MTA Commentary–Broadband comparisons and economic stimulus

I thought you might be interested in this month’s MTA Commentary, which discusses international broadband comparisons and broadband economic stimulus policies.

Please let me know if you have any questions or comments.

Best wishes for a joyous holiday season and a happy, healthy and productive New Year!

Geoff

Geoff Feiss
Montana Telecommunications Association
406.442.4316 (office)
406.594.0424 (mobile)

Serving Montana’s telecommunications industry for over 50 years

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MTA Commentary—Economic Stimulus and Broadband Deployment

December 24, 2008

One of the most commonly-cited reports on international broadband
deployment comes from the Organisation for Economic Cooperation and
Development, or OECD.

According to the OECD’s Broadband Statistics, the
U.S. ranks 15th among OECD members in terms of per capita broadband
subscribership. Denmark ranks first. But wait. I’m no expert in geography, but I
suspect, with the exception of Canada, that any one of the top 14 countries could
squeeze itself inside the borders of Montana, with land to spare. So simply
comparing broadband penetration in a country the size of the United States,
versus a country the size of, say, Denmark is somewhat misleading.

In fact, according to separate statistics by the OECD itself, the US ranks
first among its international members in terms of total broadband subscribers.
Iceland, which ranks fifth in per capita subscribers, ranks 30th in total subscribers,
with under 100,000 total subscribers. The US, on the other hand, weighs in with
over 75 million broadband subscribers, more than 250% more than the next
closest country—Japan—which has fewer than 30 million subscribers.

(Incidentally, Japan ranks 17th in the OECD report, and it, too, could fit inside
Montana.)

A closer look at the OECD data reveals even more to question about their
accuracy. Earlier this year, for example, the Technology Policy Institute, a
Washington DC think-tank, released a study entitled, “Understanding
International Broadband Comparisons.” Among other things, the report finds that
OECD data do not accurately count business broadband connections. Data from
the US Census and the Nielson Company together suggest that the OECD data
may be missing as many as 70 million business broadband connections.

Moreover, because of generally larger US households, per capita data will
indicate lower percentages in the US compared to its international competitors.
Normalizing for the size of US households alone would elevate the US to 9th
among OECD members on a per capita basis. The Technology Policy Institute
finds that “broadband speeds consumers receive in the US are comparable to
other wealthy countries…[and that] income is a much stronger determinant of
broadband adoption than is location.”

This is not to say that we can afford to be complacent with regard to our
investment in broadband technology deployment in the US—whether we rank
15th, 9th, or 1st in the world. Indeed, both Congress and the incoming Obama
Administration are looking at accelerating investment in broadband technology
deployment as a key part of an economic stimulus package to be introduced in
2009. And for good reason. Investing in broadband creates economic
efficiencies and enhances health care, education and commercial opportunity
throughout the economy, resulting in the potential creation of thousands of direct
jobs and millions of indirect jobs. One economist from Northwestern University’s
Kellogg School of Management estimates that increasing use of residential
broadband in 2006 alone accounted for a $15 billion “bonus” to gross domestic
product.

So it makes sense to invest in broadband deployment. And, naturally,
there are lots of recommendations being proposed for how to spend anywhere
from $5 to $44 billion in economic stimulus funding for broadband investment.
Policy recommendations include tax incentives, grants, loans, community
network projects, and consumer education initiatives—among other things.

The trick will be in determining how, when, where, or even whether, to
spend money on initiatives to accelerate deployment of broadband technologies.
For example, tax policy may benefit some companies some of the time, but it
may take longer to take effect than other policies, such as targeted grants or
loans or reforms to existing programs. Fixing the way telecom providers
compensate one another may yield more immediate, and effective results than
other untested proposals. And then there’s the issue of who determines what
gets funding, and what does not. Should additional funding target specific
broadband speeds? Should it target low income and rural areas only? How
much should be focused on adoption of existing broadband technology rather
than deployment? And who should make these determinations, under what
conditions?
By targeting new investment only, Congress and the Administration risk
sending the wrong signal to companies that have already invested heavily in
broadband network infrastructure.

As usual, the devil is in the details. The next few weeks will be critical in
forming appropriate strategies—and costs—for a broadband economic stimulus
package. For us policy wonks, the next few weeks should be interesting and
challenging!

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Contact: Geoff Feiss, General Manager

Montana Telecommunications Association

406-442-4316

[email protected]