September 13, 2006
Misleading FCC Data Masks Slow Speeds, High Prices and No Competition for Broadband Service
The United States continues to lag behind the rest of the world in accessible and affordable broadband service, with no signs of closing the digital divide at home, according to a new report released today by Free Press, the Consumer Federation of America and Consumers Union.
Contradicting the rosy picture painted by the Federal Communications Commission and Congress, Broadband Reality Check II exposes the truth behind America’s digital decline: A failed broadband policy that has left Americans with higher prices, slower speeds and no meaningful competition for high-speed Internet service.
“President Bush set a goal of bringing universal, affordable high-speed Internet access to every household by 2007,” said S. Derek Turner, research director of Free Press and author of the report. “We’re nowhere close to reaching that goal. Yet the FCC seems content to ignore the problem, manipulate the data, and pretend we’re moving forward.”
Broadband Reality Check II updates last year’s report on the state of high-speed Internet in America and details new empirical research. Among its key findings:
The United States is 16th in the world in broadband penetration, and 14 other OECD nations saw higher overall net growth in broadband adoption than the United States from 2001 to 2005.
Consumers in other countries enjoy broadband connections that are far faster and cheaper than what is available here. U.S. consumers pay nearly twice as much as the Japanese for connections that are 20 times as slow.
The most important factors explaining the digital divide among nations are household income and poverty – not population density.
U.S. broadband prices aren’t dropping: Cable modem prices are holding constant or rising, and DSL customers on average are getting less bandwidth per dollar than just a year ago.
Despite claims of “fierce competition,” cable and DSL account for 98 percent of the residential broadband market. And over 40 percent of U.S. ZIP codes have one or fewer DSL or cable modem providers reporting service.
The market share of “third platform” alternatives like satellite, wireless and broadband over powerline technologies has actually decreased over the past five years.
Those living in urban areas are nearly twice as likely to have home broadband access as their rural counterparts.
Approximately one out of 10 households with incomes below $30,000 reported having high-speed Internet access, but six out of every 10 households with incomes above $100,000 had broadband.
The price of broadband service, and not necessarily the lack of a home computer, is the key barrier to broadband adoption by low-income households.
The FCC uses misleading and meaningless measures of broadband coverage and competition, inflating estimates of broadband availability and competition.
FCC Chairman Kevin Martin — who will testify at a confirmation hearing before the Senate today — has used the misleading FCC data to claim that consumers have numerous choices among broadband providers. Broadband Reality Check II corrects the record.
“Wishful thinking won’t bring broadband to rural areas, and the repeated use of fishy data won’t help low-income consumers afford broadband,” Turner said. “Congress and the FCC have the power to reverse these disturbing trends, but first they need to take an honest look at the lack of meaningful competition for high-speed Internet service.”
The report’s key policy recommendations to address America’s broadband slide include removing legal barriers to building “Community Internet” systems; making more “unlicensed spectrum” available for broadband Internet; modernizing the Universal Service Fund to support broadband deployment; and restoring Net Neutrality, the fundamental protection that enabled the birth and historic proliferation of the Internet.
“Not only have we failed to craft policies encouraging competition, but we are poised to strip away the nondiscrimination rules that keep network owners from undercutting Internet content market,” said Ben Scott, policy director of Free Press. “Scrapping Net Neutrality will not bring us better broadband. But it will end any hope of meaningful competition in high-speed Internet services for a generation.”
To read the executive summary of Broadband Reality Check II, go to http://www.freepress.net/docs/bbrc2-execsum.pdf
To read the full report, go to http://www.freepress.net/docs/bbrc2-final.pdf
Craig Aaron, Free Press, (202) 265-1490, x25