Bridging the Digital Divide: Bringing High-Speed Internet to Rural Areas

Telecom companies are playing a critical role in bridging the digital divide between high-speed internet availability in urban areas and the lack of service in rural communities, overcoming the challenge of extending access to hard-to-reach remote areas.

"High-speed internet has become a life-changing necessity for many people," says Pete Foley, Group Head of Technology, Media & Telecommunications Corporate Banking at Fifth Third Bank. "Closing this digital divide is deeply important because it enables people in rural communities to access healthcare, education, business support, and more, no matter where they live."

In 2023, the Biden administration announced a $65 billion Internet for All program, which includes more than $40 billion for a program called Broadband Equity Access and Deployment (BEAD), which aims to help close the broadband gap for the 8.3 million American homes and businesses that aren’t connected to high-speed internet. As the federal government disburses the funds, states are now rolling out the program, creating opportunities for telecom companies to reach millions of new customers in rural markets.

But the expansion also faces significant challenges, including proper administration of the subsidy programs and the high cost of building networks in remote areas. The financial requirements are so large that the federal outlays are not sufficient, and commercial financing from commercial banks, private equity, or direct lenders is a necessity.

The Rural Broadband Challenge

Among people living in rural congressional districts, only 62% have access to broadband internet compared to 73% and 76% in urban and suburban areas, respectively. The digital divide exists largely because of the high costs involved in extending broadband from densely populated cities to sparse rural areas because of the greater distances involved: "The government subsidies will help overcome the prohibitive costs," says Fifth Third’s Valerie Schanzer, Managing Director of Technology, Media & Telecommunications Corporate Banking. "The funding helps telecoms deploy sufficient high-speed internet networks so that rural America may have the same access to the benefits that high-speed internet provides to those in more urban locations."

The lack of access creates multiple hardships for rural residents. For example, people without high-speed internet may be unable to access telehealth services, which often extend the reach of hospitals and medical providers into areas that typically don’t have specialty medical or mental health services. Students also face challenges, from an inability to connect with online K–12 lessons or even university-level degree programs to simply completing the research they need for regular schoolwork.

There are business impacts to limited connectivity as well. A lack of access to broadband makes it difficult for businesses in rural areas to recruit and retain professionals across multiple industries. The digital divide limits entrepreneurship and remote work options. It can also make it tough to participate in online professional development programs or certification courses that enable people to advance their careers.

Telecom Opportunities

Telecoms can leverage the BEAD program to benefit their customers and businesses, eliminating the rural divide that negatively impacts people living in remote areas. The key is understanding the landscape, including the related opportunities and challenges.

There’s much to be gained on the opportunity side, including:

• More connected end users. Whether that "last mile" of broadband is made via fixed wireless (unlike mobile phones that roam, this technology delivers broadband wireless between two fixed locations), conventional cable, or fiber optic cable, the result is increased connectivity for users. That enables residents to increase their education levels, expand their business and career opportunities, increase their earning potential, and even improve their health.
• Enhanced communities. High-speed connectivity helps rural communities by improving public safety services, healthcare, business growth, tourist attractions, and more. For rural cities, counties, and states, the positive impacts of widespread connectivity may also contribute to higher property values, more new businesses, lower unemployment, and population growth.
• Sector and industry business growth. Broadband projects require materials, products, consulting, manufacturers, administrators, construction crews, civil engineers, service providers, software developers, utilities, local and state government administration, integrators, resellers, and more. "The funds dedicated to this program benefit more than telecom customers and companies; they can also spur broad economic growth across multiple industries," says Fifth Third’s Eric Oberfield, Executive Director of Technology, Media & Telecommunications Corporate Banking.

Learning From Past Challenges

While there are great opportunities, realizing the potential of rural broadband also means navigating some unique challenges. The cost of implementing adequate networks in rural markets is a significant obstacle; however, the programs can be successful by avoiding the mistakes of previous broadband expansion initiatives.

For example, the single largest annual funding source for broadband for many years has come from the Federal Communications Commission (FCC) Universal Service Fund. In 2020, the FCC created a $20 billion program called the Rural Digital Opportunity Fund (RDOF), which awarded funding through a competitive auction to areas lacking broadband.

The process identified companies that could bring broadband to needed areas at the lowest cost. However, the FCC did not require bidders to pay for the bidding process or to verify their operating capabilities. As a result, some of the companies that bid the lowest prices were unable to deliver the broadband that they had promised to provide.

The RDOF has since received a lot of scrutiny from service providers and entities across the nation about the failures of its process. For the current round of funding, rural communities, governments, and telecoms have all expressed hope that the National Telecommunications and Information Administration (NTIA), which will allocate $48.2 billion of the total broadband funds, will play a greater role in the management and administration of the program.

That may help ensure that the funds are deployed in a way that truly helps underserved communities access the high-speed broadband they deserve. Because the states are receiving the funds, they will establish rules and procedures for awarding subgrants in consultation with the NTIA. The program’s success will largely depend on how well states and the NTIA monitor and enforce standards.

The federal broadband funding creates the potential for rural communities to close the digital divide, improving their competitiveness and opening opportunities for individuals and businesses. Telecom companies will play a key role and can enhance their impact by understanding the opportunities and preparing to navigate the potential challenges. The result will be successful broadband deployment and a more connected country.

Interested in more telecom insights or financing solutions? Contact Fifth Third’s Technology, Media and Telecommunications team.