Persistence of the middle mile problem for rural local exchange carriers

Cost of middle mile bandwidth is declining, but the bandwidth required to meet the needs of broadband subscribers is increasing. The Federal Communications Commission (FCC) has set a Broadband Availability Target of 4 Mbps downstream speed, but average speeds provided to customers in rural areas fall short of this target, indicating a need for more investment in bandwidth capacity. The cost of these upgrades will be substantial and may prove to be a barrier to providing greater speeds to subscribers. We also find that higher capacity and packet technology provide cost savings for the middle mile connections. Population density and geography alone do not explain differences in middle mile costs.