Broadband Through a Rose-Tinted Lens

New report disputes FCC claim that
U.S. "leads the world" in broadband,
calls for universal and affordable access

Despite the rosy picture painted by FCC Chairman Kevin Martin, access to affordable, high-speed Internet in America lags far behind the rest of the digital world. A new report released today at Free Press shows that Martin's glowing appraisal of broadband in America glossed over the serious problem of our ever-widening digital divide.

In a "wildly optimistic" July 7 Wall Street Journal editorial, Chairman Martin claims, "the dramatic growth in broadband services . . . proves that we are well on our way to accomplishing the president’s goal of universal, affordable access to broadband by 2007.”

By overstating broadband availability, Martin is trying to erect a façade of success that maintain the status quo -- a broadband service sector dominated by predatory cable and telecom giants -- at the expense of American consumers.

If the president’s goal of universal, affordable high-speed Internet access is to be achieved in two years, policymakers in Washington must change course. And Chairman Martin tops the list of those in need of a reality check.

The new report authored by Free Press research fellow S. Derek Turner, depicts a more accurate state of the broadband union:

• The FCC overstates broadband penetration rates. The FCC report considers a ZIP code covered by broadband service if just one person subscribes. No consideration is given to price, speed or availability of that connection throughout the area.
  
  
• The FCC misrepresents exactly how many connections are “high-speed.” The FCC defines “high-speed” as 200 kilobits per second, barely enough to receive low-quality streaming video and far below what other countries consider to be a high-speed connection.
  
  
• The United States remains 16th in the world in broadband penetration per capita. The United States also ranks 16th in terms of broadband growth rates, suggesting our world ranking won’t improve any time soon.
  
  
• Despite FCC claims, digital divide persists and is growing wider. Nearly 60 percent of households with incomes over $150,000 annually have broadband access, compared to just 10 percent of households with incomes below $25,000. In addition, broadband penetration in urban and suburban in areas is double that of rural areas.
  
  
• Reports of a broadband “price war” are bogus. Analysis of “low-priced” introductory offers by companies like SBC and Comcast reveal them to be little more than bait-and-switch gimmicks. On a per megabit basis, U.S. consumers pay 10 to 25 times more than broadband users in Japan.
  
  
• The FCC ignores the lack of competition in the broadband market. Cable and DSL providers control almost 98 percent of the residential and small-business broadband market. Yet the FCC recently eliminated “open access” requirements for DSL that represented the only true competition in the broadband market.

FCC is trying to put the best face on these problems it can. Its new chairman, like his predecessor Michael Powell, seems all too eager to please powerful media giants -- such as Verizon, Comcast, Time Warner and SBC -- who routinely strong arm regulators to pass policies that eliminate local choices and competition for Internet services. It's an insider's game of corporate and political influence peddling that leaves consumers paying more for less.

As my colleagues Craig Aaron and Ben Scott wrote at TomPaine.com last month:

Powell may be gone, but the FCC still doesn’t get it. Their answer to anti-competitive practices -- which have left two-thirds of American households without broadband connections -- is to reward the cable and telephone industry dinosaurs with sweetheart policies that make a mockery of the free market and undercut any serious commitment to solving our technology woes.

The Free Press report exposes the Chairman's misleading rhetoric for what it is: an attempt to hand over control of last mile of the Internet -- and the hundreds of billions of dollars in annual service revenues that go with it -- to an oligopoly of media companies.

But fudging the facts won’t provide high-speed Internet access to those who need it most. With 200 million Americans still without broadband access, the FCC needs to open up more broadcast spectrum to wireless internet applications and remove restrictions from public entities that seek to offer broadband services to their citizens.

If the FCC is content to let cable and phone companies control the broadband market, then consumers need more options. Wireless broadband, which is less expensive and doesn’t depend on DSL or cable modems, offers one best way to close the digital divide.

Another prospect is broadband over power lines, still under development in a number of pilot locations.