Federal Reserve: Electric co-ops, wireless systems and partnerships most promising ways to better rural broadband

Broadband access is transformative, but rural areas still lag because they're more costly to serve. It's worth it, though, according to a recent report by the Federal Reserve Bank of Richmond.

"The economic case for rural broadband infrastructure, though, is compelling despite its cost: Broadband access and adoption in rural areas is linked to increased job and population growth, higher rates of new business formation and home values, and lower unemployment rates," Alexander Marré reports. "Unlike with many other types of infrastructure, the long-run benefits of broadband access could grow exponentially, given the potential for innovation and productivity gains it provides."

Electric cooperatives, fixed satellite and wireless providers, and public-private partnerships are the most promising avenues for building out quality broadband in rural America, according to the report. But each approach has its pitfalls. Some states bar co-ops from providing broadband, and legal issues can make it tricky for co-ops to operate outside their service areass. Satellite and wireless don't require expensive house-to-house fiber installation, but can be slower and more expensive. Public-private partnerships are useful where there is no interested provider, but it can be challenging to build the right partnership with effective, interested parties. 

Connecting all of rural America to broadband will cost at least $85.6 billion, but current federal funding is about $30 billion, Marré reports. The Federal Communications Commission's Rural Digital Opportunity Fund is the largest source of funding, at $20.4 billion over 10 years. However, the RDOF has been plagued with faulty data maps that can waste money. The FCC also provides $4.9 billion through its Alternative Connect America Fund. The second-largest source of departmental funding is through the Agriculture Department's eConnectivity Pilot Program, or ReConnect Program, which provides loans, grants, and loan/grant combos to broadband service providers. ReConnect has distributed more than $1.3 billion; all told, USDA funds about $2.3 billion for broadband buildout through ReConnect and other Rural Utilities Service programs. Other major sources of funding include state spending (less than $2 billion in 2018-2019) and the CARES Act, which allocated about $600 million to broadband funding projects.

The report notes that the coronavirus pandemic has highlighted the necessity of broadband for all, and recommends increasing federal subsidies to help close the rural gap.