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How streaming entertainment makes rural broadband unsustainable
If the five companies using the most broadband bandwidth contribute more to the costs of providing it, they could help bridge the digital divide, a new report says.
Roslyn Layton, vice president of Strand Consult, researched four rural broadband service providers and found that 75% of downstream network traffic comes from five companies: Amazon Prime, Disney + / Hulu, Microsoft Xbox, Netflix and YouTube, according to its report, “Middle Mile Economics: How Streaming Video Entertainment Undermines the Broadband Business Model. The traffic from these companies generates about 90% of the net costs of the new network for the four rural providers.
The remaining 25% of the traffic is what she calls “of social value†because it comes from sources such as government entities, public safety, education, health care and news sources. They represent around 10% of network costs.
“We’re missing almost $ 100 billion a year in the marketplace, and that’s because the biggest Internet companies aren’t contributing to the cost of infrastructure,†Layton said. They do not contribute to mid- or last-mile network costs and defeat efforts to find cost recovery methods. This, according to the report, makes the current flat-rate and uniform pricing model likely to become unsustainable for rural broadband.
Now is the time to revisit the broadband setup, Layton said, especially with regard to the middle mile, which is most affected. This is the part that allows the transport and transmission of data from the telephone exchange, the network head end or the wireless switching station to an Internet point of presence, the local access point that allows users to connect to the Internet through their provider.
The broadband providers Layton studied charge an average of $ 50 for a standard broadband subscription – a relatively flat rate in alignment with the uniform pricing that is common in the United States for broadband. This means that there is a price for an advertised speed for an entire region. In addition to this fee, subscribers pay streamers $ 25 to access video entertainment, and for every $ 1 they receive, rural broadband service providers must invest 48 cents in equipment to stream the content, according to the report – costs that the supplier has no way to recover.
“You have to put in more servers, you have to use more power, you have to put in more equipment, more maintenance,†Layton said. “Broadband providers are in a difficult situation because they want to provide a good customer experience, but they can’t increase the price of broadband, they can’t get reimbursed by Netflix or Google, and the [Federal Communications Commission] will not give them any refund.
In the article, Layton presents several policy solutions. “The easiest thing to do would be for streamers to recognize that they have to contribute,†Layton said. The charges would be based on agreed thresholds and could reflect peak usage periods – a tactic she compared to the postage Netflix paid the U.S. Postal Service for sending DVDs.
Another way to do this is to incorporate the streaming companies into the FCC’s Universal Service Fund by levying a tax on them. Created by the Communications Act of 1934 and expanded by the Telecommunications Act of 1996 to include the Internet, the fund aims to ensure that everyone has access to communications, which is paid for by contributions from telecommunications providers – a percentage of their end-user revenue. . Or, Layton said, the FCC could calculate an amount Internet companies must pay per terabyte of data they send to the middle mile.
Another solution is to bill end users. The problem with this, she said, is that two-thirds of Americans who subscribe to the Internet watch movies, but one-third don’t, so those who don’t stream entertainment end up paying. more for services than they should. “It’s a little unfair,†Layton said.
A final option is taxes. The report cites a December 2020 proposal from the Benton Institute for Broadband and Society that suggests using federal and state funding to build government-owned networks that are leased to private providers under the term “Open Access Middle Mile.”
Layton pointed to legislation California Governor Gavin Newsom signed in July spending $ 6 billion on broadband, including $ 3.25 billion to “build, operate and maintain a public open access network.” Under the proposal, the government will cover the costs and Internet service providers can use it, which fixes the problem, Layton said, but adds to the burden on the already cash-strapped state.
She also cited the $ 1 trillion federal infrastructure bill that includes $ 65 billion to improve broadband access – another use of public funds, she said, should be unnecessary if the heaviest users are ‘The Internet was paying their share.
But whatever solution is considered, the current pricing model will become unsustainable, the report says.
“We need to put more money into the system or we’ll just never bridge the digital divide,†Layton said.
About the Author
Stephanie Kanowitz is a freelance writer based in Northern Virginia.
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