Pressure mounts in the USA for a national broadband infrastructure policy
By Lawrence Baker - BuddeComm Senior Analyst North America

Many years of unrealised fibre projects have left the USA trailing far behind Asia in the deployment of FttH networks. Despite having a very high total number of broadband subscribers, in terms of penetration (based on subscribers per 100 inhabitants), the USA dropped from 4th place in 2001 to 12th place in 2004 where it remained through 2005 and 2006. By 2007 the USA had dropped a further three places to 15th.

Back in 2006, BuddeComm published an analysis of the US broadband infrastructure market predicting that also here structural changes will be needed to take this market forwards.

Moreover, a country comparison of broadband penetration indicates little about speeds, bandwidth, service levels and value. For instance, although data show Japan and the US to have similar broadband penetration rates, OECD figures indicate that Japan has nearly ten times faster broadband speeds than the US, based on average advertised download speeds. According to the OECD measure, the US ranks 14th in the OECD in terms of average broadband speeds.

The US has fallen so badly off the pace in broadband development that many in the US are now calling for government to treat broadband as significant national infrastructure.

Perhaps the most significant reason for the lacklustre broadband market includes the lack of a federal broadband plan setting specific broadband goals. Having left broadband development largely to the private sector, the US market has been typified by a cosy cable-DSL duopoly which has been slow to embrace the latest technologies. In this regard, the US could learn from the national broadband initiatives of Japan, South Korea and Canada.

Similarly, only some US state governments have started treating broadband as an infrastructure issue rather than merely a communication issue. To date, the focus of the US federal and state governments has been on providing broadband to underserved rural and regional areas. However, this tends to be low speed broadband, rather than the 100Mbps speeds we see in Japan. Thus there are increasing calls for US federal and state governments to commit significant public funds to broadband infrastructure as has been successfully done by the Japanese, South Korean, Canadian and Swedish governments.

Another reason for limited private sector investment in fibre networks is the fact that the US has not required open access to, or unbundling of, fibre networks. In contrast Japan has imposed unbundling on NTT's fibre facilities whilst EU nations are debating whether to impose unbundling on fibre facilities. France and the UK have moved to the top of the G7 in terms of broadband adoption, largely due to the unbundling of their local loops.

It is envisaged that a national broadband policy would focus on high bandwidth fibre networks that can deliver 100Mbps speeds. Such a policy would foster investment by both the public and the private sectors, so as to capture the benefits that broadband can bring to, for example, education, health and public safety, whilst harnessing the capital and expertise of the private sector. The policy would aim for universality i.e. all communities, institutions, businesses, houses and individuals would have equitable and affordable access to high speed broadband services and to a wide range of content and service providers.

The federal policy should also embrace sufficient flexibility to allow local and state governments to target the funding dollars as appropriate within their jurisdiction. While a number of US cities have already built or are building fibre networks, federal and state governments could do more to encourage municipalities to deploy fibre networks.

In addition to public-private-partnerships, another means by which to encourage private sector investment in fibre networks is to offer tax incentives. This was done with much success in 1986 when the US Congress passed legislation offering tax incentives for investment in long distance infrastructure upgrades.

Based on Verizon's $800 per house FttH deployment costs, it is estimated that the total costs to provide FttH to every home in the country would amount to around $80-100 billion. The policy should include funding to improve research into broadband technology and to enhance consumer education about broadband services. It has been proposed that a new fund be established using a marching grant format such as that used in some Canadian provinces, where the federal government, the state government and the network owner each contribute one-third of the funding for each broadband project. To administer the policy and the fund, it has been suggested that there be established a council of government officials, co-chaired by the Secretary of Commerce and the Chairman of the FCC, together with officials from federal, state and local government agencies.

The policy should set an aggressive timeframe, such as providing minimum 100Mbps access to all homes, businesses and institutions within 5 years. Currently, even Verizon's FttH deployment, which is by far the most aggressive in the country (Verizon currently accounts for approximately 60% of all FttH subscriptions and nearly 90% of homes passed by fibre), is aiming to cover only half of Verizon's footprint.

Given the Regional Bell Operating Companies' success in the past to ensure that their fibre networks are not made subject to third party access regimes, it is unlikely that the envisaged national fibre networks would be subject to interconnection regulation, at least not within the 5-year horizon. Critically, however, to ensure that the full economic and social benefits of the national broadband network are properly realised, it is essential that the policy enshrines network neutrality in legislation.

Lawrence Baker
BuddeComm Senior Analyst North America

For more information on FttH developments in the US see -
2008 USA - Telecoms, Wireless and Broadband

* Paul Budde Communication Pty Ltd

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