Broadband Gaps

November 18, 2009 – FCC open meeting

91 days remaining until Plan is due

 What we hope to accomplish today

• Describe most important broadband gaps

• Ensure public awareness of areas of inquiry and start focused

discussion of solutions

• Set agenda for the next 91 days

2
 Key concepts in legislation

• A plan to achieve:

- Universal access

- Affordability and adoption

- Maximum utilization

- Utilization of broadband to advance national purposes

3
Plan will accelerate innovation and investment across the
broadband ecosystem

Applications &
Content
Adoption &
Utilization
Fixed and mobile
Consumers,
business, and
government
Devices

Network
Services

4
 Challenges remain to closing the gaps and exploiting the
opportunities broadband offers

Sources: http://www.mediabistro.com/fishbowlny/original/Glass-of-water.jpg 5
 Broadband penetration has increased since 2000

Fast growth of fixed broadband …and smart phones have also

subscribers… become increasingly prevalent

Wireline broadband adoption, Smart phone penetration

Self-reported % of U.S. adults
% of U.S. adults
31

63
24
57
54

45

36 14
29

19 7
14
9 4
4 2
1

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2003 2004 2005 2006 2007 2008 2009
Sources: Pew Internet and American Life surveys; Gartner March 2009 forecasts, Census bureau 6
 Some gaps we will cover

• Fixed infrastructure availability • Affordability gap

gap
• Set top box gap
• Middle mile gap
• Adoption gap
• USF gap
• End-user control gap

• ROW and pole attachment gap

• Data gap

• Spectrum gap
• National purposes gaps

• Consumer information gap

• Other gaps

7
 Broadband infrastructure availability gap

Gaps in fixed terrestrial broadband availability

2009 estimate

Low-tier broadband
.768-3 Mbps

1-4
million
HUs
4-10M
HUs
3-6
million
HUs

No broadband
<.768 Mbps

Sources: 2009 Form 477 data; service provider, equipment manufacturer, and trade association filings 8
and publications; analyst reports; OBI analysis
 Middle mile gap: Costs much higher in rural areas

Estimated annual cost/subscriber for transit and

transport to provide fixed broadband1
Indexed to urban cost “It is the middle mile that
is the most serious issue
for small, competitive,
and rural ISPs […] It is by
far the largest component
of the cost of wholesale
bandwidth.”

- Comment on Blogband
from rural WISP2

25x

USF does not

directly pay for
middle mile costs

Urban Rural
1 Does not include costs already incurred (e.g., spectrum, prior plant build-out). Assumptions made with regard to
penetration rate, upgrade path, cost of equipment, maintenance, operations, urban/rural mix, length of fiber run,
and discount rate. Sources: Service provider, equipment manufacturer, and trade association filings and
publications; analyst reports; OBI analysis
2 http://blog.broadband.gov/?entryId=10657#comments 9
Current USF unlikely to fill gaps due to structural
problems

1 Majority of USF funding targets deployment and adoption of voice, not broadband

2 The 4 USF support programs are not coordinated to support broadband gaps

3 High cost funding mechanism does not encourage least-cost solutions

4 High cost funding determined by characteristics of firm, not broadband needs of area

5 Current system unsustainable; the contribution factor more than doubled since 2000

6 Limited accountability for use of high cost funds as broadband support

10
Efficiency gaps exist in infrastructure placement including
trenches, pole attachments, and rights of way

Estimated total cost of a fiber build1

Dollars; percent Cost avoidable by
joint trenching

45,000 58,000

78%

8,000

5,000 22%

Materials Splicing Placement Total

1
10,000 foot build; assumes 48-fiber strand

Sources:http://www.mckimcreed.com/newsletter/2009/summer/Manatee%20SCADA/540%20SW%20FO%20Conduit%2 11
0Trench%201.jpg, OBI analysis
 There is a gap in the amount of information consumers
have about actual performance of broadband service
Download Speed
Mbps
7.0 • Lack of transparency

- Consumers lack
information about actual
performance
-56%
- Consumers cannot
compare performance
3.1 across providers

- Application providers
lack knowledge of
performance

Maximum "up to" Average "sustained"

speed (median) speed (median)
12
Source: ComScore 1H 2009 200K household panel
 Potential affordability gap for wireline broadband

ILLUSTRATIVE ONLY
Number of Competitors

Preliminary analysis suggests:

• Areas with lower income

have fewer competitors

Income • Areas with fewer

competitors have higher
prices
Price

Number of Competitors
13
Sources: Preliminary OBI analysis based on Form 477 and Telogical data
 A dramatic increase in demand is driving a spectrum gap

Smartphone sales to overtake standard phones by 2011

Consumer Apps
120

Unit Sales in the US (millions)

Hungry 100

Devices 80

60
450X
40

20

0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Smartphones Standard Wireless Telephones

30X
Source: TIA, Wilkofsky Gruen Associates from “TIA’s 2009 ICT Market Review and Forecast”.

Standard Smartphone Mobile PC

Source: Cisco
397
129% 
Unprecedented Mobile CAGR

National Purposes Data Demand

201
Petabytes per Month

Telemedicine 91
Civic Engagement
41
6 17

2008 2009 2010 2011 2012 2013

Source: Cisco VNI, 2009

Public Safety Smart Grid 14

 Consumer demand for particular services built on
spectrum is changing

Users of various technologies Users/MHz

Change from 1998-2009 2008

Mobile phone 332%

subs increase Mobile
phones 617K
Smart phone 690%
subs1 increase

OTA radio 9%
OTA radio
1,320
listeners increase million

DBS viewers 212%

DBS 85K
increase

56% OTA TV viewers OTA TV 108K

decrease

1Measures increase from 2005-2009

Sources: CTIA, Nielsen , SCBA, Gartner March 2009 forecast, Arbitron, FCC analysis 15
The looming spectrum gap requires near-term action

It takes 6-13 years to reallocate spectrum…

Approximate
Band First Step Available for Use
Lag Time

Cellular (AMPS) 1970 1981 11 years

PCS 1989 1995 6 years

700 MHz 1996 2009 13 years

AWS-1 2000 2006* 6 years

16
 Merging video and the Internet will increase adoption
and utilization

TV and PC penetration
Percent of U.S. HHs
99

• Convergence of video, TV, and

IP is creating a new
76
broadband medium

• TV is becoming an Internet
access device

• Innovation in devices merging

traditional TV and IP-video is
crucial for healthy broadband
ecosystem

TVs PCs
Source: Pew (Dec 2007); SNL/Kagan 17
 But set top box innovation gap could hinder convergence

CableCard devices installed – 7/07 – 8/09 Certified Retail Devices1

Millions Models
16.7
879

42x
63x

0.4 14
Operator-leased STBs Retail devices Total STBs (excluding leased) Mobile devices in 2008

1Total certified set tops per CableLabs excludes leased boxes (a major portion of market share). Mobile device
certification per OET. 18
Sources: NCTA
 Adoption levels vary across demographic groups

Percent of American adults

Income Geography Age Race

100%
95
90 88
85
80 77
75 72
71
70 67
65
65 61 Avg.
63%
60
55
50 46 46
45
40
40
35
35
30
30
25
20
15
10
5
0
$100K $40-50K <$20K Non- Rural 18-29 30-49 50-64 65+ White Black Hispanic*
+ rural
*Hispanics includes both English and Spanish speaking Hispanics; 63% based on survey of English-only
respondents 19
Source: Pew Internet & American Life Project, Home Broadband Adoption, June 2009
The cost of digital exclusion is large and growing

Broadband improving performance… …but also widening gap

• 71% of teens say Internet has been • Students not online at growing
Education primary source for recent school project disadvantage

• Most job searches online • Those offline find it increasingly harder

to search, train, and apply for jobs
Jobs • Application process increasingly online
• Online training improving efficiency

• Broadband enables faster acceleration, • Many small businesses don’t have

Small
small business to function like large connectivity sufficient for new
business enterprises opportunities, like cloud computing

• 61% of Americans search for health • Finding medical information without

Health care information online online access limits patients’ knowledge,
choices and care

Consumer • Broadband-enabling consumer savings • Offline consumers face knowledge and

welfare and improved product information cost gap

• Some commercial access available • But does not provide adequate

Public safety geographic coverage, and does not meet
resiliency requirements
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 Gap in end-user control of their own information

Financial
records
Social Location- • Increasingly, personal
networking based data data is being digitized
data and stored in the cloud

• End-users have limited

control of their personal
Online Educational information and liability
search records coverage on its use
data

• Ensuring guidelines for

privacy and security will
enable a new generation
Electronic Personal of applications and help
health energy
records Online usage
drive national purposes
purchase
data

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Becoming a data-driven agency will enhance the FCC’s
capabilities

• Commission needs to collect robust, reliable, and relevant data in

line with broadband-policy priorities

• Recent OSP data-review, as well as actions such as improving

Form 477, are first steps

• Further data-related initiatives to be launched over coming weeks

(as part of longer reform process)

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 Different institutions/functionalities require different
levels of connectivity to improve performance
National Purposes
Government
Energy/ Performance/ Economic
Health Care Education Public Safety
Environment Civic Opportunity
Engagement
• Hospitals • Substations • Research • Federal • Community • Police
• Clinics • Transmission institutions government centers and • Fire
INSTITUTIONS

• Long-term & distribution • K-12 schools institutions libraries • Emergency

care facilities grid • Homes and buildings • Small and medical
• Physician • Homes • Libraries • State and medium- response
offices • Buildings local sized • American
government business citizens
• Home and institutions
beyond

• Electronic • Grid • Online

health • Service • Job training
efficiency learning delivery • Next-
records and generation
APPLICATIONS

• Self-healing • Digital • Civic placement

• Diagnostic grid textbooks 911
imaging engagement • Benefits
• Distributed • Electronic • Emergency
• Tele- • Internal admin- alerts
generation student operations istration
radiology • Electric records • Emergency
• Remote • Continuity of • Productivity response
vehicle operations applications
Monitoring charging information
for business
• Situational
awareness

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 A complete ecosystem, not just connectivity, is
necessary to advance national priorities.

National Purposes
Government
Energy/ Performance/ Economic
Health Care Education Public Safety
Environment Civic Opportunity
Engagement
• Digital skills • Consumer • Digital skills • Social media • Applications • Ubiquitous,
for doctors access to for students tools and for small reliable
and staff energy and teachers open business interoperable
information government network(s)
• Health • Devices for platforms • IT support for
information • Building and students and small • Public safety
exchange home energy teachers • Robust public businesses applications
management media and software
• IT support applications • Blended content and • Community
learning delivery hubs with • Mobile,
• Mobile • Management systems connectivity interoperable
monitoring and • Telecom- devices for
devices verification • Innovation muting • Devices for first
for energy and scaling of ecosystem low-income responders
efficiency best practices and populations
• Patient savings distributed
privacy to access • Digital skills
facilities services for first
protections • Online
communities responders
• Digital skills
for target
populations

24
 Using broadband for national priorities requires aligning
incentives
National Purposes
Government
Energy/ Performance/ Economic
Health Care Education Public Safety
Environment Civic Opportunity
Engagement
• Reimburse- • Incentives for • Flexibility in • Incentives for • Individual • Incentives to
ment based on energy seat-time innovation in benefits and use network
meaningful use efficiency requirements efficiency and support
performance linked to use • Incentives to
• Cross-state • Dynamic • Incentives for of broadband purchase
certification pricing digital content • Incentives to applications interoperable
regimes development provide devices and
• Common transparent • Aggregated applications
standards for • Usage and • Common and machine- demand for
interoperabil- price standards for readable data small
ity transparency interoperability businesses

• Incentives for • Aligned

smart vehicle investment
charging

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 Other gaps and barriers we are investigating

• Digital rights management/piracy • Evaluation of progress of projects

funded by BTOP/BIP

• Cybersecurity
• Benchmarking

• Americans with disabilities

• Best practices

• Tribal issues
• Improving FCC collection of data

• Disadvantaged business
• Mobile payments

• Tax Policy
• Data roaming

• Institutional gaps
• Technology

• Research and development

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 The road ahead: Public notices
Completed public notices
• Workshop responses
• Definition of broadband
• Implementation of smart grid technology
• Telework
• Accessibility for people with disabilities
• Spectrum for broadband
• Contribution of federal, state, tribal, and
local government to broadband
• Public safety, homeland security, and
cybersecurity
• Opportunities for disadvantaged businesses
in the age of broadband
• Broadband clearinghouse
• Middle mile
• Connecting anchor institutions to fiber
• Responses to Berkman Center for Internet
and Society study
Outstanding public notices
• Broadband deployment and adoption on
tribal lands
• Public safety issues related to broadband
deployment in rural and tribal areas and
broadband communications to and from
persons with disabilities
• Broadband needs in education, including
changes to E-Rate program to improve
broadband deployment
• Adoption
• Health care
• Economic opportunity
• Universal service/Intercarrier compensation
• Digital democracy
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 The road ahead

Upcoming hearings and workshops Commission

Topic
Meeting
11/19 Workshop: “Future Fiber Architectures
and Local Deployment Choices” Report on policy
December framework
11/23 Workshop: “Research
Recommendations for the Broadband
Task Force”

12/5 Digital Inclusion Town Meeting,

Report on opportunities
Memphis, TN January to drive national
purposes
12/9 Workshop: “Lessons for the National
Broadband Plan from Local Officials
Representing Under-served
Communities” Report on
February completed plan

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