N E T W O R K E D N A T I O N : BROADBAND IN AMERICA 2 007 NATIONAL TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION United States Department of Commerce Washington, D.C. January 2008 NETWORKED NATION: BROADBAND IN AMERICA, 2007 NATIONAL TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION Executive Summary Broadband technology is changing our lives, our Technology Policies economy, and our culture. By making it possible Technology Neutrality: Past experience teaches to access, use, and share information, news, and that when government tries to substitute its judg- entertainment with ever increasing speed, broad- ment for that of the market by favoring one band knits geographically-distant individuals and product or vendor over another, it can easily divert businesses more closely together, increases our investment and/or discourage research necessary productivity, and enriches our quality of life. In to bring new and better products or services to so doing, it fuels economic growth and job crea- market. Given the rapid pace of technological tion that, in turn, provide unparalleled new change, such unintended effects can have long- opportunities for our nation’s citizens. term and far-reaching adverse consequences that Recognizing this transformative power, four years extend across multiple sectors of the economy. ago President Bush articulated a national vision: For this reason, the Administration has consis- universal, affordable access to broadband technol- tently and strenuously advocated for technology ogy. From its first days, the Administration has neutrality in order to take the government out of implemented a comprehensive and integrated decisions more appropriately left to the market- package of technology, regulatory, and fiscal poli- place. cies designed to lower barriers and create an Spectrum Policy: To satisfy society’s increasing environment in which broadband innovation and desire to function “untethered,” new wireless competition can flourish. broadband services can only emerge if spectrum The results have been striking. The last several resources exist to support them. Pursuant to the years have witnessed substantial growth in the President’s June 2003 Spectrum Policy Initiative, broadband marketplace punctuated by increases in NTIA has promoted greater access to spectrum capital investment, innovation, and market entry. by improving the spectrum efficiency of Federal Relative to other countries, the United States has radio systems and operations. NTIA and the experienced superior productivity over the past FCC, working together and with the Congress, several years. Americans today enjoy an increasing have significantly increased the amount of spec- array of broadband services, available from a trum available for advanced wireless services. The growing number of service providers, using a va- Administration has also actively sought ways to riety of technologies. Penetration continues to accelerate broadband deployment by facilitating grow, and prices continue to fall. unlicensed uses and encouraging the use of prom- ising new spectrum technologies such as A Broadband Strategy for the Twenty- ultrawideband, and by implementing new spec- First Century trum management systems that afford non- Federal users faster and easier access to spectrum. Building on the pro-competitive, deregulatory policies Congress articulated in the Telecommuni- Regulatory Policies cations Act of 1996, the Administration, through The Administration has worked to clear away the combined efforts of the National Telecom- regulatory obstacles that could thwart the invest- munications and Information Administration ment that fuels development – and deployment – (NTIA) of the U.S. Department of Commerce, of new technologies. It supported the FCC’s ef- the U.S. Department of Agriculture (USDA), and forts to modify legacy regulation in order to other agencies, and in cooperation with the Fed- expand incentives for local telephone companies eral Communications Commission (FCC or to invest in network upgrades and to stimulate Commission), has executed a combination of ini- facilities-based investments by other providers. tiatives to develop and rapidly deploy new The Administration has further encouraged ag- technologies, eliminate regulatory underbrush, and gressive broadband deployment by favoring remove economic disincentives for investment in policies to ensure that applications running on the this critical area. Internet, such as voice over Internet Protocol ser- i NETWORKED NATION: BROADBAND IN AMERICA, 2007 NATIONAL TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION vice, remain free from unnecessary economic data. Over 58 million of these lines serve residen- regulation. The Administration has also sup- tial customers. FCC data also reveal that the ported cable franchise reform efforts in order to number of broadband service providers more promote the video services competition that will than tripled from December 2003 to December help to accelerate broadband deployment. In 2006, with the newest wired and wireless services April 2004, the President signed an Executive growing at the highest rates. Data from the U.S. Memorandum to give broadband providers more Census Bureau’s Internet Use Supplement to the timely and cost-effective access to rights-of-way October 2007 Current Population Survey also on Federal lands for their networks. show that Americans’ use of broadband technolo- gies has soared: home broadband usage has risen Fiscal Policies and Targeted Funding Efforts substantially over the past six years, from 9.1 per- Tax relief has given businesses powerful incen- cent of households in September 2001 to 50.8 tives to invest in broadband technology. percent in October 2007. Rural America has also Recognizing that taxes constrain growth, President experienced impressive growth from 5.6 percent Bush on three occasions has signed legislation to of rural households in September 2001 to 38.8 extend the Federal moratorium on State and local percent in October 2007. taxation of Internet access and has consistently Digital Subscriber Line (DSL) urged that the moratorium be made permanent. The President also signed into law legislation al- Used primarily by local telephone companies to lowing companies to accelerate depreciation for provide broadband services, DSL was available as capital expenditures, including those associated of year end 2006 to 79 percent of households in with broadband deployment. The Administration areas where companies also offered local tele- has also forcefully advocated extending and mak- phone service according to FCC data. Not limited ing permanent the tax credit for research and to highly populated areas, DSL was among the development spending. Further, the Administra- broadband services offered to 90 percent of the tion has provided targeted seed-funding to carriers’ rural customer base according to recent support more rapid deployment of broadband in industry surveys. As DSL transmission speeds underserved rural areas, in particular through sev- have accelerated and prices have dropped, the eral programs administered by the USDA. number of DSL subscribers has burgeoned. FCC’s statistics reveal about 22.8 million residen- Progress in Broadband Access tial “high-speed” asymmetric DSL (ADSL) lines in service as of year end 2006, growing by more than America’s consumers are now reaping the rewards 300 percent from December 2002. of the Administration’s pro-investment, deregula- tory policies: a vigorous broadband marketplace in High-Speed Cable which providers using various platforms compete Research conducted by the cable television indus- against one another on price, speed, mobility, con- try suggests that high-speed cable service is now tent, and other service features. Currently available to some 92 percent of all U.S. house- available data suggest that broadband availability holds by the end of 2007. That same research and subscribership have increased dramatically, shows that as of year end 2006, there were 29 mil- and that consumers – including those in rural and lion residential high-speed cable subscribers, up remote areas – have more opportunities than ever more than 109 percent from the 13.8 million cus- to choose the broadband solution (i.e., technology, tomers in the second quarter of 2003. services, and provider) that best suits their needs Accompanying this growth, the industry’s trade and budget. association reports that most cable broadband Overall operators now offer transmission speeds exceed- ing five megabits per second (5 Mbps), with some Since President Bush took office, the total number delivering as much as 50 Mbps. of broadband lines in the United States has grown by over 1,100 percent from almost 6.8 million lines in December 2000, to 82.5 million in De- cember 2006 according to the most recent FCC ii NETWORKED NATION: BROADBAND IN AMERICA, 2007 NATIONAL TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION Mobile Wireless Fiber Optic and Broadband Over Power Lines The wireless industry is currently the fastest grow- FCC data show that the total number of high ing segment of America’s broadband economy. speed lines delivered over fiber and power line The FCC’s most recent data reveal that the num- connections grew 789 percent from December ber of broadband lines provided by wireless 2003 to December 2006, rising from 116,390 to operators increased from approximately 380,000 just over a million. Fiber optic lines, however, in June 2005 to almost 22 million at year end 2006 appear to be almost entirely responsible for this – a growth rate that dwarfs that of other broad- expansion. Industry data also show a steady ex- band platforms. Moreover, a significant portion pansion of fiber deployment (including fiber to of these (4.1 million, or almost 19 percent) pro- the home and interoffice fiber). As charted by the vide “advanced” services capable of delivering Telecommunications Industry Association (TIA), over 200 kilobits per second (Kbps) in both direc- annual deployment of fiber in the United States tions. grew sharply over the last four years, from the 4.8 million miles deployed in 2003 to 13.1 million Fixed Wireless miles in 2007. According to another industry es- Fixed wireless technologies have emerged both as timate, fiber now passes almost 9.6 million homes an important complement to mobile wireless and in North America (virtually all of these homes are as a potential “last-mile” broadband solution in in the United States), up more than 50 percent areas that other platforms do not reach. Accord- from September 2006. ing to FCC figures, the number of fixed wireless Industry Investment broadband lines in the United States grew 132 percent from 208,695 in June 2005 to 484,073 in The accessibility of broadband technology to an December 2006; an industry group estimated the increasing number of Americans stems directly total number of fixed wireless subscribers in 2006 from the substantial and growing capital invest- to be 800,000. The proliferation of one fixed ments made by service providers across all of the wireless technology – wireless fidelity (Wi-Fi) – subsectors of the broadband marketplace. TIA has increasingly enabled many consumers to cut estimates that overall spending to support broad- the tether to a home or office connection; based band network infrastructure will rise over the next on one estimate, there are 66,058 pub- four years from $15.2 billion in 2007 to $23 billion lic/commercial Wi-Fi access points, or “hot in 2010. This includes: significant growth in fiber spots”, currently in the United States, more than deployment by cable operators to meet customer double the next closest country. Another tech- demand for high-definition television channels nology – worldwide interoperability for and video-on-demand services; continued invest- microwave access (WiMAX) – can deliver fixed ment for the deployment of advanced mobile wireless broadband access at distances as great as wireless services and fixed wireless technologies five miles without line of sight and up to 30 miles such as WiMAX; and spending on fiber-related under ideal conditions. With potential data speeds telecommunications equipment that is estimated up to 70 Mbps, WiMAX has been identified as a to grow almost $13.5 billion annually in the next possible “last-mile” solution to deliver broadband three years. into currently unserved rural and remote areas. Affordability Satellite Escalating competition among broadband plat- With coverage of virtually the entire continent, forms and service providers has yielded both a satellite has become the default solution for areas proliferation of new communications and enter- not covered by terrestrial sources of broadband. tainment services and affordable broadband Like those other broadband services, satellite pricing for American consumers. The rapid drop broadband has seen tremendous growth over the in the prices for DSL broadband services in the past few years. From fewer than 50,000 subscrib- past five years, along with the deployment of fiber ers in 2004, satellite providers were serving an infrastructure equipment, have resulted in lower estimated 700,000 subscribers at year end 2006. prices for high-speed cable services. Despite the dramatic increase in usage, the average local iii NETWORKED NATION: BROADBAND IN AMERICA, 2007 NATIONAL TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION monthly bill for wireless services has remained relatively stable, rising only a dime per year on average over the past four years. Satellite broad- band prices have also dropped as satellite providers introduce alternative pricing models to make their services more affordable. iv NETWORKED NATION: BROADBAND IN AMERICA, 2007 NATIONAL TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION Introduction (cid:131) A surgeon in Queensland, Australia, using an Internet-based laser technology, RoboLase, performs microsurgery successfully on cells located in a laboratory in San Diego . . . 1 (cid:131) From over 6,000 miles away, an American soldier stationed in Iraq watches via live web- cast as his 18-year-old daughter in Tennessee, his oldest child, walks across the stage to accept her high school diploma . . . 2 (cid:131) With only a laptop and a wireless card, a farmer sitting in his onion field in Hermiston, Oregon, can check e-mail, monitor the water level of his crops, and even conduct business with his customers, all using the 700 square mile Wi-Fi “cloud” that covers his farm . . .3 (cid:131) Using a national, interoperable communications service, public safety personnel and first re- sponders in Dallas can communicate with one another with voice, data, and real-time live video feeds to maintain situational awareness and coordinate response activities more effec- tively . . .4 (cid:131) Students in Kotzebue, Alaska (66.53N, 162.39W), on Alaska’s Western shore facing the Bering Strait, join with students in other remote communities on Alaska’s Southwest- ern frontier, in a live “virtual field trip” to the Johnson Space Center in Houston and two weeks later visit with an Alaskan astronaut aboard the space shuttle Discovery, all using a state broadband Distance Learning network.5 TTh e foregoing examples illustrate only a tion and investment, and create an environ- few of the ways in which broadband ment in which broadband innovation and technology is changing our lives, our competition could flourish. economy, and our culture. By making it pos- The results have been striking. The last sev- sible to access, use, and share information, eral years have witnessed substantial growth in news, and entertainment with ever increasing the broadband marketplace punctuated by speed, broadband technology knits geo- demonstrable increases in capital investment, graphically-distant individuals and businesses innovation, and entry, as well as superior pro- more closely together, increases productivity, ductivity relative to other countries. and enriches the quality of life. In so doing, it Americans today enjoy an increasing array of catalyzes economic growth and job creation broadband services available from a growing that, in turn, provide unparalleled new oppor- number of service providers across multiple tunities for our nation’s citizens. platforms – traditional wireline, cable, fiber, Recognizing this transformative power and wireless, satellite, Wi-Fi and WiMAX. Pene- realizing the benefits that broadband tech- tration rates continue to grow, and prices nologies can deliver for all Americans, continue to fall. President Bush four years ago articulated a This Report examines the concerted, pro- national vision to carry the United States for- market policies that the Administration has ward: universal, affordable broadband access. implemented to remove regulatory obstacles, Even before advancing that goal, however, the foster economic incentives, and encourage Administration had started to pursue it, im- investment in the development and deploy- plementing a comprehensive and integrated ment of broadband technologies. It also package of technology, regulatory, and fiscal outlines steps the Administration has taken to policies designed to lower barriers to competi- 2 NNEETTWWOORRKKEEDD NNAATTIIOONN:: BBRROOAADDBBAANNDD IINN AAMMEERRIICCAA,, 22000077 NNAATTIIOONNAALL TTEELLEECCOOMMMMUUNNIICCAATTIIOONNSS AANNDD IINNFFOORRMMAATTIIOONN AADDMMIINNIISSTTRRAATTIIOONN hheellpp jjuummpp--ssttaarrtt mmaarrkkeett ffoorrcceess bbyy pprroovviiddiinngg bbrrooaaddbbaanndd mmaarrkkeettppllaaccee tthhaatt hhaass eemmeerrggeedd iinn sseeeedd--ffuunnddiinngg ttoo aaddvvaannccee bbrrooaaddbbaanndd ddeeppllooyy-- tthhee UUnniitteedd SSttaatteess oovveerr tthhee llaasstt sseevveerraall yyeeaarrss mmeenntt iinn uunnddeerrsseerrvveedd aanndd rruurraall aarreeaass.. 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Some of the tions Commission (FCC or Commission), has specific initiatives in each of these areas are executed a combination of initiatives to has- discussed more fully below. ten the development and deployment of new Technology Policies From the outset, fostering innovation and The Technology Agenda recognizes that technical invention as an engine for U.S. eco- broadband technology draws momentum nomic growth has been a core priority of this from pro-technology policies, amplifies it, and Administration. Consequently, promoting the transfers that force to other sectors of the development and deployment of broadband economy to stimulate innovation, competi- networks has been a centerpiece of the Presi- tiveness, and overall growth. To accelerate dent’s technology policies. In June 2002, the that momentum, the President advanced a President released his Technology Agenda.8 number of initiatives including strengthening In it, he observed that “[n]ew technologies are research and development funding; education revolutionizing the way we learn, work and reform, especially in the areas of math and play – all while improving our quality of life,” science; and support for entrepreneurship. and that “high speed data networks known as For example, to stimulate innovation, the broadband offer great potential to increase Administration championed increases in Fed- productivity, promote economic growth and eral research and development funding, revolutionize how we deliver health care.”9 elevating it to almost $143 billion, an increase Recommendations of the President’s Council of Advisors on Science and Technology (PCAST): TELEWORK In its report to the President, the PCAST identified several measures that it believed could contribute to more rapid deployment of next-generation, high-speed systems. Among them, the panel specifically urged support for telework, “with special attention to how broadband can enable and ex- pand the scope and flexibility of telework opportunities.” Report on Building Out Broadband, President’s Council of Advisors on Science and Tech- nology at 3 (2002), http://www.ostp.gov/PCAST/FINAL%20Broadband%20 Report%20With%20Letters.pdf. In this regard, a February 2007 Report by WorldatWork (based on re- search by the Dieringer Research Group) found “a 25-percent one-year increase [from 2005 to 2006], and a 63-percent two-year increase” in the number of Americans whose employer permits them to work from home at least one day a month. The Report concluded that this rising trend “is likely [due to] a combination of factors, including the proliferation of high speed/broadband and other wireless access (which has made it less expen- sive and more productive to work remotely) . . . .” Telework Trendlines for 2006 – 2007 Survey Brief, WorldatWork (Feb. 2007), http://www.workingfromanywhere.org/news/Trendlines_2006.pdf. With respect specifically to broadband use by teleworkers, the WorldatWork study found that “[t]he number of teleworkers using a broadband connection at home increased by more than 45 percent in the 2006 survey, fol- lowing an even-larger 65 percent rise in the previous survey (2005).” The Report found that the number of home-based employed teleworkers using broadband rose from 8 million in 2004 to 19.2 million in 2006. It stated that such increases “are logical given the explosion in broadband and high-speed Internet usage in the past several years” which, it observed, “has helped employees more productively work from a distance, especially in accessing corporate networks.” 4 NETWORKED NATION: BROADBAND IN AMERICA, 2007 NATIONAL TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION of 56 percent above 2001 levels and the larg- couraging the research and innovation neces- est Federal research and development budget sary to bring new and better products or in history. services to market. Central to this effort is the President’s Ameri- In a rapidly evolving area such as information can Competitiveness Initiative, which seeks to and communications technology (ICT), such double investment in key civilian Federal sci- unintended effects can carry fundamental, ence agencies (the Department of long-term adverse consequences that extend Commerce’s National Institute of Standards across multiple sectors of the economy. Ac- and Technology, the Department of Energy’s cordingly, especially in the area of ICT, the Office of Science, and the National Science government should exercise care not to dic- Foundation) that support innovation-enabling tate standards, but instead should seek to basic research in physical sciences and engi- foster an environment in which the potential neering.10 Over three billion dollars was of competitive forces can be fully realized to budgeted for the National Information Tech- maximize the choices (e.g., technologies, prod- nology Research and Development (NITRD) ucts, services, applications, providers) program, which includes research directly re- available to consumers. For this reason, the lated to broadband technology.11 The Administration has consistently and strenu- Technology Agenda also specifically charged ously advocated for technology neutrality in the President’s Council of Advisors on Sci- order to remove the government from what ence and Technology (PCAST) to examine are more appropriately marketplace decisions. consumer-demand issues and provide rec- Domestically, this policy has yielded an array ommendations for steps to facilitate of competing broadband services offered broadband deployment.12 over an equally diverse variety of platforms – In addition to the general measures identified wireless, wireline, cable, fiber, satellite, and above, the Administration also implemented a power line. Consumers need no longer buy number of targeted pro-growth telecommuni- discrete services from monopoly providers cations policies that have also contributed to but can choose from among multiple service robust technological development in the providers based on price, performance, mobil- broadband sector. These include continuing ity, and other features and characteristics. support for technological neutrality, efforts to Internationally, the Administration has ex- unlock the economic value and entrepreneu- pressed great concern whenever countries rial potential of U.S. spectrum assets, and prescribe a standard for technology that im- removing barriers to innovative new applica- pedes competition, obstructs investment, or tions such as ultrawideband technology and hampers the creation of competitive markets. broadband over power lines (BPL). The United States has actively worked to en- courage all nations to open their markets, to Technology neutrality. A hallmark of the implement measures to protect intellectual competitive system embraced in the 1996 property, and to use widely adopted interna- Telecommunications Act is consumer choice: tional standards. The Administration has also the consumer – not government – determines included technology neutrality principles in what products and services are needed, the U.S. free trade agreements. acceptable price for those products or ser- vices (i.e., what consumers are willing to pay Spectrum Policy. Recognizing society’s in- for them), and which vendor best satisfies the creasing desire to function “untethered,” consumer’s service needs. Experience teaches whether for convenience or improved effec- that when government tries to substitute its tiveness, mobility stands out more and more judgment for that of the free market, or oth- as a critical feature of broadband applications. erwise anticipate consumer demand by For example, achieving broadband access at a favoring one product or vendor over another, meeting facility enables business travelers to it can easily distort the marketplace, resulting maintain connectivity with the office. Dis- in the diversion of investment and/or dis- tributing broadband access via wireless 5 NETWORKED NATION: BROADBAND IN AMERICA, 2007 NATIONAL TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION technology to hundreds of meetings attendees lytical tools by developing best practices rec- simultaneously multiplies its utility and in- ognized by government and industry; and (3) creases the productivity of the work force. promoted the use of market-based economic Such applications require spectrum access that mechanisms in spectrum management by rec- is fast, reliable and convenient. ognizing the role that spectrum value must play in Federal procurement decision-making. While ensuring a level playing field for all Improved and more efficient spectrum man- technological platforms, the Federal govern- agement processes provide a firm foundation ment – as custodian and manager for a for an environment that will continue to ad- significant amount of our national spectrum vance new broadband networks in the assets – can play a major role in technological future.14 advancement by making spectrum resources available to engineers and entrepreneurs to Reallocating Spectrum for New Uses. In the support development and implementation of past decade, wireless technologies have prolif- new technologies and services, including erated at an astonishing pace across the globe. broadband communications. The Administra- Although the telecommunications sector con- tion has implemented a number of policies to stitutes only approximately one percent of our open up this limited resource by improving nation’s economy, experts estimate that it spectrum management policies and practices generates up to 10 percent of U.S. economic to increase spectrum efficiency, reallocating growth,15 and wireless services occupy an in- Federal spectrum so that it can be used for creasingly important place in that sector. new applications, and maximizing opportuni- High-Speed Downlink Packet Access ties for the unlicensed use of spectrum (HSPDA) is accelerating cellular data speeds wherever possible. to multiple megabits per second.16 Mobile phone content offerings supported by such Improving Spectrum Management. In June speeds – including music, gaming and video – 2003, the President issued a memorandum to are coming to market at a breathtaking pace, the heads of Executive Departments and with revenues expected to rise from $5.2 bil- Agencies outlining his “Spectrum Policy for lion in 2004 to $43 billion worldwide by the 21st Century.”13 The President’s Spectrum 2010.17 Wireless competition in the United Policy Initiative called for a critical review of States has resulted in a vibrant marketplace. current spectrum management policies and The U.S. wireless communications services practices to establish a new U.S. spectrum revenues are projected to be more than $141 policy that will foster economic growth; en- billion in 2007 and are growing approximately sure U.S. national and homeland security; 10 percent each year.18 maintain our global leadership in communica- tions technology and services; and satisfy Such new services can only emerge, however, other vital U.S. needs in areas such as public if the spectrum resources exist to support safety, scientific research, Federal them. Consequently, the Administration has transportation infrastructure, and law worked to ensure that commercial wireless enforcement. services have spectrum to compete with in- cumbents and provide new services to Pursuant to this initiative, NTIA has imple- consumers, while at the same time preserving mented measures to promote greater access to spectrum access for critical Federal systems the radio spectrum by improving the effi- and public safety services. NTIA and the ciency of radio systems and operations. FCC, working together and with the Con- Specifically, NTIA has (1) modernized Federal gress, have significantly increased the amount spectrum management processes with ad- of radio spectrum available for advanced vanced information technology, aiming wireless services, including wireless broad- toward fully-automated web-based analysis, band, and other services. coordination, and record-keeping capabilities; (2) enhanced spectrum engineering and ana- 6