Rural America goes ultra-digital

Broadband survey suggests consumers in the hinterlands will get top-of-the-line Internet technology -- if operators can get their hands on stimulus money.

By Anu Partanen, contributor

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NEW YORK (Fortune) -- Rural America is about to get gold-plated broadband service, if the results of a recent survey of telecommunications companies are to be believed.

Of the 100 rural operators polled by telecom-equipment maker Calix, nearly two-thirds say they plan to apply for federal stimulus money aimed at getting rural communities hooked up to speedy Internet connections. And most providers say they are looking at deploying super-fast fiber-to-the-home technology instead of the coaxial cable or copper technologies that now serve most urban and suburban U.S. communities.

Put another way, rural America has an opportunity to leapfrog more populous towns that got broadband first.

Calix, which provides broadband equipment to local carriers (and therefore stands to benefit from the broadband buildouts its survey purports to track), says the potential for federal funding has prompted rural operators to think big. In Calix's most recent survey, roughly a third of respondents said they would seek more than $21 million in federal funding; a rural service provider's typical project has a budget of $1 million to $2 million, says Geoff Burke, senior director of corporate marketing at Calix.

"The infrastructure builders are clearly not thinking in terms of just reaching the small area at the edge of their network, but they're actually looking at this much more broadly," Burke says. Several providers have indicated they are planning projects serving 50,000 to 100,000 homes and businesses, Burke notes, suggesting that a large portion of the rural population will benefit from the proposed broadband buildouts.

Of course, some providers' plans may be bigger than their capabilities. And the process for securing federal money actually does seem to encourage carriers to talk a big game: The money will be doled out by administrators at the Department of Commerce and the Department of Agriculture, and Calix's Burke suggests the larger-than-expected spending proposals may be a gambit on the part of rural operators to win the attention of those agencies.

But more than half of the providers surveyed by Calix say the stimulus money would represent less than 40% of the capital expenditures for their broadband projects. Burke says that means most of these companies were already planning to spend big money on stimulus, and the federal money is indeed going to expand the scope of the operators' efforts -- and thus, expand the job-creation opportunities.

The enthusiasm shown by the small to mid-sized rural providers in the survey strikes a very different tone from the comments made by their big brothers, such as AT&T (T, Fortune 500), Verizon (VZ, Fortune 500) or Comcast (CMCSA, Fortune 500), all of whom have hinted they might drop out of the grant race altogether if the government tries to impose too many restrictions on the grant recipients' business practices. (Some of this, undoubtedly, is part of the political process.) "If regulations are onerous, then yes, it will slow down investment," says Bruce Mehlman, co-chairman of the Internet Innovation Alliance, a trade group.

But unlike the biggest broadband providers, which are based in large metropolitan areas, many of the operators surveyed by Calix are headquartered in the communities they serve. As a result, the executives of rural operators may have an added reason for wanting to get broadband out to their towns: if they don't do it, they'll hear about it from their neighbors.  To top of page

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