November 19, 2008
WASHINGTON, D.C. — Consumer groups today released a new report on Internet access and pricing in the U.S. The groups called on President-elect Obama and Congress to return to sound Internet policies to help provide open and affordable access to the Internet for communities across the U.S. These policies would help prevent overcharging, blocking, and discrimination against consumers and small businesses on the Internet. In communities where competition among Internet providers has not or will not emerge, the groups said the federal government should stop price gouging and promote low-cost broadband Internet access.
For the nation to dig out of the current economic mess, the consumer groups said the government needs to jump-start Internet commerce by providing an open, nondiscriminatory platform. The groups noted that the U.S. would need to push Internet prices down 25 percent and raise typical Internet speeds dramatically to catch up to countries such as France and Japan.
The Bush administration’s telecommunications policy has failed to achieve affordable access to a ubiquitous, advanced network, a report released today by the Consumer Federation of America (CFA) and Consumers Union (CU) concluded. Broadband in America: A Policy of Neglect is Not Benign finds that the digital divide has not been closed and that the U.S. has fallen behind at least a dozen other advanced industrial nations in the deployment and adoption of broadband communications.
“The Bush Administration recognized the importance of having a world class broadband network to “stay on the competitive edge of world trade” and “the cutting edge of technological change,” Dr. Mark Cooper, CFA’s Director of Research said in remarks at a telecommunications and Media Forum convened in Washington, D.C. by the International Institute of Communications, “but it just could not break out of its ideological commitment to a laissez faire approach. As evidence mounted that the policy was not working, the administration declared “mission accomplished,” rather than admit we were falling behind and make a mid-course correction.”
“Inadequate competition makes it essential to reinstate policies that can squeeze prices down 25 percent and drive economic growth through a more open Internet,” Gene Kimmelman, CU’s Vice President for Federal and International Affairs said. “Advanced industrial nations in Europe and Asia recognized the need for aggressive policies to promote deployment of broadband and keep prices down and they shot ahead of the U.S. in the past decade.”
The report examines data on Internet adoption and broadband deployment in 2001 and 2007/2008 to measure both the extent of the digital divide with the U.S. and the status of broadband networks in a number of nations.
Key finding on the digital divide include the following:
• In 2001, 54 percent of households did not have the Internet. In late 2007, 49 percent of households did not have broadband.
• About 25 percent of households with incomes below $25,000 per year had broadband in 2007; whereas over 80 percent of households with incomes above $75,000 did.
• Rural areas lag behind urban areas in broadband adoption by 10% to 20%.
Key findings on the international comparisons on broadband include the following:
• In the U.S. consumers pay substantially higher prices for slower service than in a dozen developed nations.
• In 2001 the OECD rankings on Internet penetration put the U.S. in third place; by 2007 it had fallen to 15th on broadband.
• Half a dozen studies that try to “excuse” the lag in U.S. performance by introducing explanatory variables, like income, education, population density, urbanism, inequality, etc. only reaffirm the finding that the U.S. is underperforming.
“The Bush administration allowed a cozy duopoly of telephone and cable companies to gain a stranglehold on the advanced telecommunications network,” Cooper noted. “It allowed the cable and telephone companies to consolidate control over wires and wireless networks through mergers, foreclose competition from new entrants by denying access to monopoly network elements, and undermine competition from Internet service providers by eliminating the obligation to operate the telecommunications networks in a nondiscriminatory manner. At the same time, it did nothing to expand the universal service fund to cover access to advanced telecommunications services.”
“Policymakers must promote more affordable, higher-speed Internet services open to all consumers and small businesses to help jump-start economic recovery and compete globally,” Kimmelman concluded.
Click here for the study (PDF format).
Mark Cooper, CFA
Gene Kimmelmam, CU
Consumers Union, publisher of Consumer Reports, is an independent, nonprofit testing and information organization serving on the consumer. We are a comprehensive source of unbiased advice about products and services, personal finance, health, nutrition, and other consumer concerns. Since 1936, our mission has been to test products, inform the public, and protect consumers.
CFA is a national non-profit group that seeks to advance the consumer interest through research, education, and advocacy. Founded in 1968, the federation has more than 300 organizational members.