Want Faster Broadband? Don't Count on the FCC

As far as government-financed technology projects go, the FCC's new broadband plan amounts to a case of thrift-store shopping.

The plan, released in full on Tuesday, talks a good game about eventually delivering connections of 100 Mbps or faster to 100 million American households. But ultimately, it can't sidestep the fact that the political support for financing such a scheme is close to zero. While there are plenty of projects that Congressmen and Senators can get excited about spending money on, broadband is pretty low on most of their priority lists.

And all the while, congressmen and senators are very prone to influence from lobbyists and donors tied to local phone and cable giants such as AT&T (NYSE: T  ) , Verizon (NYSE: VZ  ) , Comcast (Nasdaq: CMCSA  ) , and Time Warner Cable (NYSE: TWC  ) . You can count on these companies' tooth-and-nail opposition to any plan that either calls upon them to make large new investments to deliver much faster connections to the majority of their broadband subscribers -- the speed of the average broadband link in the U.S. is currently below 4 Mbps -- or enables new landline competition that could deliver faster speeds, putting their broadband gravy train at risk.

For these reasons,  the resources the FCC's devoting toward delivering faster consumer landline broadband connections are the telecom equivalent of child's play: A few billion dollars more per year, mostly via the shifting of resources within the existing Universal Service Fund. And it's also for these reasons that while the FCC is happy to talk about wanting to "ensure competition in fixed and mobile broadband services," it offers few specifics about what it plans to do, never mind what Congress will let it get away with.

Why wireless isn't the answer
Instead, the main focus of the FCC's plan revolves around freeing up the 500 MHz of spectrum over the next decade for wireless broadband services, with 300 MHz being made available for mobile services during the next five years. Unlike any major landline initiative, this plan will actually generate revenue for the government through spectrum auctions. Moreover, freeing up all of this spectrum is unlikely to produce a groundswell of opposition from entrenched interests, despite some recent broadcaster grumbling.

But don't count on the FCC's spectrum initiative to deliver 100 Mbps connections, or anything close to it, to most consumers. While peak download speeds for the 4G wireless technologies that carriers will largely use this spectrum for can top 100 Mbps, average speeds are much lower. Verizon, for example, reported average download speeds of 5-12 Mbps during a recent trial featuring the LTE technology that most carriers will be using for 4G, while Sprint (NYSE: S  ) has reported average speeds of 4-6 Mbps on the 4G WiMax network it runs with Clearwire (Nasdaq: CLWR  ) .

Freeing up more spectrum should produce faster wireless connections than would otherwise be possible, and in that sense, the FCC's plan is good news for both carriers and consumers. It may also be good for Qualcomm (Nasdaq: QCOM  ) , which will collect a decent royalty on every 4G-enabled device sold. But don't expect anything spectacular, especially considering how a wireless network is bound to slow down if a huge number of consumers use it as their primary broadband link.

Instead, expect more grumbling in the coming years over how the United States is becoming even more of a "broadband laggard" internationally, as other nations race to deliver the lightning-fast connections that the FCC can only pay lip service to supporting.

Fool contributor Eric Jhonsa has no position in any of the companies mentioned. Sprint Nextel is a Motley Fool Inside Value recommendation. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.


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