Rural Broadband and the Unrecovered Cost of Streaming Video Entertainment

This paper describes the challenge of four rural broadband providers operating fiber to the home networks to recover the middle mile network costs of streaming video entertainment and quantifies the amount of the current and future shortfall. It describes the components of the rural broadband networks, policy background for their evolution, an overview of providers, and the financial calculations of cost recovery. The preliminary results show that current broadband prices are approximately $50 per month per subscriber. Separately, subscribers pay about $25 per month in subscriptions to video streaming services Netflix, YouTube, Amazon Prime, Disney+, and Microsoft. These five video entertainment streaming providers comprise 75 percent of total network traffic on the four rural broadband networks and require an additional cost of $11.65 per month in capital costs, which is presently absorbed by the broadband providers. The analysis shows that 77–94 percent of total network costs are related to streaming video entertainment. This amounted to $100-180 of unrecovered costs per subscriber annually, whether the subscribing household is streaming a lot of content or not. If we compute the average monthly shortfall for the estimated two-thirds of households that receive significant streaming content, the shortfall is $17.48 per subscriber. Given the popularity and growth of video streaming entertainment, the middle mile cost is expected to double in 3-4 years, while the number of subscribers is expected to stay constant. The unrecovered cost will grow to $25.04 per subscriber or $81,953,409 in total for the four providers.


Rural Broadband and the Unrecovered Cost of Streaming Video Entertainment