The debate over whether the U.S. is falling behind in the Internet has grown increasingly feverish in recent years. Much of the attention has been focused on the country's ranking in broadband Internet availability and penetration. As recently as 2001, the U.S. ranked fourth in the world in terms of the percentage of households with broadband Net access. But in the years since then, it has tumbled sharply, losing ground to Japan, Korea, and Sweden. As of December, the U.S. ranked 12th, according to the Organization for Economic Cooperation & Development.
Now, at least one politician is making the issue a central part of this year's election season. At the keynote speech for the Personal Democracy Forum in New York this year, state Attorney General and gubernatorial candidate Eliot Spitzer outlined a proposal to provide affordable broadband to all citizens of New York. "In the 21st century, Internet access is no longer a luxury, it's a necessity," he said.
If elected, Spitzer said he wants to contract with companies in the private sector to provide high-speed Internet service at affordable rates. The private company or companies would pay for the necessary infrastructure and agree to sell the service at low rates, in exchange for being the sole provider over that infrastructure for several years. He said the plan would be similar to what's happening in Philadelphia, where the city has contracted with Earthlink Inc. (ELNK)
PRIVATE-SECTOR OPPOSITION. Such a plan is likely to draw fierce competition from telephone and cable companies, which are now the leading providers of broadband. When Philadelphia began to investigate its broadband service, which uses the inexpensive wireless technology called Wi-Fi, Verizon Communications (VZ) fought the measure aggressively.
Eventually, the state of Pennsylvania struck a compromise that allowed Philadelphia to proceed with its broadband plan, but barred other municipalities in the state from following suit. Verizon, AT&T (T), BellSouth (BLS), and others argue that government should not enter the business of providing a service that is already supplied by private companies.
Verizon and Cablevision Systems (CVS), a large New York cable company, say they share Spitzer's view of the economic importance of broadband. "We also want to make sure New York is a broadband leader, and we think we've been pretty aggressive in rolling out broadband service," says John Bonomo, spokesperson for Verizon.
WELL-SERVED CONSUMERS. The phone company is rolling out fiber-optic lines to homes in its region, providing some of the fastest broadband service in the country. Asked if they would support a municipal rollout of broadband service or bid to take part in a state-sponsored plan to provide low-cost broadband access, Cablevision declined to comment. A spokesperson for Verizon said the company does not oppose such plans in general, though it urges that any municipal rollout be through a partnership between the public and private sectors.
They may be able to argue that Spitzer's plan is simply not needed. Nearly all residents in New York State already have the ability to get some sort of broadband access, even if they don't subscribe. According a study by the Federal Communications Comission, more than 90% of New Yorkers can buy at least one form of broadband Internet service, and the vast majority of those have a choice of three services -- the phone company, the cable company, and a satellite service provider.
Time Warner (TWX) and Cablevision both have said they offer broadband internet service to 100% of their cable subscribers. Meanwhile Verizon, the state's largest telecom company, can provide broadband to 81% of its wireline telephone customers. It offers entry-level DSL service for $14.95 a month in many of those areas.
BACKWARD BRONX. Spitzer and proponents of similar plans argue that is not enough. "The question isn't about whether or not they have access, period. The question is whether or not they have access to affordable high-speed, high-capacity broadband. If it's not affordable, it's not accessible. And if it's not high-speed or high-capacity, then it's ancient history," says Christine Anderson, a spokesperson for Spitzer's campaign.
In his speech, Spitzer didn't give specifics on what he considers to be "affordable" or "high-speed." The Philadelphia program Spitzer cites as a model provides service for a standard $20 a month and $10 a month for low-income users. He did say almost all of the speeds available in the U. S. are too slow. "If you're kid growing up in South Korea, your Internet access is 10 times faster at half the price than a kid growing up in the South Bronx," he said.
So far, roughly 43% of the New York State residents subscribe to broadband Internet service, in line with what the Pew Internet & American Life Project estimates is the rate of national penetration.
SMALL-BIZ VACUUM. Lower prices would certainly spur an increase in broadband usage, but the true cause may be lack of hardware rather than lack of broadband service.Thirty-four percent of households in the U.S. still do not own a computer, according to a May, 2006, study by the Government Accountability Office. That percentage is even higher for low-income households.
That's a much bigger reason for the lack of broadband penetration in low-income households than service accessibility, argues Bruce Leichtman, principal analyst with Leichtman Research Group and a former chair of the editorial board for the Cable & Telecommunications Marketing Assn. journal. "Broadband adoption really correlates directly with household income." If Spitzer wants to solve the digital divide, Leichtman says, "he should be giving everybody a computer."
With or without computers, one group in need of better broadband access is small businesses in New York State -- particularly those in less populated areas. Unlike residential areas, where cable access is wired to each home, commercial areas see less demand for cable television, meaning fewer cable broadband hookups.
A March, 2005, study by the New York City Economic Development Corp. and other city agencies found that small businesses in New York City must also pay higher prices than the city's residential customers, meaning more businesses will opt not to sign up for broadband at current prices. And while the study found that the central business districts in midtown and lower Manhattan had extremely sophisticated high-capacity broadband access, some parts of the city still depended on bottlenecks that could kill service if just one component of the network failed.
The Attorney General isn't the first politician to take up "universal broadband" as an election issue. Both John Kerry and George W. Bush supported the idea in the 2004 election. But there has been little followthrough by the federal government since the election. Instead, the issue has fallen to local and state governments, such as Philadelphia and Utah, which has also helped roll out affordable broadband for local residents (see BW Online, 10/04/-4, "Welcome to Broadband City"). The question is whether New York will be next.