The ongoing challenge of rural broadband

Last week, I learned about High Speed Crow, a rural Manitoba broadband provider that has been around since 2003 and laying fibre since 2015.

Haven’t heard of them? Well, neither had I.

In truth, the company should have been on my radar screen; High Speed Crow received federal funding for a rural broadband project 2 years ago.

What I found notable last week was the fibre to the home pricing on its website: $250 per month for symmetric 1 Gbps service. That is a hefty price to pay, but I have no doubt that it is a fair price given the cost of building fibre in rural communities.

For comparison purposes, I took a look at prices for fibre to the home service in Winnipeg. Bell MTS charges $139.95 for 1.5 Gbps service, or $110 per month for symmetric gigabit per second service. But keep in mind, that pricing is for an urban setting.

The pricing differential helps highlight one of the challenges of expanding service to rural markets.

If we can assume that a smaller company like High Speed Crow is charging a price that fairly reflects the cost of it providing service, it isn’t hard to imagine that Bell MTS could do so for roughly the same cost. The overhead costs may be different, and likely the cost of materials may be a little lower due to differences in scale, but it is very unlikely that Bell MTS could have costs that are half of those costs for High Speed Crow. So comparing the prices may be a kind of proxy for comparing the costs in urban versus rural Manitoba.

So, if Bell MTS had tried to offer fibre to the home service in those areas, it would be impossible for the company to offer urban pricing – less than half what is being charged by High Speed Crow. It isn’t hard to imagine the fallout that would arise if a major service provider had differential pricing that offers urban residents service for less than half the price of that offered to people in rural areas.

These kinds of dramatic cost differentials bring to mind numerous questions, such as:

  • What are the implications for expansion into certain areas by major carriers when the costs make it impossible to offer uniform prices across the province?
  • How do government broadband funding programs deal with service providers already operating in regions offering high priced services without a subsidy?
  • Many funding programs are designed to enable urban pricing to be offered in higher cost areas. If a service provider is already operating nearby with pricing that is double the urban rate, should it be eligible for funding (after the fact) to help reduce its rates?
  • Alternatively, how how do we expect it to survive, competing against a government subsidized service provider?

Rural subsidy programs can introduce complications with the potential to distort the investment efforts of service providers, both large and small.

Care is needed by subsidizing agencies to avoid distorting the marketplace and damaging the ground-breaking efforts of rural broadband pioneers.

1 thought on “The ongoing challenge of rural broadband”

  1. Interesting points. Totally agree that subsidy programmes need to understand what they are doing and how they have potential to distort the market. They benefit from having industry experience within their team – or dare I say consultants such as us who have that type of experience!

    As examples from the UK market, major carriers will not enter some rural areas even with 100% subsidy as they can’t make their returns. For existing suppliers in an area with higher prices, subsidised programmes cannot enter provided the prices to consumers are less than what is regarded as an affordability limit. Public policy is to extend availability of affordable services, they want people connected and gaining the benefits. If the price is too high such that its a barrier to take up, then subsidised programmes can enter. Looking at it from the view of end consumers and policy makers, that seems fair. In terms of a subsidy to an existing supplier to effectively lower its rates, nothing stopping that supplier submitting a bid for capital funds to rollout a more affordable solution which would then allow it to provide lower retail services.

    All good questions I think and a reflection on the importance of good intervention design.

Comments are closed.

Scroll to Top