February 24, 2011 – Now that fiber infrastructure has established a significant footprint in rural areas it makes sense to question whether the touted benefits anticipated in President Barack Obama’s commitment to broadband as a pillar of his “winning-the-future” policies are showing up in the real world. Judging by the funds already flowing into broadband expansion outside big metro areas, the answer appears to be a resounding Yes.
In 2010, 68 percent of National Telecommunications Cooperative Association (NTCA) members were connected to some portion of their customer base via fiber to the home (FTTH) or fiber to the curb (FTTC), up from 59 percent the previous year and from 44 percent in 2008. And across all technologies – including DSL and cable – 45 percent of NTCA members were offering speeds above 6 megabits per second in 2010.
Lately there’s been an influx of money to fund fiber upgrades and expansions not only from the $7.2-billion federal stimulus package, but also from a plethora of state funds and private investments. “A lot of it is driven by the promise of economic development,” says Geoff Burke, senior director of corporate marketing at access network technology supplier Calix. “Everybody can get on board with that at the state level, the regional level, etc.”
The growing sense that the investment is worth it is fueled by the experiences of communities which have enough history to demonstrate whether there’s a real payoff. As one example Burke cites Powell, Wyo., whose bet on municipal fiber years ago produced the kind of payoff that everyone from the feds down to the local chamber of commerce is hoping for.
“Because of their infrastructure, that city was able to create a very large, robust business in which they teach, via videoconferencing, English to South Koreans,” Burke says. “There are hundreds of people in that community employed in that business.”
One indication of the persuasiveness of the economic development argument for broadband is the way a legislative attempt to prevent municipalities from investing in fiber networks has played out in North Carolina. There companion measures which had progressed to passage in the state Senate and were close to adoption in the House hit a wall of opposition from advocates of development benefits last year, resulting in a tabling of further action by the House in midsummer.
Two cities in particular – Salisbury, midway between Charlotte and Greensboro, and Wilson further east – have been making the case for all-fiber development and, in the process, drawing backing for a moratorium on municipal subsidization of networks from incumbent service providers and their political allies. Interestingly, the week that Salisbury launched its Fibrant fiber service, incumbent Time Warner Cable announced it was raising its top broadband speed to 50 mbps, 10 mbps upstream, at $95.95 per month, which prompted a statement from Fibrant that it wasoffering an unpublicized symmetrical 50 mbps service at $85.95 with plans to expand to 200 mbps in the future.
Following a state House committee hearing on the now shelved moratorium bill last April, Salisbury business leaders explained to the Salisbury Post why they felt the new network is essential to development. “Fiber optic technology is far superior to the other technology currently used by these telecommunication companies,” said Brad Walser, owner of Walser Technology Group. “Certain areas within the city limits cannot receive reliable bandwidth. We host websites, e-mails, off-site data storage, and for them to get that data to us, they need a good connection to the Internet.”
“I think there’s a lot more discussion to be had about what access to this level of data could mean to N.C. as a whole, and smaller cities and towns across the state,” said Robert Van Geons, director of RowanWorks, a business development center for Salisbury and surrounding Rowan County. “For me, it’s a story of innovation in our county. It’s another thing we can sell on why this community is special and different, and a place of business a business and company should consider.”
Complementing the fiber push is a stronger federal emphasis on wireless broadband, which Obama alluded to in his State of the Union speech and, in early February, fleshed out with policy specifics in a speech at Northern Michigan University in Marquette. Obama, who in the earlier speech called for attaining broadband wireless coverage to 98 percent of the population within five years, said the government would seek to nearly double the spectrum available for mobile broadband by persuading broadcasters to sell of some of their spectrum and government agencies to free up spectrum with more efficient use of airwaves. Billions of dollars raised by spectrum auctions would be used to pay down the federal debt with the remainder going to development of new technology and a nationwide public safety network.
“It’s about connecting every corner of America in the digital age,” the president said. “It’s about a rural community in Iowa or Alabama where farmers can monitor weather across the state and markets across the globe. It’s about an entrepreneur on Main Street with a great idea she hopes to sell to the big city. It’s about every young person who no longer has to leave his hometown to seek new opportunity.”
Among the benefits already taking hold for fiber and wireless in new areas of development are initiatives tied to power grids and telemedicine.
“Smart grids are a sweet spot here at RUS because we finance both the electric grid and telecommunications,” says Jonathan Adelstein, a former FCC commissioner who’s now administrator of the USDA’s Rural Utilities Service (RUS). “We like to see them working together – and we’re seeing that. We’ve funded a number of rural electric co-operatives that are connecting their substations through a fiber network.”
Like their urban counterparts, rural utilities and operators are exploring or deploying smart grids, residential energy management and other advanced services.
“We’re seeing collaboration between the telcos and utilities because in many cases, the telco already has that physical connection to the consumer,” says Juan Vela, director of solutions marketing and strategy at network vendor Occam. “They’re collaborating on the funding, operations and sometimes even the service management of those networks.”
In a few cases, operators and utilities have gone beyond collaborating, such as Central Indiana Power and Hancock Telecom, which merged in January 2011. Regardless of how a relationship is structured, it’s not just broadband funding bringing everyone together.
“There’s a lot of government money available for smart grid initiatives,” Vela says.
Virtual Health Care
Telemedicine is another application that many rural broadband initiatives are targeting.
“This is one of the most important applications of broadband networks,” says the RUS’s Adelstein. “It’s one of the reasons why this administration is so deeply committed to ensuring that all Americans have access to broadband.”
As rural clinics and small-town hospitals get faster connections, they’re better able to support high-bandwidth services such as teleradiology, where CT and other scans are read by remote specialists, sometimes half a world away. Teleradiology frees the hospital from the cost of one or more staff radiologists.
But teleradiology also is an example of why rural areas increasingly need fat pipes. A CT scan of just a head runs 7 MB to 30 MB even after compression. If severe injuries can mean scanning a patient’s entire body, the files get even bigger. It’s here that a super-fast broadband connection can make the difference between life and death. When there’s a trauma victim on the ER table, doctors can’t wait 15 minutes for the files to upload to the radiologist who reads them.
For now, many telemedicine users have to make do with T1-level connections. The University of Tennessee’s Health Science Center is one example.
“As a standard practice, the university has used 1.544 mbps in all of our applications,” says Jason Holden, director of ITS Infrastructure. “Additional bandwidth will support software applications that deliver high-definition graphics and large data sets containing gigabits of [patient] data.
Telemedicine also is an example of how connectivity alone is just part of the puzzle. Some companies that specialize in rural health care say that it’s one thing to bring broadband access and telemedicine equipment to small-town clinics, and quite another to bring in the people necessary to run that equipment.
“Expertise in rural America is lacking: not just IT skillset, but administrative, clinical and other positions are not fully prepared to perform at a highly trained level,” says Tim Koxlien, principal at Rural Health Telecom.
“Most funding sources provide access to tools such as televideo, radiology, electronic health records and more. However, there is a very important missing piece: Who is going to operate these high-tech tools? It is not uncommon to have the tools acquired through grants, etc. sitting in boxes in the back room of the clinic.”
Enabling House Calls
Meanwhile, increasing residential broadband access is slowly expanding telemedicine from primarily a clinic-based offering to one that’s available in homes, too. That’s a major plus in areas where a trip to a clinic or hospital can take an hour or more each way.
“It’s something that we want to see brought into the home,” says the RUS’s
Changes in how public and private insurers reimburse hospitals also are driving the home telemedicine market.
“Now insurance companies are looking at hospitals and saying, ‘If somebody comes back within a certain period, we don’t pay you a second time,’” says Kian Saneii, CEO of Independa, a startup specializing in devices and services that enable adult children to keep tabs on their elderly parents. “Suddenly the hospital is very interested in you staying home and staying healthy.”
Insurers also have a vested interest in making it easier for policyholders and their physicians to manage chronic conditions. For example, insurers know that diabetics who assiduously monitor their blood sugar levels are far less likely to incur expensive problems, such as the loss of a limb. As a result, insurers can make a business case for defraying the cost of a glucometer that automatically sends an alert to the patient’s physician when her blood sugar levels exceed a certain parameter or if she fails to check it according to the prescribed schedule.
“Home-based monitoring is certainly technologically capable and has surfaced in some markets,” says Tennessee’s Holden.
In some cases, complying with patient-privacy laws is another hurdle for companies looking to target the home telehealth market.
“Affordability of broadband services in any rural area is certainly an ongoing issue,” Holden says. “However, the largest hurdle is the ability to economically fund the necessary technology to accommodate the increasing HIPAA or other personal health information concerns.”
Strong Wireless Play?
But for any rural home telemedicine application, there’s a big wild card: Just because broadband is available in a patient’s area doesn’t mean he subscribes to it. That’s particularly the case among senior citizens, who often can’t afford or don’t see a need for broadband. That uncertainty creates opportunities for telemedicine solutions that use cellular technologies, because it doesn’t matter whether the patient’s home already has wired broadband service.
One example is Independa’s Angela, a tablet-style hub device that an elderly parent would have in her home to collect information from various health and activity sensors and then relay that data via 3G to a dashboard Web portal that her children monitor. Angela also can support video chats between parents and children.
“We don’t make any assumptions about the existing infrastructure,” says Saneii, whose company is fielding calls from telcos, MSOs and other operators interested in reselling Angela. “We don’t need anything other than standard EDGE or 2G for all of our services other than video. With video, 3G should be just fine for now, but it’s not world-class in terms of visual comfort.”
Of course, many rural areas are stuck with 2G or 2.5G coverage, limiting the addressable market for telemedicine services that work best, or at all, over a fast connection. But, well ahead of any impact from the new White House wireless broadband initiative, that could change dramatically over the next year or two for a couple of reasons. One is the amount of small-town telcos, such as CenturyLink, that won wireless spectrum in recent auctions and have to start building LTE or WiMAX networks soon in order to meet their license requirements.
Another is Verizon Wireless’ LTE in Rural America program, which provides incentives for local operators – including telcos, MSOs and utilities – to deploy LTE in their areas. So far, Verizon has lined up several partners, five of which have been made public.
Partners buy their base stations and other network equipment from Verizon’s approved vendors – Alcatel-Lucent and Ericsson – build or lease towers and provide the backhaul connection between those sites and Verizon’s core network. Some partners already have spectrum, while others don’t. For example, Bluegrass Cellular will lease 700 MHz spectrum that Verizon owns in central Kentucky to build a network outside areas that Verizon already plans to cover on its own.
The program benefits Verizon by expanding its LTE footprint, while partner benefits include the ability to get into wireless faster and for less money than if they had to bid in a spectrum auction.
“Our RSA is deploying LTE this year,” says Tim Hills, president of Hancock Telecom, a Verizon partner.
Residents and businesses in those areas benefit not only from the broadband services that LTE enables – including as an alternative to wired services that are too slow, too expensive or both – but also from LTE’s backhaul requirements: Every fiber line built out to serve a new LTE base station means homes and businesses along the way are now a lateral away from FTTx. In many cases, they already are.
“Many of the people we deal with do have a significant amount of fiber assets in these markets,” says Philip Junker, who manages Verizon’s program. “Fiber or some kind of Ethernet backhaul is going to be critical to launching LTE in these markets.”
Verizon says it plans to help its partners avoid a problem that’s plagued mobile virtual network operators (MVNOs): Even large MVNOs in urban markets don’t order handsets in the same high volumes as facilities-based carriers, so historically they’ve struggled to get comparable discounts and selection. Verizon won’t say whether it will allow its rural partners to piggyback on its device orders.
“But it’s absolutely safe to say that we’ll do our level best to ensure that they have a robust line-up of devices,” Junker says. “That is crucially important to the program, and we’re going to work with them to the extent we can to make sure they get access to those devices at volume and in a timely fashion.”
Some rural operators already offer 3G wireless services that target fixed applications. One example is Oklahoma-based Pioneer Telephone Cooperative, which recently launched a CDMA2000 1xEV-DO Rev. A service and is gearing up for LTE as a Verizon partner.
“We’re going to cover much of Western Oklahoma with this fixed broadband pipe,” says Richard Ruhl, general manager. “We’re going to overlay that with 4G.”
In some rural verticals, wireless is the only option. One example is the oil and gas industry, which Texas-based ERF Wireless targets with trailer-mounted base stations that literally follow drill rigs.
“The drilling would be over with by the time the copper or fiber got there,” says Dean Cubley, CEO. “They literally cannot go to the local telephone company and get service that supports the way they operate.”
“We typically expect a four-hour notice before we have to be somewhere, and it may be 200 miles away. Not only do we accommodate their workstyle, but we also bring them 10 times more bandwidth than they could get with satellite.”
ERF also uses wireless to target banks, whose bandwidth requirements illustrate the small-town market potential.
“We have banks with 160 mbps capability on their backbone,” Cubley says. “They typically don’t need more than 10-20 mbps at the branch [locations].”
ERF often issues a press release for each new customer, and one recent response is another indication of the pent-up demand.
“We immediately started getting calls from ranchers and individuals in that area wanting to know if they could get service, as well,” Cubley says. “Word travels pretty fast.”
So how can ERF make a successful business out of serving areas whose sparse population is supposed to be a deal-breaker? One reason is it has a bigger pool – five states’ worth – of potential customers than, say, a telco that serves only a half-dozen counties. Another is it’s targeting customers willing and able to pay for multi-megabit services.
“We’re accumulating enough vertical markets to make it economical and cost-effective to provide communications in those areas,” Cubley says.
Sooner Rather Than Later
Meanwhile, on the broadband fiber front, benefits to be realized by communities receiving government stimulus funding should come fairly quickly. With cost-effective mature technology available from a wide selection of vendors, the assumption in the grant funding process is that communities can get to the cutting edge of services without having to experiment with new access technologies. Instead the push is to get the networks up and running so that the new service opportunities can be exploited sooner than later.
Recipients of federal stimulus funds must have their projects substantially complete within two years of receiving the money. “I don’t think you’d see some bleeding-edge, unproven technology being deployed in any of these,” says Brian Caskey, CMO at Zhone, another leading supplier in the Tier 2 and 3 markets.
To target operators that are receiving funding from RUS, vendors also must get their products on the agency’s approved list. The approval process includes tests to verify features and vendor claims.
“The RUS listing process is pretty comprehensive,” says Calix’s Burke. “They go through to ensure that when they loan you [the operator] money, or grant you funds, that you are deploying equipment that allows you to be successful. [For vendors,] it’s kind of a litmus test for how serious you are about the rural U.S. market.”
Caskey agrees: “It’s not a very detailed process for us to complete, but we have to make sure that our core products are on that list.”
Chicken and Egg
Yet, for all the benefits anticipated for broadband infrastructure the “build-it-and-they-will-come” philosophy has a weak spot. In 2010, NTCA members said that the take rate for their broadband services was 55 percent, indicating a healthy demand. But for some rural and small-town residents, access is only part of the equation.
“Lack of a computer is a bigger impediment in rural areas than in other parts of the country because rural areas tend to be lower income, have an older population and tend to have fewer screens per capita,” Adelstein notes.
“We recognize this as one of the reasons why broadband adoption in rural areas is lower than in urban areas, and it really is something that needs to be addressed. I really appreciate the innovative solutions that some of our providers are coming up with.”
One example is Socket, a CLEC that’s received $23.7 million in broadband-stimulus grants and loans to build a fiber network in rural and small-town Mid-Missouri. Besides possibly building at least one community computer center, Socket also is considering ways to bundle devices with its broadband services to target people who don’t own a computer.
“One of the things we were looking at is a low-cost home computing [device], like a tablet or netbook, that we can lease to people as part of our service,” says Carson Coffman, Socket’s co-owner and vice president of sales and marketing. “If they have a computer, then they have Internet. So what we’re looking at is people who don’t have a computer and trying to find an easy way for them to get online.”
Assuming that problem gets solved on a wide scale, rural America appears to be destined not only to become a part of the 21st Century communications grid. It could well be the seedbed for service innovations which, once proved out as development drivers for rural communities, could make their way to the cities as well.