The Packet Train Needs to Stop at Every Door reports that maintaining and evolving rural network infrastructure remains critical to meeting the future needs of rural consumers and their communities, including the provision of new IP-based services like VOIP. However, this cannot be achieved based solely on competitive model assumptions applied to urban areas; rural America still requires a carrier of last resort due to the lower density, higher cost characteristics of rural service areas.

The study also finds that as excess network capacities diminish and demand for voice, video and data multimedia packages increase, all carriers including companies serving rural consumers will require significant additional investment in their broadband networks. For rural carriers, this requires stable cost recovery mechanisms including adequate intercarrier compensation and sustainable universal service funding.

The “Packet Train” study assumes that demand for multimedia service packages will define the capacity requirements for broadband networks.  Based on this, the report estimates that a complete network upgrade for 5.9 million lines to deliver these services to rural consumers will require an investment of $11.9 billion based on current technology prices.

The study also looks at the incremental revenues and costs for delivering a basic multimedia service to rural customers and concludes that costs exceed basic package revenues absent significant additional revenues from advertising and premium services.  The study further observes rural carriers face issues regarding access to Internet backbone networks and video content on reasonable terms and prices. 

It also addresses the future implications of the packet world on Universal Service and Intercarrier Compensation reform. Rural networks are evolving into multiuse networks which, in addition to “POTS” help deliver VOIP, wireless and video services to rural consumers. The characteristics of rural areas, however, cannot sustain the costs of deploying advanced network services even with the lower cost levels of IP technologies.  Thus, balanced cost recovery from a combination of end users, adequate intercarrier compensation and sustainable universal service funding remains vital for rural service providers.

As policymakers consider whether the definition of supported services needs revision, it is important to recognize the role current programs play in helping to achieve delivery of advanced broadband networks to rural consumers.

The Packet Train Needs to Stop at Every Door is NECA’s third broadband study. The first study focused on the “last mile” and the second study focused on the “middle mile.”