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U.S. broadband deployment: The glass is 98% full

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Anna Maria Kovacs

Kovacs

The Federal Communications Commission (FCC) has issued its Eighth Broadband Progress Report to Congress, as required under section 706 of the Telecommunications Act. The report shows that the communications-infrastructure industry is one part of the U.S. economy that is investing to great effect.

FCC broadband report Table 15

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As the report points out, U.S. wireline, cable, and wireless companies have invested more than a trillion dollars since 1996 and $66 billion just in 2011. The result is that 98% of Americans have access to either fixed or mobile broadband at a speed defined at 4 Megabits per second down (Mbps) and 1 Mbps up (4/1), and 90% have access to both wired and wireless providers. As the FCC calculates the numbers in Table-15, 310 million Americans have access to broadband, either wired or wireless, while only 5.5 million Americans had access to neither. That is an astonishing accomplishment, given that the unserved 2% of the U.S. population occupy roughly a third of its land mass, making it prohibitively expensive to serve them with any terrestrial technology.

Looking at each technology separately, each provides access to 94% of Americans. There are 19 million Americans who lack access to fixed broadband, three quarters of them in rural areas. However, most of them have access to mobile broadband, so that only 5.5 million Americans have no broadband access at all. Conversely, 282 million Americans have access to both fixed and mobile broadband.

FCC broadband report Chart 1

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What is even more remarkable is the extent to which Americans enjoy broadband competition. As Chart-1 shows, wireline carriers provide service, via either DSL or fiber, to almost all Americans. Cable provides an alternative to 85% of those, while fixed wireless provides an alternative to about 35%. Between them, these fixed technologies provide broadband access to 94% of Americans. Mobile broadband provides an alternative, as Table-15 shows, to 94%, in many cases via several providers. Given all the overlaps among providers, 98% of Americans have broadband access, and most of them have a choice among providers.

It is also worth noting, as Table-16 does, that most Americans have access to broadband speeds well above the FCC's 4/1 standard. Just on the fixed side, roughly 90% have access to at least 10 Mbps download speeds and 54% have access to 50 Mbps download speeds.

FCC Broadband report, Table 16

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Nevertheless, the FCC chose once again not to report to Congress that advanced telecommunications is being deployed in a reasonable and timely fashion. Given a glass that is 98% full, it has chosen to judge it empty. What are its reasons?

First, while the FCC reports the mobile broadband accomplishments, it excludes them from consideration. Given that 94% of Americans have access to mobile broadband and that minorities, according to Pew Research, are more likely to use mobile than fixed broadband, that omission is disturbing. It is encouraging, however, that the FCC promises to include mobile broadband in its next report.

Second, in looking at fixed broadband deployment, the FCC focuses its attention on the lack of progress in rural areas. While 94% of Americans have access to 4/1 broadband, and in urban areas 98% have it, in rural areas that number is only 76%. That number is essentially unchanged from last year's report.

The FCC points out that it hopes to improve the rural shortfall via its reform of the Universal Service Fund (USF) and intercarrier compensation (ICC). But it does not point out at least two very important considerations. One, the 6% of the U. S. population that does not have access to broadband occupies nearly two thirds of this country's land mass. Without subsidy, providing coverage to those areas is prohibitively uneconomic. Two, for several years now, as the FCC has worked on USF/ICC reform, no carrier has known what, if any, subsidy might be available. Given those uncertainties, it has been unreasonable to deploy broadband in these vast highest-cost areas. The FCC is now in the process of developing a new subsidy-model in its USF/ICC reform process. If it develops a realistic model, we should see progress on broadband deployment in rural areas.

FCC Broadband report, table 17

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Third, in judging deployment, the FCC has focused on broadband adoption. Table-17 shows that only 40% of Americans have adopted fixed broadband at the 4/1 speed, although it is available to 94%. That metric is certainly cause for concern, but the FCC's use in this context is perverse. In arguing that low adoption means that deployment is not timely and reasonable, the FCC ignores the economics of wired networks whose key component is fixed cost. For fixed-cost networks, low adoption means high cost-per-subscriber. Low total adoption split among multiple providers, as is the case in broadband access, means extremely high cost-per-subscriber. If there is anything unreasonable about the deployment of wired broadband access in the U.S., it is that it has been deployed so pervasively, despite low adoption rates.

Along with its report, the FCC issued a request for comments for its next report. The most obvious comments are two the FCC itself has anticipated. First, it cannot continue to ignore mobile broadband. Second, the rural deployment issue will be solved if the FCC implements USF/ICC reform realistically and effectively. Finally, the FCC must take great care so that in attempting to address its valid concerns about adoption, it not deter deployment and competition.

Anna-Maria Kovacs is a Visiting Senior Policy Scholar at Georgetown University's Center for Business and Public Policy. She has covered the communications industry for more than three decades as a financial analyst and consultant.