Broadband Reality Check

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Broadband Reality Check

There is a "state of the broadband industry report" report I just came across from the Free Press, Consumers Union and The Consumer Federation of America. The report blasts FCC Chairman Kevin Martin and takes excerpts from an op-ed piece he wrote for the Wall Street Journal and other statements and says Martin's conclusion is either wildly optimistic or intentionally misleading.

Here are the statements/quotes in question:

he United States "leads the world in total number of broadband connections"

"broadband platforms are engaged in fierce competition."

He lauded the Supreme Court's recent Brand X decision and praised the results of the FCC study, proclaiming that "the dramatic growth in broadband services depicted in this report proves that we are well on our way to accomplishing the president's goal of universal, affordable access to broadband by 2007."

The report goes on to say:

The US lacks a broadband policy that will ensure inexpensive broadband access for all.

The standard measure of high-speed Internet used by the FCC is 200 kbps and is too low to carry low-quality video.

The FCC uses a misleading measure of broadband coverage. The Commission counts a ZIP code as covered by broadband service if it contains at least one broadband subscriber. No consideration is given to the price, speed or availability of connections across the ZIP code.

US broadband is expensive. We pay 10-25 times more per megabit than they do in Japan. (While this may be accurate it is a by-product of the US consumer not having broadband options above 4 megabits or so per second. If a service provider was to give the option of having a 100 Mbps connection it would probably cost $100-$200 per month. Broadband cable let's say averages around $45 per month for 4 mbps throughput today.)

Broadband speed is not increasing very quickly

Broadband pricing competition consists of bait and switch tactics as opposed to dropping prices

The FCC knows that Satellite and wireless broadband are losing share and more importantly cable and DSL own 98% of the market.

Open access policies create competition in the broadband market. Open access, or common carriage, for competitive DSL carriers has loosened the dominance of cable modem service in the residential market. Despite gains in service availability, the FCC seems eager to eliminate open access, entrench an incumbent duopoly, and stifle consumer choice.

The United States continues to fall in the world rankings of broadband penetration.
The United States now stands at 16th worldwide in the number of broadband subscribers per 100 inhabitants, placing it far behind countries such as Canada, Japan, and South Korea. The United States also ranked 16th in the net change in broadband penetration from 2003 to 2004, indicating a comparatively slow pace of broadband adoption within the country.

Broadband adoption is highly dependent on socio-economic status. Almost 60 percent of households with incomes above $150,000 have a broadband connection, while less than 10 percent of households with incomes below $25,000 have a connection.

The gap between rural and urban America persists. The broadband penetration rate in urban and suburban households is almost double the rate in rural areas.

Here is another chilling but well-known (to me anyway) piece of information worth reading in the report:

According to the International Telecommunications Union (ITU), last year the United States dropped from 13th to 16th place in broadband penetration, with 11.4 connections per 100 inhabitants. By comparison, South Korea leads the world with 24.9 connections per 100 inhabitants. According to the 2004 broadband penetration data compiled by the Organization for Economic Co-operation and Development (OECD), the United States was 16th in net increases in broadband penetration from 2003 to 2004. This puts the United States near the average for the OECD, and far behind countries such as the England and France, which have made rapid progress in broadband adoption.

In short the study is depressing. US broadband penetration is uncompetitive with the rest of the world and worse yet the government doesn't seem to care about the details. There does need to be a policy. I just witnessed President Bush on TV at a press conference saying that the US has to have the world's best roadway system in order to be competitive with the rest of the world. He said this in support of a new spending bill that will allocate 286 billion dollars for our highway system. In my view, broadband is just as important if not more. When will broadband adoption rates become important enough for the US government to take action? I hope it is soon.



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