Obama's broadband stimulus: throwing money at wrong target?

Current draft may not result in many more broadband Internet users

President Obama is not happy that the United States is ranked 15th in the world in broadband adoption and wants to fix things as part of his big economic stimulus package. But it's not at all clear that the type of approach in the current draft bill will help improve the U.S. ranking all that much. Part of the problem is that the ranking is misleading.

The ranking comes from the Organization for Economic Co-operation and Development (OECD). The OECD report from last summer lists the U.S. as 15th in broadband subscribers per 100 inhabitants. But there are a lot of problems with relying on this number for all that much. There are reasons to say that the United States should be ranked even lower.

There are a lot of statistics on the OECD Web site about broadband usage in various countries. (See the OECD broadband portal for a range of broadband-related statistics.) Let's start with the OECD's definition of broadband, which it defines as any Internet connection with a download speed of 256Kbps -- hardly high speed these days. The United States shows up as having an average advertised download speed of 8.8Mbps, 14th in the world, but there are a lot of places where getting an actual 256Kbps would be a rare event.

The best in the world is Japan with an average advertised speed of 93Mbps followed by France and Korea, both of which are at more than 40Mbps. The United States looks rather wimpy in comparison.

The key statistic that points to why the president's plan may not help a whole lot is the fact that the United States ranks 11th in terms of monthly price per megabit -- $12.60.

This compares rather poorly to Japan and France at under $4 per month.

The Pew Internet & American Life Project just published the results of two surveys on Internet connectivity it ran over the last year. This report shows that not all that many people are blocked from getting broadband Internet access because it is not available in their area. There is no question that there are big parts of the country where broadband access cannot be obtained unless you are willing to use a satellite service. It is hard to tell in how much of the country this is true because of the poor statistics the FCC has been collecting. (See "All's well with U.S. broadband deployment (says FCC).")

The Pew report says that some people (more than 15%) have no interest in getting online. Another 6% think the price is too high, and 5% have usability problems. The president's plan is unlikely to change these numbers much.

The current draft of the broadband part of the stimulus package focuses on providing grants to companies that are willing to deploy wireless or wired broadband in underserved areas. The bill mandates open access to any services that result from such grants.

But, if the Pew report is correct, the stimulus money and open access policies might only result in a few percent of additional broadband users in the United States. Figuring out how to get more competition into the picture so that prices could come down might yield a greater return.

Disclaimer: Competition does not bring down prices in all areas, for example university fees (although Harvard has an aggressive aid program to offset the fees for many students). Harvard has not commented on broadband stimulus package options, so the above is my observation.

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