This document discusses issues with assessing broadband market penetration and competition in the United States. It notes that broadband statistics can be interpreted in vastly different ways to draw opposing conclusions about conditions. While some claim the US broadband market is doing quite well, others argue true broadband shows marketplace failure in many areas with only one or two facilities-based carriers. The document also examines international broadband comparisons that show the US lags most developed nations in terms of household penetration and penetration relative to GDP. It questions the credibility of FCC broadband statistics and advocates for more transparency in data collection to develop clearer assessments.

1. Lies, Damn Lies and Statistics:Lies, Damn Lies and Statistics:
Developing a Clearer AssessmentDeveloping a Clearer Assessment
of Market Penetration and Broadbandof Market Penetration and Broadband
Competition in the United StatesCompetition in the United States
A Presentation at the
36th
Annual Telecommunications Policy Research Conference
George Mason University School of Law
September 28, 2008‘
Rob Frieden, Professor of Telecommunications and Law
Penn State University
rmf5@psu.edu
Web site : http://www.personal.psu.edu/faculty/r/m/rmf5/
Blog site: http://telefrieden.blogspot.com/

2. 2
Absent Market Failure, Should Governments Stimulate
Broadband Investment, Subsidize Service,
or Become a Carrier?
 Few would dispute the view that broadband access contributes to regional and globalFew would dispute the view that broadband access contributes to regional and global
competitiveness, especially in the hinterland where distance insensitivity can havecompetitiveness, especially in the hinterland where distance insensitivity can have
greater impact.greater impact.
 ““This country needs a national goal for…the spread of broadband technology. WeThis country needs a national goal for…the spread of broadband technology. We
ought to have…universal, affordable access for broadband technology by the yearought to have…universal, affordable access for broadband technology by the year
2007, and then we ought to make sure as soon as possible thereafter, consumers have2007, and then we ought to make sure as soon as possible thereafter, consumers have
got plenty of choices when it comes to [their] broadband carrier.” President Georgegot plenty of choices when it comes to [their] broadband carrier.” President George
W. Bush, March 26, 2004W. Bush, March 26, 2004
http://www.whitehouse.gov/infocus/technology/economic_policy200404/chap4.htmlhttp://www.whitehouse.gov/infocus/technology/economic_policy200404/chap4.html
 John Kneuer, Assistant Secretary for Communications and Information andJohn Kneuer, Assistant Secretary for Communications and Information and
Administrator at the Commerce Department’s National Telecommunications andAdministrator at the Commerce Department’s National Telecommunications and
Information Administration claims the United States “has the most effectiveInformation Administration claims the United States “has the most effective
multiplatform broadband in the world.”multiplatform broadband in the world.”
 Mission accomplished? The Internet does provide a case study of successfulMission accomplished? The Internet does provide a case study of successful
government incubation, anchor tenancy and privatization. But even for basicgovernment incubation, anchor tenancy and privatization. But even for basic
telecommunications services, a $ 7 billion subsidy mechanism works to promotetelecommunications services, a $ 7 billion subsidy mechanism works to promote
greater accessibility and affordability.greater accessibility and affordability.
 Does broadband require similar government promotion?Does broadband require similar government promotion?

3. 3
Using Current Broadband Statistics, One Can ReachUsing Current Broadband Statistics, One Can Reach
Vastly DifferentVastly Different Conclusions About ConditionsAbout Conditions
in the U.S.in the U.S.
The broadband marketplace in the U.S. is doingThe broadband marketplace in the U.S. is doing
quite well and could do better if governmentquite well and could do better if government
deregulated further to remove regulatoryderegulated further to remove regulatory
uncertainty and disincentives for investment.uncertainty and disincentives for investment.
versus
True broadband, i.e., 786 kilobits per second orTrue broadband, i.e., 786 kilobits per second or
greater, shows marketplace failure in manygreater, shows marketplace failure in many
regions where two or less facilities-basedregions where two or less facilities-based
carriers operate.carriers operate.

4. 4
Lines by Information Transfer Rates in the Faster Direction as of June 30,Lines by Information Transfer Rates in the Faster Direction as of June 30,
2007 (Includes only lines exceeding 200 kbps in both directions)2007 (Includes only lines exceeding 200 kbps in both directions)
Source: FCC (2008); available at:http://www.fcc.gov/Bureaus/Common_Carrier/Reports/FCC-Source: FCC (2008); available at:http://www.fcc.gov/Bureaus/Common_Carrier/Reports/FCC-
State_Link/IAD/hspd0607_tables.xlsState_Link/IAD/hspd0607_tables.xls
Total “High Speed” Lines (theoretical bitrate exceeds 200 kbps in 1 direction)Total “High Speed” Lines (theoretical bitrate exceeds 200 kbps in 1 direction)
0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
80,000,000
90,000,000
100,000,000
110,000,000
Jun 2000 Jun 2001 Jun 2002 Jun 2003 Jun 2004 Jun 2005 Jun 2006 Jun 2007
40.2%
54.2%
5.6%
> than 200 kbps, < than 2.5 mbps
≥ than 2.5 mbps, < than 10 mbps
≥ than 10 mbps

5. 5
The U.S. Has 100% Broadband Penetration With Consumers in 77.4% of All
Zip Codes Having 4 or More Broadband Choices
Source: FCC (2008); available at:http://www.fcc.gov/Bureaus/Common_Carrier/Reports/FCC-
State_Link/IAD/hspd0607_tables.xls
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Jun
2000
Jun
2001
Jun
2002
Jun
2003
Jun
2004
Jun
2005
Jun
2006
Jun
2007
One or More Providers Four or More Providers

6. 6
The FCC Provides One Source Document for All the Positive News—
Everything Else Constitutes a “Trade Secret”
Necessitating Confidential Treatment

7. 7
Wireless Carriers Don’t Claim the Trade SecretWireless Carriers Don’t Claim the Trade Secret
Exemption and Willingly Disclose CoverageExemption and Willingly Disclose Coverage

8. 8
The U.S. Ranks 15th
Among OECD Nations in
Terms of Household Penetration
source: OECD (2007) www.oecd.org/sti/ict/broadbandsource: OECD (2007) www.oecd.org/sti/ict/broadband
0
5
10
15
20
25
30
35
Denmark
Netherlands
SwitzerlandKoreaNorwayIcelandFinlandSwedenCanadaBelgium
UnitedKingdomAustraliaFrance
Luxembourg
UnitedStatesJapanGermanyAustriaSpain
New
Zealand
ItalyIrelandPortugal
CzechRepublicHungaryPolandGreece
SlovakRepublicTurkeyMexico
DSL Cable Fibre/LAN Other
OECDBroadband subscribers per 100 inhabitants, by technology, June 2007
OECDaverage

9. 9
0
5
10
15
20
25
30
35
Denm
ark
Netherlands
Switzerland
KoreaNorwayIcelandFinlandSwedenCanadaBelgium
United
KingdomAustraliaFrance
Luxem
bourg
United
StatesJapanG
erm
anyAustria
Spain
New
Zealand
ItalyIrelandPortugal
Czech
RepublicHungaryPolandG
reece
SlovakRepublicTurkeyM
exico
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
Broadbandpenetration(subscribers per100inhabitants,June2007)
GDP percapita(USD PPP,2006)
The U.S. Lags Most Nations in Broadband Penetration
On the Basis of Per Capita GDP
source: OECD (2007) www.oecd.org/sti/ict/broadbandsource: OECD (2007) www.oecd.org/sti/ict/broadband

10. 10
33.38
30.56
30.44
28.71
26.75
25.29
24.13
22.88
22.18
21.98
21.93
21.66
21.22
21.02
20.75
20.09
19.34
18.59
18.14
17.92
16.99
16.79
16.54
16.15
15.82
14.99
10.75
7.74
6.06
5.80
CzechRepublic
Korea
Iceland
Mexico
Portugal
Luxembourg
Italy
Austria
Hungary
Canada
Norway
Australia
Japan
Germany
Poland
Spain
Greece
Belgium
Ireland
Finland
France
Sweden
United Kingdom
New Zealand
Slovak Republic
United States
Turkey
Netherlands
Denmark
Switzerland
321.88
50.93
79.38
157.52
91.71
90.83
54.44
102.33
166.94
97.63
163.04
108.45
131.57
45.19
132.48
233.64
90.43
72.66
154.03
49.04
74.01
89.60
62.76
119.70
266.93
199.99
117.18
87.68
72.62
52.15
1.00 10.00 100.00 1000.00
Czech Republic
Korea
Iceland
Mexico
Portugal
Luxembourg
Italy
Austria
Hungary
Canada
Norway
Australia
Japan
Germany
Poland
Spain
Greece
Belgium
Ireland
Finland
France
Sweden
United Kingdom
New Zealand
Slovak Republic
United States
Turkey
Netherlands
Denmark
Switzerland
Broadband price ranges, October 2007, all platforms, logarithmic scale, USDPPP
U.S Broadband Rates: Quite Cheap to Some
and Quite Expensive to Others (source: OECD 2007)

11. 11
Average broadband monthly price per advertised Mbit/s, Oct 2007, USD PPP
97.43
63.89
29.13
28.14
25.03
22.85
22.22
21.34
19.59
18.55
18.40
17.70
17.66
17.54
16.75
15.26
14.92
14.31
13.45
12.60
11.52
9.81
8.44
8.17
7.31
5.96
5.29
4.61
3.70
3.09
Turkey
Mexico
Greece
Canada
Poland
Spain
Iceland
Australia
Slovak Republic
Belgium
Sweden
Denmark
Austria
Czech Republic
New Zealand
Netherlands
Ireland
Hungary
Finland
United States
Portugal
Norway
Germany
Sw itzerland
Luxembourg
Korea
United Kingdom
Italy
France
Japan
U.S Broadband Rates: Moderate to Many (source: OECD 2007)(source: OECD 2007)

12. 12
Who’s Statistics Are Most Credible?Who’s Statistics Are Most Credible?
 Most satellite and terrestrial wireless broadband options doMost satellite and terrestrial wireless broadband options do
not exceed 200 kbps, yet the FCC showed a 24% increase innot exceed 200 kbps, yet the FCC showed a 24% increase in
market penetration from 2006-2007.market penetration from 2006-2007.
 Wall Street JournalWall Street Journal tests of the cutting edge, Apple iPhone 3Gtests of the cutting edge, Apple iPhone 3G
measured actual data speeds in the 200-500 kbps range.measured actual data speeds in the 200-500 kbps range.
 The U.S. government and sponsored academics dispute theThe U.S. government and sponsored academics dispute the
OECD statistics as failing to include Wi-Fi hot spots, at workOECD statistics as failing to include Wi-Fi hot spots, at work
access, etc.access, etc.
 Additional excuses include the lack of computer literacy andAdditional excuses include the lack of computer literacy and
access, having a large rural hinterland, adverse demographics,access, having a large rural hinterland, adverse demographics,
yet other nations with similar disadvantages do better.yet other nations with similar disadvantages do better.

13. 13
Case Study: Port Matilda, PA
The FCC reports I have eight (down from nine in the previous year) broadbandThe FCC reports I have eight (down from nine in the previous year) broadband
options (source: FCC, Number of Holding Companies Reporting High-Speedoptions (source: FCC, Number of Holding Companies Reporting High-Speed
Subscribers by Zip Code as of June 30, 2007Subscribers by Zip Code as of June 30, 2007
available at:available at:
http://www.fcc.gov/Bureaus/Common_Carrier/Reports/FCC-State_Link/IAD/hzip0607.pdfhttp://www.fcc.gov/Bureaus/Common_Carrier/Reports/FCC-State_Link/IAD/hzip0607.pdf
(p.570).(p.570).
The options range from DSL (Verizon not available in my neighborhood, butThe options range from DSL (Verizon not available in my neighborhood, but
presumably somewhere in the Zip Code) at $14.99 (up to768 kbpspresumably somewhere in the Zip Code) at $14.99 (up to768 kbps
downstream/ up to128 Kbps upstream) to Satellite (Wild Blue $79.95 up to 1.5downstream/ up to128 Kbps upstream) to Satellite (Wild Blue $79.95 up to 1.5
Mbps downstream/ up to 256 kbps upstream, plus $368.95 hardware,Mbps downstream/ up to 256 kbps upstream, plus $368.95 hardware,
installation and activation fees).installation and activation fees).

14. 14
Case Study: Port Matilda, PA (cont.)
Making an “apples-to-apples” comparison, which factors in actualMaking an “apples-to-apples” comparison, which factors in actual
price cross elasticity, there are three distinct market segments:price cross elasticity, there are three distinct market segments:
1)1) Non-mobile residence and businesses that can access cable and possibly DSL service;Non-mobile residence and businesses that can access cable and possibly DSL service;
available for as a low as $14.99 for DSL (with a 1-2 yr. service commitment) up toavailable for as a low as $14.99 for DSL (with a 1-2 yr. service commitment) up to
$37.99 (no service commitment for up to 3 Mbps downstream/ up to768 kbps$37.99 (no service commitment for up to 3 Mbps downstream/ up to768 kbps
upstream); cable modem service ranges from $27.99 for up to768 kbpsupstream); cable modem service ranges from $27.99 for up to768 kbps
downstream/up to128 kbps upstream) to $42.95 for up to 6 Mbps downstream/ up todownstream/up to128 kbps upstream) to $42.95 for up to 6 Mbps downstream/ up to
128 kbps upstream) for customers that currently subscribe to Comcast Cable or128 kbps upstream) for customers that currently subscribe to Comcast Cable or
Comcast Digital Voice. Without bundling: $59.95;Comcast Digital Voice. Without bundling: $59.95;
2)2) Users that want mobile access;Users that want mobile access; service available for as a low asservice available for as a low as $26.95 for 10 Mbps
plus about $10 in surcharges and fees (no throughput specified, but GPRS and Edge
do not come close to wireline speeds); up to $59.95 (one-two year service
commitment 5 GB quota and throughput of up to 600 kbps – 1.4 Mbps and at claimed
average upload speeds of 500 Kbps – 800 kbps); and
3)3) Non-mobile rural users lacking access to cable modem or DSL;Non-mobile rural users lacking access to cable modem or DSL; satellite servicesatellite service
available for as low as $49.95 for up to 512 kbps downstream/up to 128 kbpsavailable for as low as $49.95 for up to 512 kbps downstream/up to 128 kbps
upstream, plus $368.95 hardware, installation and activation fees; $79.95 for up toupstream, plus $368.95 hardware, installation and activation fees; $79.95 for up to
1.5 Mbps downstream/ up to 256 kbps upstream, plus $368.95 hardware, installation1.5 Mbps downstream/ up to 256 kbps upstream, plus $368.95 hardware, installation
and activation fees.and activation fees.

15. 15
The Current Strategies Do Not Work Well
 Transparency and credibility is essential in data collection.Transparency and credibility is essential in data collection.
 Section 706 of the Communications Act could be interpreted as requiringSection 706 of the Communications Act could be interpreted as requiring
the FCC to disclose broadband deficiencies rather than treat them as tradethe FCC to disclose broadband deficiencies rather than treat them as trade
secrets.secrets.
 e-rate subsidies have achieved modest goals at great expense ande-rate subsidies have achieved modest goals at great expense and
inefficiency.inefficiency.
 Municipal wi-fi networks have mixed records; compare Blackburg, Va. withMunicipal wi-fi networks have mixed records; compare Blackburg, Va. with
Philadelphia.Philadelphia.
 Reserving to an incumbent wireline carrier a right of first refusal does notReserving to an incumbent wireline carrier a right of first refusal does not
offer an optimal national strategy.offer an optimal national strategy.
 Regulatory forbearance based on “robust competition” ignores evidenceRegulatory forbearance based on “robust competition” ignores evidence
that over 98% of the national broadband market served by two types ofthat over 98% of the national broadband market served by two types of
carriers (cable modem and DSL).carriers (cable modem and DSL).
 A broad geographic footprint does not constitute a “perfect storm.”A broad geographic footprint does not constitute a “perfect storm.”
 Failure to applyFailure to apply CarterfoneCarterfone policies to wireless carriers passes up a lawfulpolicies to wireless carriers passes up a lawful
and inexpensive catalyst.and inexpensive catalyst.

16. 16
Recommendations
 Use more granular and forthright data collection and dissemination; the recent
broadband statistics reform (using census tracts with an eye toward mapping
penetration) constitutes a belated start toward rehabilitating the FCC into becoming an
honest broker. However, the FCC needs to report actual throughput speeds and
subscription costs with the same granularity as it does for wireline and wireless
telephone service.
 The FCC should abandon its confidential treatment of broadband penetration data as
trade secrets. Identifying locations where a specific carrier does not operate provides
little, if any, potential financial harm to a carrier that already has determined that
service there does not make financial sense. Likewise, identifying locations where
little if any broadband competition exists could identify unserved, or underserved
areas—a task consistent with the spirit of Sec. 706.
 Adopt best practices evident in other nations, e.g., Canada, Korea, Japan.
– capping government project funding to a percentage of total cost;
– creating incentives for demand aggregation;
– one time project funding rather than recurring discounts;
– promoting innovation and creativity in projects, including technologies that
provide greater efficiency and lower recurring costs, e.g., wireless;
– auctioning off subsidies; and
– blending government stewardship and vision with financial incentives for private
stakeholders to pursue infrastructure investments.