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01 Over Coals
Infrastructure Project

‘They Rake Us Over the Coals': Rural Schools, Telecoms Battle Over Internet Prices

By Benjamin Herold — November 19, 2015 14 min read
  1. Chapters
  2. 01.
    Introduction
  3. 02.
    Closing the Digital Divide
  4. 03.
    Connecting a 16-Student School
  5. 04.
    'A Regulated Monopoly'
  6. 05.
    Reason for Skepticism
Infrastructure Project

‘They Rake Us Over the Coals': Rural Schools, Telecoms Battle Over Internet Prices

By Benjamin Herold — November 19, 2015 14 min read

In New Mexico cattle-ranching country, harsh geography and a lack of competition lead to astronomical bills for schools desperate to get their students online.

  • Introduction

    Nichole Sanders’ daily commute begins with a 14-mile drive across a seemingly endless stretch of New Mexico grassland, mountains rising in the distance on all four sides, the only traffic the stubborn cattle that congregate on the dirt road leading out to Highway 12.

    mapNMv 02

    At 53,000 acres, the Harriet Family Ranch, originally homesteaded by Sanders’ great-grandparents, now covers more land than the city of Baltimore.

    But all that space is home to just eight people: Sanders and her husband, her brother and his wife, and a pair of children for each couple.

    To help make ends meet, Sanders works in the nearest school district, 68 miles away.

    “It’s tough, but I wouldn’t trade it,” she says of ranching life. “Given the choice to raise my kids in town or come back here, I chose to come back.”

    "I have no use for the big city. There's nothing to do there," says Tucson Sanders, 16.

    For diehards like Sanders, the vast distances and sparse population are part of western New Mexico’s draw.

    But those characteristics are also at the heart of the Internet-connectivity challenge for schools in such rural and remote parts of the country.

    It is undeniably expensive for telecommunications companies to run high-speed lines to schools like tiny Datil Elementary, Sanders’ first stop each day, where her nephew is one of just 17 students in grades K-6.

    Many larger telecoms won’t even try. And without generous federal subsidies, serving such schools doesn’t make financial sense even for smaller, more community-oriented companies.

    But the resulting lack of competition has a punishing impact on schools like Quemado, a K-12 building 40 miles down the road, where 16-year old Tucson Sanders and two of his cousins are among the 109 students enrolled.

    Together, the Quemado and Datil buildings split a modest 22 megabits per second of bandwidth. A small regional carrier called WNM Communications bills the district roughly $3,700 each month. Most U.S. schools can get similar speeds for about $550.

    “You can get angry all you want, but there’s not a whole lot we can do,” said Tim Angelus, the district’s technology director.

    “They just rake us over the coals.”

  • Closing the Digital Divide

    In 2013, President Barack Obama vowed to bring high-speed Internet to schools serving 99 percent of U.S. students. To deliver on that promise, the FCC, led by Chairman Tom Wheeler, overhauled the federal E-rate program, which will now dole out almost $4 billion a year to help schools and libraries pay for telecommunications services.

    There are signs of significant progress: In just two years, the number of students without access to adequate bandwidth has been cut in half, according to a new analysis of E-rate application data by school-broadband advocacy group EducationSuperHighway.

    But that still leaves more than 21 million students disconnected, the group found.

    And when it comes to closing that remaining gap, it’s clear where the biggest challenges lie.

    Part2 ShadowsOnSchool

    Nearly half the school systems in America — more than 6,300 altogether — enroll fewer than 1,000 students. Many of those are in rural areas. When it comes to getting broadband service, they are often victims of a numbers crunch.

    The large carriers that dominate the national landscape — such as AT&T, Verizon, and CenturyLink — avoid serving places like Catron County for a simple reason: There’s no money in it.

    Without them, school districts such as Quemado have limited options. In a recent survey conducted by the Consortium for School Networking, more than half of rural districts reported that only one Internet provider operates in their area, resulting in a shortage of qualified bidders willing to help them get connected.

    Limited Competition for E-Rate Services

    Often, those that do bid are companies like WNM, a small local telecom willing to offer service where others won’t. But the little guys face the same steep costs and shallow customer pools that drive the big telecoms away. In addition, they are generally guaranteed a profit by the federal government, and they typically face little or no pressure to keep prices down.

    Evan Marwell, EducationSuperHighway’s CEO, summed up the problem.

    “There’s no competition,” he said. “As a result, [rural schools] are pretty much at the mercy of whatever local phone companies want to charge them.”

    The CoSN survey results back up that notion: Nearly 20 percent of districts reported paying monthly rates of $50 per megabit per second or more for their Internet access — almost five times the national average.

    The E-rate is supposed to prevent against price-gouging. A provision known as the “lowest corresponding price rule” says that telecoms can’t charge schools and libraries more than they ask comparable non-residential customers to pay.

    But in places like Catron County, determining such comparisons can be tricky, if not impossible.

    The FCC has also shown little ability to aggressively enforce its own rules, despite a history of credible claims of fraudulent pricing by telecoms.

    As part of a 2008 lawsuit, for example, AT&T was charged with flouting the lowest corresponding price rule in Wisconsin for nearly 10 years. Millions of dollars in allegedly inflated rates charged to schools and libraries were in turn passed on to the government, which paid for them via the E-rate program, according to court documents.

    Still, the commission has only tepidly sought to ferret out potential abuses. It is currently seeking to recover just $347,000 out of $2.2 billion in E-rate funds distributed during its last funding cycle.

    The lesson: When it comes to making high-speed Internet access more feasible for schools like Quemado, the FCC’s biggest bet by far is on the power of market forces.

    “We’re not going to enforce our way to achieving the affordability goals of the [E-rate] program,” said Jon Wilkins, the commission’s managing director.

    “Chairman Wheeler is very focused on competition as a specific way to make sure this money is being well-spent.”

  • Connecting a 16-Student School

    The Quemado district would welcome other options, if it could find them.

    But in a school like Datil Elementary, you learn to work with whatever is available.

    At tiny Datil Elementary, "personalized learning" for students doesn't involve much technology.
    NM Drone
    At tiny Datil Elementary, "personalized learning" for students like 8-year old Chisum Harriet doesn't involve much technology.

    It’s a reality that veteran teacher Ricky Chavez is grappling with all over again. A Catron County native, Chavez spent three decades teaching all over New Mexico and Texas. After beating cancer, he decided to return home to finish out his career.

    His class at Datil this year has nine students, spanning 3rd through 6th grades.

    At the front of the room, a large sheet of yellow paper is covered with the leftovers of yesterday’s lesson on descriptive writing:

    My favorite color is green. I like the color green because it is the color of money. Green is a very bright color and it is the color of green grass. When the grass is green, it makes my cows fat and happy. That’s why I like green, because when the cows are fat and happy, I get more money.

    Chisum Harriet, Nichole Sanders’ 8-year old nephew, a wisp of a boy nearly overcome by the heft of his father’s rodeo belt buckle, picks up the conversation. He tells Chavez he now owns 17 head of cattle. The teacher turns it into a math problem. The class eagerly starts figuring.

    “I think they get a quality education,” Chavez said. “You make do with what you got, you don’t panic, and sooner or later you get it accomplished.”

    That’s been the district’s approach to slowly boosting its Internet capacity, too.

    Around the time Angelus was hired to help with technology, in 2003, the district got online via a 1.5-megabit per second T1 copper line, provided by WNM Communications. With only four functioning computers in the school, it was enough.

    Two years later, though, the district bought laptops for its teachers. The network started to buckle under the strain. That’s around the time that Angelus and former Quemado Superintendent Bill Green say they first began asking WNM for faster speeds.

    It took roughly six years for the company to heed their requests.

    In the interim, the district paid through the nose for slow service. In 2008, for example, WNM billed Quemado more than $4,300 per month for its 1.5 mbps of bandwidth, according to district records.

    Even more frustrating for Angelus:

    For all the wide-open spaces in this part of western New Mexico, it turned out WNM only needed to lay less than a half-mile of cable to upgrade the district to a faster connection.

    “There just wasn’t a whole lot we could do to make [the company] be more urgent,” he said.

    WNM, meanwhile, blamed the delay on the district, saying it never made a formal request for the extra bandwidth via the E-rate program. The company also absorbed the full $22,000 cost of construction on the new fiber line, officials said.

    Either way, by the 2012-13 school year, the district finally had its modest upgrade, to 22 mbps of bandwidth.

    The impact can still be seen all over the K-12 school in Quemado.

    Quemado technology director Tim Angelus hopes to boost his school's bandwidth so that students can have more access to online learning tools.
    Part2 SpeedTest
    Quemado technology director Tim Angelus hopes to boost his school's bandwidth so that students like William Yates, 10, can have more access to online learning tools.

    Through a dual-enrollment program, senior Caitlynn Atwood takes an online biology course on her school-issued laptop, receiving college credit at Eastern New Mexico University. Science teacher Aliesia McCoy, pressed into duty teaching math for the first time, relies heavily on online lesson-sharing sites and teacher blogs to find content for her students. Fifth graders in one of the school’s computer labs learn math by battling aliens and robots in an online video game. Middle school students use a software program that lets them read at their own pace through texts tailored to their particular skill levels.

    All the while, though, Angelus sits in his narrow office, one anxious eye on a computer screen. When things at Quemado are humming, the needle on a digital gauge starts bouncing at around 20 mbps, indicating that the school’s available bandwidth is almost maxed out.

    The Cost of Faster Internet

    His bosses say they’d love to introduce more online courses and teaching tools. They’re also under pressure to migrate more of their administrative operations to the cloud. The demands of computerized testing are only going to get more intense.

    But it will all require more bandwidth. And that will only come at a steep price.

    Bumping Quemado up to 50 mbps wouldn’t require WNM to lay any new fiber cable or replace any electronic equipment. From a technical standpoint, it would be as simple as entering a few keystrokes into the computer.

    Company officials, though, say that such an upgrade will cost an additional $1,003.47 each month.

  • ‘A Regulated Monopoly’

    Along with EducationSuperHighway, a group of state agencies is working with Governor Susana Martinez’s office to tackle New Mexico’s rural-school-broadband problem.

    The first step has been understanding the current landscape.

    According to a recent analysis by the state Public School Facilities Authority, the monthly rates schools are charged for Internet access vary wildly across New Mexico, from as little as $1.35 to as much as $3,780 for each megabit per second.

    WNM typically bills its school customers about $150/mbps per month, well above the state average of $19.52/mbps.

    Take the 216-student Reserve school district. It’s on the same deal as Quemado. As with the school in Datil, WNM bills the remote 7-student Glenwood Elementary $697.13 per month for a 2-meg DSL connection.

    Carolyn Nelson is the lone teacher at Glenwood Elementary school, located in the heart of the GIla National Forest.

    In Lordsburg and Magdalena, the high cost of bringing in bandwidth from the outside means the local districts can’t fully utilize the robust fiber-optic networks that connect their schools to each other. Magdalena, for example, is billed $3,457.19 per month by WNM for a 50 mbps connection.

    And down near the massive copper mines in the southwestern part of the state, the Cobre Consolidated district says it can’t find another carrier willing to serve the 69-student San Lorenzo Elementary. So each month, WNM bills the district more than $6,000 for that tiny school alone. San Lorenzo is served by copper T1 lines that deliver a paltry 9 mbps of bandwidth.

    State leaders declined to comment on the record about any specific carrier.

    But Marwell of EducationSuperHighway was blunt in his assessment.

    “I can’t think of anything that would justify that pricing,” he said.

    For their part, WNM officials bristle at the suggestion they are ripping off schools.

    In an interview at the company’s modest single-story office in Silver City, N.M., president David Thomas pointed first to history. By 1974, when the entity that would become WNM began, bigger companies had already pulled out of the state’s harder-to-serve areas, he said.

    Now, WNM’s fiber lines span a service area covering more than 15,000 square miles of harsh, sparsely populated terrain. Maintaining and upgrading that infrastructure isn’t cheap, Thomas said, and the costs have to be spread out across a total of just 5,300 customers.

    “Larger carriers consider a community with a population of 20,000 rural,” Thomas said. “We consider Quemado metropolitan.”

    “Nobody else wants to come to Dodge, because there’s nobody in Dodge,” says John Francis, the executive vice president of WNM Communications, which provides Internet service to schools across western New Mexico.
    “Nobody else wants to come to Dodge, because there’s nobody in Dodge,” says John Francis, the executive vice president of WNM Communications, which provides Internet service to schools across western New Mexico.

    Not only that, but WNM has to buy its bandwidth from someone, too. And in that market, the small local company is actually the victim of limited competition, Executive Vice President John Francis maintained. WNM has to pay more than $20 a month for each megabit per second it brings in to its customers, he said — a much higher cost than in other parts of the state.

    Then there’s the final piece of the puzzle: tariffs. Like more than 1,000 other small “rate of return” carriers around the country, WNM is a part of the National Exchange Carrier Association, or NECA. Through a confusing process that even many broadband experts confess to not fully understanding, NECA establishes rates that allow its members to cover costs and earn a predictable return. The FCC approves those tariff rates, even though it means some schools end up getting astronomical monthly bills.

    “We may have a monopoly, but it’s a regulated monopoly,” Francis said.

    “I take exception to the overture that we’re out there raping and pillaging.”

  • Reason for Skepticism

    The WNM officials also scoffed at the notion that the FCC can magically inject new competition into an area that other companies have neglected for decades.

    If someone wants to come to Catron County and lay 100 miles of fiber at $80,000 a mile to serve a handful of people, Thomas said, “have at it.”

    The reality is that he’s likely right, at least for now.

    And that drives home the scope of the challenge facing the FCC, advocates like Marwell, and states such as New Mexico and Mississippi.

    See Also

    Video Are Rural Students Getting Shortchanged in the Digital Age?
    Education Week talks with students, educators, and FCC Chairman Tom Wheeler to gauge whether billions of new federal dollars and new rule changes to the federal E-rate program can finally help bring affordable high-speed Internet access to America's rural schools. This video segment appeared on PBS NewsHour on February 16, 2016.
    April 7, 2016
    7:00

    It’s hard to envision another company competing to upgrade the Quemado district given the way things are now. The most likely candidate would appear to be Louisiana-based CenturyLink, a giant telecom with a footprint that covers parts of 37 states and about 70 percent of New Mexico’s schools.

    But CenturyLink’s nearest existing fiber connection point is in Socorro, nearly two hours down Highway 60 from Quemado.

    When asked if they’d be willing to invest in new fiber out to the small town and its schools, the company’s answer, essentially, was not a chance.

    It’s also hard to envision the recent changes to the E-rate program shaking things up here. One of the FCC’s biggest new policy sticks involves the “Connect America Fund,” through which federal subsidies are given to companies that bring broadband to rural homes and businesses. Under the new E-rate regulations, telecoms that get money through the fund will soon be required to also offer competitive rates and speeds to schools and libraries. At first blush, that would seem to have big implications for CenturyLink, which in the coming years will receive more than half a billion “Connect America” dollars, including $11 million for work in New Mexico.

    But Quemado is outside of CenturyLink’s existing service area, so the new E-rate requirement won’t apply.

    For all the official optimism, then, there’s plenty of reason to be skeptical that the huge national push to bring affordable high-speed Internet to all rural schools will pan out.

    In fact, groups like NCTA - The Rural Broadband Association, which represents nearly 900 small carriers around the country, including WNM, say the revamped program is now a “60 Minutes story waiting to happen.”

    The group contends that E-rate money that could be used to further offset the legitimately high costs that telecoms incur on existing fiber lines to places like Quemado will instead be used to fund wasteful new networks.

    The association has a point: Within the past decade, more than $200 million in federal stimulus funds, plus millions more from the U.S. Department of Agriculture, have been spent in New Mexico alone on efforts to extend high-speed broadband networks to rural areas. But state officials here, as elsewhere, now say they don’t know where much of that privately owned fiber is.

    The FCC’s strategy of injecting more competition into rural areas may sound good in theory, concluded Michael Romano, the group’s senior vice president of policy.

    “But a lot of these places barely justify the operations of even one provider,” he said.

    Given the challenges, then, why are the FCC and school-broadband proponents so hopeful that even rural and remote schools like Quemado will soon have affordable high-speed Internet?

Full Credits
Reporter: Benjamin Herold
Additional reporting by John Tulenko, David Wald, and Cat McGrath
Photographer and Videographer: Swikar Patel
Additional videography and photography by David Wald
Editors: Kevin Bushweller, Sean Cavanagh
Photo Editor: Charlie Borst
Designers: Laura Baker, Deanna Del Ciello, Stacey Decker
Developer: Chienyi Cheri Hung
Research Assistance: The Education Week Library and Carmen Rojas
Video Intern: Doyle Maurer

Coverage of trends in K-12 innovation and efforts to put these new ideas and approaches into practice in schools, districts, and classrooms is supported in part by a grant from the Carnegie Corporation of New York at www.carnegie.org. Education Week retains sole editorial control over the content of this coverage.
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