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The broadband gap: is the FCC grabbing for the wrong tool?

By: Scott Bradner

A FCC task force studying broadband deployment in the US has started to let us know what they have been thinking about. I've not found a white paper that explains things in detail but the FCC issued a press release (http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-294706A1.pdf) and a presentation (http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-294708A1.pdf) on the topic. There are no specific recommendations in either but the task force thinking seems to be to reward the inefficient and to tax the affluent.

The task force identified a number of "gaps in the pathway to universal broadband." The task force seems to assume that these gaps are what explain the low rate of broadband deployment, as compared to many other countries, in the US. The task force reports that 63% of US adults have adopted broadband -- up from 4% in 2000. They also report that the adopters do not necessarily have the faintest idea on what level of service they are actually getting when they sign up for "broadband."

For some reason the task force does not seem to be able to just come out and admit that broadband service in the US is too expensive for a lot of people. The hint at it by noting that only %35 of adults with a annual income of under $20K subscribe to broadband where 88% of those with an annual income of over $100K do.

They do gloss past a root case of the relatively high cost of broadband in the US when they note that "areas with lower incomes have fewer competitors" and " areas with fewer competitors have higher prices." What they do not mention is that, even in areas with some competition, it is almost always only two providers: a cable company and a telephone company. A duopoly of giant, similarly motivated carriers is not normally a recipe for robust competition.

Since the current documents only identify gaps and do not make any specific recommendations it is hard to tell for sure what the task force might be thinking but the arrangement of gaps on the FCC press release may give a hint. The first gap that they list is that of the "Federal Universal Service Fund (USF) Structure." The five points they list hint that they understand that the USF has not been a unambiguous success. Saying that the USF "rewards inefficiency," has an "unsustainable funding mechanism," and that "accountability is limited" are not high praise. But starting off with a discussion of the USF may be a hit that they think that a modified USF is a possible path.

Just in case you did not know, the way the USF works is to add fees to the phone bills of most people, high fees for people with second phone lines, in order to reduce the cost of phone service to people in underserved areas. (See Flavors of universal access http://www.sobco.com/nww/1997/bradner-1997-06-16.html.) In other words, tax the better off to pay carriers to inefficiently deliver services to people who live off the grid.

A bit of real competition just might go a long way to expanding subscriptions by reducing costs and expanding coverage. But that would make too much sense (and run counter to the normal regulatory impulse to protect the incumbents).

disclaimer: "Sense" and "Harvard" are often associated in the minds of people at Harvard, less often by people outside the university, but, whatever the level of sense at Harvard they have not offered a university opinion on broadband access, even if they had, this opinion is mine.