Affordable Broadband: Empowering Communities Across the Digital Divide

8/14/2019 Affordable Broadband: Empowering Communities Across the Digital Divide

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Afrabe Braba:Empowering Communities Across the Digital Divide

Dr. Jabari Simama


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EXECUTIVE SUMMARY

By opening the door to economic and educational opportunity, better health care, personal enrichment and

political power, broadband Internet access has become a transorming technology that can help narrow the

gap between societys rich and poor.

With a broadband connection, children in the most isolated inner-city neighborhoods and rural regions can

tap into the same universe o knowledge as children in the most auent suburbs. Workers who want to

enhance career prospects by earning advanced degrees can use broadband to sit in the classrooms o the

worlds most renowned proessors and young students can walk the stacks o distant libraries and access

the wealth o inormation available online.

Broadband also helps create wealth and opportunity or communities that are wired by attracting

businesses that want to locate in areas with a strong broadband presence. Recent economic models show

that or every one percentage point increase in broadband penetration, employment expands by almost

300,000 jobs.

Fortunately, in recent years the combination o alling prices and increasing deployment o high-speedInternet connections means that a greater number o lower- income Americans and minorities have joined

the broadband revolution. By early 2007, or example, the gap between home broadband access or

Arican-Americans and their white counterparts had narrowed rom 17 percentage points in 2005 to a mere

eight percentage points currently (48-40 percent). The data also shows that English-speaking Hispanics are

signing up or home broadband at about the same rate as non-Hispanic whites. But Latinos with limited

English are less likely to go online than either white or black Americans. While there remains a substantial

gap between the broadband use o the wealthiest Americans and the poorest, the drop in prices has

acilitated greater broadband adoption across the board. Even among households with annual incomes o

less than $30,000, the number o consumers high-speed Internet connections has doubled rom 15 percent

to 30 percent in the last two years.

But the recent gains are ragile and could easily be reversed by public policy errors that drive prices


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higher. Such an outcome could orce large numbers o the most recent broadband users to cancel their

new connections due to lack o aordability. The ollowing study, Aordable Broadband: Empowering

Communities Across the Digital Divide, examines both the opportunities and the risks, while simultaneously

outlining some public policy guidelines or maintaining the momentum toward the national goal o

broadband or every American.

KEEpIng BRoAdBAnd AoRdABlE WIll SpREAd dIgITAl EMpoWERMEnT

To ensure a continued increase in the number o consumers signing up or broadband and to retain those

consumers currently using broadband, we must reject policies that raise prices and embrace those that may

help drive prices lower.

Three strategies that enhance this eort are as ollows:

Stratey 1 oe te dr t Cmetiti

As exemplied by the experience in video services, opening the door to competition is among the best ways

to reduce prices or broadband. For example, recent FCC data shows that cable TV prices are 17 percent

lower ($35.94 a month v. $43.33 a month) when cable TV providers ace competition rom a second landline

provider. Economist Robert J. Shapiro, who served as U.S. Under Secretary o Commerce or Economic

Aairs rom 1997-2001, put it this way:

Broad access to new broadband telecommunications services for Americans at every income level and

geographical area can be achieved by encouraging competition itself, which drives down the prices of these

services and promotes additional technological innovations that further drive down prices.

To this end, policymakers should look or opportunities to acilitate the market entry o new competitors

and new services and press ahead with eorts to eliminate antiquated regulations that restrict competition,

limit choices and keep prices high.


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Stratey 2 Avi Reuati tat drives U prices

Regulators should remain a strong deender o consumer rights and continue to protect consumers against

business misconduct. But they should be wary o taxes or regulations that could raise costs to consumers.

For example, some policymakers are considering proposals that would limit the use o technology and

management techniques designed to enhance the eciency o broadband service and handle an emerging

explosion in Internet trac. By reducing eciency, this type o rule could result in increased prices or

consumer broadband access.

Economists Robert E. Litan and Hal J. Singer have argued that the cost per customer o providing basic

Internet access (and thus the price) would increase signicantly i access providers were prohibited rom

using intelligent trac control, including quality o service, to meet the demand or Internet trac. They

calculated that under some scenarios, as many as one third o broadband subscribers might disconnect rom

high-speed Internet because the price burden would be too great.

Stratey 3: Ecurae Ivestmet

Policymakers should seek strategies that would encourage capital investments into underserved

communities to ensure the delivery o aordable and sustainable broadband services to every consumer.

Perhaps the principal question is how to nance the necessary capital cost associated with the expansion

o online video and other data (dubbed the exafood by some). Many commentators believe that this

exafood will create a critical online trac jam unless Internet capacity is greatly expanded. One recent

study estimates that the total investment required to meet the growing demand or bandwidth will be up to

$137 billion.

Public policy choices that restrict the implementation o innovative technical and business approaches

would undoubtedly place a heavier cost burden on the backs o individual consumers.


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ThE pATh To EMpoWERMEnT

The path to broadband empowerment or America is clear ocus on aordability. Americans can now buy

high-speed Internet services or as little as $15 a month, down rom more than $80 dollars a month less than

a decade ago. Moreover, packages that deliver phone, broadband and video are currently priced at around

$100 a month. At those prices, most households can aord a high-speed Internet connection. As a result,

more American homes are connected to broadband than ever beore and the gains are seen among every

racial group and at all income levels.

Broadband is among the rare technologies that can undamentally transorm the way people live. When

all people have the chance to have broadband Internet access, America can become a more air and just

society. In recent years, minorities and lower-income Americans have begun to close the gap with their

more auent ellow citizens. The long-term challenge is to resist actions that will make broadband more

costly and reverse recent progress by ensuring new entrants to the broadband community are not the last in

and the rst out.


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Afrabe Braba:Emweri Cmmuities Acrss te diita divie

ThE pRoMISE o dIgITAl EMpoWERMEnT

The United Nations recently proclaimed that or someone striving or success in the 21st century, broadband

Internet access is as crucial as access to water or electricity. For both communities and individuals, the split-

second click o a mouse opens a door to economic and educational opportunity, better health care, persona

enrichment and equally as important, global political power.

With a broadband connection, children in the most

isolated inner-city neighborhoods and rural regions

can tap into the same universe o knowledge as

children in the most auent suburbs. Workers

who want to enhance career prospects by earning

advanced degrees can use broadband to sit in the

classrooms o the worlds most renowned proessors and young students can walk the stacks o distant

libraries and access the wealth o inormation available online. Without it, they are conned to what is

available only in their own backyard.

Using broadband, employees rom rms around the world can collaborate on projects in real time, workers

can telecommute to a virtual oce hundreds or even thousands o miles rom where they live, or gain new

on-demand skills as they need them. Without a reliable Internet connection, job seekers are cut o rom

these opportunities.

Broadband also helps create wealth and opportunity or communities that are wired by attracting

businesses that want to locate in areas with a strong broadband presence. At a macro level, studies estimate

The split-second click o a mouse opensa door to economic and educational

opportunity, better health care,

personal enrichment and equally asimportant, global political power.


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that universal broadband access would unleash up to $500

billion in economic growth1 and more than 1.2 million

high-wage jobs.2 And, recent economic models show

that or every one percentage point increase in broadband

penetration, employment expands by almost 300,000 jobs.3

Broadband empowers in other ways too. It can enhance

health care by connecting patients to medical specialists

and procedures that are not available locally, increasing patient knowledge and also cutting medical

costs. It can bring Americans closer to their government by acilitating the delivery o government services

and also serve as an eective grassroots inormation and mobilization tool that can expand the political

infuence o societys less powerul.

1 The $500 Billion Opportunity: The Potential Economic Benet o Widespread Diusion o Broadband Internet Access, Robert W. Cran

dall and Charles L. Jackson, July 2001, http://www.criterioneconomics.com/docs/Crandall_Jackson_500_Billion_Opportunity_July_2001.pd

2 Building a Nationwide Broadband Network: Speeding Job Growth, by Stephen B. Pociask (February, 2002) http://www.newmillenniumresearch.org/event-02-25-2002/jobspaper.pd.

3 The Eects o Broadband Deployment on Output and Employment. Robert W. Crandall, William Lehr and Robert Litan. June 2007.

I Ass M Ml?

When connecting to the Internet, consumers can choose between dial-up service and broadband. Dial-up

is slower. It requires a user to dial a phone number and connect every time he or she wants to go online,

and it cannot reliably deliver streaming video and other high capacity applications that dominate todaysInternet.

This paper focuses on broadband, high-speed connections that are always connected to the Internet and

can run applications that will not work effectively on dial-up because of transmission delays or lack of

bandwidth. Broadband is qualitatively better and delivers opportunities that dial-up cannot. Choosing

dial-up over broadband is like opting for a moped over a motorcycle. The moped enables you to move

around the neighborhood much faster than walking, but the motorcycle can carry you across the country.

More than 15 percent of Americans use home dial-up connections to go online. It is certainly better to be

online with dial-up than not at all, but the data shows those with dial-up do fewer things online. Full digital

empowerment requires broadband.

Broadband also helps create

wealth and opportunity or

communities that are wired.

For every one percentagepoint increase in broadband

penetration, employmentexpands by almost 300,000 jobs.


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UlIllIng ThE pRoMISE

As prices a te divie Cses

A dozen years ago, a groundbreaking report by the U.S. Commerce Department, Falling Through the Net,

drew attention to a digital divide that separated white Americans rom their ellow citizens in the Arican-

American and Hispanic communities in their adoption o computer technology. About one-third o non-

Hispanic whites said they owned a home computer in 1995, compared to just over 10 percent o Blacks and

about 12-13 percent o Hispanics.4

Moreover, poorer Americans were ar less likely than the more auent to own a computer. In 1995,

personal computers cost $2,000 or more or an entry level machine [the equivalent o $2,758.23 in 2007

dollars]. Back then, computers were simply too expensive or many Americans to aord. While more than

six o 10 Americans with annual incomes o $75,000 or more owned a computer in 1995, only about 20

percent o those earning less than $35,000 a year reported that they had a computer at home. Among

citizens with incomes o less than $20,000 annually, only about 12 percent owned a computer.

But as prices ell, computer ownership rose or all groups. From 1994 to 2003, the price o computers

dramatically declined, even as quality improved. During that period, Americans with incomes o less than

$20,000 increased their computer ownership at an average annual rate o 18.1 percent, more than twice the

8.3 percent average annual rate o those earning over $50,000. Today, a basic computer can be purchased

or as less than $500. Not inexpensive, but within reach or most working Americans.

As the divide in computer ownership closed, a new divide opened between those with broadband service

and those without. This new divide is critical because a high-speed broadband connection to the Internet

is what really brings lie-changing power to the personal computer, liting it rom a home-bound device

or writing text or playing games to a powerul engine that brings a world o opportunity and inormation

directly into our homes.

4 Falling Through the Net: A Survey o Have Nots in Rural and Urban America, U.S. Department o Commerce, July 1995. nte, thepercentages quoted here are inexact because the report divided each group into three categories rural, urban, and inner city, but did not

aggregate the three categories to produce a single, total number or racial or income groups.


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Here, too, we see a connection between price and adoption. As the cost o broadband access has declined,

the percentage o Americans signing up or broadband has climbed rapidly. Monthly access ees or

broadband, once $80 or more have allen as low as $15 or entry-level services and the average cost o

broadband appears to have settled in the mid-$30 range, making it aordable or a much larger group o

Americans than ever beore.

As the The New York Times wrote in March 2006: Arican-Americans are steadily gaining access to and ease

with the Internet, signaling a remarkable closing o the digital divide that many experts had worried would

be a crippling disadvantage in achieving success.5

The body o research that bolsters the newspapers assertion

is steadily growing. The Pew Internet & American Lie Project

reported in March 2007 that the percentage o Arican-

American adults with a home broadband connection has

nearly tripled, rom 14 percent in early 2005 to 40 percent

in early 2007. The black-white gap also narrowed dramatically during that time. In early 2005, 31 percent

o white Americans, but only 14 percent o blacks, reported a home broadband connection. Two years

later, this gap had been cut by more than hal. The percentage o white Americans with a home broadband

connection has risen to 48 percent, just eight percentage points higher than the participation rate or

Arican-Americans. The data shows that English-speaking Hispanics are signing up or home broadband

at about the same rate as non-Hispanic whites. But Latinos with limited English are less likely to go online

either by dial up or broadband than either white or black Americans.

As prices decline, poorer Americans as a group also are adopting broadband at a aster pace. For those

earning less than $30,000 a year, Pew reports that broadband access at home doubled rom 15 percent in

2005 to 30 percent in 2007. Despite this progress, the rich-poor gap remains substantial as 76 percent o

households with income o more than $75,000 reporting that they have broadband access at home. Rural

Americans also remain behind. While 52 percent o urban households have broadband, only 31 percent o

5 Michel Marriott, Blacks Turn to Internet Highway, And Digital Divide Starts to Close, The New York Times, p. A1, March 31, 2006.

As the cost o broadband accesshas declined, the percentage

o Americans signing up or

broadband has climbed rapidly.


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households in rural areas report they

enjoy high-speed Internet access.6

Wireess Ater Ra t Emwermet

The wireless revolution and the

introduction o such alternative

delivery methods such as broadband

over powerlines and satellite

may open another road to digital

empowerment or underserved

groups, including minorities

and rural communities. Current

pricing and availability o these

technologies may limit their immediate appeal or some groups at this time. Nonetheless, FCC data shows

remarkable growth in satellite and wireless broadband in the home rom some 532,000 households in

December 2005 to almost 3.4 million households in December 2006 (when businesses are included, wireless

broadband lines totaled 22.5 million in December 2006, compared to just 3.4 million a year earlier).7 While

wireless still accounts or less than six percent o all home broadband, the upward trend as well as the

likelihood that wireless prices will decline over time bodes well or the uture providing policymakers

6 Pew Internet and American Lie Project, Home Broadband Adoption 2007, June 2007, available online at http://www.pewinternet.

org/pds/PIP_Broadband%202007.pd

7 Federal Communications Commission, High Speed Services or Internet Access: Status as o December 31, 2006, released October2007, available online at http://hraunoss.cc.gov/edocs_public/attachmatch/DOC-277784A1.pd

BroAdBAnd AdoptIon By rAce/ethnIcIty

(pag wi baba a m)

2005 2006 2007

White 31 42 48

Black 14 31 40

Hispanic

(English-speaking)

28 41 Not available

BroAdBAnd By IncoMe LeveL

(pag wi baba a m)

2005 2006 2007

Under $30K 15 21 30

$30K-$50K 27 43 46

$50K-$70K 35 47 58

More than $75K 47 62 70


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avoid new regulations or other actions that infate wireless

costs. Whats more, the proven willingness o minorities to

embrace advanced technology suggests wireless may also

be attractive to the most recent broadband adoptees.

For example, The Pew Internet & American Lie Foundation

reported in April 2006 that Arican-Americans are more likely than whites to use their cell phones to send

and receive text messages (42 percent to 31 percent); play games (29 percent to 20 percent); use the

Internet (17 percent to 12 percent) and play music (11 percent to 5 percent).8 A 2006 survey by Forrester

Research showed that minorities have been about twice as likely as white Americans to abandon their local

phone line in avor o a mobile phone. Only 4.4 percent o whites have given up their wireline phone line or

a mobile phone, compared with 10.4 percent o Asian-Americans, 8.6 percent o Hispanics, and 6.3 percent

o Arican-Americans, according to Forrester.9

Wireless also has the potential to help close the urban-rural divide, which to date has proven more stubborn

than the divide between the races. As it stands now, only about 31 percent o rural households have

broadband compared to 52 percent o urban homes.

Delivering broadband to less densely populated and geographically dispersed locations such as rural

communities involves special challenges. But just as emerging countries with limited telecommunications

inrastructure have chosen to leaprog to wireless instead o expanding their wireline networks, rural

Americans may increasingly opt or wireless to help bridge the gap. In addition to the benet o mobility

that enables consumers to take their network with them or because it may be the only option available,

wireless may soon be more attractive economically as well. JP Morgan, the Wall Street investment banking

rm, projects dramatic declines in wireless broadband prices over the next several years. According to JP

Morgan, average monthly prices or other broadband technologies declined 24 percent rom almost $60 in

2004 to about $45 in 2007. JP Morgan says average costs could drop to less than $33 by 2010.

8 Pew Foundation Internet & American Lie Foundation, How Americans Use Their Cell Phones, April 2006, available online at http://www.pewinternet.org/PPF/r/179/report_display.asp (A January 2006 survey by JackMyers.com reported similar results)

9 Maribel D. Lopez, What Communications Services Are Ethnic Minorities Buying? Forrester, April 11, 2006.

The wireless revolution may

open another road to digital

empowerment or underserved

groups, including minorities and

rural communities.


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I these projections prove correct, rural Americans (and others interested in mobile broadband) may be on

the cusp o a broadband breakthrough.10

AoRdABIlITY And oThER KEYS To pRogRESS

What is closing the digital

divide between the races?

The most signicant actor

is price. It has long been

established that within a

country or community, the

cost o a new technology

critically aects the rate at

which it spreads. When a new technology is introduced, it is usually relatively expensive and only a small

number o higher income enthusiasts, or early adopters, will purchase it. The oundation or broader

adoption is laid once the technology has shown itsel to be useul, and competing manuacturers have

entered the market. Competition in a rapidly expanding market, coupled with improvements to the

product, drive down the price. That is when access to the

technology whether it is a powerul new computer, a

mobile phone, or a plasma-screen television spreads

ar and wide. Since lower-income people are more price

sensitive, they purchase the technology in ar greater

numbers as the prices drop. Or, as the Yankee Group

investment rm said in the headline o a 2005 report on

broadband: Price Erosion Drives Mass Adoption.11

Precise price estimates vary depending on methodology, but there is no doubt that steep price declines

10 Guerilla Economics, Broadband Competition Throughout the United States and the Impact on Pricing July 12, 2006.

11 Nicole Klein and Daniel Klein, Yankee Group, 2004 Broadband Subscriber Forecast: Price Erosion Drives Mass Adoption, January 2005

The cost o a new technology

critically aects the rate at whichit spreads.

Steep price declines have

coincided with dramatic

increases in the number oAmericans who now enjoy

broadband service at home.

AVERAgE MonThlY REVEnUE pER SUBSCRIBER15

2004 2005 2006 2007

DSL $41.71 $38.64 $35.50 $33.50

Cable Modem $40.56 $40.09 $37.92 $36.27

Other $59.57 $55.78 $50.14 $45.03(satellite, 3G, mobilewireless, wif, BPL)


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have coincided with dramatic increases in the number o Americans who now enjoy broadband service

at home. Economists generally report a drop rom $80 to $25 a month or 1.5 Mbps service rom 1999 to

2006, and in many parts o the country consumers can buy broadband or $20 a month or less. The Pew

Foundations 2006 broadband survey prices also showed average prices alling into the $30s and estimates

by JP Morgan, the Wall Street investment banking rm, show that average DSL prices ell about 20 percent

rom almost $42 in 2004 to $33.50 in 2007. According to JP Morgan, cable modem costs also ell, declining

about 6.5 percent to $37.92 rom 2004-2006.12

Pew reported an 8 percent price decline in average broadband prices rom $39 to $36 a month between

March 2005 and March 2006, a time when broadband adoption accelerated dramatically rom 30 percent to

42 percent or all Americans and rom 14 percent to 31 percent or black Americans. In a urther indication

o a correlation between price and adoption, Pew noted that consumers were adopting DSL broadband

service at a much aster rate than cable modem service during the 12-month period a time when DSL

prices ell almost 16 percent rom $38 to $32.

In Pews words: DSL has captured a majority o subscribers in the ast-growing middle- or lower-middle

income range o the market. Among broadband-using households with incomes between $30,000 and

$50,000 annually, 55 percent use DSL and 35 percent have cable modem service. 13

Ctet Matters, T

Factors other than price can also encourage broadband adoption. One is the availability o online content

that is geared toward specic populations or interest groups. Movida Communications has had great success

in selling a service that oers Hispanic-specic news and content, including regional news programming,

Latin American soccer scores, Hispanic celebrity news and gossip, home country news alerts, and Patron Saint

o the Day eatures.14 In promoting broadband access, it is important to highlight the online content that wil

12 Sidak, J. Gregory, A Consumer-Welare Approach to Network Neutrality Regulation o the Internet. Available on line at http://papers.ssrn.com/sol3/papers.cm?abstract_id=928582

Hahn, Robert and Litan, Robert, The Myth o Network Neutrality and the Threat to Internet Innovation. The Milken Institute Review, First Quarter

2007. http://www.aeibrookings.org/admin/authorpds/page.php?id=1342; Pew Internet & American Lie Project, Home Broadband Adoption

2006. available on line at http://www.pewinternet.org/pds/PIP_Broadband_trends2006.pd

13 Pew Internet & American Lie Project, Home Broadband Adoption 2006. available on line at http://www.pewinternet.org/pds/PIP_

Broadband_trends2006.pd

14 Maribel D. Lopez, What Communication Services Are Ethnic Minorities Buying?Forrester Trends, April 11, 2006.


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be the most attractive and useul to reluctant or late adopters.15

In their study on how minority groups use computers and the Internet, Bharat Mehra, Cecelia Merkel, and

Ann Peterson Bishop emphasize the importance o community in broadband adoption. They note that

many people learn how to use the Internet rom amily or riends, or take up computer activity on behal o

others. Making broadband Internet access available at libraries, churches, schools, community centers and

clinics in Arican-American neighborhoods is likely to generate a greater demand or broadband in individua

residences, especially as prices continue to decline.16

drivi Ati Tru Eucati

Helping individuals better understand the value o broadband is another key to accelerating the adoption rate

As with anything new, inormation technology triggers ear and a natural suspicion o change in a sizeable

segment o the population. As John Horrigan o the Pew Internet & American Lie Project observes:

Non-Internet users do not have very positive attitudes about information technology. Many report worries about

information overload and fewlink information technology to greater control over their lives. Moreover, non-

Internet users are apt to see the online environment as a dangerous place that is, a place with inappropriate or

irrelevant content.17

Initiatives like ConnectKentucky, a public-private partnership designed to drive broadband adoption in

Kentucky, show the value o aggressive eorts to promote adoption among skeptical citizens. Beginning with

a mapping eort to determine the level o broadband availability and gaps in coverage, ConnectKentucky

promotes deployment by building demand in communities that are not currently wired. It also encourages

citizens to sign up or broadband service by explaining how the Internet works and how individuals can use it

to enrich their lives. As a result o these eorts, which can be replicated to drive broadband in every American

community, Kentucky boosted computer ownership by 20 percent and raised the number o households

15 Bharat Mehra, Cecelia Merkel, and Ann Peterson Bishop, The Internet or Empowerment o Minority and Marginalized Users,NewMedia and Society6, no. 6 (2004): 781-802.

16 Margaret C. Simms, Measuring the Divide: Arican-Americans Access to the Online Universe, The Joint Center or Political and Eco-

nomic Studies, March 2006.

17 John B. Horrigan, Why it Will be Hard to Close the Broadband Divide, Pew Internet & American Lie Project, August 1, 2007, available

online at http://www.pewinternet.org/pds/Broadband_Commentary.pd


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using broadband by 73 percent between 2005 and 2007.

SECURIng ThE gAInS And SpREAdIng EMpoWERMEnT

Broadband access is price elastic; it is spreading because declining prices have enabled more people to t high-

speed Internet access into their budget. Conversely, policies or economic developments that drive up price

or reduce incomes can reverse the progress and cause the divide to widen again. Income levels are beyond

the scope o broadband policy, but broadband policy can and must be heavily infuenced by considerations

o price -- rejecting approaches that would drive up prices. We must make sure that the large number o

Americans who have just joined the broadband generation are able to stay online. The last ones on, must not

become the rst ones o as a result o policy mistakes that put broadband beyond their economic means.

Conversely, policies that tend to drive prices lower should

accelerate adoption and move America closer to its national

goal o universal broadband.

Among the best ways to reduce price is to expand competition.

The experience in video services oers an especially compelling

example o what happens to price in the absence o competition

and when competition is introduced.

For decades, most consumers who wanted to purchase cable television services were orced to buy rom a

monopoly provider and the rates they paid rose steadily. In recent years, as reorms in video ranchise regulation

have enabled new competitors to enter the market in many states, rates have declined signicantly in areas where

cable companies now ace direct competition rom alternative wireline carriers.

In 2004, the General Accounting Oce noted that competition leads to lower cable rates and improved

qualitywhere available [competition rom a wire-based company], cable rates are substantially lower (by

15 percent) than in markets without this competitionin markets where DBS [Direct Broadcast Satellite

We must make sure that the

large number o Americans who

have just joined the broadbandgeneration are able to stay

online. The last ones on must

not become the rst ones o as

a result o policy mistakes that

put broadband beyond theireconomic means.


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service] provides local broadcast stations, cable operators improve the quality o their service.18 Recent

FCC data shows average cable prices are about 17 percent lower ($35.94 a month v. $43.3 a month) when

the incumbent cable provider aces competition rom a second wireline competitor.19 Economist Robert J.

Shapiro, who was U.S. Under Secretary o Commerce or Economic Aairs rom 1997-2001 during the Clinton

Administration, emphasized the power o competition in his 2006 examination o how technology spreads.

Broad access to new broadband telecommunications services for Americans at every income level and

geographical area can be achieved by encouraging competition itself, which drives down the prices of these

services and promotes additional technological innovations that further drive down prices. This is precisely how

large shares of Americans at every income level, race, and education, living in center cities and rural America as

well as suburbia, achieved access to home computers and the Internet.20

Moreover, because most providers o video now oer a suite

o telephone, video and Internet services or about $100 a

month, competition in this market eectively reduces the cost

o broadband and drives adoption rates higher. The message

or policymakers is clear in order to promote the spread o

broadband, they should invite video competition into their

communities by eliminating antiquated ranchise rules that

restrict competition, limit choices and keep prices high.

Excessive government regulation o broadband service models also could push up prices or broadband

Internet access. For example, some proposals in the U.S. Congress that would limit network operators

ability to use technology and management techniques to enhance eciency and accommodate the

explosion in Internet data. The legislative proposals, which proponents argue are necessary to ensure that

all data whether multi-player games or medical services are treated the same and without costs to the

supplying vendors, could shit a larger share o Internet costs to individual consumers. The reality is that i

large content providers who are in the business o supplying bandwidth intensive Internet services do not

18 General Accounting Oce, Subscriber Rates and Competition in the Cable Television Industry, GAO 04-262T, testimony beore the

Committee on Commerce, Science and Technology, U.S. Senate, www.gao.gov/cgi-bin/getrpt?GAO-04-262T

19 Federal Communications Commission, Report on Cable Industry Prices, December 27, 2006, available online at http://hraunoss.cc.

gov/edocs_public/attachmatch/FCC-06-179A1.pd

20 Robert J. Shapiro, Creating Broad Access to New Communications Technologies: Build-Out Requirements Versus Market Competition

and Technological Progress, April 2006, p. 4.

In order to promote the spread

o broadband, they should invitevideo competition into their

communities by eliminating

antiquated ranchise rulesthat restrict competition, limit

choices and keep prices high.


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pay their air share o network expansion costs, consumers

will be let to pay the bill.

Economists Robert E. Litan and Hal J. Singer have argued

that the cost per customer o providing basic Internet

access (and thus the price) would increase signicantly i

access providers were prohibited rom using intelligent

trac control, including quality o service, to meet the

demand or Internet trac. They calculated that under

some scenarios, as many as one-third o broadband

subscribers might disconnect rom high-speed Internet

because the price burden would be too great. 21 The risk

that lower-income consumers will be priced out o Internet service may be compounded by external

economic events such as the emerging melt-down in the subprime mortgage industry or the recent spike in

oil prices.

Perhaps the principal question is how to inance the necessary investment to deal with an explosion

o online video and other data (dubbed the exalood by some) that many commentators believe

will soon create a critical online traic jam unless Internet capacity is greatly expanded. For example,

downloading a single hal-hour television show consumes more Internet bandwidth than receiving

200 emails a day or a ull year, and downloading a single high-deinition movie consumes as much

bandwidth as 35,000 web pages. These data-hungry applications mean that by 2010, 20 typical

households could generate more traic than the entire Internet did in 1995. Competitive orces would

typically lead to new business models to pay or the needed investment that some say could exceed

$100 billion. But public policy choices that restricts the implementation o innovative technical

and business approaches would undoubtedly place a heavier cost burden on the backs o individual

21 Robert E. Litan and Hal J. Singer, The Unintended Consequences o Net Neutrality Regulation,

Journal on Telecommunications and High Technology Law, 2007, January 2007, available online at http://papers.ssrn.com/sol3/papers.

cm?abstract_id=942043

I large content providers who

are in the business o supplying

bandwidth intensive Internet

services do not pay their air

share o network expansioncosts, consumers will be let to

pay the bill.

Under some scenarios, as many

as one third o broadbandsubscribers might disconnect

rom high-speed Internet

because the price burden would

be too great.


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consumers that could conceivably slow the pace o broadband adoption nationally and orce some o

the newest adoptees to be dislodged, especially lower-income consumers who eel the most pressure

rom price increases.

Instead, policymakers should seek strategies that would encourage capital investments into

underserved communities to ensure the delivery o aordable and sustainable broadband services

to every consumer. Consultation with community-based groups can help policymakers better

understand barriers to adoption and identiy appropriate incentives to drive broadband deployment

and adoption at the local level.

It has been determined that excessive taxes or other ees drive up consumers broadband bills.

Typically at higher rates than on other goods and services, telecom taxes have historically been an

attractive source o local government revenue. For example, The Chicago Tribune reported in October

2007 that Cook County was considering a $4 monthly tax on every phone line in Chicago a hike o 10

percent or more in broadband access ees or every county resident who relies on DSL to connect to

the Internet.22 That sort o regressive lat tax would have a disproportionate eect on lower income

groups.

Public policy makers and network providers must work to ind common-ground on the issue o

build-out requirements that compel new competitors to extend video or broadband lines to entire

communities on a ixed schedule. This was the case in the State o Florida in May 2007 with the passage

o video ranchising legislation. This legislation allows investigations o a discrimination claim under

the states Deceptive and Unair Trade Practices Act. This ensures prompt legal action initiated by the

Florida State Attorney General against network providers that attempt redlining o communities based

on race or income in the deployment o new services.

By the end o 2007, Arican-American and Hispanic consumers in the United States will likely have a

combined purchasing power o $1.663 trillion, a igure greater than the GNP o many o the leading

22 Jon Van, County Eyes $4 Phone Tax, The Chicago Tribune, October 13, 2007


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developed countries. Moreover, economic reality would suggest that inormation technology purveyors

can ill-aord to by-pass low-income consumers, who are oten avid purchasers o new technology once

the price alls to aordable levels. As the Connecticut NAACP noted in February 2007 testimony to the

state legislature: No company that is serious about entering the video market is going to ignore any

community that is willing to buy their service.

Moreover, economist Shapiro notes that build-out rules ignore what we know about how technology

spreads:

Build-out requirements are based on the view that those providing competitive telecommunications

services will systematically bypass areas that include large numbers of households with relatively low

incomes. The economic literature and economic logic, as well as the data on the spread of computers and

Internet access, all argue otherwise.23

ThE pATh To EMpoWERMEnT

The path to broadband empowerment or America is clear ocus on aordability. Historically, alling

prices drive the spread o technology and broadband is no exception. From $80 or more a month less

than a decade ago, Americans can now buy high-speed services or as little as $20 a month or as part

o packages that deliver phone, broadband and video or about $100 a month. At those levels, most

budgets can aord a high-speed connection. As a result, more American homes are wired than ever

beore and the gains are seen among every racial group and at all income levels.

Policies that open the door to new competition in video and broadband, encourage investment in new

network inrastructure, stimulate demand or broadband services, or promote beneicial applications

such as telemedicine are likely to speed deployment and adoption o broadband. Broadband advocacy

initiatives that educate consumers about the economic opportunity, educational, and healthcare

beneits that broadband can deliver to communities also will acilitate greater demands or high-speed

services. In combination, these approaches should help America reach its national goal o universal

23 Robert J. Shapiro, Creating Broad Access to New Communications Technologies: Build-Out Requirements Versus Market Competition

and Technological Progress, April 2006, p. 3.


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broadband.

But policy decisions such as regulations that restrict business lexibility or broadband network

providers, encourage regressive taxes, or ail to establish reasonable built-out criteria guidelines

could reverse the avorable trends by adding to the costs consumers pay. When that happens, the less

aluent are severely marginalized and the divide is not just digital.

The political clout that broadband delivers also lies beyond their grasp. With broadband, long shot

candidates can enhance their viability and their undraising. With broadband, Americas minority

community can use the Internet to mobilize action against political or economic injustice when the

traditional media remains silent. Broadband enables the less aluent to ampliy their voices, draw

greater attention to their pleadings, and enhance their ability to bring about political, economic or

social change.

Broadband is among the rare technologies that can undamentally transorm the way people live by

enlarging knowledge, tempering cultural dierences and improving interpersonal relationships. When

everyone has the chance to subscribe to broadband Internet access, America can become a airer

and more just society. In recent years, minorities and lower-income Americans have begun to close

the gap with their more aluent ellow citizens. In so doing, they also have begun to close the gap in

opportunities. As more Americans have greater access to broadband and prices decrease, broadband

will be viewed as an aordable commodity within the economic reach o every single American.

The long-term challenge is to resist actions that will make broadband more costly, price out the less

aluent, and reverse recent progress against inequality by ensuring that those who have only recently

signed up are not the last in and irst out.

I am reminded o the prophetic writings o Dr. Martin Luther King, Jr. nearly 40 years ago in Where

Do We Go From Here: Chaos or Community? in which he argued at the time that advancements in

the civil rights movement in the United States would be attained with the recognition o a variety o

diverse pro-active strategies being deployed to end economic and racial discrimination in America.

Delivering broadband to every part o America is among the strategies that will enable us to continue


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to advance towards Dr. Kings vision or an America in which individuals are judged on the content o

their character and not on their socio-economic status.

Some 39 years ater Dr. Kings assassination, our success or ailure in delivering broadband to all will

be an important part o the answer to the question poised by Dr. King : Where Do We Go From Here:

Chaos or Community?.


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JABARI SIMAMA, Ph.D.Executive Assistant to President & Vice President, Community Development/External Relations

Dr. Jabari Simama is currently Executive Assistant to the President and Vice President o Community

Development/External Relations at Benedict College. He is also Vice President o the Division o Community

Development. In this cabinet-level post, Dr. Simama supports the president in critical aspects o the

presidency particularly und-raising, external and political relations, budget and strategic planning, and

communications.

Dr. Simama also ounded national annual conerences on Broadband in Cities and Towns. This years

conerence was successul with attendees rom 13 states plus the U.S. Virgin Islands.

Prior to Benedict College, Dr. Simama served as executive director o the City o Atlanta, GA Oce o

Community Technology where he was the chie executive ocer or the Mayors $10 million initiative

to address the education and workorce related digital divide between the citys inormation haves and

inormation have-nots. Dr. Simama served seven years in total heading up executive oces or two mayors

o Atlanta (including Mayor Shirley Franklin, the current mayor). He was the ormer Chie o Communication

and spokesperson or the City o Atlanta and a ormer (two-term) member o the Atlanta City Council. Dr.

Simama was elected by his city council peers to serve as a member o the Metropolitan Atlanta Olympic

Games Authority (MAOGA), the state authority that oversaw the 1996 Olympic Games committee.

Dr. Simama is a graduate o Emory University in Atlanta where he received a Ph.D. in American Studies. In

addition to a Ph.D., he holds a M.A. rom the ormer Atlanta University (now Clark Atlanta University) and a

B.S. rom the University o Bridgeport (Bridgeport, Connecticut). He also holds a certicate rom the Institute

o Educational Management (IEM) rom the Harvard University Graduate School o Education.


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Atlanta, GA 30361

(800)826 2195 lli di it l lit

Affordable Broadband: Empowering Communities Across the Digital Divide

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