By Adlane Fellah, CEO and Founder
Details of the U.S. broadband stimulus package were released last week by the RUS (Rural Utilities Service) and the NTIA (National Telecommunications and Information Administration). The total amount that the agencies expect to award exceeds the US$7.2 billion specified in the American Recovery and Reinvestment Act passed earlier this year, because the RUS anticipates awarding a mixture of loans and grants. The objective of the program is to promote the proliferation of broadband in underserved areas.
According to the NOFA (Notice of Funds Availability) “broadband” is now defined as a terrestrial wireless or landline connection that can deliver speeds of at least 768 kb/s downstream and 200 kb/s upstream. Although these speeds are lower than some might have wished, a senior administration official for the NTIA told reporters that this definition was influenced by geographic realities.
Why broadband is important
Research conducted by Strategic Networks Group (SNG), finds that the local economic growth and secondary investment enabled by broadband is 10 times the initial broadband investment, and the contribution to Gross Domestic Product (GDP) is 15 times the initial investment. Broadband today is as vital as electrification was in the 1930s and increased participation in the digital economy results in economic and quality of life improvements.
The impacts from investments in broadband infrastructure and broadband-enabled applications are measurable and significant. The immediate effects from an investment in broadband are twofold. The first comes from the construction of the broadband infrastructure. The affected residents, businesses and organizations then invest in the skills, know-how, tools and facilities to take advantage of broadband and e-business solutions so they can more effectively participate in the digital economy. These secondary economic effects take longer but have far greater impact as they improve productivity, competitiveness and quality of service on an ongoing basis.
Why is stimulus needed?
The U.S. has a high rate of Internet access. Unfortunately too much of that access is still achieved via dial-up, although this is rapidly changing.
According to NOFA “unserved” is defined as one or more contiguous census tracts in which at least 90% of households lack broadband connectivity. “Underserved” areas are those where 50% of households or more lack broadband, where fewer than 40% of households subscribe to broadband or where no service provider advertises broadband transmission speeds of at least 3 Mb/s.
In fact, the Pew Internet & American Life Project just released its latest “Home Broadband Adoption 2009,” which found that broadband adoption has increased in the last year but several portions of the U.S. population remain chronically underserved or have limited broadband choice in their areas. Home broadband adoption stood at 63% of adult Americans as of April 2009, up from 55% in May 2008. However residential high-speed usage among adults grew from 38% in 2008 to 46% in 2009.
The U.S. Census Bureau classifies 61.7 million (25%) of the total population as rural; OMB classifies 55.9 million (23%) of the total population as non-metro. According to the Census definition, 97.5% of the total U.S. land area is rural; according to the OMB definition, 84% of the land area is non-metropolitan. USDA/ERS estimates that, in 1990, 43% of the rural population lived in metropolitan counties.
In any case, broadband penetration is rising in the country but not evenly. The following presents the categories being left on the side:
Pew Internet reveals that 17% of dial-up users would adopt broadband if it were available in their areas where they live while 16% don’t know. It is likely that one quarter of those dial up users would switch to broadband if they could. Unfortunately a large portion of dial-up users are concerned with broadband pricing. Unless they experience first-hand broadband service and start valuing the broadband applications, this situation will constitute a barrier to broadband adoption especially in light of continued increase in broadband pricing in the country.
What technology for broadband?
Broadband connectivity continues to be dominated by cable technology. It boasts a 41% share of all broadband connections while Digital Subscriber Line (DSL) adoption is pegged at 33%. Asynchronous DSL (ADSL) growth outpaced cable during 2006, growing by 30% to 25.4 million users, while cable connections increased by 21% to 32.1 million users. Nearly half of ADSL service is at speeds between 200 kbps and 2.5 mbps, while a quarter attain 2.5–10 mbps in the faster direction.
4.4 million American households receive Internet, telephone and/or cable television services via lightning-fast fiber to the home (FTTH) connections, according to Fiber-to-the-Home Council. Further, the number of homes passed by fiber networks grew - from 13.8 to 15.2 million - and FTTH networks are now available to more than 13% of North American households, with end-to-end fiber connections now being used by nearly 4% of the residential telecommunications market. FTTH remains however an urban and suburban phenomenon.
Satellite and Broadband Wireless
Because rural and underserved areas have a low population density, wireless is the most cost effective solution to deliver broadband.
Early technical problems slowed the adoption of satellite broadband, and it is still largely confined to rural areas due to technical limitations. Market share of satellite broadband has
remained low. However in urban areas, satellite remains more expensive than most DSL and cable options.
Broadband wireless statistics have been historically so consistently modest that the FCC and others have grouped them within the satellite or “other” category or combined with fixed wireless. Most satellite connections fall into the 200 kbps performance category, while the bulk of fixed wireless services are deployed in the 200 kbps to 2.5 Mbps range.
Maravedis tracks BWA and WiMAX deployments worldwide through its 4GCounts service. According to 4GCounts, there were almost one million BWA subscribers in the US at the end of 2008, with Clearwire representing half of these.
Broadband Wireless Activity
The U.S. regulatory environment is very supportive of broadband wireless. The industry is well represented by cellular wireless associations and broadband-specific groups that promote the interests of broadband wireless carriers. For spectrum at 2.3 GHz, there were 162 active licenses held by a handful of companies as of 2008. In the 2.5 GHz range, split between BRS and EBS segments, there were 1728 active BRS licenses and 3180 active EBS licenses at the end of 2008. The 2006 auction of AWS spectrum improved the broadband wireless opportunity despite some spectrum-clearing issues that have slowed deployments. Carriers largely feel that this spectrum meets immediate mobile voice and 3G expansion needs and that these needs don’t require WiMAX networks. AWS spectrum will be utilized largely for LTE in the 2011-2012 timeframe. The FCC auction of 700 MHz drew intense interest from carriers and became a primary band for a nationwide mobile broadband network.
BWA networks exist today in the U.S. both in licensed and unlicensed bands. Licensed based networks are larger than unlicensed band network for various reasons, one of them being the risk of interference in the long term for larger scale networks.
The exhibit below presents some of the most notable fixed wireless service providers. The list is not meant to be exhaustive of course. Clearwire is the largest BWA network in the US both in size and subscriber numbers. Although it is targeting 4G mobility, Clearwire is looking at ways to leverage its ongoing deployment to serve some of the vertical applications and deployments in underserved areas.
Other notable service providers who may play a role in the stimulus spending include Digital Bridge communications, Kite Broadband, etc. These are service providers that have gained field experience with both WiMAX and proprietary equipment, learned from interpreting vendor claims, re-worked their business models with real field data, and managed frustrated customers who lost signals because a tree grew in their line of sight. There is simply no shortcut to go from lab and field-testing to real large scale deployments regardless of how well built a standard is.
Source: “Opportunities and Challenges for Broadband Wireless and WiMAX in the USA”- Maravedis
Conclusions
Investment in telecom infrastructure in underserved and rural areas has been lagging because it is perceived as very risky compared to the expected return. Among the barriers to broadband adoption are low population density and a catch-22 situation where a large portion of the population has only experienced dial-up service and has not been exposed to the benefits of broadband applications, and thus does not see a need for broadband. In fact 50% of adults using dial up and non-Internet users do not see being online as relevant to their lives.
The stimulus program aims at increasing the broadband availability in underserved areas by encouraging investments in the required infrastructure. It will directly benefit those 17% of Americans who do not have broadband because it is simply not available. But it will also encourage newcomers to see the relevance of the service. The question is will it help foster competition and make broadband more affordable? That is far from granted since broadband pricing continues to increase in many areas, leaving behind those who point to pricing as the reason for not subscribing to broadband service. Broadband is too important to be left to the invisible hand of market forces and the stimulus plan makes sense in order for the U.S. to regain its place among the top 5 connected countries worldwide.
For more information, contact the author at afellah@maravedis-bwa.com
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