National Telecommunications and Information Administration
U.S. DEPARTMENT OF COMMERCE
Washington, DC 20230
In the Matter of
Request for Comments on Deployment of Broadband Networks and Advanced Telecommunications
Docket No. 011109273-1273-01
The National Exchange Carrier Association, Inc. (NECA) submits these comments in response to the NTIA’s Notice of Inquiry (NOI) in the above-captioned proceeding. The NOI requests comment on the status of broadband deployment in America. The NTIA asks interested parties to comment on a number of issues, including: supply and demand for broadband services; and the technical, economic, or regulatory barriers to broadband deployment.
In specific, the NOI seeks comment on the current status of supply and demand for broadband services. NECA submits for the record in this proceeding summaries of two extensive studies of the costs of broadband deployment in rural areas. These studies focus on areas of network infrastructure that are of particular expense and concern to rural telephone companies seeking to offer broadband services using digital subscriber line (DSL) technology: the "last mile" and the "middle mile."
NECA has an extensive background in collecting and analyzing data from rural telephone companies. Biennially, the efforts of the 1,100 mostly small, rural telephone companies that participate in NECA's traffic sensitive (TS) pool are published in NECA's Access Market Survey. The most recently published Access Market Survey concluded that small companies have higher risks resulting from: 1) the need to recover higher deployment costs associated with serving demand in areas where customers are widely dispersed over large geographic areas; 2) changing network standards; and 3) continuing regulatory uncertainty.
Building on the knowledge acquired through the Access Market Survey, NECA focused directly on broadband deployment in its "last mile" study, which was completed in June 2000. NECA’s "last mile" cost study found that the estimated cost of upgrading 3.3 million rural study area lines amounted to $10.9 billion dollars. Approximately half of that total was associated with upgrading lines serving customers situated in areas that are either very remote or situated in difficult terrain.
NECA's Middle Mile Cost Study, completed in the fall of 2001, focuses on the cost of transporting Internet traffic from an Internet Service Provider (ISP) operating in a rural telephone company's territory to an Internet Backbone Provider (IBP). This section of transport is commonly referred to as the "middle mile." In NECA's Middle Mile study, member companies indicated that long distances to Internet backbone nodes and lack of market size create revenue shortfalls that make it uneconomical for ISPs to do business in rural communities.
NECA’s Middle Mile study showed, for example, that 55% of rural telephone company switches are more than 70 miles away from an IBP node, and that 10% are more than 200 miles away. Costs per line for transporting high-speed traffic to these nodes range from $17 to as much as $8,754 per line. Because of this high transport cost, high speed services, if offered in rural areas at all, generally incur revenue losses for providers. Paradoxically, these losses increase as market penetration increases because operating margins remain negative at higher levels of demand. These obstacles make it uneconomical for rural LECs to provide broadband service to many of their customers.
The NECA member companies represented in these studies currently account for more than 49 percent of the lines served by rural telephone companies as defined by the Federal Communications Commission. They serve more than 30 percent of all lines that are classified as rural, regardless of telephone company size. NECA's studies clearly indicate that many customers in rural areas will be left unserved through market forces alone.
Small, rural LECs face tough challenges posed by the high cost of the "last mile" and the "middle mile" in the territories in which they are situated. NECA's Last Mile and Middle Mile studies provide valuable insight into the special circumstances and challenges rural companies face in making broadband deployment economically feasible. The studies show that there are two aspects of the problem: the cost of deploying broadband-capable services to individual homes and businesses in sparsely-populated rural areas, and the cost of connecting rural areas to the Internet “backbone.” As NTIA moves forward with its analysis, it should give consideration both to the “last mile” and “middle mile” portions of the broadband deployment challenge.
CARRIER ASSOCIATION, Inc.
By: s\ Gina Harrison
December 19, 2001 Gina Harrison
Colin Sandy (admission pending)
2120 L Street NW, Suite 650
Washington, DC 20037
 NECA is a non-stock corporation in which all incumbent local telephone companies are members, as mandated by rules of the Federal Communications Commission. Formed in 1983 to administer the FCC's access charge plan following the breakup of AT&T and the Bell System, NECA today provides a wide range of services to the telecommunications industry. NECA has staff with expertise in telecommunications regulation, the administration of complex public policy programs, and the collection, analysis and forecasting of industry data.
 Notice, Request for Comments on Deployment of Broadband Networks and Advanced Telecommunications, Docket No. 011109273-1273-01, 66 Fed. Reg. 57941 (2001)(NOI).
 NTIA itself has found that only digital subscriber line technology holds the prospect of delivering broadband beyond the rural town limit. See United States Department of Commerce, National Telecommunications and Information Administration & United States Department of Agriculture, Rural Development and Rural Utilities Service Advanced Telecommunications in Rural America: The Challenge of Bringing Broadband Service to All Americans (April 2000).
 A summary of NECA's Last Mile study results, titled NECA Rural Broadband Cost Study: Summary of Results, is attached as Appendix A. A summary of NECA's Middle Mile study, titled NECA's Middle Mile Cost Study: Executive Summary, is attached as Appendix B.