Shawn Douglas

Thursday - Nov 10, 2011

Expanding broadband Internet access in USTwo stories have been playing out recently involving the expansion of broadband access and usage in the U.S. Let me touch on them both briefly and then discuss them together in further detail.

The potentially good:

On October 27 the Federal Communications Commission (FCC) voted to overhaul an antiquated telephone subsidy plan which first began in 1934. By spending the next six years transitioning the funds from the controversial Universal Service Fund, subsidies to telephone carriers will likely disappear in favor of a new Connect America Fund.

This new fund will go towards a vigorous expansion of “broadband build-out to the 18 million Americans living in rural areas who currently have no access to robust broadband infrastructure.” Though it’s incredibly early, cautious optimism is due, with an array of potential future benefits to some Americans.

The potentially not so good:

On November 9 the Federal Communications Commission (FCC) announced the expansion of a pre-existing Comcast program that provides low-cost broadband Internet service to qualifying low-income households. Comcast’s “Internet Essentials” program was introduced on September 20 as part of an agreement with the FCC concerning its merger with NBC Universal. The newly-proposed expansion would involve most of the country’s major cable providers. All would adopt similar aspects of Comcast’s program in their own tailored-made programs, which wouldn’t receive an investment of federal funds.

There’s a hitch, however. The qualifications for the program would likely be so archaic that few U.S. residents would be affected positively for the long-term.

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There’s no doubt that the U.S. needs greater broadband expansion. The common refrain for years has been that the U.S. lags far behind other countries in adoption and infrastructure, with an FCC report earlier this year stating that broadband access is only getting marginally better compared to previous years. Recent news out of Alaska and Idaho has further emphasized the need for rural broadband access across the United States. The FCC is betting that the recently announced Connect America Fund will help. And to be honest, it’s difficult to imagine broadband access not being positively affected with the transferal of funds allocated to now ubiquitous phone access subsidies to more sparse Internet access subsidies. The fund would essentially have to be mismanaged, though it wouldn’t be a first.

Conservatives are already deriding the new fund, however. “By subsidizing rural broadband, the FCC is attempting to offset the additional costs of deploying technology to communities with low population density,” said Diane Katz and Luke Welch in a recent article on conservative mouthpiece The Foundry. “But those costs reflect the realities of rural life, and it is simply wrong to force city dwellers to pay for the choices made by rural residents.”

Despite their argument, data by the Pew Internet and American Life Project shows that broadband adoption in rural areas* has more or less kept pace with suburban and urban adoption rates since 2006. This would seem to indicate that broadband saturation hasn’t occurred yet in rural communities. The same research also showed that of those who don’t go online, 21 percent don’t do it because the price is prohibitive.** This leads me to talk about the second bit of news from the FCC dealing with low-cost broadband Internet service.

While it sounds like major cable providers offering $10 per month broadband service would go a long ways towards appeasing the previously mentioned 21 percent of non-users, the details reveal the stunt to add up to little more than a positive PR ploy, one that again fails to address what many view as the major problems with high prices: the lack of competition in the U.S. broadband industry. It’s likely the details of the participating providers’ low-cost service will be similar to Comcast’s requirements for eligibility, which are:

• must have at least one child receiving free school lunches through the National School Lunch Program
• must not be a current Comcast Internet subscriber and must not have been a subscriber within the last 90 days
• must not have an overdue Comcast bill or unreturned equipment

Sadly these requirements likely mean few will actually be able to take advantage, as Karl Bode notes for DSLReports.com:

“Once you’ve eliminated those who don’t qualify for the school lunch program, eliminated those who already have service (not uncommon even in poor homes), and eliminate those who also owe Comcast money (also obviously not uncommon in poor homes), how many customers will Comcast actually wind up having to serve at the $10 price point?”

Brian Stelter of The New York Times rightfully points out another aspect of the program that fails to address the long-term goals of the FCC. Stelter notes that for those who do qualify, the $10 price point will only be good for two years, leaving low-income customers to either discontinue their service or pay beyond their means to continue with the service.

“The price is akin to an on-ramp for new customers,” said Stetler, “with the hope being that they will decide to pay more for access once they have had it for a while.”

What seems strange here is the assumption that low-income households will suddenly have additional money to cover the price increase two years later. If the FCC is counting on wider broadband adoption to last beyond the two-year period in low-income households, I believe they’re being entirely overconfident.

These recent and any future tactics by the FCC to expand broadband service, if anything, will likely continue to draw ire from some Americans. Additional research by the Pew Internet and American Life Project (published in August 2010) has shown that 53% of Americans don’t think the government should meddle with the expansion of affordable broadband. Yet without government intervention, it’s difficult to imagine the problem of stifled broadband competition fixing itself. Rather, the FCC likely will need to gain a better understanding of the rural broadband picture and spend more time focusing on methods to encourage lower pricing. Such action won’t fully solve the complex issues surrounding the opposition to who foots the bill for broadband in areas of low population density, but it will at least bring greater legitimacy to its fervent push to catch up.

* See slide six of the hyperlinked slide show for the relevant information.
** See slide 21 of the hyperlinked slide show for the relevant information.

Photo via Gavin St. Ours, Flickr Creative Commons

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