US Internet Adoption and Efforts to Boost IT

Although we may take for granted these days that “everyone uses the Internet,” recent headlines demonstrate that Internet and broadband adoption are not yet universal and much work still needs to be done if the U.S. is going to realize the full benefit of these powerful tools. Without broadband, people and businesses are cut off from the $8 trillion global Internet economy, limiting opportunities for jobs and economic prosperity.

Recently released census estimates show that while a growing number of Americans surf the Web, some still lag behind in computer and Internet adoption. 76.7 percent of households surveyed had a computer at home. Household Internet access jumped in all 50 states between 2007 and 2010 and about 71 percent of U.S. households were connected to the Internet in 2010, according to Current Population Survey estimates. That’s up from 61.7 percent in 2007, with the rate steadily climbing since the first homes plugged in during the 1990s.

But strong divides in Internet access remain, with adoption rates varying widely among different regions and demographic groups. In some rural areas, Internet providers offer limited coverage or slow connection speeds. Many low income Americans also opt not to purchase Internet service, citing cost concerns. Less-educated individuals are far less likely to have Internet access in the home. Only 43 percent of those age 25 and older with less than a high school education and 66 percent who graduated high school but did not attend college had access at home, compared to nearly 91 percent holding at least a bachelor’s degree. Household Internet adoption also varies across race and ethnicity: About 63 percent of Hispanics and blacks lived in households with access, compared to 81 percent for non-Hispanic whites and nearly 87 percent for Asians.

While older Americans lag other age groups in Internet access, more than half of those 65 years and older -- 55.5 percent -- lived in homes with Internet access in 2010. This was up from 29.4 percent in 2003. [In May the Benton Foundation and Connected Living co-hosted a day-long examination of the challenges related to broadband adoption by low-income elderly consumers. Getting Seniors Online highlighted the work of several projects targeting low-income seniors.]

Data indicates southern states have the nation's lowest household adoption rates. New Mexico recorded a household adoption rate of 64.1 percent – the lowest of any state. Mississippi and Arkansas reported the next-lowest adoption rates for residents age 3 and up. By comparison, an estimated 86.2 percent of New Hampshire residents had household Internet access, the highest share in the 2010 survey. Many states recorded a significant boost in Internet access in recent years. Idaho led the way, with 80 percent of residents living in households with access, up from less than 62 percent in 2007. The state's increase was followed by Arizona, West Virginia and Kansas.

Although the data pertains to respondents' access as of October 2010, the findings would still appear to support the relatively urgent efforts of several federal agencies — particularly the Federal Communications Commission — to narrow the gap in Internet adoption through initiatives stemming from the National Broadband Plan.

On July 25, the FCC announced that nearly 400,000 residents and small business owners in 37 states will gain access to high-speed Internet within three years, as a result of the first phase of the Connect America Fund (CAF). About $115 million of public funding (collected through charges on consumers' monthly phone bills) will be coupled with tens of millions more in private investment to quickly expand broadband infrastructure to rural communities in every region of the nation. Many projects will begin immediately, and all projects must be completed within three years.

The FCC also released a new, data-driven, interactive map developed to help illustrate areas in the U.S. that will receive broadband infrastructure build-out within three years through the Connect America Fund phase-one roll out. The map shows the 37 states where new broadband will be deployed as a result of the CAF. The number of homes, businesses, and anchor institution locations that will gain access to new broadband are displayed, along with the number of residents in each state that currently lack access to broadband.

The Connect America Fund aims to connect 7 million unserved rural Americans to broadband in six years, and puts the nation on a path to connect all 19 million unserved residents by 2020. The FCC launched this unprecedented broadband expansion last year when it reformed and modernized the Universal Service Fund, which connected rural America to the telephone network in the 20th century. The CAF offers carriers $775 per broadband line deployed to an unserved home within its territory up to a specific dollar level, which varies from one carrier to another. Seven of the 10 carriers were offered allotments exceeding $1 million.

A number of carriers have signed up for support from the Connect America Fund.

• CenturyLink will accept $35 million from the fund to deploy broadband service to 45,000 homes in unserved rural areas.
• FairPoint Communications is planning to expand broadband Internet in 53 towns across Vermont. In all, multiple neighborhoods in 53 Vermont towns will see this new high-speed access. FairPoint will leverage $2 million from the FCC. The project buildout will span three years with about a third of the communities coming online each year.
• Frontier Communications accepted $71.9 million in CAF funding pledging to provide broadband service to an additional 92,876 households covering more than half of the 27 states it serves, ensuring rural customers in states such as Michigan, Oregon, Washington and West Virginia have access to broadband.

Not all carriers are jumping at the chance to use CAF support, however.

• As much as $185 million of the $300 million offered to the carriers in the first phase of the Connect America Fund program will not be accepted. CenturyLink was eligible for nearly $90 million in CAF Phase I funding, but said restrictions on the use of CAF funds made some deployment uneconomic. CenturyLink has filed a waiver application which, if granted, would allow it to deploy broadband services to approximately 60,000 more homes in high-cost areas where reliable and affordable service is currently not available. This waiver has been supported by the Washington Public Service Commission, the Minnesota Department of Commerce and other state agencies.
• Windstream accepted just $653,000 of the $60.4 million it was offered. Windstream said that if it were given its total allotment, it would be able to bring service to 17,000 additional unserved homes and businesses in 15 states. The company also pledged to provide $12.2 million in matching funds, even though CAF rules do not require matching investment on the part of the carriers. “Because Windstream has aggressively invested its own capital in its broadband network over the past 10 years, there are very few areas in its territory that can be served for $775 or less in government support,” wrote a Windstream spokesman. The level of support Windstream is requesting for the proposed 17,000 new lines works out to just over $3,500 per line.
• AT&T and Verizon declined all of the funding they had been offered. AT&T — which was offered $47.8 million — said it is “optimistic” about its ability to get more broadband into rural areas, “particularly as the technology continues to advance.” But the company said it could not commit to participate in the program until it finalizes that strategy.
• Verizon, which operates largely in the densely populated Northeast, was offered $19.7 million. The company did not cite a specific reason for its decision, other than noting that the amount of money involved was “relatively small.” Verizon also said it “fully supports” the FCC’s Universal Service Fund (USF) reforms. (1)

On July 26, the FCC’s Wireline Competition Bureau sought public comment on a proposed survey of urban rates for fixed voice and fixed broadband residential services. The Bureau also seeks comment concerning how, using data from the urban rates survey, to determine the local voice rate floor and the reasonable comparability benchmarks for fixed voice and fixed broadband services. The rate survey, conducted once each year, will be used to establish a rate floor that carriers receiving high-cost loop support (HCLS) or high-cost model support must meet in order to receive their full support amounts, beginning in 2014. In addition, the rate survey will be used to develop reasonable comparability benchmarks for voice and broadband rates that carriers will annually certify their rates do not exceed, with the first certification due July 1, 2013.

In addition to the Connect America Fund, the FCC has also reformed its Lifeline program aimed at low-income households. Speaking at a Broadband Breakfast Club event recently, the Benton Foundation’s Amina Fazullah noted the FCC’s Broadband Adoption Lifeline Pilot Program aimed at transitioning the traditionally voice subsidy program into a broadband-focused support. Fazullah said that all the applications for the Pilot Project were received by the FCC and over half the country is represented in the applications. She references a mix of rural and urban applications that all seem to have a combination of support for providing broadband service, as well as partnering with community organizations to provide equipment and digital literacy training. Once the projects are implemented there are two rounds of data collection which will help move FCC forward in plans to modernize Lifeline. “Hopefully all this data will show that just having a cost subsidy is not enough to transition low income and vulnerable populations to broadband. There are a lot of different components to being able to utilize broadband properly; it is more than just having the money to connect,” said Fazullah. Only $25 million out of the total $1.2 billion of the Lifeline Fund will be placed toward the research piece to transition the fund to broadband. These projects will provide data on how much of the fund needs to go toward subsidy, digital literacy and equipment, noted Fazullah. She also highlighted the legal question of authority and what can be done with the money under the constructs of the USF and the FCC. “Can the money even be used for equipment and digital literacy support?” added Fazullah.

Benton will continue to monitor US broadband adoption and efforts to implement the National Broadband Plan. Click here for a quick look at next week’s agenda which includes spectrum allocation, online sales taxes, and the FCC’s monthly open meeting. And we’ll see you in the Headlines.

Notes:
1.) The FCC’s USF reform efforts were recently reviewed by the Government Accountability Office. In a report to Congress, the GAO examined the FCC’s 1) plans for repurposing the high-cost program for broadband, and 2) plans to address previously identified management challenges as it broadens the program’s scope.
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