The United States Broadband Problem: Analysis and Policy Recommendations

Charles H. Ferguson


This paper discusses last mile broadband services, i.e. the high-speed local data
services required for large-scale videoconferencing, videotelephony, Internet-based audio
and video entertainment, multimedia email and Web sites, telecommuting, local wireless
data services, faster Internet access generally, and future voice telephone services. A
detailed analysis is presented in a forthcoming book from Brookings Press.

My principal conclusions are as follows. First, the pace of deployment and technological
progress in broadband services remains seriously inadequate. Second, the principal
source of this problem is the monopolistic structure, entrenched management, and
political power of the incumbent local exchange carrier (ILEC) and cable television
(CATV) sectors, worsened by major deficiencies in the policy and regulatory systems
covering these industries. Third, this is a truly important issue. Failure to improve
broadband performance could reduce U.S productivity growth by 1% per year or more, as
well as reducing public safety, military preparedness, and energy security. And finally,
structural reforms in industry, policy, and the U.S. regulatory system are required.
Appropriate policy measures include structural separation of switching, enhanced
services, and data transport in the telephone industry; divestiture of content from
transmission in the CATV sector; mandatory open interfaces for interconnection;
increased financial transparency and disclosure; and reforms in regulatory systems to
increase their efficiency, high technology expertise and political independence.