The price of universal broadband

Bringing universal broadband to all Americans is not going to be cheap.

The Federal Communications Commission said Tuesday it could cost more than $350 billion to wire the United States with high-speed Internet access.

The FCC has been given the responsibility of coming up with a national broadband policy to ensure every American has access to broadband. And on Tuesday a task force at the FCC led by Blair Levin, former chief of staff to onetime FCC Chairman Reed Hundt, issued its initial report on forming this plan. The final report is due to Congress in February.

The FCC task force has been hosting workshops and hearings. And it will continue to do so over the next few months. But what it has concluded at this early stage is that bringing true broadband to all Americans is going to cost a lot.

While it would only take about $20 billion to blanket the country with broadband service with speeds between 768Kbps to 3Mbps service, the FCC has questioned whether those speeds will be enough. Instead, it is recommending more aggressive network build-outs that would increase the speed of these networks to about 100Mbps or faster. This will likely push the price tag of the entire network expansion to more than $350 billion. And if all consumers are given a choice of broadband provider, these cost estimates would be even higher.

There are a lot of factors that make building universal broadband expensive. It's much more expensive to build infrastructure in rural areas. Not only are capital expenditures more expensive in rural areas, but the operating expenses are higher, driven by transport and transit. Universal Service Fund recipients have made progress bringing broadband to rural America, but the fund faces systemic and structural problems.

So who is going to pay for this expensive infrastructure? The government will pay for some of it. Congress has already allocated $7 billion as part of the economic stimulus package. And more tax payer money is likely to be used in the future. Exactly, how much is uncertain.

But the bulk of the money used to build these networks will likely come from private industry, Levin said at the meeting held Tuesday in Washington, The Wall Street Journal reported (subscription required).

"Most of that ecosystem is funded by the private sector," Levin said. "We expect that to continue. Where can the government play a role in ensuring and improving the role of that ecosystem?"

The FCC believes these faster networks are necessary because broadband users are expected to use more bandwidth-intensive applications in the future than they use today. For example, the average consumer today uses the Internet for Web browsing, e-mail and instant messaging, and entertainment, but in the future uses will include streaming video, video teleconferencing, and electronic medical monitoring. These services and applications will require significantly more bandwidth.

If the FCC establishes regulation and policy to encourage these faster speed connections, the agency will have to figure out how to measure the quality of these connections. Today no such quality assurance is in place. And the FCC said in its report that actual broadband speeds lag advertised speeds by at least 50 percent, which means people are often paying for speeds that they do not get.

Another issue that must be dealt with is how the FCC will encourage more competition to give consumers choice, especially when it comes to these higher-speed services. At least half of Americans today only have access to one provider that can offer Internet speeds for video streaming and two-way video conferencing.

While wired broadband is critical, the FCC also noted in its report that wireless broadband access is also becoming increasingly important. By 2011, smartphones, which are more like mini-computers than phones, will overtake sales of traditional cell phones. Smartphone users generally use a lot more wireless data services, which means that carriers will have to keep beefing up their networks to provide more capacity.

While some of the biggest carriers, such as Verizon Wireless and Sprint Nextel are already building the next generation of wireless networks, which increase speeds and network capacity, the FCC noted that there is still a need to make more wireless spectrum available.

The CTIA, the trade association for the wireless industry, sent a letter to the FCC this week saying the government needs to identify more airwaves that can be used for commercial use.

[SethGorton]

I hope it is someone else other than Comcast. We have comcast Broadband for our home and office networks. Comcast is constantly scanning the links and shutting them down when they are over a certain peak. I am constantly having to reboot or networks because of this. At home we have a cable coming into the house to a modem, then to a router then it splits to a switch and then to the home personal pcs and then to another switch and then to my pc and a wireless gateway for the kids gaming consoles. If more than two pcs are on the network it will crash. If one pc and the game console is going then it crashes. We did not have this problem until Comcast took over. I hope comcast doesnt take over nations Broadband.

[gerbache]

That sounds like something is wrong with your network rather than Comcast. I have 3 computers, 2 game consoles, and 2 iphones on my network through comcast and very rarely have troubles. When I do, it usually has a semi-obvious cause, like bad weather.

[SteveW928]

What about the $200 Billion we've already paid?... and that isn't even including the stimulus money.
http://www.newnetworks.com/ShortSCANDALSummary.htm

[mathcreative]

What % of the costs of 350Billiion are we going to pay? We have already invested 200billion dollars for nationwide fiber that was supposed to come about in 2006.

[sanenazok]

Uhm 100% - where do you think the government or corporations get their money? They send money TO the Chinese and other foreign governments, but take FROM the tax payers here in the US.

[mathcreative]

@sanenazok I would like citation

[mathcreative]

@sanenazok I don't know much about what yur talking about so if you could please enlighten me

[lkrupp]

Who pays? What a stupid question. WE pay, of course. Taxpayers and customers pay for everything. Where does government gets it money? Where do corporations get their profit? I can't believe people even ask such a question anymore.

[baconstang]

Years ago they tore up the streets in my neighborhood to install fiber. Ripped up the sidewalks and brought it right to the edge of the units and left it there. Still there, not hooked up.

Oh well, if people in the boonies want broadband, try satellite, or move to the Big City.

[Random_Walk]

First and foremost, the guys making policy on this should google for "UTOPIA broadband" (or just hit this: http://www.freeutopia.org/ )

Comcast and Qwest did their level best to prevent the best means of solving the whole universal coverage problem - letting localities put their own fiber in, then run the thing like a utility (and allowing all ISPs to compete equally on the same fiber). The localities make money off the deal (as their own ISP if they want), the public gets fast speeds (even in rural areas), and if the feds put their boost in that direction, they can get what they want, likely for a fraction of the $350bn cost.

It also leaves current broadband providers with the task of actually competing for your business, for once in their miserable collective existence.

[ddhboy]

The only problem with that though is that for it to work the smaller towns way out in the middle of nowhere would have to be given federal money to build up their networks. Meanwhile cities would have to rip control out of the cable/phone company's hands while facing the inevitable lawsuits that would rise out of it.

Rather, I think the feds would be best to handle this. For an example, look at the rails. Amtrak owns much of the public railway, and they allow local transportation agencies to use the railways to maintain their own services. Meanwhile everyone saves cash because Amtrak and the state government pools their money in the maintenance of the railroad while they keep their own service's profits.

[SteveW928]

@ ddhboy -

They already WERE given this money you speak of.
http://www.newnetworks.com/ShortSCANDALSummary.htm
Does that make you mad? It should...

[SX10 IS]

Compared with Obama's $787b "stimulus", $350 billion i peanuts

[ewelch]

And why is that? Because stupid ISPs over the years put in the minimum infrastructure possible. If they had laid optical fiber from the beginning of when it was possible, and desirable, it wouldn't cost nearly as much now.

It's time to take away broadband from greedy corporations who innovate as little as possible and make it a utility like electricity, water and sewer. It's just about as important - well as important as sewer maybe. :D

[Michichael]

Hell, our utilities are monopolies in California. Charge you 250 dollar deposits that don't get refunded unless you never miss a payment for a year... "oh, you missed a payment? Our system was down? Well that's not our fault you should have paid sooner. You tried paying every day for a week after you got your bill and it just wouldn't work? We're sorry. We can't help you."

[Michichael]

So, let me get this straight. They don't want to implement this because of the cost right...? Let's see here...

217 million people over 18 in the US. For speeds like that, the average consumer would pay out 134 bucks a month for a year and the entire cost of the project is done. Paid for. Complete. In one year.

After that, everything is pure profit. But nobody is going to pay that much, and not all 217 million will have that access. Even if the 217 million people paid.. say... 30/mo, it'd take about 5 years before they start turning a profit again. Internet is not something that is going to go away. Hell, let's say 150 million Americans want to pay for usable, decent high speeds. At their 350 bn price tag, the teleco companies could charge each 45 a month and still make a profit after 4.5 years.

The only reason that they're not is because it'd take them 4.5 years to start making a profit, and they like making huge, obscene profits right now. and all of this is without tapping into taxpayer money. If they did that it'd be even cheaper.

[solitare_pax]

Agreed - it seems that both big business and politicians cannot consider anything beyond the current fiscal year - or comprehend that a few years of losses setting a good scalable system up will result in decades of profit.

[bosunj]

FU Capitalism, ain't it grand! Duhmerica.

[SteveW928]

@ Michichael -

First, that price tag is a bit misleading IMO. I would guess the $350B is starting from scratch, such that even the most remote locations had fiber to get those top speeds. In reality, it is more likely that the remote areas will get some slower speed and those top speeds would be in more urban areas. I doubt that would cost much more than the $20B mentioned in the article, as much of the infrastructure is already in-place. The ISPs just need to quite being such idiots, spending their money on fancy 'limiting' technologies and putting it into the pipes. The money would go a LOT farther if they did so.

@ solitare_pax -

That fault trickles down to all the investors who will pull their money if the company doesn't operate that way. I think the fix would be to make some fundamental changes to how our stock markets work... and people (you and I included) need to start thinking long term... in investments, the products we purchase, our saving, etc.

@ bosunj -

It isn't so much a problem with capitalism, as with a nation of unusually spoiled, greedy, get-rich-quick and screw everyone else, people. With some checks and balances, capitalism seems to do relatively well when companies are run taking the actual health of the organization into consideration.

What we have in the last few decades are a bunch of cycles of pillage anything of value out of a company and then force the tax-payers bail them back out. Rather than being a capitalistic system, it is more like two competing forced wealth redistribution systems.

[Tod Smith]

If the ISPs are going to play the cap rate game then this money should go else where.

[dargon19888]

Rural broadband would best be solved by implementing a wireless broadband solution like WiMax. Trying to put in a fiber network in rural locations will never work or be cost effective.

[faceless128]

exactly. it would cost a RIDICULOUS amount of money to wire all those rural areas... i wonder how much of the totall cost is for rural areas, and what the cost per user is in rural areas versus urban and suburban...

[bigmc6000]

Beyond that - how many rural folks do you expect to pay the $80 or more a month for that highspeed internet when they can get the 3Mbps for $20 to $30. Answer - probably well less than 10%.

My parents just got a wireless solution that gets them 3 Mbps and they couldn't be happier with it and they live in rural America. The cost? About $35 - $40 a month - the same as I pay for DSL in a huge Metropolitan area. The free market can fix this on their own - stop wasting our tax money...

[bosunj]

This is why the world is beating the pants off Duhmerica in everything except making war. China has decided to bypass wiring their country due to the expense and has opted for wireless. Why the so-called greatest country in the world can't figure out what Chinese school children can leads on to conclude that Duhmerica is no longer, if ever, the greatest country in the world.

[Police_States_of_America]

if you're going to call america a bad country, which it is in many respects like any other country, i advise you not to use china as an example. it may make you sound very stupid to some people.

[Ycarcomed]

Wireless for metropolitan areas. They're not extending coverage past a few hundred miles off the shore and major cities. The US will impose it nationally, not regionally. Also, and this is just from a technical perspective, where do you think wireless internet comes from? Wireless also leads to massive attacks on security and on use by people without paying.

[washrice]

we can cut military fund and spend it on broadband infrastructure and a sales tax on telcos like verizon and att

[Ycarcomed]

Why not just government incentive towards private contractors with a set spending limit? Competition will ensure that the wires will be put in place, and the private sector will always follow money. Hospitals and other public institutions would also benefit, why not put some non-profit private money into it?
So long as theirs oversight. We don't need another $200m buried into *******.

[myles taylor]

The thing is, most rural areas would be happy with 3 mbps down. I now live in the city but lived in rural Montana for years and 2 megs was great. Don't overdo it. Get the really fast speeds into the cities and get 3-5 mbps down in the rural areas. They'll be happy with it and it's plenty fast enough for now. They are getting greedy and setting their sights too high.

[SteveW928]

I'd be happy with the bi-directional 45 Mbps I already paid for and the telcos promised the last time we gave them $200 billion. They certainly shouldn't get any more until they deliver the goods.
http://www.newnetworks.com/ShortSCANDALSummary.htm

But, I agree that it is likely rural areas aren't going to get those high speeds as quickly as the urban areas.... but even the urban areas don't have it.

[sythara]

Where I lived in Montana my internet was faster than Comcast back in California... and cheaper, and more reliable.

[Nicholas Buenk]

That's about the same or less even, as a percentage of GDP, of the $42b($36b USD) program the Australian government has to connect the whole nation to 100mbit fibre broadband.
They decided the private sector would be slow to make that sort if investment and that would harm the economy. So Australian government founded a company to build the network, which will rent the infrastructure to ISP's. And they will be privatized after the network is fully rolled out.

[vidanuevatx]

The vast majority of Australians live near the coast. Did they provide fiber broadband to all of the remote cattle stations in the Outback? I doubt it. I suspect that the USA has a larger percentage of population scattered in small towns far from the shore and the cities. That almost certainly increases the cost in the USA.

[Nicholas Buenk]

The cost here is already more than the US as a percentage of GDP, so I don't understand your point. That is the only way to compare a country of 22 million to one of 307 million.
Australia also has this 22 million spread over a large ground area, it's a country of the dame size as the US with lower population. That will infact tend to mean more fibre per head is necessary even if you account for most people being on the coast.

[Nicholas Buenk]

Here's how you really compare it.
The cost of the Australian roll out is $36b USD, or 3.6% of GDP.
Where this $350b US rol out cost, is 2.4% of GDP.

[ggore]

WiMax was touted as the way to get broadband into rural areas and cover ALL POPULATED rural areas, maybe with the exception of the western deserts where virtually no one lives. Now WiMax has been deployed and where is it? In major metro areas on the east and west coasts. That's it, NO rural areas at all. 13 major metropolitan areas last time I looked, with 2-3 more to come in 2010. What a "massive" rollout! WiMax was supposedly able to be transmitted many miles requiring far less towers, making the investment much less to cover a very large area, but it evidently doesn't work, and they aren't about to extend it beyond the major cities.

[freemarket--2008]

Well it does cost money to build and operate those towers. If they don't build out in the cities and start getting some cash, where will the money come from to build in the small towns?

[Nicholas Buenk]

HSDPA 850mhz can do the job too. Basically US needs AT&T to step up their game to provide rural 3G. Or Verizon could do it with low frequency LTE.
Wimax is going no where.

[clynx]

If it gives competition to the massive monopoly we are having to deal with now. When all wireless has the same price for the same wimpy and limited service we have a monopoly here. Even if it is slow I will take it. The so called Broadband thieves have stolen our tax payed for infrastructure and call it their own. We need to put the hammer down on them and put them in their place, GET BACK TO WORK and build something or loose it. And stop trying to become content providers, that is not what I want from them.

[bawkbawkboo1]

All I know for sure is that my Comcast service sucks. bad. I live in what I consider to be a rural area (I have a five acre apple orchard) and Comcast is the only option for broadband unless you count satellite. I've suffered pretty severe lag on TF2 before caused by my local connection speed.

[molotov]

The major cities and important municipalities already have strong broadband connections. I live in New York City and have a CHOICE of cable, DSL and fiber-optic internet services. It does not cost that much to hook me up with any of these services, since the city is all hooked up already. What brings up the tab are people that live in far flung locations like Fargo, ND. Sorry for picking on you. Sure it is nice for these people to have good internet TOO, but its not essential to their survival - a 4X4 truck is essential, in my opinion.

So now you know why it will cost a boat-load to get internet to our truck driving friends living in remote areas with no people around them for miles and miles. These far flung municipalities need to spend their OWN money on broadband to attract technology companies and boost their lacking economies, do not spend my money - I already pay a lot to live in a city; high taxes and exhorbitant property prices, while these people in remote locations get to purchase acres of land for cheap - the trade off is that you will have some disadvantages. Its like our healthcare debate; everyone wants high-end drugs and world class treatment and no one wants to pay for it - brilliant! Not gonna' happen.

Keep trucking my 4X4 driving friends.