Plugging America's Broadband Gap

An FCC proposal could boost U.S. competitiveness by giving each household high-speed Web access

Should speedy Internet service be free? Kevin J. Martin, chairman of the Federal Communications Commission, wants the agency to vote on a plan in August that would let any household in the country cruise the Net at broadband speeds, at absolutely no cost. But his idea faces heated opposition from companies such as AT&T (T) that worry their profits will be threatened by a free alternative.

Martin is concerned about a U.S. broadband gap. Only 60% of American households have speedy Net access. That puts the country in 15th place among developed nations, according to the Organization for Economic Cooperation & Development. It's a mighty fall from 2001, when the U.S. ranked fourth.

There are three basic options for catching up. The government can take the lead, making its own investments in broadband. Second, the government can mandate that existing providers make the service available more widely. Most realistically perhaps, the government can create incentives for private companies to roll out more broadband. That's what Martin is trying to do. He wants to auction off wireless spectrum and require the winning bidder to provide free broadband throughout the country. The company could make money by selling advertising and advanced services.

The free service wouldn't be the fastest on the market. The winning bidder would have to offer a minimum speed of 768 kilobits per second to 95% of the country within 10 years. Although that's technically broadband, it's about half the speed of today's average U.S. broadband link.

Still, Martin's proposal has drawn support because it has the potential to crack what has become a broadband duopoly. In most markets, only one telecom company and one cable provider offer the service. A third alternative with decent speed and big savings off the current $50 monthly average price could spark more competition. The leading contender to win the auction is M2Z Networks, a startup founded by former FCC staffer John Muleta.

The FCC approach is no panacea. It'll provide competition at the low end of the market and will do nothing to bring the U.S. the blazing speeds common in Korea and Japan. But if Martin succeeds, his plan could allow Americans to participate more fully in the Information Economy. "Broadband has become an important economic driver," says Richard Whitt, a Google (GOOG) lobbyist in Washington. "It's too important to leave solely to those in the marketplace."

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE