The cost of running fiber in rural America: $200,000 per passing

In a routine release last week, the U.S. Department of Agriculture (USDA) announced the latest group of grant winners for its ReConnect broadband deployment program. But hidden in the otherwise unassuming announcement were some startling figures. A prime example: The Alaska Telephone Company, which won a $33 million grant, is planning to run fiber to 211 homes and five businesses at a staggering cost of nearly $204,000 per passing.

Here's the breakdown. In addition to the grant, the operator said it plans to invest $11 million of its own money in the project. If divided evenly, that means the cost per location shakes out to around $203,700.

Another operator – Texas-based Big Bend Telephone Company – won a $24 million grant to deploy fiber to just over 100 locations. While this would imply a cost of nearly $231,000 per passing, Big Bend said in a press release the project will actually cover around 312 locations, which would lower the per-location cost to just under $77,000.

It’s worth noting that the whole point of the ReConnect program is to help connect rural and remote areas that might not otherwise be economical for operators to cover. Indeed, the cost per passing was also high for other grant winners. For instance, Alaska’s Arctic Slope Telephone won nearly $31 million to cover 492 locations, implying a $63,000 cost per passing. And Michigan’s Sault Ste. Marie Tribe of Chippewa got a $24.9 million grant to cover 1,243 locations, which factors out to a cost per passing of just over $20,000.

For comparison, other operators have cited much lower figures for their fiber builds. Frontier Communications, for instance, has repeatedly said its cost per passing runs between $900 and $1,000. Meanwhile, Shenandoah Telecommunications (Shentel), which operates in more rural-leaning areas, has estimated its cost per passing at $1,000 to $1,400.

The ReConnect grants lead to (at least) two key questions: why fiber in the first place and what’s driving the higher costs?

A WISPA spokesperson noted in a statement to Fierce that fixed wireless access (FWA) technology “can be ideal for sparsely populated, tough to reach and costly areas,” since it holds up even “in the most unforgiving conditions” and can be deployed faster than traditional wireline networks.

But in the case of the Alaska Telephone Company and Arctic Slope projects, the answer to the question “why fiber” is simple. A USDA Rural Development representative told Fierce it “did not receive any applications from Alaska which overlapped with the projects announced in that state.” Basically what that means is while it’s feasible that another technology like fixed wireless access could have been cheaper, no other options were on the table for these areas.

As for what’s driving the high cost in award areas, Michael Burke, CEO of Alaskan operator MTA, told Fierce the rugged terrain, short construction season and wetlands in the state are all factors. But he added “the most significant cost driver is the difference between the relatively small number of homes being served and the distance to the nearest fiber optic network. For example, the rural area of Tyonek is one that MTA would like to serve, and we plan to apply for grant money to achieve it, but the project would require a 41-mile fiber build to connect to our fiber in the Point Mackenzie area.”

Indeed, regional operator C Spire has previously flagged access to backhaul as a key challenge for rural fiber deployments. 

Additionally, while FWA deployments are generally cheaper than fiber, Nextlink CEO Bill Baker told Fierce by email that in a place like Alaska even “getting a tower built is going to be much more expensive given the rural nature of the roads, lack of rural electricity at a tower site and mountain topography.”

“Ultimately, it wouldn’t shock me if they had rural costs in excess of $20 a ft for fiber” in Alaska, he added. “We build fiber and fixed wireless all over rural USA and I would not want to touch Alaska with a 10 ft pole.”