The Federal Communications Commission (FCC) decided in its January open meeting that a data connection must offer at least 25 Mbps downstream and 3 Mbps upstream to be considered “broadband.” That was a mistake. It would also have been a mistake to adopt a lower standard preferred by Internet service providers (ISPs). Even the 4 Mbps standard the FCC adopted in 2010 was unnecessary.
Why? Because there is no bright speed line between “broadband” and “not broadband.” Instead, any standard should be based on studies of consumer demand and explicitly stated policy objectives. Such an approach would yield a more nuanced view of broadband that would ultimately be more useful to informed policymaking.
{mosads}The FCC undertakes this exercise because the 1996 Telecommunications Act directs it to determine “whether advanced telecommunications capability is being deployed to all Americans in a reasonable and timely fashion.” It matters because the higher the speed standard, the less competitive the ISP landscape appears and the more strictly the FCC can regulate.
As nearly every party has noted, different applications require different speeds. Proponents of a lower standard standard argue that available speeds are consistently increasing and that the only common high-bandwidth use is high-definition video streaming, which typically requires only 5 Mbps or less — far below the adopted 25 Mbps standard. Proponents of the higher standard argue that a given household is likely to contain several broadband users and that multiple simultaneous streams could quickly overwhelm slower connections.
A useful standard must take into account consumer preferences and explicit policy objectives. Drawing a virtual line in the sand and declaring any service on one side to be unacceptable doesn’t consider either of those especially deeply.
One purpose of defining a broadband standard — besides the Telecom Act requirement — is to inform competition analyses. But competition analysis should be based, at least in part, on consumer demand, which is far more complicated than a bright line standard implies. Internet service has many attributes, of which speed is only one. Consumers trade off speed, price and reliability, to name a few. Businesses may value reliability over speed. A gamer may value low latency more than faster speeds.
Additionally, different flavors of data connectivity can affect the price and demand of others. Given the existence of trade-offs and different classes of consumers — not all of which an ISP can easily identify — the price of one broadband plan is likely to influence the price of other plans. For example, the price of a 20 Mbps plan is likely affected by the price of a 25 Mbps plan, and vice versa, even if the FCC were to consider one broadband and not the other.
Although every consumer understands those observations when choosing among broadband plans, the January open commission meeting suggests that the commissioners who voted in favor of the 25 Mbps standard don’t.
Any definition, like competition analysis, should take into account consumer demand. To be sure, consumer demand includes growing demand for multiple data streams into a household. But declaring the sum of data needs for an arbitrary handful of activities — even common ones — as the basis for a standard is not founded in any meaningful understanding of consumer demand. Instead, the FCC should conduct studies of consumer willingness to pay for different attributes of broadband, including simultaneous uses.
Such demand studies are eminently doable. In a 2010 study, Drs. Gregory Rosston, Scott Savage and Donald Waldman found consumers willing to pay quite a bit for a “fast” and reliable connection but only a few dollars more for a “very fast” connection. Is that still true today? Similarly, how much do the prices of broadband provided by different technologies affect each other? Those are empirical questions whose answers should inform the FCC’s definition of broadband.
That kind of information would yield a far more accurate understanding of whether broadband is being deployed in a “reasonable and timely fashion.”
Of course, demand analysis may not provide the complete picture, especially if the regulators or politicians wish to achieve social objectives via broadband policies. It is hard to understand how many of the examples provided in favor of the 25 Mbps standard advance valuable policy goals. For example, what national priority do we achieve by basing a standard on the needs of a dysfunctional upper middle-class family whose members spend their days in separate parts of their house each watching his own high-definition video?
Instead, we should identify meaningful policy goals that a standard might help achieve in a cost-effective manner. For example, a useful national standard might involve connections that can support common educational tools like Edline, Google Education or Khan Academy videos.
What is particularly unfortunate about the FCC’s decision is that it acknowledged many of these issues in its August notice of inquiry, where it asks for input on different aspects of broadband, how they should be measured and how they interact. The commission also acknowledges these issues in its biannual broadband deployment report by reporting the distribution of speeds to which consumers subscribe.
In the definition war, the FCC should take a page — several pages, actually — from itself and consider more nuanced definitions rather than a blanket speed minimum. That could mean incorporating the distribution of available speeds that the commission staff dutifully churns out twice a year and conducting willingness to pay studies to determine how those distributions match consumer demand.
That kind of analysis won’t give anyone a single, simple talking point about the state of broadband. But with some information on the costs of deployment, it will make it possible to determine in a meaningful way whether the pace of broadband improvements appears consistent with changes in demand or whether investment is falling short.
Wallsten is vice president for research and senior fellow at the Technology Policy Institute.