Last Mile Problem

In telecommunications and information technology, the Last Mile problem refers to the issue of connecting people to technology in the last leg of delivery within the infrastructure network. The “last leg” delivery is the final link of physical infrastructure that connects internet services to consumers. Examples of physical last-mile infrastructure are telephone poles, landlines, fiber-optic cables, coaxial cables, etc. The term “Last Mile Problem” originated in the context of communications, but has since spread to the areas of transportation, supply chain logistics, and utilities (e.g. water, natural gas, etc.). The issue first rose to prominence with the popularization of landline telephones in the majority of homes in America, but has come into focus as an issue for many logistics managers and supply chain analysts.

Telecommunications Problems & Background

Map showing areas (in red) without access to Broadband Internet in the United States

The Last Mile Problem has become a larger logistics issue that has cascading effects on many services. Within telecommunications, any break in Tier 3 Internet service has Last Mile effects on users. Tier 3 service is the connection between local Internet Service Providers (ISPs) and the end user (retail customer). In 2021, 73% of people in Least-Developed Countries (LDCs) and 38% of people globally did not have access to the Internet, which precludes them from accessing any information or services that the Internet provides. During the 2020 COVID-19 Pandemic, the growth in Internet users accelerated globally, with 800 million more online users in 2021 than there were in 2019. In 2019, there were 4.1 billion internet users globally. In 2021, there were 4.9 users globally, but 2.9 billion people around the world remain unconnected to the Internet. Outside of major metropolitan areas, Last Mile connectivity is an increasingly large cost for ISPs as they do not have the population density and smaller overall area that gives them a financial incentive to provide broadband speed Internet access. High-Speed internet service is provided by fiber-optic cables, which are prohibitively expensive to install and maintain in less densely populated areas. Last Mile connectivity issues also affect poorer areas as ISPs tend not to upgrade their physical infrastructure (their largest expense) in areas they do not see as economically feasible to do so. This creates an obstruction to the access of information in rural and poor areas and could lead to disparities in education, healthcare, and other areas that depend in some part on access to high-speed Internet. Additionally, some in the American telecommunications field have suggested that the United States Government or local governments should subsidize wireless internet access and this has led to increasing calls for the Internet to be classified as a public utility/service in the United States. This has fueled a debate as to suggested issues of equity surrounding internet access in rural and socio-economically disadvantaged communities around the country. Last Mile connectivity in Telecommunications could pose issues for businesses as well. eCommerce businesses could experience up to a 2% increase in revenue from just a 100ms decrease in latency, some scholars say. Outside of eCommerce platforms specifically, more and more businesses are using the Internet as an important part of their business, with online stores burgeoning in popularity over the course of the 2010s. If Last Mile connectivity for these businesses is poor, it could affect a business’ revenue.

Last Mile & Net Neutrality

Net Neutrality is defined as “The principle that Internet Service Providers must treat all Internet Communications equally, offering users and online content providers consistent rates irrespective of content, website, platform, application, type of equipment, source address, a destination address, or method of communication.” Some Net Neutrality experts have raised concerns about Telecommunications companies taking advantage of laissez-faire Net Neutrality laws to leverage the Last Mile connectivity over consumers. Some concerns that have been raised include speed-throttling, restrictions on accessing websites, and a general lack of high-speed internet that would limit the free flow of information to consumers as they please. Advocates say that this so-called “artificial congestion” would restrict consumers from accessing certain content and allow ISPs to favor specific websites or content. Additionally, ISPs could use this leverage in order to raise the price of Internet access to consumers or create pay packages that allow a certain amount of access to the Internet depending on the package the consumer chooses to pay for. An example of artificial congestion can be seen in China, which has a firewall over all users trying to access the Internet within its borders. Internet speeds are artificially slower in China because all content users’ access over the Internet has to be scanned for content and potentially censored by the government. In 2015 in the United States, the Federal Communications Commission (FCC) ruled that the Internet should be regulated under Title II as a common carrier. This meant that ISPs were not allowed to discriminate against Internet traffic and had to treat all Internet activity equally. In 2017, the FCC reversed this decision and repealed net neutrality principles in the United States.

Telecommunications Solutions

Fixed Wireless Access (FWA) is a technology that uses radio waves and antennas to send signals to modems that can convert the radio waves into wireless Internet. This solution provides fiber-like connectivity speeds and could be deployed in both rural and urban settings. FWA could be a more economical solution to network densification and can be done in areas without existing wireless infrastructure or dated infrastructure. This makes it more cost-effective for broadband companies than upgrading their physical infrastructure in these areas. FWA has been suggested as a companion for existing fiber-optic networks. In fact, some experts believe that FWA can handle enough bandwidth to give businesses competitive advantages in rural areas that have traditionally not had the capability to run numerous internet applications to support their businesses. For example, this would allow manufacturing plants to support Internet of Things (IoT) and AI applications in their processes.

A Verizon Fixed Wireless Access (FWA) unit attached to a telephone pole

Scholars have also raised concerns about the barriers to gaining a license to provide internet access, particularly in rural, underserved areas. Relaxing procedures and red tape as well as discounting costs surrounding licensing in these areas has been brought forward as a solution that would help providers expand access at a lower barrier to entry. Tax breaks and incentives for ISPs to invest in these areas have also been proposed to make high-speed Internet access more attractive to companies. Another similar proposal is public-private partnerships, which would see ISPs partner with government entities to bring Internet access to traditionally underserved areas, while splitting the cost between taxpayers and the firms. These kinds of solutions have been employed in Brazil, where state tax credits have spurred ISPs to build in rural areas.

Supply Chain Logistics

Information Technology has enabled supply chain logistics to advance rapidly in the 21st century. One area where this has become particularly apparent is in eCommmerce. With the rise of online shopping, particularly during the COVID-19 pandemic, logistics and delivery companies struggled to keep up with the demand of consumers. The Last Mile of delivery presented the biggest challenge for these companies, particularly in less dense areas, as delivery in the last mile is the least efficient part of the supply chain. However, some technological solutions have helped to ease the stress of eCommerce delivery. For example, crowdsourcing deliveries through gig economy platforms like InstaCart allow companies to take the burden off of the last leg to get the product to the consumer.

Supply Chain Software

Aside from gig economy platforms, there are many software solutions for last-mile delivery. Route optimization is one key software solution that uses algorithms to identify the fastest and most efficient route for delivery drivers. These algorithms consider a number of factors, including distance, traffic, and customer delivery time windows. Although these algorithms started with creating pre-defined routes, they have since advanced to include real-time data that makes changes as inputs are received. Another software solution is Real-Time Fleet Tracking. This software uses GPS technology and drivers’ smartphones to create visibility on package deliveries. This software allows delivery dispatchers and customers to view where their drivers are. Estimated Time of Arrival (ETA) calculation algorithms are employed to predict when a package will arrive to a customer. ETA algorithms use predictive analytics and machine learning algorithms to increase their accuracy. They are fed historical data as well as real-time data in order to make these predictions. Electronic Proof of Delivery (ePOD) systems are enabled by drivers’ tablets and smartphones. Customers can sign directly onto these devices and their confirmation is then uploaded instantly to confirm receipt of the delivery. Data Dashboards are used by delivery services to track and optimize their delivery operations. Key Performance Indicators (KPIs) are displayed to ensure that the delivery network is on track. While none of these software offer a complete solution to last-mile deliveries, in tandem they provide a much clearer picture of last-mile deliveries for both the customer and the delivery service. This can improve the customer experience and contribute to more efficient operations for the delivery service.

Last-Mile Delivery Startups

Several startups have launched in the last decade to address Last Mile delivery issues. One of these startups is Onfleet. Onfleet, based out of San Francisco, was launched with a specific focus on food and beverage deliveries. Onfleet has end-to-end offerings including a dashboard for dispatchers, a mobile app for delivery drivers, and real-time notifications and tracking for customers. These three offerings ensure visibility and transparency for everyone involved in a last-mile delivery. Another startup in the last-mile delivery space is Bringg. Bringg uses AI to orchestrate deliveries for retailers, restaurants, and grocery stores. It is also used by large distributors, logistics companies, and healthcare providers. One key feature of Bringg is its ability to engage fleet capacity on demand. It can leverage existing delivery fleets as well as third-party logistics providers to expand a fleet in real time. Bringg can also interface as a hub to connect retailers with no delivery fleets to external delivery providers. Due to the modular nature of Bringg’s software, including an Application Programming Interface (API) with extensive documentation, users are able to build customized last-mile solutions according to their own requirements.

Ethical Issues with Last-Mile Deliveries

Sustainability has become a key ethical issue when considering last-mile delivery issues. eCommerce began its rise throughout the 2010s, but had not reached a critical mass until the COVID-19 pandemic. With the meteoric increase in eCommerce deliveries during the COVID-19 pandemic, package delivery sustainability has become an increasingly debated issue. One issue that environmentalists have raised concerns about is the carbon footprint of logistics and delivery companies. Overall supply chain emissions make up about 90% of many companies’ carbon emissions, with last-mile deliveries contributing to about 5% of the total, but this number can vary greatly. With an increasing focus on fast deliveries, experts believe that last-mile emissions will rise. For example, a report based around Tokyo predicted that eCommerce order volumes will increase by 85% in the city by 2030. With the increase in orders, it is predicted that 71% more delivery vehicles will be needed in Tokyo. This increased traffic and congestion could contribute to a 25% rise in emissions in city centers. As a consequence of faster deliveries, many trucks are being sent out on routes, despite only being partially full. This is a contributing factor to traffic, congestion, and pollution. Refrigeration emissions are yet another delivery issue. Refrigerated delivery trucks emit more carbon than regular delivery trucks. 40% of these temperature-controlled vehicles’ emissions come from the energy devoted to refrigeration. The chemicals used in the refrigeration process, hydrofluorocarbons, also contribute to ozone depletion.

An Autonomous Amazon Prime Delivery Robot in the process of completing a delivery

Last Mile Autonomous Delivery could be another solution for helping to solve the burgeoning environmental issues that Last Mile Deliveries are causing. eCommerce sales are rapidly increasing, and are expected to account for 20% of all retail sales in 2022, as opposed to just 10% in 2017. According to a study conducted in Mexico, Fast Shipping resulted in a 15% increase in CO2 emissions in the country. This is attributed to a lack of delivery consolidation due to the constant need to send out various packages before trucks are full. However, Autonomous Delivery robots or drones could offer a solution to this problem. The robots are used for ground delivery and the drones are used for air delivery. These robots and drones are electric, which would help to reduce delivery carbon emissions. Drones offer a solution for remote or rural deliveries, but are unlikely to be permitted in major urban centers. The robots can be used as a solution in cities, however, and have been shown to have the highest efficiency by energy consumption per customer in these densely populated areas. Autonomous delivery can help to reduce carbon emissions, noise pollution, and traffic congestion.

Last Mile Internet as a Utility

Certain cities and municipalities have taken solving last-mile problems as local government issues. For example, Owensboro, Kentucky utilized its local utility provider to create a high-speed broadband Internet service for its 58,000 residents at a more affordable rate than major Internet Service Providers were offering. Additionally, they were able to solve their rural last mile problem by delivering internet access wirelessly. This allowed Owensboro’s rural residents to access the Internet at far better speeds than the previously available dial-up services. A similar experiment was conducted by Always On Network, a startup company, in Oregon. However, the startup cost of creating easily accessible Internet for all customers, not just those in cities, can be prohibitive. For example, Always On Network faced a $4.2 million bill to get the necessary infrastructure in place to broadcast wireless to customers’ homes. This was compared to an expected annual return of $2.5 million. Although this figure is far lower than the cost to create wired internet connections, particularly in rural areas, it can be difficult for small or government-funded companies to make this investment. In the wake of the COVID-19 pandemic, many clamored for broadband Internet access to be deemed a necessary public utility, in a class with electricity, telephones, and water. A study conducted by Consumer Reports notes that 80% of Americans believe that broadband Internet access is as important as water and electricity. Additionally, during the pandemic response, the government acknowledged Internet access as a utility in the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Classifying Internet alongside electricity, water, gas, and transportation as a “covered utility payment.” The FCC also rolled out its Emergency Broadband Benefits program during the pandemic, offering a short-term subsidy of $50 per month in the wake of the pandemic. However, outside of the pandemic response emergency, Internet has yet to be classified as a full-fledged utility.