A Mobile Future for Rural America


The recent announcement of President Obama's White House Rural Council shows renewed Federal government recognition of the importance of investment in rural areas. As we continue to move forward in this digital age, we must also recognize that access to reliable broadband technology is one of the most important benefits that rural communities can have.

Increased broadband deployment and adoption across America provides the promise of access to technologies, education, medicine, and conveniences that simply have never been available in rural America in the past.  Yet, fulfilling this promise is challenging because traditional wired broadband is extraordinarily expensive to deploy in rural areas.   Traditionally, Washington has primarily relied on private sector investment with supplemental government funding to overcome this economic barrier to build-out.  In light of current fiscal constraints, governments will be hard pressed to help fund future broadband investments.

This raises the question of how to achieve the Obama Administration's goal to accelerate broadband availability to those Americans who do not have it without having to use taxpayer dollars to do it.  Fortunately, the evolution of the wireless industry may provide an answer.   While market structure in the wireless industry continues to change, virtually all the key economic indicators across the industry are positive:  prices have fallen, consumer demand has increased, output is exploding and new innovation and services are hitting the market at breathtaking speeds.  And private investment by wireless companies has provided one of the few bright spots in an economy that is otherwise still struggling.

And along came the proposed merger of AT&T with T-Mobile and with it, the potential to accelerate the deployment of wireless broadband across rural America.   The companies say the merger will expedite the investment of more than $8 billion to enable the delivery of next-generation wireless broadband to millions of Americans than otherwise possible.  Importantly, this investment will occur without relying on public sector funding.  What's more, the accelerated deployment of advanced wireless networks to rural America creates the potential for enhanced competition with wired and other broadband services in these communities.

Whether this transaction will unleash these kinds of benefits will hinge on whether or not regulators determine the merger will have a negative impact on competition.  The Department of Justice Antitrust Division will closely scrutinize the transaction to determine its effect on competition, while the Federal Communications Commission will apply its "public interest" review standard to analyze the merger's impact on issues like the provision of telecommunications and broadband internet services in rural America.

During last month's Congressional hearing, some seemed to imply that rural Americans will be disadvantaged by the merger.  In fact, new research suggests that the expansion of wireless service comports with the prevailing trend in rural America where large numbers of consumers are opting to replace wired service for mobile.   A recent Center for Disease Control (CDC) report found that in the first half of 2010, over one-quarter of all American households (26.6%) had wireless-only telephone service - and that the shift was being led by states with large rural populations, including Arkansas, Mississippi, Texas, North Dakota, Idaho, Kentucky, Oregon, Colorado, Nebraska and Oklahoma.

At a time when rural America faces economic hardships, broadband internet provides an important pathway to renewed prosperity.  Government studies have shown that rural communities with broadband access significantly outpace communities without such access with respect to employment, business activity and property values.  Given the limited resources available to government these days, private sector investment such as that envisioned by the AT&T-T-Mobile merger could be a practical and timely way for regulators to ensure the unique economic and social benefits associated with access to the Internet are available to more Americans living in rural areas.

Some have suggested, correctly in my view, a revamp of the federal Universal Service Fund to focus on broadband could accelerate advanced broadband in rural America.  But, this idea has been on the table for years without much progress.   The FCC is now considering the matter, but considering its complexity, fundamental reform appears years from implementation.

Thus, the best hope for timely deployment of state-of-the art high-speed broadband services to rural communities may reside in AT&T's recent proposal to acquire T-Mobile USA's wireless operations.   If Washington approves the transaction, and the companies make good on their commitments, more than 97% of the U.S. population and an additional 55 million Americans will benefit from the economic and social opportunities that broadband connections create.  Thus, public policy makers - including members of the White House Rural Council -  should view this merger as an opportunity to generate new private investment that will significantly enhance economic and social opportunity in rural communities across the country.

John Mayo is the Executive Director of the Georgetown Center and Professor of Economic, Business and Public Policy at Georgetown University's McDonough School of Business.


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