title:

Obama's broadband stimulus: throwing money at the wrong target?

By: Scott Bradner

President Obama is not happy that the US is ranked as 15th in the world in broadband adoption and wants to fix things as part of his big economic stimulus package. But the it's not at all clear that the type of approach in the current draft bill will help improve the US ranking all that much. Part of the problem is that the ranking is misleading.

The ranking that Obama is using comes from the Organization for Economic Co-operation and Development (OECD). The OECD report from last summer lists the US as 15th in terms of broadband subscribers per 100 inhabitants. (http://www.oecd.org/dataoecd/21/35/39574709.xls) But there are a lot of problems with relying on this number for all that much. There are reasons to say that the US should be ranked even lower.

There are a lot of statistics on the OECD web site about broadband usage in various countries. (OECD broadband portal

http://www.oecd.org/sti/ict/broadband) Lets start with the OECD's definition of broadband. They define any Internet connection with a download speed of 256 Kbps as "broadband" -- this is hardly high speed these days. The US shows up as having an average advertised download speed of 8.8 Mbps, 14th in the world, but there are a lot of places where getting an actual 256 Kbps would be a rare event. The best in the world for download speed is Japan with an average advertised speed of 93 Mbps followed by France and Korea, both of which are at more than 40 Mbps. The US looks rather wimpy in comparison.

The key statistic which says why the President's plan may not help a whole lot is the fact that the US ranks 11th in terms of monthly price per megabit - $12.60. This compares rather poorly to Japan and France at under $4/mo.

The Pew Internet & American Life Project just published the results of two surveys on Internet connectivity it ran over the last year. (http://www.pewinternet.org/pdfs/PIP_Broadband Barriers.pdf) This report shows that not all that many people are blocked from getting broadband Internet access because it is not available in their area. There is no question that there are big parts of the country where broadband access cannot be obtained unless you are willing to use a satellite service. It is hard to tell how much of the country this is true for because of the very poor statistics the FCC has been collecting. (see All's well with U.S. broadband deployment (says FCC) - http://www.networkworld.com/columnists/2008/062408-bradner.html)

The Pew report says that some people (more than 15%) have no interest in getting on line. Another 6% think the price is too high and 5% have usability problems. The President's plan is unlikely to change these numbers all that much.

The current draft of the broadband part of the stimulus package (http://energycommerce.house.gov/Press_111/20090122/broadbandans.pdf) focuses on providing grants to companies that are willing to deploy wireless of wired broadband in under served areas. The bill mandates open access to any services that result from such grants.

But, if the Pew report is correct, the stimulus money and open access policies might only result in a few percent of additional broadband users in the US. Figuring out how to get more competition into the picture so that prices could come down might yield a greater return.

disclaimer: Competition does not bring down prices in all areas, for example University fees (although Harvard has an aggressive aid program to offset the fees for many students) and Harvard has not commented on broadband stimulus package options so the above is my observation.