Rural high-speed internet lags cities

12/5/2016

Growing flowers require soil and sunshine. Selling them requires dependable internet access.

That’s just as true for small-town florists like Kyle Prichard, owner of Eden Floral Design in New Tazewell, Tenn., as it is for shops in larger cities like Knoxville. His point-of-sale program is cloud based, provided by the same remote company which does Eden Floral Design’s website. And Prichard needs to reach customers in a 60-mile radius, including Knoxville, he said.

“Ninety percent of our marketing for our business is social media,” Pritchard said. Eden Floral Design gets service over DSL from CenturyLink, with a top download speed of 10 megabits per second, he said.

“For our business and what we do on the internet, I think it’s pretty satisfactory for us,” Prichard said.

Prior to 2015, 10 Mbps download/1 Mbps upload speed was more than enough to meet the Federal Communications Commission’s definition of “broadband” access. But as Americans’ hunger for data such as live video increased, the FCC upped the standard to 25 Mbps download/3 Mbps upload.

Faster, higher-capacity internet service in New Tazewell would help the family business, but the real need is at home, Prichard said. He, his wife and their two teenagers live in Sharps Chapel, 15 miles southwest of their store and 40 miles north of Knoxville. There, their current online options are dial-up or satellite, he said.

“We have no access to any other kind. We can’t really get good internet in our area where we live,” Prichard said. A desktop computer, iPad, smartphones and miscellaneous devices soak up the available bandwidth, he said.

“You get all of that running together and it does slow things down.”

On the horizon is access to fiber optic cable, which promises as much capacity as the Prichards’ household could use for the foreseeable future: download speeds up to 1 gigabit per second. One gigabit is 1,000 megabits; so 1 gig service is 100 times faster than 10 Mbps service.

Fiber optic service is coming to Sharps Chapel. But there is a waiting list, Prichard said.

Randy Boyd, state commissioner of Economic and Community Development, said in a July 2016 report that “over half” the conversations he had at town hall meetings across the state were about rural broadband access. So he commissioned a report from consultants Strategic Networks Group and NEO Connect, which surveyed 23,000 households and businesses and found 87 percent of Tennessee households have broadband access, leaving close to 835,000 people without high-speed service.

“Businesses participating in the assessment said broadband enabled 43 percent of all net new jobs and 66 percent of revenues,” the consultants’ report said. “In addition, 34 percent of businesses classified broadband as essential to selecting their location, and 56 percent noted that it was essential to remain in their location. Sixteen percent of economic development agencies reported that businesses frequently chose not to locate in an area due to insufficient broadband.”

The 21 local telecoms in the Tennessee Telecommunication Association have about 205,000 customers, of which 60 percent meet the FCC’s definition of broadband service, said Levoy Knowles, TTA executive director. TTA member telecoms have invested about $1.3 billion in rural broadband so far, and are putting in another $100 million each year, he said.

“Rural folks need broadband just like folks in the metro areas do,” Knowles said. School systems need high-speed service, and it’s a key part of allowing more people to work from home, he said.

In the Knoxville area, people employed at Oak Ridge National Laboratory and offices in downtown Knoxville should welcome fiber speeds, said Bruce Mottern, manager of state government affairs for TDS Telecom.

“Telecommuting is certainly a benefit with the 1 gig service,” he said.

TDS serves about 2,500 square miles of Tennessee, with broadband available to 96 percent of customers, Mottern said. The company is looking to push its speeds higher system-wide, and in January announced speeds of up to 1 gig in its Knoxville service areas of Concord, Farragut and Halls Crossroads.

The announcement sparked lots of interest in 1 gig service, but discussions with inquiring customers showed their needs were usually satisfied with speeds of 50 to 100 Mbps, Mottern said.

More than two-thirds of the people surveyed by state consultants said speed and reliability are major barriers to their internet use.

“Satisfaction correlates with the speed of the service,” the report said. About half of households said 10 Mbps was good enough, but nearly three-quarters were satisfied at 25 Mbps.

“Demand for bandwidth has increased and will continue to increase dramatically in the coming years,” consultants said. Most new network construction is fiber- to-the-home, Knowles said; about 30 percent of the TTA’s members currently provide that.

“You just cannot get a gig level of speed over a copper network. It has to be fiber,” Knowles said.

But it’s pricey. In rural areas, it costs about $20,000 for each mile of fiber optic cable, he said. That can carry broadband service for thousands of customers, but while urban areas may have 300 customers per mile, rural areas often have only eight to 10 residents per mile, and not all of them will sign up for service.

“That’s why it’s so difficult sometimes to get service in a rural market,” Knowles said.

Then there is the cost of associated electronic equipment, which often is 30 to 40 percent of a project’s total cost, he said. Finally there is the fiber drop/network interface going from a utility pole into a house.

“That cost runs about anywhere from $1,000 to $1,400 per household,” Knowles said.

Mottern puts the cost of running overhead fiber optic lines at $35,000, not counting the additional necessary equipment. Putting the lines underground would be far more expensive, he said.

Highland Telephone Cooperative, which serves Morgan and Scott counties in Tennessee and McCreary County in Kentucky, has replaced all of its copper cable with fiber optic all the way to the home, Highland CEO Mark Patterson said.

Co-ops serve rural areas which most for-profit companies won’t because so few potential customers live there, he said. Highland has 16,700 service lines, of which about 85 to 90 percent are homes, Patterson said. In some areas the co-op has only three customers per mile.

Work finished in 2015, and now all coop customers can get download speeds of up to 1 gig.

“We have built a state-of-the art, world-class network in a very rural area,” Patterson said.

For many years, the key to an area’s success was access to an interstate highway for moving goods and people. Now it’s equally vital to have an “internet superhighway,” Patterson said.

Patterson said the Great Recession hurt Highland’s service area, and Scott County sometimes has had the state’s highest unemployment rate as more businesses downsized or left in 2007 and 2008.

 Not all businesses need gigabit internet, but high-tech firms that the area wants to attract do, Patterson said. Medical offices need the capacity for imaging data, sending X-rays or MRI scans in seconds instead of hours. Existing companies like JDS Technology can use it to swap detailed specifications with international customers. Schools can use it to offer distance learning classes on subjects they might not otherwise have, Patterson said. If a school doesn’t have a physics teacher, it can still have a physics class via live video from a school which does.

The big question is how to pay for building broadband networks. In 2010, Highland got a $66.7 million combination grant/loan to improve internet service through the American Recovery & Reinvestment Act’s Broadband Initiatives Program.

The co-op has to repay 25 percent of the federal funding over 25 years, but that hasn’t required a rate change, Patterson said.

“Our rates are very competitive,” he said.

But that was a one-time program. To pay for fiber networks, Knowles said telecoms borrow at low rates from the federal Rural Utilities Service. Not all necessary parts are eligible for those loans, so companies are putting in lots of their own money, too.

“Our association feels that every Tennessean should have access to broadband,” Knowles said. He added that it should be considered as basic infrastructure needed for economic development, like water or sewer service.

The 2016 state study didn’t recommend fiber to every house, but figured the total cost for such a project at $1.1 billion to $1.7 billion. Building a partial fiber system, with links to each house that can handle 25 Mbps download/3 Mbps upload speeds, is estimated to cost from $500,000 to $1.4 billion.

Knowles wants governments to stay out of building broadband networks anywhere there is a private provider in the market.

“We feel that government should not be involved as long as private enterprise is filling the gap, is filling the need,” he said. “We feel like, at this point, the less government, the better.”

But he does want public funding for those companies building networks in sparsely populated areas which otherwise wouldn’t be profitable to serve.

“We’re supportive of expanding broadband, and we’re supportive of putting money into rural markets that would allow expansion quicker,” Knowles said.

The TTA wants the state to offer tax credits, deferred payment and other funding mechanisms. Knowles hopes legislation passes in the next session to fuel further broadband expansion.

In the 2016 session, Tennessee legislators again punted proposals to let public electric utilities offer high-speed internet outside their electric service areas.

State Rep. Kevin Brooks, R-Cleveland, blamed big broadband companies such as AT&T and Comcast for lobbying against his bill, one of several on the subject.

For seven years, rural broadband supporters have tried unsuccessfully to get Tennessee’s permission for utilities to expand their high-speed services. Large for-profit companies have consistently blocked those efforts, yet are reluctant to build networks in sparsely populated and less profitable areas.

A higher percentage of customers makes it more practical to serve less populous areas; the average customer density for TDS Telecom is 12 per square mile, Mottern said.

State and federal funding should aid not just construction, but also promote the benefits and uses of high-speed internet.

“That will lead to increased adoption, we believe,” Mottern said.

“Businesses participating in the assessment said broadband enabled 43 percent of all net new jobs and 66 percent of revenues.”

Source: Knoxville News Sentinel, by Jim Gaines

The East Tennessee Economic Development Agency markets and recruits business for the 15 counties in the greater Knoxville-Oak Ridge region of East Tennessee. Visit www.eteda.org

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