the article is correct:
Verizon is not alone in its desire to reduce the number of landlines it owns. Big phone and cable companies are reluctant to upgrade and expand their networks in sparsely populated places where there are not enough customers to justify the investment. Instead, they are funneling billions of dollars into projects in cities and suburbs where the prospects for a decent return are higher.
And these statements are correct:
Verizon has sold phone lines before. In 2005, the Carlyle Group bought its business in Hawaii. Verizon also sold 1.3 million lines in Alabama, Kentucky and Missouri in 2002.
Others have followed. In May, Sprint Nextel spun off its local phone division with 7.1 million lines and renamed it Embarq. In July, Alltel spun off its local phone group and merged it with Valor Communications.
Here is where Ken Belson veers off into the weeds:
[tease] (emphasis added)
If Verizon does sell the New England lines, it would most likely be to a smaller company or private equity group that could be even less capable of offering fast Internet access. …
Belson, bless him, is just flat wrong on the effect of smaler (and more nimble) owners taking over a rural phone franchise.
I know from personal experience that the smaller telcos — so-called “Independent Operating Companies” — are currently investing in broadband at a rapid clip. Many of them are installing advanced fiber optic systems that are far superior to the Verizon FIOS project.
There’s a reason the “little guys” (who in fact throw off a nice profit) can make this investment. It’s called your tax dollars at work. A little known government program called RUS provides funding by extending multi0million dollar loans at below market rates.
As a taxpayer I hate it. As someone who gets a check twice a month from a company that sells into this IOC market, I absolutely love the RUS idea.
Objectively, RUS (and a few other government incentive programs for small telcos) helps enable the spread of broadband into lightly populated areas that otherwise might not be served.
Don’t cry for Vermont. Those small communities mentioned in the article will be far better off when Verizon sells off its phone franchise.