The 3 Big Myths that Are Holding Back America’s Internet
The U.S. is lagging its competitors in the quality of its Internet access, and the people in charge are hearing excuses. It’s time to debunk the myths.
Back in 2001, then newly minted Federal Communications Commission (FCC) Chairman (and now top cable industry lobbyist) Michael Powell was asked a question about the digital divide.
He quipped, “I think there is a Mercedes divide. I would like to have one, but I can’t afford one.” The talking point hasn’t changed: Last week I met with a telecom industry investor who is completely unconvinced that there is anything wrong with the state of high-speed Internet access in America. He looked me right in the eye and said, “Sure, I’d like a Ferrari too.”
The staying power of the “it’s like a luxury vehicle” meme in the minds of those who fervently support the status quo got me thinking. It’s the end of the calendar year — the time when our need for summing-up expresses itself in a flowering of lists. So here’s my list of the Three Great Myths about U.S. Internet access. Go to any meeting on high-speed Internet access policy and you’ll hear these lines.
Myth Number One
“There’s no problem because everyone who wants high-speed Internet access has it.”
It’s true that most of America — 93% of households — is reached by cable, the dominant form of high-speed Internet access in the country. But people don’t sign up for high-speed Internet access in similar numbers. The FCC’s most recent data on this is from 2011 — the commission hasn’t issued a report on adoption since the summer of 2012 — when just 40% of Americans had signed up for wired download speeds of 3 Mbps or higher. And adoption rates are even lower in rural areas and for poorer and older Americans: Income, level of education and age are the largest predictors of Internet access adoption. Adoption plateaued several years ago and hasn’t significantly increased.
(Pew says adoption of “broadband” is about 70%, but they’re counting everything other than dial-up, including satellite and mobile wireless services that don’t substitute effectively for a wire. Smartphones are complementary, supplemental methods of online access; about 83% of people with a smartphone also have a wire at home.)
Why don’t people sign up for wires in their homes? Its expense is the most-cited reason. We pay a lot more than people in other countries do, for service that is worse. We’re in the middle of the pack for OECD nations when it comes to wired Internet access and we are low-ranked for fiber access; the US is 21st out of 34 OECD countries for penetration of fiber.
Our lack of fiber is a substantial competitive problem for the country: fiber, unlike the cable network, is capable of equal upload (publishing!) as well as download capacity, can be easily upgraded by installing advanced electronics, and (as far as we can tell) has unlimited capacity to carry information. Fiber will last for decades and is the world standard for communications networks.
Even counting everything other than dial-up as “high speed,” we’re at risk of leaving behind 60 million Americans who are truly disconnected from the Internet. Given the huge differences in usage patterns between Internet access via smartphone and over wires, we’re at risk of relegating many poorer Americans to second-class Internet access. Research clearly shows that levels of online engagement among smartphone-only users are substantially lower than for people with wires at home. Smaller screens make for relatively impoverished online experiences, access speeds are usually slower, and data caps combined with steep overage charges constrain users from doing all the same things they might do with a wired home connection. More tweeting, more Facebook, but less producing and collaborating.
We’re also far behind other countries (Sweden, Japan, South Korea, Norway, etc.) when it comes to the global standard for Internet access — fiber optic connections to homes.
We’ve got a policy problem.
Myth Number Two
“The industry has invested a tremendous amount in high-speed Internet access infrastructure; we would lose that investment if there was any attempt to regulate high-speed Internet access.”
We know that Comcast, Time Warner Cable, Verizon, and AT&T made just shy of $1.5 trillion in revenue between 2009 and 2013, which is more than twice what these same companies made between 2001 and 2005. Yes, they’ve invested in their networks — but their capital expenditures for 2009 to 2013 amount to just 15% as a percentage of that flood of revenue (quite a bit less than the 20% for all four during 2001–2005). These companies are in harvesting mode.
There is no evidence other than the companies’ assertions that investment would go even lower if they were regulated. It’s far more likely that they’ll invest when they feel the pressure of competition. Or when policy provides incentives for them to do so. For example, a recent paper from consulting firm Diffraction Analysis suggests that greater investment into fiber network assets could come from policy changes that either make the separation of network services from online services more palatable (fiber-only companies would have more incentives to install more fiber), or make old-fashioned copper networks more expensive to keep in place.
Free Press points out that investment in networks went down following deregulation, not up, and that there is no evidence that a return to a regulatory regime would “be devastating to the United States,” as the cable lobby claims.
Myth Number Three
“Who needs fiber? Mobile wireless is the future.”
This is like saying that because we have airplanes we don’t need airports. A wireless signal is just the last 50 feet of a wire; wireless and wired connections are complementary. A 20 Mbps local wireless connection — between your handset and a cell tower, say — is no good if the wire running from the tower to the core network (the “backhaul”) doesn’t have enough capacity to carry that number of bits or is having latency issues. When that wire is a fiber optic line, it can carry an enormous amount of information.
To haul all our mobile wireless data back from us to the Internet, particularly when we’re uploading a ton of data, we’ll need fiber deep into the places we live, work and entertain ourselves. Fiber, the glass tubes themselves, is cheaper to maintain than copper and can be easily upgraded. And without a major change in policy in the U.S. we’re not going to have it — even as other countries take it for granted and start building the new uses and new societies that are based on ubiquitous, vanishingly cheap communications.
I could go on. A private basic-communications-infrastructure company unconstrained by either competition or oversight will, quite rationally, act to harvest rents from everyone around. And that’s what we’re seeing in America. Yes, cable reaches everyone — and it’s an expensive, second-class network that can’t provide the upload capacity of fiber and is controlled in each town by a single operator that has no particular incentive to upgrade. Yes, the industry has invested in its networks, but that investment has become a trickle of the floods of revenue the companies gather from American subscribers. Yes, there are wireless companies and cable companies selling “broadband,” but they don’t compete with one another; these are complementary Internet access products.
Fiber Internet access isn’t a Ferrari. In other countries, it’s a basic, inexpensive utility. It’s a Camry.