America’s broadband ranking has fallen once again, mostly at the expense of other countries who have accelerated service and speed upgrades above and beyond what is available in the United States.  That is the conclusion one can reach after reviewing the Federal Communications Commission’s second annual broadband report, delivered to Congress to fulfill obligations under the Broadband Data Improvement Act.

Through a combination of data from OECD broadband rankings and actual speed test results collected by the Commission, the FCC report notes American cities are at risk of losing the broadband speed race.

“This report compares data on average actual download speeds reported by a sample of consumers in a number of U.S. and foreign cities and finds that some large European and Asian cities exhibit a significant edge over comparable U.S. cities in reported download speeds, though reported speeds for some other international cities are roughly comparable to speeds in many U.S. cities,” the report concludes.

“The best currently available data set comparing the United States to other countries appears to be from the OECD, which collects data on various broadband deployment, adoption, and usage metrics and publishes rankings of its member countries. The OECD’s deployment data ranks countries based on particular technologies, rather than overall coverage. The U.S. ranking in these surveys ranges from 27th out of 30 in DSL coverage to 1st out of 28 in cable modem coverage.  The U.S. ranks 6th out of 16 in fiber-to-the-home (FTTH) coverage and 8th out of 29 in 3G mobile wireless coverage.”

Broadband Rankings (click to enlarge)

Most of the countries accelerating far beyond the United States in broadband speed and quality are in Asia and Europe, and many are upgrading their networks to fiber-based broadband.  As these fiber networks come online, the United States can be expected to fall further behind.

The cable industry lobby attacked the report's findings.

Just like last year, the Internet Service Providers turning in poor grades are rejecting the report’s conclusions.

“While the Commission’s headline proclaims that 20 million Americans are denied access to broadband, by that measure private investment has fueled the build-out of broadband networks to nearly 300 million consumers and is responsible for the jobs that flow from that investment,” said Michael Powell, president and chief executive of the National Cable and Telecommunications Association.  Powell used to oversee the FCC as chairman during the first term of the Bush Administration.

Another trade association with ties to the telecom industry, USTelecom, attacked the findings noting most Americans think their existing broadband service is good enough.

Walter McCormick Jr., USTelecom CEO, noted the FCC’s own report found that 95 percent of Americans have access to fixed broadband and 93 percent are happy with their service.

...so did USTelecom, another industry funded group

But McCormick says nothing about the speeds those customers receive, a bone of contention with the Commission.  As part of this year’s report, the FCC is increasingly relying on its own verifiable data about broadband speeds, collected through its SamKnows broadband speed test project.  The Commission has repeatedly noted that broadband speeds marketed by ISPs do not always match the actual speeds customers receive.

Speed tests comparing broadband performance in comparably sized cities found some sizable differences.

The data suggest that mean actual download speeds in some European and Asian cities are substantially higher than in comparably sized U.S. cities (e.g., 24.8 megabits per second (Mbps) in Paris and 35.8 Mbps in Seoul versus 6.9 Mbps in San Francisco, 9.4 Mbps in Chicago, and 9.9 Mbps in Phoenix). Some of the U.S. cities in our sample have higher speeds than some foreign cities (e.g., Chicago with 9.39 Mbps versus Rome with 5.6 Mbps).

The most significant reason for the disparity in speed is the technology used in each respective area.  Fiber to the home service traditionally delivers the fastest broadband speeds.  Cable broadband technology, common in the United States but less so abroad, is responsible for a great deal of speed increases in the United States.  Telephone company DSL and wireless are responsible for some of the slowest speeds, with rural DSL service commonly providing just 1-3Mbps service.  Many European cities still relying on DSL technology have upgraded to bonded DSL, ADSL2+, or VDSL service, which can significantly boost speeds.

Unfortunately, the report concludes, the faster the broadband service delivered, the higher the price — often out of proportion with other OECD countries.

Results […] suggest that U.S. stand-alone residential broadband prices are generally “in the middle of prices in OECD countries,” after accounting for speed, terms of service, data caps, and service delivery technology. Similarly, prices in the United States for business stand-alone broadband services were fourteenth out of 30 among the OECD countries. A paper by the Berkman Center for Internet and Society at Harvard University found prices for U.S. broadband with download speeds of around 768 kbps to be “very good” by international standards. However, as download speeds increase, the paper found that U.S. prices become more expensive than most other OECD countries.

Some providers unimpressed by the independent research accused the FCC of using biased and inconsistent research methods.  AT&T, for example, was unhappy with comparisons among U.S. cities and those of comparable size abroad.  They accused the Commission of not using “a well-defined or consistent methodology for choosing the ‘communities’ or offers.”  In fact, several providers suggested the Commission’s pricing comparisons ignored significant, albeit temporary, discounts some new customers receive, as well as discounts for bundled service packages.  Promotional pricing factors are acknowledged by the Commission, but the report notes the findings do attempt to collect real world pricing paid by actual customers.

For consumers in the United States, broadband envy is as close as the next news report highlighting broadband expansion efforts abroad.  Some countries are deploying 1Gbps broadband networks that deliver consistently faster speeds than American providers, at dramatically lower prices and without a usage cap attached.

Copps

Federal Communications Commissioner Michael Copps believes that when private companies drop the broadband ball, local communities should have the right to pick it up and run their own community-owned Internet providers.

Copps delivered his remarks yesterday at the annual conference of the SouthEast Chapter of the National Association of Telecommunications Officers and Advisors, a group representing the communications needs and interests of local governments and the communities they serve.

Copps told the audience in Asheville, N.C., broadband is no longer simply a nice thing to have.  It’s now an essential service for many Americans whose work, education, civic involvement, and entertainment increasingly depend on a fast, reliable, and affordable broadband connection.

According to the commissioner, the fact that many communities still don’t have it comes from the mistaken notion that private providers will deliver the service in areas where return on investment requirements are unlikely to be met:

As most of you know, I have been pushing municipal broadband for a long, long time.

When incumbent providers cannot serve the broadband needs of some localities, local governments should be allowed–no, encouraged–to step up to the plate and ensure that their citizens are not left on the wrong side of the great divide. So it is regrettable that some states are considering, and even passing, legislation that could hinder local solutions to bring the benefits of broadband to their communities. It’s exactly the wrong way to go. In this context, too, our previous infrastructure challenges must be the guide.

The successful history of rural electrification, as one example, is due in no small part to municipal electric cooperatives that lit up corners of this country where investor-owned utilities had little incentive to go. Those coops turned on the lights for a lot of people! You know, our country would be a lot better off if we would learn from our past rather than try to defy or deny it.

Copps is now the second FCC Commissioner to defend municipal broadband.  Commissioner Mignon Clyburn has repeatedly expressed similar concerns about private companies trying to restrict public broadband development.

Baker

The Wall Street Journal is reporting this afternoon that Republican FCC Commissioner Meredith Atwell Baker, nominated to the FCC in mid-2009, is preparing to leave her duties to take a job with Comcast Corporation, just four months after voting for the controversial merger between NBC-Universal and the nation’s largest cable company — her new employer.

The newspaper reports Baker is expected to announce her departure as soon as this week for an unknown position at the Philadelphia-based cable giant. Comcast declined to comment, a company spokeswoman told the Journal.

This is the latest example of the revolving door that rotates people to and from the industries they regulate as government employees.  Baker was expected to be renominated for another term at the FCC.

Baker’s performance on the Commission was decidedly business-friendly, although at several points she seemed confused about the issues involved.  At a Tech Policy Summit held in January 2010, Baker suggested consumers paying for roaming while using mobile broadband would be an effective solution to ease congestion on wireless data networks.

Among the public interest groups that have historically steered clear of the fight against usage caps and usage based billing is Public Knowledge.

Stop the Cap! took them to task more than a year ago for defending the implementation of these unjustified hidden rate hikes and usage limits.  Since then, we welcome the fact the group has increasingly been trending towards the pro-consumer, anti-cap position, but they still have some road to travel.

Public Knowledge, joined by New America Foundation’s Open Technology Initiative, has sent a letter to the Federal Communications Commission expressing concern over AT&T’s implementation of usage caps and asking for an investigation:

[…] Public Knowledge and New America Foundation’s Open Technology Initiative urge the Bureau to exercise its statutory authority to fully investigate the nature, purpose, impact of those caps upon consumers. The need to fully understand the nature of broadband caps is made all the more urgent by the recent decision by AT&T to break with past industry practice and convert its data cap into a revenue source.

[…] Caps on broadband usage imposed by Internet Service Providers (ISPs) can undermine the very goals that the Commission has committed itself to championing. While broadband caps are not inherently problematic, they carry the omnipresent temptation to act in anticompetitive and monopolistic ways. Unless they are clearly and transparently justified to address legitimate network capacity concerns, caps can work directly against the promise of broadband access.

The groups call out AT&T for its usage cap and overlimit fee model, and ponder whether these are more about revenue enhancement than network management.  The answer to that question has been clear for more than two years now: it’s all about the money.

The two groups are to be commended for raising the issue with the FCC, but they are dead wrong about caps not being inherently problematic.  Usage caps have no place in the North American wired broadband market.  Even in Canada, providers like Bell have failed to make a case justifying their implementation.  What began as an argument about congestion has evolved into one about charging heavy users more to invest in upgrades that are simply not happening on a widespread basis.  The specific argument used is tailored to the audience: complaints about congestion to government officials, denials of congestion issues to shareholders coupled with promotion of usage pricing as a revenue enhancer.

If Bell can’t sell the Canadian government on its arguments for usage caps in a country that has a far lower population density and a much larger rural expanse to wire, AT&T certainly isn’t going to have a case in the United States, and they don’t.

The history of these schemes is clear:

1. Providers historically conflate their wireless broadband platforms with wired broadband when arguing for Internet Overcharging schemes.  When regulators agree to arguments that wireless capacity problems justify usage limits, extending those limits to wired broadband gets carried along for the ride.  Dollar-a-holler groups supporting the industry love to use charts showing wireless data growth, and claim a similar problem afflicts wired broadband, even though the costs to cope with congestion are very different on the two platforms.
2. Providers argue one thing while implementing another.  Most make the claim pricing changes allow them to introduce discounted “light user” plans.  But few save because true “pay only for what you use” usage-based billing is not on offer.  Instead, worry-free flat use plans are taken off the menu, replaced with tiered plans that force subscribers to guess their usage.  If they guess too little, a stiff overlimit fee applies.  If they guess too much, they overpay.  Heads AT&T wins, tails you lose.  That’s a clear warning providers are addressing revenue enhancement, not network enhancement.
3. Claims of network congestion backed up with raw data, average usage per user, and the costs to address it are all labeled proprietary business information and are not available for independent inspection.

There are a few other issues:

In the world of broadband data caps, the caps recently implemented by AT&T are particularly aggressive. Unlike competitors whose caps appear to be at least nominally linked to congestions during peak-use periods, AT&T seeks to convert caps into a profit center by charging additional fees to customers who exceed the cap. In addition to concerns raised by broadband caps generally, such a practice produces a perverse incentive for AT&T to avoid raising its cap even as its own capacity expands.

In North America, only a handful of providers use peak-usage pricing for wired broadband.  Cable One, America’s 10th largest cable operator is among the largest, and they serve fewer than one million customers.  Virtually all providers with usage caps count both upstream and downstream data traffic 24 hours a day against a fixed usage allowance.  The largest — Comcast — does not charge an excessive usage fee.  AT&T does.

Furthermore, it remains unclear why AT&T’s recently announced caps are, at best, equal to those imposed by Comcast over two years ago.  The caps for residential DSL customers are a full 100GB lower than those Comcast saw fit to offer in mid-2008. The lower caps for DSL customers is especially worrying because one of the traditional selling points of DSL networks is that their dedicated circuit design helps to mitigate the impacts of heavy users on the rest of the network. Together, these caps suggest either that AT&T’s current network compares poorly to that of a major competitor circa 2008 or that there are non-network management motivations behind their creation.

AT&T has managed to create the first Internet version of the Reese's Peanut Butter Cup, combining Comcast's 'tolerated' 250GB cap with AT&T's style of slapping overlimit fees on data plans from their wireless business.

As Stop the Cap! has always argued, usage caps are highly arbitrary.  Providers always believe their usage caps are the best and most fair around, whether it was Frontier’s 5GB usage limit or Comcast’s 250GB limit.

AT&T experimented with usage limits in Reno, Nevada and Beaumont, Texas and found customers loathed them.  Comcast’s customers tolerate the cable company’s 250GB usage cap because it is not strictly enforced — only the top few violators are issued warning letters.  AT&T has established America’s first Internet pricing version of the Reese’s Peanut Butter Cup: getting Comcast’s tolerated usage cap into AT&T’s wireless-side overlimit fee.  The bitter aftertaste arrives in the mail at the end of the month.

Why establish different usage caps for DSL and U-verse?  Marketing, of course.  This is about money, remember?

AT&T DSL delivers far less average revenue per customer than its triple-play U-verse service.  To give U-verse a higher value proposition, AT&T supplies a more generous usage allowance.  Message: upgrade from DSL for a better broadband experience.

Technically, there is no reason to enforce either usage allowance, as AT&T DSL offers a dedicated connection to the central office or D-SLAM, from where fiber traditionally carries the signal to AT&T’s enormous backbone connection.  U-verse delivers fiber to the neighborhood and a much fatter dedicated pipeline into individual subscriber homes to deliver its phone, Internet, and video services.

A usage cap on U-verse makes as much sense as putting a coin meter on the television or charging for every phone call, something AT&T abandoned with their flat rate local and long distance plans.

Before partly granting AT&T’s premise that usage limits are a prophylactic for congestion and then advocate they be administered with oversight, why not demand proof that such pricing and usage schemes are necessary in the first place.  With independent verification of the raw data, providers like AT&T will find that an insurmountable challenge, especially if they have to open their books.

[flv width=”640″ height=”368″]http://www.phillipdampier.com/video/Bell’s Arguments for UBB 2-2011.flv[/flv]

Canada’s experience with Usage-Based Billing has all of the hallmarks of the kind of consumer ripoff AT&T wants Americans to endure:

• A provider (Bell), whose spokesman argues for these pricing schemes to address congestion and “fairness,” even as that same spokesman admits there is no congestion problem;
• Would-be competitors being priced out of the marketplace because they lack the infrastructure, access, or fair pricing to compete;
• Big bankers and investors who applaud price gouging and are appalled at government checks and balances.

Watch Mirko Bibic try to rationalize why Bell’s Fibe TV (equivalent to AT&T U-verse) needs Internet Overcharging schemes for broadband, but suffers no capacity issues delivering video and phone calls over the exact same line.  Then watch the company try and spin this pricing as an issue of fairness, even as an investor applauds the company: “I love this policy because I am a shareholder.  That’s all I care about.  If you can suck every last cent out of users, I’m happy for you.”  Finally, watch a company buying wholesale access from Bell let the cat out of the bag — broadband usage costs pennies per gigabyte, not the several dollars many providers want to charge.  (11 minutes)