March 20, 2018
USTelecom this month released its “2018 Industry Metrics and Trends,” an analysis of the most recent public and private data, and offering a fresh look at the state of broadband in the United States.
The data—which covers the transition from legacy voice to mobile and IP networks; broadband investment, deployment, adoption, and competition and internet traffic trends and drivers—paints a clear picture of U.S. broadband and internet leadership on the world stage.
USTelecom consistently tracks several key broadband industry indicators, updating this research with the most current data available. This analysis was compiled from the Federal Communications Commission (FCC) reports, data, and maps covering broadband deployment, broadband connections, international broadband comparisons, wireline voice competition, and wireless competition. Additional data comes from the Centers for Disease Control (CDC) on wireless voice substitution and the Cisco Visual Networking Index (VNI) on internet traffic growth.
In addition to the success, growth and competition evident in this analysis, challenges remain in transitioning from legacy businesses, building next generation networks, and in closing the digital divide to unserved communities. Efficiently confronting these challenges in an even-handed, rational, light-touch policy environment will be the key to building a more connected future for all Americans.
Telecom and Broadband Competition: A U.S. Success Story
Since Congress opened local telecommunications markets to competition in the 1996 Telecommunications Act, competition has thrived in the form of both market share shifts and technological innovation. U.S. policy has encouraged facilities-based competition in which providers compete by investing in innovative technological platforms, such as wireline, fiber, cable, wireless, and satellite – to provide a range of voice, video, and data services. The beneficiaries of this policy approach continue to be U.S. consumers.
The USTelecom analysis of the FCC’s and CDC’s voice competition data show that, by the end of 2018, the legacy voice network will be 20 percent of its peak year-2000 size in terms of connections, and the portion of landline voice connections using internet Protocol will be approaching three-quarters. By the end of 2018, USTelecom projects that only 11 percent of consumers that have home phone service will use traditional “switched” voice services, with 29 percent using internet-based landline service and 60 percent using wireless only. Even among those still using landlines for voice service, new entrants – telecom competitors and cable companies – serve more than half of all voice landlines, even when traditional phone companies include their VoIP lines and wholesale switched lines that new entrants resell to the end customer.
USTelecom’s analysis of FCC broadband deployment and broadband connections data show that broadband has been a competitive industry since its inception. As of year-end 2016, fixed broadband, which includes wired broadband and fixed terrestrial wireless, was available to 98 percent of American households from two or more providers and 90 percent could choose from two or more fixed providers. The remainder could choose from nationwide satellite service and mobile networks. Mobile broadband using fourth generation Long-Term Evolution (LTE) technology was available to more than 99 percent of Americans and 96 percent could choose among three or more providers. At the end of 2016, the cable industry served 60 percent of fixed broadband market; telecom providers served 37 percent; and satellite and fixed wireless served the remainder. In wireless markets, no provider had more than 34 percent of subscribers (these data include both voice and data, but approximately three-quarters to four-fifths of wireless subscribers have smart phones, so these figures are likely representative of mobile broadband shares).
Moreover, broadband service providers compete in part by providing ever-faster services over time, and consumers are choosing these faster services. From 2010 to 2016, availability of wired broadband service at 25 megabits per second download grew from 49 percent to 91 percent of Americans; and availability of broadband service at 100 megabits per second download grew from 10 percent to 83 percent of Americans. As of year-end 2016, 59 million, or 61 percent, of subscribers chose a service of at least 25 megabits per second download and 3 megabits per second upload. A quarter of subscribers, or 24 million, had chosen service of at least 100 megabits per second download.
The U.S. Leads the World in Internet Usage
Among the reports the FCC has issued recently is its international broadband report comparing the U.S. to other countries on a series a metrics, including deployment, adoption, speed, and price. According to the FCC, the U.S. as a whole ranks in the middle of the pack on these measures, and has been improving on several of these measures over time.
USTelecom has noted that many theoretical international broadband metrics, including those in the FCC report, ignore actual usage of the internet. Using data from the Cisco Visual Networking Index (VNI), USTelecom has tracked measures that take into account actual usage, such as traffic volume per user and per capita. Accounting for such measures of actual usage provides a more accurate picture of broadband performance, and here the U.S. leads the world. The U.S., for example, comprises less than five percent of world population but generates approximately one-third of internet traffic. The U.S. generates more internet traffic per user than all other nations for which the Cisco VNI reports data. In 2016, the average U.S. user generated 97 gigabytes of internet protocol data per month, 28 percent greater than the next highest generator of IP traffic, South Korea, which averaged 76 gigabytes per month. The U.S. is projected to retain its leadership as traffic grows two and half times over the next five years. It is also home to the most innovative and, by far, the most highly valued internet companies in the world.
The FCC international broadband report, as with many international comparisons, presents challenges. First, countries with different geographic and population density characteristics may not make for legitimate comparisons because these factors have strong effects on costs, which in turn affect other metrics – deployment, price, and adoption. For instance, the report compares the U.S. to 28 largely industrialized countries from the Organization for Economic Cooperation and Development (OECD). Among these, the United States is the most geographically expansive country with one of the lowest population densities, especially when considering habitable areas. The U.S. also has, on average, larger household sizes, which affect per capita adoption metrics. Pricing comparisons introduce another set of challenges: converting currencies; adjusting for quality; accounting for hidden subsidies; accounting for bundles, promotions, and discounts; accounting for the amount and quality of content available; differences in market segmentation practices; and relating price to the underlying cost. Another obvious — but often ignored – flaw of studies that rank countries is that rankings may mean very little if many individual countries cluster in groups with essentially minor differences.
The FCC report does attempt to control for some of the explanatory variables that may affect broadband rankings. In addition, the FCC presents some fairer comparisons, such as U.S. states compared to the OECD nations and U.S. state capitals compared to OECD national capitals. Certain U.S. states and cities perform very well in these comparisons.
While the power and promise of U.S. broadband remains substantial, some challenges remain. For one, while rural broadband deployment has begun to catch up with non-rural deployment, there are still coverage gaps in rural areas. Wired broadband is available to 99 percent of non-rural households and 86 percent of rural households at any speed. These figures rise to almost 100 percent and 94 percent, respectively, if terrestrial fixed wireless is included. At higher speeds, rural availability is lower. At 25 megabits per second download and 3 megabits per second upload, wired broadband is available to 62 percent of rural household, 68 percent if terrestrial fixed wireless is included. USTelecom supports direct government support to broadband providers as the most economically and administratively efficient way to close the gaps without wasteful, duplicative overbuilds. Policies must also be sufficiently flexible to allow for the most cost-effective solutions rather than adhering to rigid technology or speed requirements.
Another important challenge is network modernization. Wireline telecommunications providers have traditionally borne the heaviest regulatory burden of all broadband providers. Yet, their legacy networks have dropped to less than 20 percent of their peak capacity as consumers have shifted to internet-based and wireless networks. Maintaining legacy networks adds to costs, slowing the transition to fully modernized networks and limiting the reach of rural broadband deployment and competition. USTelecom supports continued FCC efforts to reduce legacy network requirements and the removal of barriers to wireline broadband deployment.
Looking Toward the Future
The USTelecom 2018 Industry Metrics and Trends makes clear that the U.S. policies favoring facilities-based competition and light-touch regulation have benefited consumers and the economy. Competition has driven significant market share from legacy providers and spurred a sustained cycle of broadband network innovation, deployment, and adoption. Given the more than $1.6 trillion U.S. broadband providers have invested in networks since 1996, USTelecom applauds the recent FCC finding that broadband is being deployed on a reasonable and timely basis, while acknowledging that work remains to bring the promise of broadband to more Americans. Broadband has evolved as a vastly more competitive marketplace than the legacy telecom and video markets it is replacing, a competitive marketplace that is benefiting consumers. This must remain the central focus of U.S. broadband policy as we strive to overcome the challenges ahead, including closing the digital divide and transitioning to fully modernized networks.