U.S. may need as much as $350 bln to extend broadband

WASHINGTON Tue Sep 29, 2009 4:33pm EDT

A technician works on network cables in central Sydney April 7, 2009 file photo. REUTERS/Daniel Munoz

A technician works on network cables in central Sydney April 7, 2009 file photo.

Credit: Reuters/Daniel Munoz

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WASHINGTON (Reuters) - Expanding broadband usage throughout the United States will require subsidies and investment in infrastructure upgrades of as much as $350 billion, a regulatory panel said on Tuesday.

The U.S. Federal Communications Commission is crafting a national broadband plan aimed at increasing usage in rural and urban areas. The report is due to be submitted to Congress in mid-February.

In a mid-course status report, an FCC task force said preliminary estimates indicate that investments in the range of $20 billion to $350 billion may be needed for wireless and landline infrastructure, depending on the speed of service. The range indicates the slowest speeds to premium fast speeds.

The report, which reflects information from dozens of workshops, did not provide initial recommendations. Panel members said they are still collecting data and studying how consumers are affected. It is expected to issue recommendations in the final report.

The potential costs for investment dwarfs the $7.2 billion set aside in President Barack Obama's massive economic stimulus package. The panel said transferring the universal services fund collected for traditional phone calls for broadband usage will not suffice.

"Subsidy mechanisms must also be considered as a means to universal adoption," the panel said in a statement.

The panel said the majority of Americans have Internet service at home, one-third have access to broadband but have not subscribed, and another 4 percent have no access.

However, those who have broadband are receiving slower speeds than what is being advertised, said the panel, which estimated that actual speeds lag by as much as 50 to 80 percent.

"It is actual speed we should be thinking of," Shawn Hoy, a business analyst for applications on the task force, said at an open meeting with FCC commissioners.

The panel, which is trying to envision a broadband ecosystem 10 years from now, also said broadband usage for online videos and music is increasingly used on mobile devices and putting a strain on networks, driving a need among carriers for more spectrum to meet consumer demand.

Big wireless providers such as AT&T Inc, Verizon Wireless, Sprint Nextel Corp and T-Mobile are seeking more spectrum as they roll out more sophisticated bandwidth-hogging smartphones such as Apple Inc's popular iPhone.

Cable companies such as Comcast Corp and satellite TV providers such as DirecTV also provide broadband products and services.

T-Mobile is a unit of Deutsche Telekom AG. Verizon Wireless is a joint venture between Verizon Communications Inc and Vodafone Group Plc.

As the demand for smartphones, which many consider small computers, increases applications for those mobile devices they are expected to eat up more bandwidth, which will drive the need for more spectrum.

The panel said with next generation upgrades to the network it expects the sale of those smartphones will overtake the sale of standard phones by 2011.

CTIA, the wireless industry trade group, said spectrum is needed at least over the next six years. "The industry needs access to more spectrum so we can continue to meet the growing consumer demand," CTIA President Steve Largent said.

Another strain on the networks is the broadband usage during peak hours after work, which can result in network congestion and slower speeds.

(Reporting by John Poirier; Editing by Matthew Lewis, Bernard Orr)

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