USA: the stimulus of $7billion for broadband will be too little to achieve its goals

[business week] Access to telecommunications networks for all Americans has been the centerpiece of U.S. information policy for 75 years. Now the U.S. government is endeavoring to equip every citizen with broadband Internet access. But the $7.2 billion Congress has allocated for the plan may not stretch as far as lawmakers envision.

The economic stimulus package, officially known as the American Recovery & Reinvestment Act of 2009, directs the Federal Communications Commission to construct a "national broadband plan" and provides $7.2 billion to the Agriculture Dept. and Commerce Dept. for grants and loans for broadband deployment and related projects.

In doing so, Congress kicked off a race for government broadband money and a debate over how to achieve universal broadband access. Ironically, the money will likely be gone before the broadband policy is in place.

Part of what's slowing the process of rolling out broadband networks to remote rural and unwired urban areas are debates over how fast the networks should be, how much it will cost to provide universal broadband service, and who will pay for it.

A Leap in Data Capacity
Broadband connections allow the fast flow of information that permits people to send e-mail, shop online, and retrieve information from the Web at high speeds. Broadband Internet access also lets PC users exchange videos, music, and other large digital files. To get an idea of the leap in data capacity we're talking about, standard phone system voice calls transmit data at the rate of about 10,000 bits per second. But digital videos require bandwidths of about 2 million bits per second. Applications such as online "distance learning" classes need even more.

Some companies and consumer groups have advised the FCC to set a goal for national broadband speeds of 10 million to 20 million bits per second. Meeting that goal will require network speeds 20 to 100 times faster than is typical in today's networks, which were designed for voice or one-way video distribution. Upgrading, extending, and adding to today's networks will require enormous capital expenditures.

The problem is, nobody really knows how much capital will be needed. The broadband goal isn't yet defined, and the U.S. doesn't have an accurate count of how many households lack Internet connections or are "underserved" by slower networks.

Part of the government's stimulus money will go toward defining this "broadband gap." Closing the gap could be more expensive than the country expects, however, and will depend on several technical and geographic factors.

A More Realistic Estimate

Many estimates say that about 40 million U.S. households may be unserved or underserved by broadband networks and that providing those homes with broadband connections will cost about $1,500 per household. That comes to $60 billion at minimum, since this math excludes the money consumers will need to spend to acquire PCs and other computer gear.

The $60 billion estimate also excludes the cost of bringing users who are in areas served by slow broadband connections up to the emerging national standard. Our best estimate of the minimum capital requirement is about $120 billion. This assumes substantial provision of wireless Internet service to rural homes and elsewhere, which is contingent on making available more radio spectrum.

It's clear the $7.2 billion stimulus package funding won't go very far, even if all the money is used for network investment. And that won't likely happen, since the Recovery Act says the money also needs to be used for things such as consumer education and maps that show which areas are least served.

Some public interest groups urge more government funding and call attention to efforts of state, local, and foreign governments to build networks with tax funds. But the fiscal realities are discouraging.

To Spread Broadband, $7.2 Billion Isn't Enough