Last week, FCC Chairman Julius Genachowski gave a speech at LivingSocial’s Washington, D.C., headquarters about the economic impact of broadband. LivingSocial is a great example of a start-up company that has been empowered by broadband, becoming one of the leaders in the social-buying category and transforming the way consumers discover and buy goods and services.

The Chairman highlighted the economic force that broadband has become in the American economy, especially as a technology that powers job creation, and he cited a recent report by McKinsey which shows that broadband now creates 2.6 jobs for every one lost.

As cable was America’s first broadband provider, I welcome the Chairman’s remarks and enthusiasm about how broadband is sparking a renaissance in America’s economy.  But the irony of the entire speech is that not a single broadband company was even mentioned nor did we hear about the millions of jobs created by broadband providers which have built the networks that are the “indispensible infrastructure for America in the 21st Century.”

Sure, it’s to more fun talk about garage start-ups or cake delivery success stories, but let’s not forget who brought us to the dance.  Broadband is not some mystical force of nature. Broadband is the result of hard work and private investment, first from the cable industry and now many others.

The cable industry launched residential broadband service in the late 1990s and after $170 billion in construction and network upgrades, our broadband service is available to 93 percent of U.S. households – more than 123 million homes.  Cable’s broadband networks offer speeds of 5 Mbps or faster to more than 90 percent of U.S. households. Cable is also now providing next-generation wideband service, with speeds of 50 Mbps or more (in some cases, over 100 Mbps) to more than 90 million American homes.

Currently, 45 million customers rely on cable for their broadband Internet connections. As Chairman Genachowski notes, those broadband connections have become indispensible.

I know it’s been 15 years, but it’s important to remember that it was cable that brought broadband to life and gave birth to everything we delight in today.

But we also help impact the economy. Just this past March, we released the latest study by Bortz Media and Sports Group, Inc. on the economic impact of the cable industry. The study found that the U.S. cable industry supports nearly 1.8 million jobs representing gross economic output amounting to more than $251 billion.

Since 2002, direct and indirect employment attributable to the cable industry has increased by 638,000 jobs.  The industry added 4,700 jobs over the last three years at a time when the U.S. economy’s net loss of jobs was more than seven million.

We deployed broadband first; we offer some of the fastest speeds in the marketplace; we help keep American employed. When you think of the economic impact of broadband, don’t forget the critical role that cable has played.

Yesterday, NCTA released a new economic analysis [see news release and full study] of a few broadband stimulus projects funded by Department of Agriculture’s Rural Utilities Service (RUS).  The study’s key finding: the program’s funding of duplicative broadband networks has resulted in an extremely high cost to reach a small number of unserved households and is not a cost-effective means of achieving universal broadband availability (a goal that NCTA strongly supports).

In response to the study – which was prepared by economists Jeffrey Eisenach and Kevin Caves of Navigant Economics – RUS said: “The projects highlighted in the NCTA study are in rural areas that lacked sufficient broadband for rural economic development, as required by the statute,” the spokesman said. “All were carefully vetted on the ground by RUS field staff, received strong support from the local community, and will vastly increase broadband capacity in their communities.”

The RUS is correct in that some small sections of the three case studies lack sufficient broadband access, but when looking at the overall project area, the vast majority of consumers in those areas were already being served.  So instead of using limited government resources to extend broadband to unserved homes, these projects allow for the construction of duplicative networks.  The Navigant study simply demonstrates that the cost of building duplicative networks means that the small number of unserved homes that will be reached comes at an extremely high – and clearly inefficient – cost.

The funding of duplicative networks is also at odds with the prudent strategy that the FCC is implementing in its reform of the universal service system.  As we have noted before, both the National Broadband Plan and the Commission’s February 2011 USF/ICC NPRM recognized that the key to a successful broadband subsidy program is targeting scarce funding to those areas that do not have broadband.  Such an approach achieves the benefits of extending broadband to new areas without the negative consequences of subsidized overbuilding that were identified in the study.

Specifics of the Study

The economic analysis released yesterday shows that the RUS’ history of funding duplicative service has continued under its Broadband Initiatives Program (BIP) despite findings by the Department of Agriculture’s Inspector General and the Government Accountability Office that such projects are not cost effective.

The study examined three large BIP subsidy awards which total $231.7 million, or about seven percent of the total BIP $3.5 billion combined loan and grant program, and found:

• Of the three projects analyzed, more than 85 percent of households were already passed by existing broadband providers, and in one project area, more than 98 percent of households were already passed by at least one provider.
• The estimated cost per incremental home passed will be $30,104 if existing coverage by mobile broadband providers is ignored, and $349,234 if mobile broadband coverage is taken into account.
• The RUS funding approach was at odds with the National Broadband Plan recommendations; the approach used would massively increase the cost of extending broadband to all unserved homes.

I was pleased to run across a new FCC survey which focuses on commercial broadband service, indicating that the vast majority of respondents are happy with their connection. However, I didn’t see any coverage of these results.

I keep thinking about a post I wrote five months ago, in which I marvel that some people never seem to be satisfied, no matter how much broadband improves or the proliferation of connected devices continues to grow. Any good news about broadband doesn’t seem to get the traction of the not-so-good.

In June, we highlighted an FCC survey entitled “Americans’ perspectives on online connection speeds for home and mobile devices.” That study found that 91% of home broadband users report being satisfied with the speed of their service. Those results were echoed by a report from Leichtman Research Group that came out that same month. Leichtman found that “71% of US broadband Internet subscribers are very satisfied with their current Internet service at home.”

Now, a new post on the FCC’s Blogband blog offers the results of a new survey which focuses on commercial broadband service.  In talking to managers, owners or IT directors at businesses with 5 or more employees, the survey determined that nearly all businesses report having at least one broadband Internet connection.

When looking at attitudes towards broadband service suppliers, 95% of businesses report being very or somewhat satisfied with their current service. In addition, 85% of businesses were not planning to upgrade their service in the next 12 months, citing the adequacy of their current connection.

Of course, this is only the beginning. The cable industry continues to improve the speed and quality of its broadband service and we all need to do more to promote broadband adoption by the general population. But we should also step back on occasion to remind ourselves of the amazing success story that broadband has already become.  The FCC’s latest survey is a nice opportunity to do just that.

I know, moment’s over – back to work.

With 95% of U.S. households already having access to broadband service with download speeds of at least 4 Mbps – including 50% of homes with access to cable’s DOCSIS 3.0 speeds of 50 Mbps and faster – broadband in the U.S. is a success story that keeps getting better.  Over the past decade, deployment of broadband throughout most of our country has created millions of jobs, added billions of dollars to our economy and unleashed innovators who are developing creative services and applications that have remarkably improved our quality of life.

While acknowledging these successes, the FCC’s Sixth Broadband Deployment Report – or 706 Report – nevertheless concludes that broadband is not being deployed to all Americans on a “reasonable and timely” basis because five percent of American households don’t have access to broadband with speeds of at least 4 Mbps.

It’s worth noting that the 4 Mbps threshold is new and represents a significant increase from the 768 Kbps used in the 2008 report, and the 200 Kbps used in the first four reports.  We have no problem using a 4 Mbps threshold for defining broadband:  I have argued for several years that 200 or 768 Kbps was an inadequate threshold for a policy definition of broadband (pages 5-6).  But if the 706 Report is to retain any value as a measurement tool, the Commission must heed its own advice and use the definition as “a relatively static point at which to gauge progress and growth… from one Report to the next.” If the Commission continually increases the speed threshold to reflect “current demand patterns” and “estimated future demand” as it did this year, it becomes a circular nullity and it will be a certainty that deployment never will be considered reasonable and timely.

Read the rest of this entry »

There’s a video of Louis C.K. that’s been floating around the Internet for the past two years called “Everything’s Amazing and Nobody’s Happy.” In an appearance on Late Night with Conan O’Brien, the comedian observed that despite our technological advances, people still like to complain.

I think about this when I hear people complain bitterly that the U.S. is dangerously behind on broadband – there’s not enough broadband available, it’s too slow, it’s too expensive. Nobody can get online!

Of course, we have to ensure that as many Americans as possible have access to the Internet. Read this February post from Kyle McSlarrow or this one from James Assey in March. The cable industry has deployed broadband to 92% of American households. We continue to regularly increase broadband speeds and we’re rolling out wideband service based on the DOCSIS 3.0 standard (now reaching 65+ million homes). We proposed the Adoption Plus program to bring broadband to lower income households.

This is a time when:

• 95% of U.S. households have availability to Internet access with speeds of 4 Mbps or more
• 82% of HHs can choose from two or more wireline platforms
• More than 90% can choose from several 3G mobile options

Internet access is important. We can and should do more to get Americans connected. But are we really so bad off?

I Don’t Think We’ve Surrendered to Sweden.

Last month, we blogged about how high consumer satisfaction is with their current Internet connections, but all you’ll hear is about how slow our connections are.  Surveys show that an increasing number of people are using mobile devices to access the Web, but some wouldn’t count those consumers when measuring “broadband.”

Adam Theirer pointed out last year that the speed of adoption for Internet access is far faster than other technology developments (See this Pew report). With three-quarters of Americans currently using the Internet, adoption hit 50% in a decade, ahead of multichannel video (35 years), wireless phones (20 years), home computers (20 years), telephone and electricity (50+ years). Are we crawling along or well ahead of schedule?

Nokia Siemens Networks’ annual broadband development index, the Connectivity Scorecard, just came out and it showed that the U.S. just lost the #1 slot to Sweden. Sweden is beating us!

Of course, Sweden’s population is 3% of the U.S. population; it’s 4.57% of our land mass; the Swedish government owns 37% of the incumbent telecom provider (TeliaSonora) and the Finnish government owns another 13%, making the incumbent half-owned by the government.  Still, look at how bad we have it.

It’s not like I can buy a little device for a couple hundred dollars that I can carry around in my pocket and access most of the Internet, anytime and anywhere. It’s not like I can watch one of thousands of movies 24 hours day by firing up my Wii to reach the Netflix library or by tuning to my VOD service. It’s not like I can get on an airplane and fly across the country while surfing the Web.

Oh, wait. Yes, I can.

[NOTE: I should probably mention Louis C.K.'s terrific FX show Louie. And check out George Ou's debunking of the Berkman study – a key tool used to "prove" how the U.S. is behind – here and here.]