Definitions Matter

Minimums, median and maximum all are valuable indices in life, business and nature, including measures of internet access adoption or “quality.” It also has to be noted that constantly moving goalposts--changing our definitions--is a way of creating permanent problems.

That is not to deny the usefulness of revising our definitions over time. It is a truism that yesterday's power user is today's typical user. 

The percentage of U.S. customers buying internet access at the minimum speeds keeps dropping, as customers migrate to tiers of service that offer higher speeds at the same or only slightly-higher cost. 

But such definitions matter for both consumers and suppliers. Customers might sometimes buy services that actually are overkill. Most internet access customers buy what they believe is good enough to support their actual use cases, and rarely what is the “best” available level of service. 

Suppliers might imperil their business models by forcing investment in facilities that customers will not use, overprovisioning service in ways that raise sunk costs of doing business without providing capabilities customers actually buy. 

Those buying patterns also suggest why some ISP offers that are not state of the art can still be commercially viable. The reason is that, beyond a certain point, additional speed provides no tangible user experience benefit.  

And permanent problems are essential for those who claim to be in the business of “solving those problems.” That matters for education, health, disease, economies, social and economic equality, sports and just about anything else you can think of. In other words, one cannot marshall public policy support to solve a problem that does not exist.  

To be sure, our definitions of “broadband” have evolved, and will continue to evolve. 50 years ago, broadband was defined as any speed at 1.5 Mbps or faster. Once upon a time, Ethernet ran at 10 Mbps, while fiber to the home offered 10 Mbps. Today’s systems all run much faster than that. 

But it also makes a difference to “problem solvers” that definitions are revised upwards. Doing so always creates a “bigger problem.” 

Changing the minimum definition of broadband would shift the size of the “underserved” population or locations, for example. Today, perhaps 20 percent of U.S. buyers of fixed network internet access purchase services at the minimum speed of 25 Mbps. 

Changing the definition to 100 Mbps would increase the size of the underserved locations to nearly half of all buyers. Again, we will keep increasing both minimum levels of service, customers will keep changing the speed tiers they purchase and internet service providers will keep supplying faster speeds. 

The point, however, is that changing minimum definitions does not change the number or percentage of tiers of service customers purchase or that ISPs supply. Already, we find that the percentage of customers buying the fastest-possible speeds (at least 1 Gbps) is in mid single digits. 

More to the point, the typical buyer prefers a service offering 100 Mbps to 400 Mbps. Changing “minimum” to “average” has consequences, arguably distorting our understanding of “good enough” levels of broadband speed. 

Benchmarks are valuable when trying to measure “progress” toward some stated goal. A minimum speed definition for broadband access is an example. But that does not obviate the value of knowing maximum and median values, either, especially when the typical U.S. internet access buyer routinely buys services significantly higher than the minimum. 

In the first quarter of 2020, for example, only about 18 percent of U.S. consumers actually bought services running at 40 Mbps or less. All the rest bought services running faster than 50 Mbps. 

source: Openvault

An analysis by the Open Technology Institute concludes that “consumers in the United States pay more on average for monthly internet service than consumers abroad—especially for higher speed tiers.” 

As always, methodology matters. The OTI study examines standalone internet access plans, even if that does not account for the plans most consumers actually buy. The figures do not appear to be adjusted for purchasing power differences between countries. Were that done, it might be clearer that average internet access prices are about $50 a month, globally. 

Global prices are remarkably consistent, in fact, when adjusting for purchasing power conditions in each country.  

Nor does any snapshot show longer term trends, such as lower internet access prices globally since at least 2008. A look at U.S. prices shows a “lower price” trend since the last century. U.S. internet access prices have fallen since 1997, for example. 

source: New America Foundation

The OTI study claims that, comparing average prices between markets with and without a municipal system shows higher prices in markets with government-run networks. Not all agree with that conclusion. 

“The OTI Report’s data, once corrected for errors, do not support the hypothesis that government-run networks charge lower prices,” says Dr. George Ford, Phoenix Center for Advanced Legal and Economic Public Policy Studies chief economist. 

“Using OTI’s data, I find that average prices are about 13 percent higher in cities with a municipal provider than in cities without a government-run network,” says Ford. 

Our definitions of “broadband” keep changing in a higher direction. Once upon a time broadband was anything faster than 1.5 Mbps. Ethernet once topped out at 10 Mbps. 

Today’s minimum definition of 25 Mbps will change as well. The point is that having a minimum says nothing about typical or maximum performance.

About 91 percent to 92 percent of U.S. residents already have access to fixed network internet access at speeds of at least 100 Mbps, according to Broadband Now. And most buy speeds in that range. 

source: Broadband Now

It is useful to have minimum goals. It also is important to recognize when actual consumers buy products that are much more advanced than set minimums. 

What Percentage of U.S. Homes Cannot Buy, or Do Not Buy "Broadband?"

One often has to be careful about statistics related to broadband (25 Mbps or faster) internet access. There are some very common confusions. 

Sometimes the issue of “supply” is conflated with “demand.” It is one thing to say a consumer “cannot buy” a service because it is not available. It is something else to say a consumer chooses not to buy a particular product. 

Sometimes the confusion is definitional. The U.S. Federal Communications Commission defines “broadband” as 25 Mbps, minimum downstream speeds. That is not to say internet access is not available, or purchased. “Broadband” simply means a product offering speeds of at least 25 Mbps.

Such statistics often only refer to terrestrial networks using cables (cable hybrid fiber coax, telco fiber -o-home, fiber to curb or digital subscriber line). Satellite access most often is not enumerated, even when available virtually everywhere in rural areas from two suppliers or more. 

Sometimes one sees a confusion of “people” and “locations.” Homes are one thing, the number of people living in homes is another thing. In the United States, the average number of people in each home is about 2.5 (2.3 by some estimates). Since cabled or fixed internet is sold to “locations,” citing “people” is not as accurate. 

The reverse is true when counting mobile internet access. There, it is “people,” not places, that matter. 

There are a few other nuances. There is a difference between estimated homes and “occupied” homes. And some reported homes are boats, trailers or rooms in houses or apartments. 

With the caveat that I have not read the full report, NPD says in a recent report that 19 million rural residents do not have access to broadband internet. 

If one assumes 2.5 people per household, that in turn implies 7.6 million households that might have internet access, just not at potential speeds of 25 Mbps. NPD also is said to argue that 100 million total people “do not have access to broadband.” 

Since NPD also is reported to argue that “vast majority” of these underserved people are in rural areas, the numbers are off. The most-obvious reason is that reporters are confusing “households” (locations) with “people” (residents of those homes). 

Differences are an issue, but saying X households lack “broadband” is not the same thing as saying X households lack  internet access. Many homes that do not buy “broadband” do have access, just not at 25 Mbps. 

The other obvious qualification is that such data deals only with service purchased from terrestrial providers. 

Virtually all rural households can buy internet access at official “broadband speeds” from at least two satellite internet access providers, at speeds up to 100 Mbps. 

NPD estimates that 31 percent of people do not have broadband service (25 Mbps download speed at a minimum). Qualifications are necessary. Such statements omit service from satellite providers that absolutely meets the broadband definition, and can be purchased by virtually every rural household. 

If the average household has 2.5 people in it, then 100 million people works out to about 40 million households. It is hard to square such numbers with the claim that  the vast majority of underserved households are in rural areas. 

If 7.6 million represents “the vast majority,” it is hard to see how the total universe could be 40 million households. The official press release issued by NPD Group claims 31 percent of U.S. households do not “currently buy” a broadband service, defined as 25 Mbps. 

And the issue of demand cannot be ignored, either. Many households choose--for whatever reasons--not to buy internet access service of any type. That is a demand issue, not a supply issue. 

Gaps exist, to be sure. Up to this point, and possibly always, rural internet access speeds are, on average, slower than found in urban and suburban areas, for reasons directly related to the cost of network infrastructure. So some of the gap is supply related. But not all of the gap is supply constrained; some of the gap is produced by differential demand for the product in urban and rural areas. 

That gap also exists with respect to buy rates. “Rural Americans are now 12 percentage points less likely than Americans overall to have home broadband; in 2007, there was a 16-point gap between rural Americans (35 percent) and all U.S. adults (51 percent) on this question,” according to the Pew Research Center. 

 source: Pew Research Center

You might think the differences are completely based on the supply of service, but demand also is an issue. 

“Rural residents go online less frequently than their urban and suburban counterparts,” says Pew Research Center. “Roughly three-quarters (76 percent) of adults who live in rural communities say they use the internet on at least a daily basis, compared with more than eight-in-ten of those in suburban (86 percent) or urban (83 percent) areas. 

Some 15 percent of rural adults say they never go online, compared with less than one-in-ten of those who live in urban communities (nine percent) and those who live in the suburbs (six percent). 

The point is that some reports, and news stories about those reports, often are misinterpreted. Fixed internet access is not “all” internet access. “Broadband” is not synonymous with “internet access.” And homes are not the same thing as “people.”

It simply is not believable that “31 percent of U.S. households do not have a broadband connection.”

There are only about 122 million total U.S. households, according to U.S. Census Bureau statistics. That implies 38 million U.S. homes not buying internet access running at a minimum of 25 Mbps.

source: U.S. Census Bureau

A more reasonable estimate would be that seven million to possibly nine million locations cannot buy 25 Mbps service from a terrestrial supplier, though virtually 100 percent can buy from at least two satellite providers.

Is Broadband Access One Market, or Many?

It isn't always easy to figure out what a "product" is, for purposes of plotting that "product's" life cycle. Is landline voice "one product," or a series of products that have been offered over the years? Similarly, is "Internet access" one product, or several?

The answer matters, as we can assume any product, including broadband access, will have a product life cycle. But we have to agree on what “the product” is, before we can figure out how to understand the life cycle.

Some might argue that “Internet access” is  the product, with successive new generations of products simply reflecting better ways of supplying “Internet access.” 

That view would make dial-up, slower speed DSL or cable modem services and now 300 Mbps services products one category. Product managers might not agree, and for good reason. One can plot the rise and fall of "dial-up" Internet access quite distinctly from the adoption of high-speed access services.

The precedent, one might argue,  is “voice service.” Over time, the industry has evolved through various types of switching and access technology, but the product category always has been “fixed network voice.” 

In a business sense, we can count the number of subscribers served by specific switch technologies, but the business-relevant distinction has remained “total number of lines in service” (access lines in service).

Using that analogy, all forms of Internet access represent one product category. But few are likely to accept that definition so readily.

For starters, there is the simple matter of lead applications for various types of Internet access.

The "killer app" for “dial-up Internet access” was email. That isn't exactly true for the early generations of broadband services, which tended to shift the lead apps to visual Web apps.

Now, streaming video and audio seem to be the lead applications, even though a variety of apps are used by most broadband customers. But as we push to speeds routinely above 20 Mbps, it is likely new lead apps will develop. 

Also, there is the matter of mobile broadband access, which arguably gets used in different ways than fixed access. Are those examples of two distinct markets, or one market with segments?
The answer might matter since, In many developed markets, the “fixed network Internet access” product is reaching saturation, where every consumer who wants the product already is buying it. To refresh product lines, and earn more revenue, service providers are relying on faster speed services that sell for higher prices.

But the faster-growing segment is mobile broadband. China, for example, has seen fewer fixed broadband subscribers over the past year, instead of growing. 

In other words, fixed broadband accounts actually declined, as users apparently decided to spend their money on mobile broadband, rather than fixed broadband.

Chinese Internet users reached 530 million over the past six months, but the broadband subscriber base actually shrank as mobile became the most popular way for users to get online for the first time, a report by the Chinese government suggests.

Of those users, some 380 million were fixed broadband users, down from 396 million in December 2011, and 388 million were mobile internet users, up from 356 million.

So “mobile broadband access” appears to be a substitute and new product, with a different life cycle, than fixed broadband.

Home Broadband Now Driven by Entertainment Use Cases

Some 25 years ago, it might have made sense to assume that home use of PCs drove demand for home broadband. That clearly is not the case anymore. These days, video streaming and gaming dominate in-home data demand. Also, in terms of minutes or hours of use, it is likely that mobile devices are bigger sources of engagement than are PCs.

source: Statista 

Leichtman Research Group reports that 90 percent of U.S. households buy an Internet access service at home, up from 84 percent in 2017, and 74 percent in 2007. That figure correlates with PC ownership and use at home. 

That is an important finding for policy advocates since people who do not use PCs or the internet are unlikely to have much interest in home broadband.

The important caveats are that home broadband is useful for users of mobile and gaming devices and for watching streaming video. It would be interesting to see surveys shift to include smartphone use, gaming consoles and streaming video use, essentially ignoring value for PC users, to see if the correlation with home broadband is equally strong. 

It now is likely that the value of home broadband encompasses smartphone, video entertainment, gaming and computing use cases in relatively equal measure. 

Likewise, mapping home broadband to 4K TVs and smartwatches might be useful, though perhaps not as crucial as those other anchor services. Streaming video tends to triple data consumption, and higher-resolution video consumes more data than high-definition TV. 

source: Increase Broadband Speed  

Also, higher resolution video requires more bandwidth than lower-resolution video. Likewise for cloud gaming, a shift away from consoles and to cloud gaming could grow data consumption  six times, according to Kagan, a unit of S&P Global Intelligence. 

source: Increase Broadband Speed 

These days, the devices most commonly connected to home broadband, and the devices most commonly used, are likely to be smartphones, TVs and gaming consoles, rather than PCs. 

Leichtman Research also found that broadband access accounts for 99 percent of households with an Internet service at home. Dial-up might still be used by one percent of customers, in other words, but internet access and broadband now are virtually synonymous. 

Of respondents  that use a laptop or desktop computer at home, 96 percent have an internet access service at home. Those that do not use a laptop or desktop computer at home account for 58 percent of all those that do not get Internet service at home.

But in many parts of the rest of the world, smartphones are likely to remain the way most people get access to the internet. By some estimates, in 2025, for example, about 75 percent of the world’s people will get access to the internet solely using their smartphones. 

The point is that the historic argument that home broadband makes sense for users of PGs is outmoded. Home broadband matters for mobile phone users, gamers and TV watchers. In terms of actual in-home bandwidth consumption, PCs are getting to be the least significant source of data demand.

"What is Broadband?" Could Affect U.S. ISP Market Share

Words matter, the old adage suggests. So do definitions, others might add. One case in point is the possible Federal Communications Commission action to change the definition of “broadband.” At the moment, the FCC uses a definition of 4 Mbps downstream, 1 Mbps upstream.

But the FCC reportedly is considering raising that definition to 10 Mbps, or some suggest, as high as 25 Mbps. Changing the definition would have direct impact on federal support payments for universal access and would change reporting on the status of U.S. high speed access.

But there are other potential implications. Though typical access speeds are growing in the U.S. market, high speed access market share disproportionately is held by cable operators, the reason being that cable services using DOCSIS 3.0 are faster than possible using digital subscriber line.

That is not necessarily true of fiber-to-home services, but the high reliance on DSL by U.S. telcos has lead to a situation where cable providers supply the overwhelming share of faster connections, a situation that also prevails in the U.K. high speed access market.

Basically, cable supplies most of the fastest connections.

So imagine the potential impact if high speed access definitions are revised upwards to 25 Mbps, a figure probably less likely than a shift to 10 Mbps. In the instance where the new definition is 25 Mbps, cable suppliers will capture more share of the overall high speed access market, as millions of telco lines would likely no longer qualify as “high speed.”

Some think that Comcast, combined with Time Warner Cable, might, using the 25 Mbps minimum definition, have as much as 50 percent of U.S. market share for high speed Internet access.

That would be a troublesome figure for an antitrust official to contemplate, especially if high speed access is deemed to be the anchor service for any fixed network services provider.

Using the current definition, a future Comcast that has acquired Time Warner Cable would have 40 percent market share of high speed access. Some would note that already exceeds the level of share antitrust authorities consider “competitive.”

Using the 25-Mbps definition, Comcast’s share would be even higher.

In principle, periodic definitional changes make sense for an agency trying to spur faster and more widespread broadband.

By effectively creating tension between goals and the present status, the FCC can encourage continual progress. The FCC does so directly by using definitions that cause universal service fund recipients to build to a higher standard, for example.

But there are other potential effects. Changing the definitions also changes market share calculations. And that matters, when mergers and acquisitions are weighed.

Most of the Time, Wideband--Not Broadband--Satisfies Consumer Needs

Internet access matters. Wideband internet access also matters. But “broadband” sometimes does--and sometimes does not--really matter to end users. The easiest example is mobile internet access, which often runs at far less than the 25 Mbps U.S. minimum to be called “broadband.”

One rarely hears anybody complain about their mobile internet access preventing them from actually doing something. Sure, there are dead spots. But wideband mobile internet access is sufficient for consumer smartphone use cases.

Think about the ways people use their smartphones. Do most users of 4G networks in the United States routinely get 25 Mbps downstream speeds? No. Does that prevent them from using all the apps they want, with satisfactory experience? In nearly all cases, yes.

For most users, access speed no longer is an issue preventing them from using the apps they want.

That might be less true for fixed connections supporting multiple users, to be sure. And many U.S. connections actually purchased by consumers are wideband, not broadband.

By definition, U.S. satellite internet, many fixed wireless offers and mobile connections are “not broadband.”

But 10 Mbps to 20 Mbps for mobile users seems to work just fine for consumers. And while more speed arguably is needed for any multi-user household, the actual end user experience often hinges on how many users or devices are using the shared connection at any single point in time. Obviously, the types of apps make a difference as well.

People often confuse internet access “availability” with “buying choices.” And there is a lot of nuance to be sorted through.

One hears it said that some number of people do not have access to broadband, using the 25 Mbps definition. Fair enough.

Since the U.S. Federal Communications Commission defines broadband as a “minimum of 25 Mbps downstream, some 24 million U.S. residents (though not that many locations) do not have the ability to buy “broadband” internet access.

That is not the same as claiming those consumers and citizens do not have access to internet access. They do. But it now is defined as wideband (less than 25 Mbps), not broadband.

Over time, as we keep redefining the minimum for “broadband,” some of those consumers will still be disadvantaged, compared to urban dwellers. Still, you get the point. When, in the future, broadband is defined as 50 Mbps, and then 100 Mbps, some of those people might still not be able to buy broadband internet access.

Will it matter? Will wideband be enough? For most people, probably. At some point, for any single user, additional speed does not actually improve experience. For most people, the minimum practical standard is enough bandwidth to watch Netflix. And that only requires wideband speeds.

"Back" to the Narrowband Future

“Voice” has been steadily losing value  as a revenue driver for communications service providers.

Still, voice will matter more in the future, but not “people talking to people.” Voice will be a key interface for interacting with computing resources. In many ways, that is an analogy for what will be happening in other areas of communications as well.

To be specific, even if industry revenue in recent decades has shifted from narrowband to broadband, in the next era revenue growth is likely to shift substantially back to narrowband.

That might seem crazy. It is most eminently realistic. Keep in mind that our old definitions of narrowband, wideband and broadband have evolved. Traditionally, narrowband was any access circuit operating at about 64 kbps. Wideband was any circuit operating between 64 kbps and 1.5 Mbps.

Broadband was anything faster than 1.5 Mbps.

These days, almost nothing matters but the definition of “broadband,” now defined by the U.S. Federal Communications as a minimum of 25 Mbps in the downstream. Using that definition, and recognizing the floor will keep rising, most of the coming new use cases will be “less than broadband, and many will be classically narrowband.

Consider the mix of existing and “future” applications. With the salient exceptions of 360-degree video, virtual reality and augmented reality and some autonomous vehicle use cases, virtually all other applications useful for humans (using smartphones, watches, health monitors, PCs, tablets) or sensors and computers (internet of things) require bandwidth less than about 25 Mbps to 50 Mbps.

source: Nokia

The somewhat obvious conclusion is that most of the use cases and potential revenue will be driven by use cases that do not require  “broadband” access speeds. Once upon a time, video was the classic “broadband” use case. These days, even high-definition video requires a few megabits per second support.

In that sense, using the 25-Mbps floor for defining “broadband,” even video has become a wideband app, requiring about 4 Mbps to 5 Mbps.

The big switch is coming.

How Many New Broadband Access Lines Will be Added by Broadband Stimulus?

For most applicants, Feb. 16, 2010 to March 15, 2010 is the window for filing "broadband stimulus" requests to the Rural Utilities Service and National Telecommunications & Information Administration programs. 

Satellite providers largely will be waiting for a new "third round" aimed at funding satellite projects, funded by the RUS.  A funding window will open "later" to provide grants for satellite service for premises that remain unserved after all other Recovery Act broadband funding is awarded, NTIA says. 

It isn't clear how much funding that might entail. The RUS will be disbursing about $2.2 billion in this funding round, while the NTIA will be awarding about $2.6 billion, of which approximately $2.35 billion will be made available for infrastructure projects, $150 million for public computer center projects, and $100 million for sustainable adoption projects. 

Most of the NTIA money is expected to support middle-mile projects, rather than access. Perhaps oddly enough, that decision by NTIA means there will not be a significant increase in new broadband access facilities,. since the middle mile projects, by definition, are "backbone" projects deemed necessary to get broadband backhaul facilities into place, not serve end users. 

The RUS, on the other hand, has said its $2.2 billion will be spent directly to expand access facilities. 

Assume each new broadband line costs just $3000, the figure suggested as an average for new rural broadband deployments. If all $2.2 billion is spent on access facilities, an additional 733,333 new broadband access lines would be added to the national total. Since there are additional costs, the total will be less than that. 

As the bulk of the total RUS funding ($2.3 billion out of a total of $2.5 billion) will be awarded in the second round, and using the same $3,000 per line assumption, of the $200 million awarded in the first round, 66,667 new lines could have been added, for a grand total of 800,000 lines. 

That is not to say the additional middle-mile facilities will not be foundational, and will result in potential new lines later. But there is no particular reason to believe an additional $3,000 per new access line will be required, when the time comes to actually install access facilities.

$7.2 billion for 800,000 lines might be an unfair way to characterize the program, as some of the money will be spent for public access facilities and training, and the middle-mile infrastructure is required for eventual deployment of new access facilities. 

But it is not far from the truth to point out this near-term conclusion: the immediate change in new broadband access lines from the whole broadband stimulus program will be on the order of 800,000. There will be some additional growth when wireless broadband networks funded under the program are able to finish deployment of their new networks, of course.

But the calculation of 800,000 new lines does not subject overhead and other administrative costs that will lessen the total number of added lines. In all likelihood, adding all fixed broadband lines will only bring the total back up to the 800,000 range.