How the FCC sees Broadband’s 95% Success as 100% Failure

Published August 23, 2012

Some very creative and determined pessimists at the FCC have managed to turn a thrilling victory into an agonizing defeat.

As of June, 2011, 95% of all Americans had access to broadband Internet from cable, DSL, fiber or other wired services.  That’s up from 15% as recently as 2003, and zero percent in 1996, when high-speed Internet didn’t even exist.

Yet the agency’s three Democratic Commissioners nonetheless hung their heads and announced, for the third year in a row, that broadband deployment in the U.S. is just not happening fast enough.  That was the conclusion, in any case, of a nearly 200-page report published on Tuesday, the eighth annual “Broadband Progress Report.”

That bizarre finding matters.  Under section 706 of the 1996 Communications Act, the FCC must make an annual determination of whether broadband “is being deployed to all Americans in a reasonable and timely fashion.”   If not, the agency must take “immediate action” to remove barriers that are keeping network operators from spending their investors’ money even faster.

Which translates, on the majority’s view, into a vast array of regulatory powers that otherwise aren’t available to the agency.  Like the power to create “digital literacy” programs.  Or the power to raid the $8 billion Universal Service Fund—a tax on your monthly phone bill intended to subsidize basic phone service for those who can’t afford it–to provide broadband Internet for low-income and rural residents, as well as buying computers for libraries and schools.

Or the power to enforce the agency’s notorious 2010 “net neutrality” rules, which were, not coincidentally, adopted only a few months after the FCC found for the first time ever that broadband adoption wasn’t happening in a “reasonable and timely fashion.”

(With no actual authority from Congress, the agency’s Democratic commissioners announced that the negative finding of the 2010 Broadband Progress Report magically conferred on the FCC the superpower to police broadband Internet access.  Later this year, a D.C. court will hear arguments that section 706 has no such effect, and will likely throw out the rules sometime next year as an absurd overreach of agency authority.)

Whatever the scope of section 706, the Commission only gets its extra powers by finding a way to play Debbie Downer on the state of broadband deployment.  How to do it?  In the teeth of dramatic evidence of a stunning broadband infrastructure build out that has continued throughout the economic downturn, the majority cynically ignores the “reasonable and timely” language and simply concludes that “all Americans” means each and every person in the U.S.

“The standard against which we measure our progress is universal broadband deployment,” the majority solemnly concludes.  “We have not achieved this goal as of yet and likely will not achieve it in any reasonable timeframe absent continued implementation of the Commission’s broadband-related initiatives.”  Until Ted Kazinski’s old Montana mountain shack gets a DSL line, in other words, we’ll never be at “reasonable and timely” deployment.

And that means the agency’s power will continue to grow, leaving network operators perpetually uncertain how far the FCC will insert itself into the broadband ecosystem.  As Republican Commissioner Ajit Pai wrote in a dissenting statement, “If we are willing to set an objective with no intent of reaching it, then I suppose that this is not a problem.”  Here in the real world, of course, it is a very big problem indeed.


The Good News is the Bad News…Somehow

Let’s look at some of the good news scattered throughout the report.  Then let’s see how the majority managed to turn the feel-good story of the year into a tear-jerker:

  • Since the first cable modem was introduced in 1997, America’s broadband infrastructure has been built almost entirely with private funding.  Broadband network operators have spent over $1 trillion dollars to lay cable and fiber, and upgrade network equipment to reach ever-faster Internet speeds.  (The report currently defines broadband as 4 Mbps download and 1 Mbps upload, but newer networks will are capable of much faster speeds.)
  • Nearly 300 million Americans—roughly 95%–had access to at least one and in most cases two or more broadband providers as of June 2011.
  • Between June 2010 and June 2011, an additional 7.4 million Americans had access to broadband connections, the result of $66 billion in new investments by providers.  That reflected a 24% increase in private infrastructure spending from the prior year.
  • Nearly 20% of Americans now have access to broadband from fiber-to-the-home, which today can reach speeds of up to 300 Mbps and the promise, soon, of 1 Gigabit speeds.
  • Despite its vast geography, sparsely populated mid-section and entirely taxpayer-free communications spending, the U.S. ranks first in the world in cable modem coverage and remains competitive on every other broadband measure.

How can such positive findings lead to such a negative conclusion?  The majority is fixated on the part of the glass that is 5% not full—the 19 million Americans who still don’t have access to any broadband service.  That number is repeated thirteen times in the main text of the report, in case anyone forgets it.  (In the last report, the number was 26 million.)

Worse, the majority notes that of those 19 million, 14.5 million (76%) live in rural areas, where the costs of building high-speed networks is much higher—perhaps too high to ever make economic sense.  “We have acknowledged,” the majority writes, that “there is no business case for broadband investment in some parts of the nation.”

So we’re stuck at 95%.  There will never be broadband for “all Americans.”  At least not without the FCC grudgingly stepping in to break the logjam.

But that logic requires some enormous leaps of faith.  Most important and most implausible of all, the majority starts by limiting its definition of broadband to access available by wire or other fixed technology.

That, however, is not the only way to get high-speed Internet.  With improvements in cellular technologies driven in part by the explosive adoption of smartphones, wireless broadband is expanding even faster than wired.  Yet mobile broadband from cellular and, more recently, satellite providers, is left entirely out of the report’s findings.  Why?  The majority says it just can’t find reliable data on the number of Americans who can get mobile broadband.  So it doesn’t count them.  At all.  Zero.

But mobile broadband is the fastest-growing category of new Internet access services.  Wireless carriers invested over $25 billion in 2011 alone, compared to $18.6 billion in the fifteen largest European economies combined.  As dissenting Commissioner Robert McDowell reminds his colleagues, the U.S. continues to lead the world in 4G LTE deployment, which averages speeds well beyond the majority’s definition of broadband.

Just to be clear how much excluding mobile skews the majority’s ultimate conclusion, the report itself offers alternative results based on a few different data sources, including the Department of Commerce.  Adding in the most conservative estimates of mobile broadband availability, the actual number of Americans without access to broadband drops from 19 million to 14 million.  It is perhaps as low as 5.5 million–only 1.7% of Americans.

To put all of these numbers into perspective, consider that the most recent data from the U.S. Census finds there are still nearly 8 million Americans—almost 3%–whose homes lack complete plumbing.  And the drive for universal sanitary living conditions began well before the founding of the American Republic.  Broadband Internet access has only existed since 1997.

The only real limits to even faster mobile broadband deployment, as the majority admits, are regulatory hurdles–rights-of-way, access to conduits, rooftops, and utility poles, and local zoning delays on building or modify cell towers.  That and the lack of additional radio spectrum, which network operators would be willing to license from U.S. taxpayers for billions of dollars if only it could be pried from the clutches of less-efficient users, including the federal government itself.

Indeed, had the FCC and the Department of Justice not blocked last year’s proposed merger of AT&T and T-Mobile, combining the spectrum and equipment assets of the two companies would have made it possible to offer mobile broadband to 95% of all Americans within a few years.  The deal would have disproportionately affected small and rural communities—in a positive way.

Wishing away mobile broadband, however, is essential for the majority, particularly in the context of rural Americans–the group the majority singles out as uneconomic for wired service.  For rural users, mobile broadband is a much more cost-effective option to build, whether via cellular or satellite technology or both.  Including current and future mobile deployment makes the rural picture look far less bleak.

Take Immediate Steps…in the Opposite Direction

So the actual number of Americans without broadband access is significantly smaller than the majority says, and market incentives to provide capacity to the actual number are not in fact broken.  Ironically, the extent to which broadband deployment “to all Americans” isn’t happening in a “reasonable and timely fashion” is largely the result of missteps by the regulators themselves.

By wishing away the most relevant data, however, the majority reaches the opposite conclusion.  Even including mobile broadband, the majority still believes that “immediate action” is essential.  “We would likely reach this same finding,” they write, “even if we considered the best available mobile data.”

So the only solution to the 5% problem, according to the majority, is more extensive intervention by the FCC.  After all, “the standard against which we measure our progress is universal broadband deployment,” the majority says.  “We have not achieved this goal as of yet and likely will not achieve it in any reasonable timeframe absent continued implementation of the Commission’s broadband-related initiatives.”

Most Americans, it’s worth noting, seem to feel otherwise.  According to the most recent data from the Pew Internet and American Life project, over half of Americans surveyed say they don’t think promoting broadband should be a priority for the federal government—26% percent say they shouldn’t do it at all.  Only 11% believe it should be a top priority.

The Pew research also undercuts the majority’s methodology as well as the steps it believes essential to solve the problem it has invented (or perhaps caused).  Despite 95% broadband availability, for example, Pew finds that only 66% of Americans are actually using broadband Internet services.

The real “broadband gap,” has nothing to do with access, in other words, but with adoption.  Only 17% of those who haven’t adopted say the reason is lack of availability.  And the demographic that most determines adoption is someone’s level of education, not whether they live in a city or in the country.

The FCC argues that the cost of broadband, as well as vague concerns over privacy, are significant reasons for non-adoption.  But 49% of the respondents in the Pew research cite reasons other than cost, including that they don’t want it.  “Among adults who do not use the internet,” according to Pew, “almost half have told us that the main reason they don’t go online is because they don’t think the internet is relevant to them.”

Subsidizing access and saddling network operators with rules about how packets can and cannot be prioritized, along with the FCC’s other “broadband-related initiatives,” won’t do anything to solve that problem.


Desperately Seeking Relevance

Rather than ask how the majority reached its startling conclusion, perhaps the better question to ask is why.

The answer is simple:  the FCC needs someone to regulate, and it’s rapidly running out of options.

The agency’s traditional regulated industries–over-the-air broadcast TV and radio and legacy copper telephone networks—are disappearing, in part because of disruptive technological change and in part because of the agency’s long history of micro-mismanagement.  All forms of communication are converging at an accelerating pace on a single digital network—the Internet.

But under the 1996 Communications Act, the FCC has almost no authority to regulate Internet access or content.  So as a matter of both politics and the continued relevance of the agency, the FCC seems determined to grab any foothold it can in regulating broadband.

The current FCC is wired to conclude that every market it either oversees or wants to is uncompetitive, falling dangerously behind other countries, and mistreating its customers.  But rather than solve real or imagined problems, the agency’s desperation is actually making them worse.

Congress was right to keep the agency out of the Internet.  Broadband markets—wired and wireless—are innovating at a pace no agency could ever keep up with.

We’ve arrived at 95% or higher, nearly all of it through private investments that happened in spite of federal, state and local regulators who did everything possible to deter it.  To reach 100% availability, we need to continue building wireless networks.

That means less regulation, not more.  We need to accelerate the process of getting new spectrum in the hands of those who will use it wisely, and stop local zoning authorities from treating applications to improve the mobile infrastructure as invitations to extract tribute or worse.

The sell-by date for an annual report that arbitrarily charts the progress of wired broadband deployment in the U.S. expired a long time ago.  The agency’s only real purpose in issuing it is to make the continued and increasingly cynical claim that broadband customers need the FCC to save them.

But the FCC’s superpowers need not be activated by invoking section 706.  The agency’s real expertise, its natural ability to slow Silicon Valley time down to a barely-perceptible crawl, is always at the ready.  If that power continues to be deployed, unfortunately, broadband innovation will stall, waiting for the agency to issue reports, pursue inquiries, and mull over rulemakings at the more leisurely pace of Washington.

Does anyone outside the beltway think that’s a good idea?