Rural Broadband: Tail Wagging the Dog?
The New York Times ran an op-ed of mine in the Sunday Review last weekend that summarizes the overall state of the broadband networks in the U. S. and Europe. It’s an interesting topic because the U. S. and Europe have chosen very different regulatory models, and enough time has passed since these models were operationalized that we’re in a good position to evaluate results.
The policy differences are stark: Europe went for an model in which incumbent networks, the formerly state-owned telephone monopolies, are required to offer access to their wires to independent ISPs on the same terms and conditions that their own ISP business has. In the US, this “open access” or “unbundling” regime was imposed on telephone networks from the late 90s until the 2005 decision of Michael Powell’s FCC to reclassify DSL as an “information service” free of the unbundling requirement. In 2005, the “Brand X” case was decided by the Supreme Court, making is certain that cable modem was an information service as well. So the policy divergence can be dated from 2005.
The results are reasonably clear. As things stand today, the average broadband speed in the US is substantially higher than it is in most European Union nations; only Latvia, Sweden, and the Czech Republic have faster average speeds than the U. S., and American networks are faster than those in the other 24 EU nations (Switzerland is also faster than the U. S., but it’s not an EU member.)
The rate of broadband subscribership, called “adoption” by policy wonks, is roughly equal between the US and the EU, and this is the area where you would expect to see the EU leading because unbundling focuses on low prices (at the expense of investment and higher prices) and price is one of several factors that influence adoption.
Prices tend to be lower in the EU, but this may be more a consequence of population density and subsidies than of unbundling. In terms of deployment, 94% of American homes have access to cable modem service, but only 50% of EU households do. The US also has more FTTH and is installing more fiber cable each year than the EU does.
On the mobile front, the gap between the US and the EU is even more dramatic: we’re literally running rings around Europe in mobile performance, price per minute and price per byte, smartphones, apps, and leading platforms. Here a different choice comes into play: the EU imposed a single technology mandate on their carriers, forcing them to use GSM and mandating the technologies that can be used on specific wireless frequencies, while US carriers are free to choose the technologies and network configurations that suit them best. The US also doesn’t have a hard roaming mandate like the EU does.
The US is clearly winning; there’s really no way to read those numbers as saying anything else. So there’s not a serious issue with the quality of American broadband networks, but we still have work to do in terms of bringing people online. About 70% of Americans access the broadband Internet from their homes, and it would be best if adoption could reach the level that plain old telephone service had at its peak, 97%. Universal adoption would enable schools, doctors, and government to move to an Internet-based services model, lowering costs and improving effectiveness all the way around. America has a lot of poor people who must be equipped with computers and trained in how to use them before this can happen, and some people will need subsidies regardless of the price of broadband service.
One area that will need subsidies and new rate plans is rural America: most of the critical comments my column elicited were from folks out in the boondocks where speeds are low, reliability is poor, and prices are perceived to be high.
Watching Tom Wheeler’s nomination hearing for FCC chair today, the rural theme was evident in much of the questioning. Chairman Jay Rockefeller represents a rural state, West Virginia, and other members of the Commerce Committee hail from Alaska, Minnesota, New Hampshire, and South Dakota. The Senate is more representative of rural America than is the House, so the advise and consent process places more power in the hands of each rural American than it does in the hands of those of us who live in the cities and the suburbs.
We really are “Two Americas” where issues of rural life are concerned. Rural folks pull water out of wells, buy natural gas from a truck, process their own sewage, and often deal with their own garbage. Their electric and telephone service is subsidized, and they expect that their broadband should be subsidized as well. They’re also quite fond of farm subsidies, but that’s topic for another forum. Rural America prides itself on its self-reliance, but the rural lifestyle is heavily dependent on the kindness of strangers.
So we aren’t going to resolve rural America’s need for broadband with the same technologies and business models we use in mainstream America: while 94% of American homes have access to some form of wireline broadband, markets aren’t going to increase its penetration. The cellular carriers project that 4G/LTE will reach 98% of America by 2015, but that still leaves two percent with no access to broadband except by satellite. Satellite is improving rapidly: two networks now offer download speeds in excess of 10 Mbps, but LTE and DSL go up to 50 Mbps under ideal conditions and cable will ultimately reach 10 Gbps per neighborhood. Fiber, of course, has no meaningful limit.
LTE rate plans are currently optimized for urban mobile use, but there’s an entirely different usage scenario in rural America that nobody’s really exploiting yet, although there are steps in that direction. Satellite isn’t infinitely scalable, so there may be some congestion issues as more people go that way.
So there is a role for rural-focused businesses that depend at least in part on subsidies, but the programs that support these businesses need not represent the bulk of American broadband policy. They’re properly seen as adjuncts to the main technology thrust that should be designed for limited life and eventual phaseout.
If I were seeking nomination to the FCC I’m not sure I could say that to the committee, but it’s the truth. And if it’s any comfort to rural Americans who feel that their broadband is second rate, be thankful you’re not living in rural Europe; you’d probably be worse off than you are.
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