Obama Is Missing the Broadband Boat

Data cables at an office in Washington, D.C. Paul J. Richards / AFP-Getty Images

It's a well-known lament that America's broadband performance badly lags the rest of the world's. Household adoption rates are mediocre compared with those of other OECD countries, and subscription prices are scandalously higher than even the super-speed nirvanas of South Korea and Japan.

Mainly this is a curse of geography. Vast, suburbanized America is pricier to equip with high-speed fiber or wireless than densely populated Asia. But unlike in many countries, the government also lacks clout over the telecommunications sector, leaving private operators such as Verizon and AT&T to upgrade aging copper networks on their own time.

Still, as 14 million Americans go without broadband (defined by the Federal Communications Commission as a minimum download speed of 4 megabits per second), and millions more battle poor service, the nation is squandering a once-in-a-generation chance to modernize its digital footprint. The die was cast almost two years ago when President Obama's $787 billion economic stimulus lobbed a disappointing $7 billion toward broadband: mainly grants to help municipal, nonprofit, and private entities connect rural digital backwaters. By contrast, green energy received 13 times more funding. Now, with unemployment beached at 9.8 percent, it looks as though Obama made the wrong bet.

Broadband advocates salivate at the potential to deliver productivity-boosting applications. Imagine, they say, if telecommuting workers could beam into the office as holograms, reducing peak-hour congestion. Or a farmer could discuss X-rays with his city specialist over high-definition video, revolutionizing health-care delivery. According to the global consulting firm LECG, if America added five more broadband connections for every 100 people, the productivity benefit would exceed $50 billion, contributing at least 0.5 percent to GDP. And while the up-front cost of trenching fiber to every home is high, the infrastructure is scalable and lasts for decades. The OECD estimates that if a network drives public-sector efficiencies of between 0.5 and 1.5 percent, it effectively pays for itself.

Compare that with Obama's broadband approach, which flunks the test as short-term stimulus. Due to a complex tender process, the Department of Commerce (allotted most of the $7 billion) finalized its 233 grants only two months ago; in dozens of cases, environmental-impact assessments are causing delays.

More seriously, it undersells the need for long-term transformation. The goal set by Obama's National Broadband Plan is 100 million households (of about 130 million nationwide) accessing world-class speeds of 100 megabits per second by 2020. Encouragingly, the private sector is already inching America toward this target. Verizon, AT&T, and Qwest have committed to build high-speed fiber past 50 million homes in the next two years; cable-television companies also plan upgrades. But these expansions are concentrated in dense areas that are profitable to serve, leaving pockets of the country languishing.

Experts agree that $7 billion is, at best, a government down payment. Robert Atkinson, president of the Information Technology & Innovation Foundation, observes that in the early 2000s, Sweden invested heavily in delivering fiber to 99 percent of homes. "We would have to invest upwards of $30 billion to match on a per capita basis what the Swedes did," he says. Sweden, Japan, and Korea also unapologetically use tax credits and depreciation concessions to jump-start private-sector rollout, whereas in America, Atkinson sees "animus" to the idea of subsidizing major broadband providers.

A national fiber-to-the-home scheme, hooking every American residence to 100 megabits per second, would cost $100 billion, estimates John Windhausen, president of Telepoly Consulting. But Blair Levin, author of the National Broadband Plan, says that government, with finite resources, can realistically underwrite only 4 megabits per second to remote areas: sufficient for a student to download a digital textbook, but not for more advanced e-health applications such as remote video consultations.

Yet Obama's plan aims five times lower than the speed nominated by Levin, defining 768 kilobits per second as acceptable. So grant recipients, as a condition of federal funding, are required to guarantee only a very modest level of service. Moreover, areas of the country where a majority of households already have access to the lackluster baseline are not eligible for funding at all.

If Obama's broadband vision is too circumspect, then Australia—another giant landmass—offers insight into the vicissitudes of a bolder plan. The government is building a US$35 billion National Broadband Network, delivering speeds of 100 megabits per second to 93 percent of the population. Telstra, Australia's privatized telecommunications carrier, will be compensated US$14 billion to throw open its aging copper-wire infrastructure so a new publicly owned company can install fiber.

Critics say the government is creating an infrastructure monopoly and "picking winners" when the private sector could expand broadband with less risk. "The Australian government is making a [$35 billion] bet on technology," says Levin, citing the unknown potential of advanced 4G wireless technology to appeal to customers prioritizing mobility rather than a fixed line. Others predict the decision will be vindicated and that it contains an urgent lesson for America: show leadership and bring the telecommunications sector to the table. Obama's broadband stimulus may have undershot the mark, but ensuring America's preparedness for the digital future is one area where the president can't afford to give up.