Solving the broadband problem in America

One of the biggest problems that face America today is one that few lawmakers are paying attention to: the lack of access to a true broadband connection. This may seem trivial; the failure to obtain a high-speed internet connection is a major barrier for many who do not live in the wealthier areas of major cities or suburbs. This inability causes users to be unable to truly benefit from the power of the internet. For some the problem is simply the lack of any internet connection at all, but for most, it is the inability to access a high-speed connection. Broadband connections allow users to not only surf the web but also download content at lightning fast speeds, view High Definition videos in real time, make internet-based calls, and participate in e-commerce.

Recent global rankings of America’s broadband availability and speed have placed the United States toward the middle of the pack. A comparison of the ranking over a number years shows that the US continues to decrease in rank. By comparison, most of the other G7 countries either have implemented, or are in the progress of developing, broadband implementation plans. In speed comparison, the United States has the second slowest speed of the G8 countries.

Obstacles

One of the major factors that inhibits the spreading of true high speed broadband is that the FCC still uses an antiquated definition of what can legally be called broadband. Currently they claim that any internet connection that provides users with a speed of at least 200kbps, [1] the OECD by contrast uses 256kbps as their minimum speed and most nations have surpassed this speed.[2] This problem is being mitigated in the current stimulus bill by forcing the FCC to come up with new definitions.

The other major problem is the lack of true data. The government, consumers and researchers currently lack a true map of connection speeds. The only available data comes directly from the ISP which tend to advertise peak speeds not average speeds. Additionally these speeds are often inflated or based on low usage periods. The 2008 Broadband Data Improvement Act instructed the FCC to do the following

“to compile a list of geographical areas that are not served by any provider of advanced telecommunications capability (high-speed, switched, broadband telecommunications capability that enables users to originate and receive high-quality voice, data, graphics, and video telecommunications);”[3]

This is still going on and the stimulus plan has given the FCC the funds to develop a map which would allow the government to figure out where funding needs to be increased in order to achieve targeted speeds.

The short term growth is also a factor in dealing with broadband expansion. Public corporations must show quarterly growth in order to appease investors and continue to accrue capital. In order to develop a high speed network a company needs to spend billions. “Verizon’s $23 billion planned investment in the service, called FiOS, was met by a chorus of skeptics, both on Wall Street and among rivals.”[4] This was a risky bet on the part of Verizon and it will take over a decade to recoup these costs. Currently Verizon is rolling out this service but very slowly and with the current economic downturn, they appear to have even decreased their previous rollout plans.

The final issue in dealing with a national broadband network is that most localities set up favorable deals with one or two telecom companies to provide TV and internet service. In the best areas there are two companies “competing” with each other however, in most areas there is generally just a single telecom monopoly. During the late 1990s Congress tried to stem this problem by passing the Telecommunications Act of 1996 which allowed ISPs to use local phone lines. The act allowed ISPs to use the local phone and fiber (cable TV) lines that were owned by local phone companies in order to provide competition in the ISP market. The cable companies saw the future and did not want to have to share their cables. In 2005 the cable companies (via the National Cable & Telecommunications Association NCTA) argued in front of the Supreme Court that since their cables carried more than just telecommunications information they do not fall under the regulations setup by the Telecommunications Act of 1996. Their opponents, smaller ISPs, claimed that the cable s were uses to transmit data just as the phone companies did and therefore constituted a telecommunications company. Unfortunately, for the consumer the NCTA prevailed and many local ISPs simply went out of business when standard speed went beyond what could be provided by telephone lines.

Pre-Conditions

There are two clear ways to solve this problem: first by enabling the market to find solutions or via government intrusion. In order for the market to find a solution to this problem first, the government must act in order to diminish information asymmetries and increase access rights. These actions must actually be taken prior to any true government intervention also but are necessary in order for the market to be able to act.

Prior to any action, the FCC needs to update its definition of high-speed access and make it congruent with global standards. This will force all ISPs to increase their speeds or stop calling their product high speed access. At minimum it should be raised to 13Gbit/s, currently the US average speed is 8.8Gbit/s. The current OECD average is 13Gbit/s with Japan in the lead at 93Gbit/s followed by France at 44Gbit/s.[5]

Additionally there needs to be a comprehensive map of current broadband lines and connections so that private industry or the government can determine where new lines needed to be added or upgraded. Currently this is going on and when completed soon.

The government needs to enact a new Telecommunications law, which would bring the cable companies under its regulatory purview and requiring that they share their cables. By enabling sharing of cables new smaller ISPs would be able to compete with existing large ISPs. If cables are not shared then natural monopolies occur and true competition cannot allow for innovation.

The following solutions are all predicated upon these pre-conditions being met.

Market Solution

If smaller ISPs are able to use the current lines that are in place all of the ISPs will be forced to engage in true competition which will lead to decreased prices. These new ISPs along with existing ISPs will be forced to find new customers and expand the current lines. In addition they will have to use better lines to increase performance.

Government Intervention

The best way to achieve true universal connectivity is via government intervention. The initial investment necessary in order to accomplish this goal is much greater than any corporation can handle. Additionally if one looks abroad to find other nations that have achieved this high level of penetration and speed they all had some form of government intervention. In Japan, the nation with the fastest speeds and largest penetration, the main ISP is Nippon Telegraph and Telephone Corporation. The Japanese government owns at least 1/3 of the shares and allows the company to grow at a slower pace if necessary. Recently the Australian government in order to provide full broadband coverage to its nation has decided to simply start wiring the nation.

“This new National Broadband Network will:

• Connect 90 percent of all Australian homes, schools and workplaces with broadband services with speeds up to 100 megabits per second – 100 times faster than those currently used by many households and businesses
• Connect all other premises in Australia with next generation wireless and satellite technologies that will be deliver broadband speeds of 12 megabits per second”[6]

Both these nations have realized what the United States must do: directly invest in creating a national broadband network. The government must simply create multiple government corporation like it did when it created the Tennessee Valley Authority. Instead of creating a single national corporation mandated with providing service the government should create numerous regional corporations. These corporations should be charged with providing high-speed internet access and would be able to charge their customers for access. The main reason why multiple regional corporations are better than a single national company is that the geography and population density in America is too disparate for a single solution to work all across the nation. In the Midwest the company may find that WiMax is the best solution in sparsely population and generally flat Kansas, while the North East company may find it easier to simply provide Fiber to the Node and then cable to the house in the densely populated developments. These corporations would be preferable to having just a simple agency be in charge of the deployment since a corporation would be able to generate a profit. These profits could eventually offset government subsidies.

The other option is for the government to take the Japanese route and create public private partnerships where they are needed. To provide access to underserved areas and bring competition in to areas where a monopoly exists.