America's Broadband Dilemma

For millions of people around the world, broadband Internet access is big part of modern life. We download movies and music, play online games, share photos, and upload information to social-networking sites–all at ever-increasing speeds. Rates of at least 50 megabits per second–enough to download a DVD-quality movie in about 10 minutes–have become mainstream in cities from Seoul to Stockholm. In the United States, however, the broadband landscape is different: the average download speed is about 10 megabits per second, according to the broadband testing firm Ookla, and only 23 people in 100 have broadband subscriptions, according to the International Telecommunications Union (see “The Global Broadband Spectrum”). Statistics from the Organization for Economic Coöperation and Development rank the United States behind more than a dozen other countries–including South Korea, Japan, Canada, the U.K., Sweden, and Belgium–in both broadband penetration and average advertised speed.

Faced with these statistics–and the widespread assumption that access to high-speed broadband is critical to the country’s economic health–the U.S. Federal Communications Commission created the National Broadband Plan, which directs up to $15.5 billion in public funds toward improving U.S. connectivity. The plan aims not only to ensure affordable and reliable broadband for every community but also to equip the majority of households (some 100 million homes) with lines running at speeds of at least 100 megabits per second. It’s an attempt to shove the United States into the high-speed age–and all of it, the FCC suggests, is achievable by 2020.

Yet the case for federal investment boils down to one fundamental question: how much public good will $15.5 billion buy? Answering that with any accuracy, it turns out, is nearly impossible. Serious studies on the economic and social effects of wider, faster Internet access are surprisingly few–and many of those that do exist are dated. The answer also depends on how the FCC balances the plan’s two goals of inclusivity and innovation.

It is often taken for granted that greater access to high-speed Internet services will boost the economy while improving health care, education, civic engagement, and more. Such assumptions are built into the plan and endorsed by various experts. In March of last year, for example, the Information Technology and Innovation Foundation, a think tank in Washington, DC, published a study suggesting that government support for wired and wireless broadband is vital to future economic development. The benefits of increased Internet access, the report’s authors suggested, in turn spur the growth of new networked technologies as well as wholly unforeseen developments.

But Shane Greenstein, a professor of management and strategy at Northwestern University’s Kellogg School of Management, says the advantages are in fact far less obvious. “The research challenge is substantial,” says Greenstein, one of a handful of academics who have studied the economic impact of broadband. “One problem is that the real impact generally doesn’t come in the sector where the investment takes place. For example, when broadband first arrived, who knew that restructuring the music industry would be the first thing to happen?” A lack of empirical research, Greenstein suggests, is also the result of a kind of institutional blindness apparent on nearly every side: “It’s in no one’s interest to be a skeptic, because it undermines one of the mythologies of broadband–that it is a technological panacea.”

A 2007 study by researchers at MIT and at another Washington think tank, the Brookings Institution, did find some benefits when it attempted to discern the effect of increased broadband penetration on job opportunities at a state level. More high-speed access barely seemed to change activity in sectors such as construction, but it appeared to improve opportunities in knowledge industries like finance, education, and health care. The researchers determined that each percentage-point increase in broadband penetration was associated with an overall employment increase of 0.2 percent to 0.3 percent. William Lehr, an economist at MIT and one of the paper’s authors, says that the returns diminish as penetration nears the FCC’s target of 100 percent, but the advantages remain significant.

It’s less clear, however, whether the superfast connections championed by the FCC offer benefits commensurate with the costs. A study published last year by Motu Economic and Public Policy Research, a nonprofit institute in New Zealand, found that increasing broadband speeds may not help businesses’ bottom lines. The research, which examined 6,000 companies, found that productivity increased significantly when service was upgraded from narrowband to broadband; but there was “no discernible additional effect arising from a shift from slow to fast broadband.”

Nonetheless, the FCC does want commercial speeds to increase rapidly, to help the United States keep pace with rival countries. At the same time, the National Broadband Plan articulates a social and moral imperative to make sure that everybody can access the same basic services and operate in a 21st-century economy. Indeed, the plan often conflates these two goals. But the truth is that they require different technical approaches, political policies, and levels of investment.

The challenge, then, is to work out how to balance inclusion with innovation on a budget of $15.5 billion. Guidelines that the European Commission published last October after reviewing projects across the continent suggest that heavy government investment is the best way to extend broadband to underserved areas. That could be expensive, however. Northwestern’s ­Greenstein points out that bringing broadband to the farthest reaches of the United States will come at rapidly increasing costs–as much as $5,000 per household in some rural parts of the country, compared with a couple of hundred dollars in built-up areas.

Instead, the FCC recommends a fresh approach: freeing up new portions of the wireless spectrum and encouraging mobile broadband providers to fill the gaps in coverage. Some academics have endorsed this solution, but wireless broadband technologies are unproved. WiMax, for example, can deliver speeds of 50 megabits per second, but that speed declines with distance from the transmitting station.

Achieving ever-higher speeds may also require significant government intervention. According to a study by Harvard University’s Berkman Center for Internet and Society, the key to speeding up existing service is an initial government investment combined with policies that encourage competition. Municipal investment in fiber networking capacity, which is then leased to commercial parties, has led to increased broadband speeds in European cities such as Amsterdam and Stockholm. But it will be tricky to follow this path in the United States, because the industry has been set up differently. In the 1990s, the FCC decided to encourage competition between infrastructures such as cable and DSL, rather than between different providers using a shared backbone. As a result, companies in the United States have been less willing to shoulder the cost of investing in new broadband technology, since doing so would give them little advantage over any direct competitor.

Yet private investment will be vital to increasing broadband speeds. Korea’s rapid advances in the past decade were attributable in no small part to funding from companies. And there are encouraging signs that something similar is beginning to happen in the United States; in the most obvious example, Google is planning to roll out one-gigabit-per-second fiber lines to at least 50,000 and up to 500,000 people in trial locations across the country. But an FCC task force has suggested that more than $300 billion of private funding would eventually be required on top of the government’s expenditure in order to boost speeds to 100 megabits per second or higher for the entire nation.

In the end, the success of the National Broadband Plan will be judged according to the targets that the FCC has set for increasing both penetration and speeds by 2020. But the tension between those two distinct goals leaves a desirable outcome very much in doubt.

Bobbie Johnson is a freelance writer based in San Francisco. Previously, he was the technology correspondent for the Guardian newspaper.