The GAO Makes the Case for Community Broadband

Not that you would know it either from the headline or the general coverage, but the the Government Accountability Office, Congress’ investigative arm, issued its own report that makes a strong case in favor of community-based broadband and against more regulatory goodies for the incumbent telcos and cable cos. Not that the GOA intended to make that case, and they word their conclusions carefully. But dig down into the actual report and you find a lot of good stuff beyond discrediting the FCC’s rosy numbers on broadband penetration and competition.

Sorry for the long time-delay on this. As you can imagine, life keeps getting busier and busier and network neutrality has taken a great deal of my attention and available time (along with the occasional effort to see those people who live in my house, my ummm….uh….FAMILY! Yeah, that’s what they’re called!

Back on May 6, the Government Accountability Office (GAO) issued a report with the descriptive but not terribly user-friendly title: “Broadband Deployment Is Extensive Throughout the United States, But It Is Difficult to Assess the Extent of Deployment Gaps In Rural Areas.” For those unfamiliar with GAO (i.e., most normal people), the GAO provides members of Congress with research on requested topics. This all started back in the day when policy makers liked to have, oddly enough, actual information about the real world before passing laws rather than just relying on ideology and fact sheets provided by lobbyists. While the GAO has not remained immune to the drive to politicize everything, it still generally does a good job doing research to describe the world and generally limits its political weasely-ness to its description of the data and the conclusions it will draw. Just about anything controversial is noted, but with language that allows people to discount it. But at least it makes it into the report!

Which puts the GAO one up on the Federal Communications Commission. As I’ve observed at length elsewhere, the FCC’s reports usually oscillate between vague dissembling and outright lies. Since (from the FCC’s perspective), the objective of mandatory reports appears to be to confirm that everything the FCC is doing is hunky-dory-peachy-keen-we-should-just-keep-doing-what-we’re-doing, the reports get skewed in all kinds of fun and exciting ways that cause those of us who actually care what happens beyond the Washington D.C. Beltway to yank out our hair and shout in despair.

So Congress has taken to asking the GAO to investigate when the FCC keeps reporting that the world is super, thanks for asking, while everyone else (other than industry incumbents) with contact with the real world keeps saying it ain’t. Since members of Congress and FCC Commissioners live rather like the Chinese Emperors of the Forbidden City, one cannot expect them to actually get out of DC and find out what goes on in the real world. Hence requests to GAO to double check the FCC.

Which brings us to the May 2006 report. The FCC keeps reporting that broadband penetration continues, in the words of the Section 706 of the Telecommunications Act of 1996, “to all Americans” on a “reasonable and timely basis,” but international organizations keep ranking us as one of the worst industrialized nations in terms of broadband adoption. So, Congress asks the GAO, what gives?

So the GAO investigated and discovered some very interesting things about deployment. While careful to phrase the politically controversial things neutrally, the report ends up making a very strong case for community broadband and local government support.

Let me start first with the obvious, and what drew the most attention. The GAO (politely) found the FCC’s methodology of determining broadband penetration flawed. The FCC requires every broadband provider (defined as 200 kbps, a speed the FCC has not adjusted since 1998) to identify its service area by zip code. If a provider serves anyone in the zipcode, whether a residential customer or business customer, the FCc considers the entire zipcode served by the provider. As a result, the FCC finds that almost everyone has access to at least one broadband provider, and many people have access to two or more providers.

The GAO acknowledged that the bad methodology partly flows from the need to develop some metric that the FCC can easily track. Nevertheless, this so contradicts the reality that it becomes positively misleading. Rural areas in particular get over counted, because a provider might serve the edge of an area close to a densely populated area, while not reaching 99% of the zip code. Worse, providers might serve a few business customers, while residential customers have no broadband choices.

Even in urban and suburban areas, this sort of thing can happen. The FCC might find a telco and cable broadband provider serve a zip code and conclude they compete, but neither might cover the entire zip code. As a result, the FCC finds competition while any individual resident has only a single broadband provider actually available.

So yeah, the FCC figures suck rocks. Hardly news, but nice to see confirmed.

But the real importance of the GAO Report comes afterward. The GAO looked at what does and doesn’t influence deployment of broadband. While not phrased this way, the GAO’s findings make an amazing case against deregulation and in favor of community-based broadband.

The case against eliminating network neutrality. The telcos and cable cos argue to what can only be described as the worlds most gullible Congress that broadband providers need to engage in “tiered” pricing to pay for rural deployment. The GAO Report, however, significantly undercuts the claim. Critically, the GAO found that cost of deployment most influenced whether a private company would deploy. These factors include population density (the more dense, the more likely to see deployment) and terrain. There wass also evidence that areas with higher median incomes are more likely to get broadband service (or multiple providers) than those with lower median incomes.

In other words, build outs make sense economically or they don’t. While the GAO did not directly address NN, it did examine taxation of internet services and found the impact on adoption negligible. Nothing suggests that other deregulatory goodies on the telco wish list, like eliminating network neutrality, would make any kind of difference either.

In short, as one might expect, a company looks at any specific build out and decides whether that build out makes economic sense. The argument by the Bells and cable cos that allowing them to charge third parties will generate income they decide to use on rural build outs is nonsense. The new income stream isn’t tied to the deployment. It doesn’t make deployment in a marginal area sufficiently more profitable to encourage deployment – especially as it is unlikely third parties will pay premium prices to reach these rural areas.

The case for community-based broadband. The GAO report strikes a careful political balance on the issue of municipal deployment. The GAO noted that many stakeholders support the right of localities to deploy, and that local governments deployed in cases where they felt that their residents did not receive adequate broadband services (or, in some cases, any broadband services). At the same time, the GAO observed that some stakeholders opposed entry by local governments.

Two other conclusions in the Report, however, strongly support the case for municipal entry (or, at least, not prohibiting muni entry as a matter of law). First, the GAO Report found that “deployment by a new entrant often spurred incumbent telephone or cable providers to upgrade their infrastructures so as to compete with the new entrant.”

As I have argued elsewhere, muni deployment (or even the threat of muni deployment) can do wonders for getting an incumbent monopoly or duopoly provider to shape up. That’s why statutes that eliminate the muni option by giving a private sector veto or that require public-private partnerships – like the Stevens Bill – can do real harm to broadband adoption and deployment. Without the threat of muni competition, and with entry by other competitors unlikely in medium and smaller markets, the incumbent providers can charge ridiculous prices for crappy service. Econ 101, known to everyone but members of the Senate Commerce Committee, apparently.

The GAO Report includes a second important finding – community leadership strongly encourages broadband deployment and adoption. That doesn’t mean it has to be a municipal government deployment, mind. But it does speak to the broader community broadband movement. Whoever deploys – local government, private company, public-private partnership – engagement of the community in the deployment and active leadership by members of the community stimulates adoption and successful deployment.

So while the GAO Report does not come out and say “community broadband advocates make a heck of a case,” the individual findings in the report amount to much the same thing. Hopefully, as the debate over community broadband continues, advocates will pull more out of the GAO Report than “the FCC’s statistics stink.”

Stay tuned . . . .

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