"Broadband Reality Check" -- New Free Press Analysis Rips Apart FCCs July 2005 Broadband Report.

In the interests of full disclosure, I consulted on this Free Press Broadband analysis of the July 2005 FCC Broadband Report. Free Press, Consumers Union and the Consumer Federation of America all worked on the research for this report.

The Free Press report offers a devastating critique of the FCC's findings. Among the key Free Press Report's key findings:

The FCC report overstates broadband penetration rates, service quality, and the competitive conditions of the marketplace:

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• The standard the FCC uses to measure “high-speed” connections is misleading and low. The 1996 Telecom Act mandates the FCC to ensure deployment of broadband “that
  enables users to originate and receive high-quality voice, data, graphics and video telecommunications.” However, the standard used by the FCC to measure “high-speed” connections (200 kbps) is barely enough for users to receive low-quality streaming video. It is certainly insufficient for users to originate high-quality video.

• The FCC uses a misleading measure of broadband coverage. The Commission counts a ZIP code as covered by broadband service if it contains at least one broadband subscriber. No consideration is given to the price, speed or availability of connections across the ZIP code.
• Broadband costs in the United States remain high, despite growth in the total number of connections. Meanwhile, the cost of broadband in other countries has dropped dramatically while speeds have increased. On a per megabit basis, U.S. consumers pay 10 to 25 times more than broadband users in Japan.
• The average speed of U.S. broadband connections has seen minimal increase over the past five years. More than half of DSL lines do not offer capacity of 200 kilobits per second (kbps) in both directions. Consumers in France and South Korea have residential broadband connections with speeds 10 to 20 times higher than those in the United States.
• Reports of a broadband price war are misguided. Analysis of “low-priced” introductory offers by companies like SBC and Comcast reveal that these are little more than bait-andswitch gimmicks designed to capture market share. When amortized over three years, SBC’s $14.95 per month introductory offer will cost consumers $47.17 per month, plus the cost of phone service.
• The “fierce competition” among broadband platforms is seriously overstated. The FCC’s own report shows that satellite and wireless broadband continue to lose market share. Today, cable and DSL providers control almost 98 percent of the residential and small-business broadband market.
• Open access policies create competition in the broadband market. Open access, or common carriage, for competitive DSL carriers has loosened the dominance of cable modem service in the residential market. Despite gains in service availability, the FCC seems eager to eliminate open access, entrench an incumbent duopoly, and stifle consumer choice.

The digital divide persists and shows no sign of narrowing:

• The United States continues to fall in the world rankings of broadband penetration. The United States now stands at 16th worldwide in the number of broadband subscribers per 100 inhabitants, placing it far behind countries such as Canada, Japan, and South Korea. The United States also ranked 16th in the net change in broadband penetration from 2003 to 2004, indicating a comparatively slow pace of broadband adoption within the country.
• Broadband adoption is highly dependent on socio-economic status. Almost 60 percent of households with incomes above $150,000 have a broadband connection, while less than 10 percent of households with incomes below $25,000 have a connection.
• The gap between rural and urban America persists. The broadband penetration rate in urban and suburban households is almost double the rate in rural areas.

As Free Press documents, in the United States, we're paying far more for far worse services compared with other industrialized countries. And the broadband divide is growing, not just within the United States, but globally as well. As the FCC lowers the bar to obfuscate how few people actually have truly hi-speed connectivity, they're forced to engage in more an more misinformative rhetoric and research.

The report concludes with two broad recommendations -- both of which would help foster meaningful, constructive changes in our national broadband policies:

Congress should take notice of these alarming trends. Wireless technologies can offer incredibly fast connections at a fraction of the cost of cable or DSL. But these technologies are being crippled by the wasteful allocation of the public airwaves and by incumbent-backed legislative efforts to stifle competition and innovation at the local level.

Congress must enact clear statutes that will free the broadband market from duopoly domination and promote new market entrants. Congress should authorize any entity, public or private, that seeks to offer broadband services to American consumers, open up more spectrum for wireless broadband, and ensure open access to all high-speed communications networks. Advances such as these will promote a strong American economy, one able to effectively compete in the global marketplace.