Uncommon Wisdom

Oct 29 2010   6:00PM GMT

Bad data could mean bad decisions on FCC broadband plan



Posted by: Tom Nolle
Tags:
Broadband
broadband plan
FCC
national broadband plan

Anyone who’s followed my writing knows that I’m no fan of the National Broadband Plan. My main issue is with the data that’s been presented to back that plan, as well as some recent work I’ve been doing that is making me even more skeptical — if that’s possible.

What started me off was a comment by a White House science type. He was sure there were billions to be gained in productivity and jobs if broadband were more available, though he admitted he didn’t know exactly how those benefits were calculated or realized. OK, I said, let’s take a look at broadband versus economics and see if there’s a correlation. The FCC has data by ZIP code that shows where there are a lot of broadband providers available. Other agencies provide household income data, also by ZIP code. Suppose we correlated the two?

If broadband availability is in fact an economic benefit, we should see some correlation between the number of providers and the household income of consumers. We do, but it’s the wrong kind. The data shows that the correlation is overwhelmingly in the reverse. The areas with the most broadband providers available are the areas with the lowest household income.

Let me illustrate with a random example from my own area. Take two suburban communities in southern New Jersey as an example. One, which is a kind of middle-upper community, has 11 providers, according to the FCC. The second, which is arguably the richest community in the area, has only 10. Grab a random residential ZIP code from across the river in Philadelphia, where the household income is a quarter that of the first community and a sixth that of the second, and you find they have 12 providers.

Now, I’m not saying broadband is making people earn less (though, in fact, that’s a more supportable view given the data than the contrary assertion that it would help them earn more). I’m not even saying that the urban poor have generally better broadband, the FCC’s rhetoric notwithstanding. What I’m saying is that even a simple review of the data we’ve collected shows that our viewpoint on the role and value of broadband Internet isn’t supporting the popular views, or the views the FCC is presenting in its National Broadband Plan.

The data also seems to suggest that geographic factors like population density are by far the most significant forces in determining where broadband competition will develop. Even in very poor ZIP codes, we see a lot of providers — more than in most of the richer ones. Why would operators focus their efforts on places where household income is the lowest if it weren’t because those places have population densities that overcome even four-to-one or six-to-one income disparities? That proves our longstanding point that demand density means everything.

We’re also concerned that the FCC’s data includes non-facilities-based broadband providers, which in our view distorts the picture considerably. The only way to get broadband to the user is to deploy infrastructure. Riding on someone else’s infrastructure doesn’t create new options, only “new” providers. In fact, there’s every reason to believe that multiplication of wholesale players might erode margins and further limit investment. It certainly distorts the figures, and most people where I live couldn’t name more than two wireline and four wireless providers, which totals six and leaves at least four or five unaccounted for. 

The biggest problem here is the lack of clarity of the data, or the reliance on incomplete or just bad data — it’s hard to say which. The FCC appears to have muddled its own data collection, as well as gathered a lot of information through third parties. As I noted, it’s hard to say whether this was ineptitude or deliberate. What’s easy to say is that bad policies are inevitable if bad data fuels them.

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