As much as 94% of rural broadband providers’ network costs is related to streaming video entertainment, according to an academic paper from Roslyn Layton, PhD and Petrus Potgieter, PhD. Those costs have been rising and as they continue to do so, rural broadband economics are threatened, the authors argue.
According to the authors, middle mile costs are the most problematic because government subsidy programs only focus on the last mile.
The authors explore various possible solutions to the issue, including usage-based pricing, requiring the five “Big Streamers” to pay fees to rural broadband providers, requiring streaming companies to pay into the Universal Service Fund and requiring taxpayers to help cover the costs.
The researchers define the five “Big Streamers” to include Alphabet, Amazon, Disney+/Hulu, Microsoft and Netflix.
A usage-based pricing approach would shift more of the cost of supporting streaming traffic to those who generate the most of it.
“Flat rates imply directly that low-volume users subsidize high-volume users,” the report, titled “Rural Broadband and the Unrecovered Cost of Streaming Video Entertainment,” notes.
The authors also argue that if consumers were more aware of the impact of streaming on overall usage, they might learn to optimize their budget and might be more interested in policy issues involving streaming costs.
As for the idea of requiring the Big Streamers to pay fees to rural broadband providers, the authors envision a negotiation process based upon “agreed thresholds” that “could reflect periods of peak usage and other appropriate metrics.”
The authors argue that such fees are pro-consumer because end users aren’t forced to pay for middle mile upgrades if they don’t subscribe to streaming video services. This approach also would incentivize Big Streamers to invest in video compression technologies and the like.
The authors note, however, that “This solution may require government oversight to ensure good faith negotiations.”
An alternative method of having Big Streamers contribute to the cost of middle mile upgrades would be to require them to pay into the Universal Service Fund via a usage fee.
The authors caution, though, that:
“Ideally market actors should be able to resolve the issue without government intervention, but almost two decades of experience have shown that Big Streamers will avoid participating in middle mile and core network costs unless forced by government.”
The authors’ concept of a taxpayer-based solution would involve using federal and state funding to build government-owned networks that would be leased to private providers under the term “open access middle mile.” The authors go on to cite several risks to this approach, however, including unwillingness of consumers to pay, difficulties in determining where to build the networks and others.
The authors stop short of making a policy recommendation, instead stating that “This paper contributes to the ongoing policy discussion of rural broadband and closing the digital divide.”
It would be interesting to hear what readers think about this. Is the emphasis on middle mile merited? Which solution sounds best? Are there others that would be better?
Let us know your thoughts in the comments section below.