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

Network World - An FCC task force studying broadband deployment in the United States has started to let us know what it has been thinking about. I have not found a white paper that explains things in detail, but the commission has issued a press release and a presentation that show 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." It seems to assume that these gaps are what explain the low rate of broadband deployment in the United States, as compared to many other countries. The task force reports that 63% of U.S. adults have adopted broadband -- up from 4% in 2000. It also reports that adopters do not necessarily have the faintest idea what level of service they are getting when they sign up for "broadband."

For some reason the task force does not seem to be able to admit that broadband service in the United States is too expensive for a lot of people. It hints at this by noting that only 35% of adults with a annual income of under $20K subscribe to broadband whereas 88% of those with an annual income of over $100K do.

It does gloss past a root cause of the relatively high cost of broadband when it notes that "areas with lower incomes have fewer competitors" and " areas with fewer competitors have higher prices." What it does not mention is that, even in areas with some competition, there are 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 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 listed is that of the "Federal Universal Service Fund (USF) Structure." The five points listed hint that they it understands the USF has not been an 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 hint that it thinks 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 those in underserved areas. (See "Flavors of universal access".) In other words, tax the wealthier 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 increasing 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, the university has not offered its opinion on broadband access; even if it had, this opinion is mine.