When Is The Cost Of Delivering Internet Too Much?

Alaska has long been behind the times when it comes to internet access.  Nearly 30% of the state’s population doesn’t have access to broadband internet.

The answer of “why” to that question is not all that hard to figure out.

It’s expensive.

Really expensive.

And there appears to be no financial limits placed on “how much is too much” when it comes to getting broadband to the most remote locations in Alaska.

The Actual Cost Of Broadband

I happened to be reviewing some of the tribal funding that was going to rural connectivity around Alaska.

According to the FCC, the Calista Corporation is set to receive a little over $52.5 million dollars of federal tax money to deploy high speed broadband.

Now, this is some of the most rural, inaccessible and least connected part of Alaska.  You might think, “Good for them!”  And that’s what I initially thought as well.

Until I read how many households all that money is actually going to serve.


For $52.5 million dollars, we’re going to connect just 806 households.  When you do the math, that’s over $65,000 per household!

With that same amount of money, you could literally buy those same households access to Starlink for almost 50 years!

And that’s assuming they actually have a “take rate” (or, people that subscribe) of 100%.  Typical take rates are in the 10% to 40% range.

Some people just don’t see the value of an internet connection, can’t afford one or prefer to get internet in other ways.  Or maybe they have service through another carrier like Starlink.

Is Internet-For-All In Alaska Sustainable?

A way more educated way to look at the shocking numbers is to consider a basic return on investment.

Let’s assume that this area is desperate for internet and we see a high end take rate of 40%.  So, of the 806 households that are served, approximately 322 of them subscribe.

Our cost per household then goes up to $163,228.  (Which is insane, but bear with me…)

Let’s also say those households are charged something around $150 per month for service.

It’s going to take over 90 years of service to pay for the cost of implementing that connection.  90 years!

What is the internet going to look like in 90 years?  I have no idea.  Will fiber even be relevant at that point?  I have no idea!

And to be 100% clear.  No one has that crystal ball.

But, we do know that a reasonable life span for a cable is around 50 years, give or take.  So, not even halfway through the payoff period, it’s likely to become obsolete.

Going back to the “why not just buy them Starlink?”  You could buy them Starlink for 123 years with that kind of money!

No company on earth would ever accept that as a reasonable return.  The only way it can be done is through public money.

And remember, the equation only gets much worse with lower take rates.

The question really is…is that even sane?

No One Seems To Ask How Much Is Too Much

One of the problems with infusing public money into infrastructure is there are apparently no rational limits placed onto what’s reasonable or not.

Like we said above, if this were a private venture, there’s no way it’d happen.

That’s also why it hasn’t happened.

But, in this quest to try and equalize access to the digital era, it seems that we have truly lost our minds.

I’m even sympathetic to people who’ve found themselves on the other side of the digital divide.  And even I think this plan is ludicrous.

I suppose in this day and age, no one really pays attention to the value we get from taxation.  Or, the thoroughly ridiculous ways that our money is spent sometimes.

The Wrong Mindset For Alaska

It’s very clear that looking at recent broadband programs like BEAD and other various funding that it strongly prefers traditional “wireline” services.

Reading between the lines, that’s fiber and gigabit connectivity at all costs.

But, is that really the right mindset for Alaska?

No one really “needs” gigabit connectivity today.  Most households rarely exceed 50mbps, so these targets are based entirely on fictional desires as opposed to a needed reality.

Beyond that, it’s purely matters of convenience.

I’d argue when the the theoretical return on investment is over 100 years that to solve that mythical problem, we’re not solving the problem correctly.  Much less, asking the right questions.

100 years in technology terms is insane to think about.

The internet, as we know it today, didn’t even exist 35 years ago.  Why are we making bets that are financially insolvent for more than three times that long?

This is what happens when you get government and big business together, they pick the winners and losers.

Yet, we forget, this is OUR money that they spending!

(Well, admittedly, it’s mostly lower-48’ers money…)

What’s A Sane Approach?

I was raised right.  If I’m going to complain, at least I’ll offer a potential solution.

The wise approach would be to consider all current options on the table.  It could be a multitude of things.

Point to point and point to multi-point wireless is much better than it was only a few years ago.  We’re also sitting on the precipice of WiFi7 that will increase possibilities even more.

Using this technology, it’d likely be possible to service many times the amount of households and villages, while using a much more strategic fiber footprint.

Starlink is also certainly a viable option for people in these places, despite “Uncle Elon” being the loved and hated nemesis that he is.  Like it or not, it’s there and it’s proven.  So, why aren’t we leveraging it?

In fact, it’s likely anyone that desperately wanted internet access probably all ready has Starlink!

There’s also massive investment into upcoming LEO systems like Amazon’s Kuiper and even others.  Perhaps let them evolve a bit before we start blowing millions on a few people?

But, these are all sensible approaches.  And it appears that the people with the purse strings aren’t interested in sensibility.


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