ISPs to rural U.S.: Live with dial-up

You can't get there from here. That old New England saw is an apt metaphor for the state of high-speed rural broadband. While many telecommunications carriers are posting record profits this year, millions of U.S. homes and businesses still have no access to broadband -- and that's no coincidence.

The return on equity that Wall Street demands from players in today's largely unregulated telecommunications business all but requires carriers to abandon rural America.

As population density drops outside of metropolitan areas, it's impossible for telecommunications companies or cable service providers to justify the tens to hundreds of thousands of dollars per mile it can cost to bring fiber to every rural community, let alone every home. The result: Today, just 17% of rural U.S. households subscribe to broadband service, according to the Government Accountability Office. And a recent report from the Organisation for Economic Co-operation and Development says the U.S. dropped from fourth in the world in broadband penetration in 2001 to 15th place in 2006.

Communications infrastructure is widely seen as the biggest driver of economic growth, yet 21% of Americans -- the nearly 60 million people who live in rural areas -- are often underserved.

Kim Rossey is one of them. Soon after moving to Gilsum, N.H. (population 811), Rossey learned that he couldn't get broadband to support his Web programming business, TooCoolWebs. DSL wasn't available, and the local cable service provider wasn't interested in extending the cabling for its broadband service the three-tenths of a mile required to reach Rossey's house -- even if he paid the full $7,000 cost.

Rossey ended up signing a two-year, $450-per-month contract for a T1 line that delivers 1.44Mbps of bandwidth. He pays 10 times more than the cable provider would have charged and receives one quarter of the bandwidth.

Limited options for high-speed Internet connectivity are stifling bigger rural companies too. Earlier this year, a $1 billion-plus e-commerce business was left scrambling for answers after Verizon announced that it was selling its rural telecommunications business in New England to the much smaller, less well-capitalized FairPoint Communications.

"These guys were freaking out because the only network they've been able to have up there is an [asynchronous transfer mode] network, and it's going away when Verizon leaves," says an analyst who consulted with the company and asked not to be identified. "They may have to move [to another state]."

The Internet is becoming the road to the workplace. The number of U.S. home-office households is expected to grow from 35.7 million today to 38.3 million in 2011, according to IDC. But rural workers without broadband could be shut out of New Economy jobs.

Alpine Access hires its workforce of 7,500 home-based call center agents over the Internet, and broadband is the price of admission. "Access through our Web site is the only way you can become an employee here," says Rick Owens, vice president of technology. "Some type of broadband service is necessary." Dial-up won't cut it because the applet that connects employees to Alpine Access systems requires a high-speed connection.

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