1) The document discusses myths about rural broadband access, including that rural households are less interested in broadband access when in fact around 1/3 do not have access at any price. 2) It also discusses how the market fails to account for positive externalities of broadband access, like economic and community benefits, so underinvests in rural broadband infrastructure. 3) Additionally, the document cautions against one-size-fits-all solutions and emphasizes learning from successes and failures of past rural broadband initiatives.

1. Mythology of Rural Broadband
Jon M. Peha
Chief Technologist, FCC
Professor, Carnegie Mellon University
Freedom to Connect, March 2009
Opinions expressed are those of the author alone
© 2009 Jon Peha
Myth 1: Less Interest in Rural Areas
(So the market is right)
There is great speculation about why a third
less households would want broadband.
Income? Education? Profession? Culture?
© 2009 Jon Peha

2. % US Households with Internet
But rural households
are roughly as
interested in Internet
© 2009 Jon Peha
A Simpler Explanation
• Roughly one third of rural households do not
have access to terrestrial broadband services at
any price.
– (No one knows exactly how many)
– So not surprising that % of rural households
subscribing to broadband is one third less.
© 2009 Jon Peha

3. Myth 2: If customers unwilling to pay
cost of buildout, costs exceed benefits.
(So the market is right, version 2)
• But the benefits of broadband do not go only to
those who subscribe, and thus pay for build-out.
– People decide to pay based on benefits to
themselves, not based on benefits to everyone.
– A free market will underinvest in any product with
this property.
– (Positive externalities lead to market failure.)
© 2009 Jon Peha
Reasons for Spill-Over Benefits
• Impact on local community
– Some studies show broadband deployment is followed by
increases in small business creation, job creation, and
property values.
• Even those who do not use the Internet benefit
• More studies are needed!
• Impact on Internet users outside the community
– Other Internet users gain ability to communicate with
residents of newly served community
• Social networks gain members, ecommerce merchants gain
customers, etc.
– “Network effects” – increasing the size of a network benefits
those who are already in it.
© 2009 Jon Peha

4. Myth 3: Unserved communities don’t
gain from broadband, but not harmed
by lack of broadband
• More network effects: reducing the size of a
network harms those who remain.
– Dial-up Internet can be seen as a network.
• Applications were once optimized for dial-up users
• Designers now assume broadband, so Internet experience
for dial-up users gets steadily worse.
– Non-Internet services also degraded as broadband-
based replacements become popular.
• Newspapers, airline reservations, government documents,
health care information, book stores, ...
© 2009 Jon Peha
Myth 4: Government involvement in
infrastructure always helps.
• Kenya builds 140 Megawatt Kiambere Dam
• Benefits exceed costs? A fit for the community?
– Kenya accepts debt
– 7000 residents displaced
– Farms under water. 82% of income lost.
© 2009 Jon Peha

5. No “one size fits all” solution
• Some communities have created wireless broadband nets
– with public funds, private funds, or combination thereof.
– Some boast of great success, e.g. government savings greater
than build-out costs, advancement of other community goals.
– Others expended a lot of money and time, with limited benefit.
• Pittsburgh leaders hoped for citywide wifi network.
– For Pittsburgh at that time, benefits did not seem to justify costs
– Pittsburgh had DSL, cable. Getting 3G wireless.
• An effective and uniquely Pittsburgh solution
– Wifi deployed throughout downtown, but not citywide
– Financially sustainable
– Builds on resources and ideas from Pittsburgh institutions
– Part of broader community goal: revitalizing downtown
© 2009 Jon Peha
Lessons
• Broadband matters
• We should not
– assume that the market solves all problems perfectly
– devise initiatives that merely replicate what the market is
already doing very well
– assume that an effective strategy in one community can be
replicated in another
• We should continue to
– seek innovative technology, business, and policy approaches
– study past experiences, learn from successes and failures
– let government create right environment
© 2009 Jon Peha

6. New Developments
• New spectrum in 2009.
– Spectrum availability is important for rural broadband
– DTV transition frees up spectrum
• Cellular carriers gain access to new licensed spectrum
• Unlicensed devices allowed to operate in TV “white spaces”
• New funding in 2009
– $7.2 billion for grants and loans related to broadband
• New information gathering begins in 2009
– New “broadband inventory”
• New National Broadband Plan under development
© 2009 Jon Peha
For More Information
• Jon M. Peha, Bringing Broadband to Unserved Communities,
Brookings Institution Press, July 2008.
www.brookings.edu/~/media/Files/rc/papers/2008/07_broadband_peha/07_broadband_peha.pdf
• Jon M. Peha, Wireless Pittsburgh: Sustainability of Possible
Models for a Wireless Metropolitan-Area Network,
New America Foundation Working Paper, Feb. 2008.
www.newamerica.net/files/WirelessPittsburgh_Peha.pdf
• More at www.cmu.edu/~peha
© 2009 Jon Peha