The FCC’s Latest Statistics on Internet Speeds

FCC_New_LogoThe FCC recently released their annual report that looks at the number of nationwide broadband customers and data speeds. As always, this is an interesting snapshot in time of where broadband is at in the US. The data is gathered from carriers on FCC Form 477 and captures connections that are at least 200 kbps in one direction, meaning it is leaving out dial-up and other extremely slow connections to the web. I would note that these numbers are self-reported by the carriers, meaning it represents the speeds that ISPs say they are delivering, which is not the same as what customers are actually receiving.

The statistics show that overall broadband connections continue to grow. Total landline connections grew from 97.8 M in 2014 to 102.2 M in 2015. Cellular data connection grew from 223.5 M to 253.0 M. Together that’s an annual growth rate of 11%, with cellular continuing to grow faster that landlines. The 102 M landline connections in 2015 includes 84 M residential and 18 M business connections.

The latest breakdown of download speeds delivered to households show that 4.9% have less than 3 Mbps, 15.4% have between 3-10 Mbps, 23.9% have between 10–25 Mbps, 39.9% have between 25-200 Mbps and 15.9% have over 100 Mbps. Again, these are carrier reported numbers which is most important at the lower end of the scale. My work in rural areas, for example, shows that a lot of households that are being sold 3 Mbps or 6 Mbps connections are often actually only getting slower speeds like 1 Mbps.

But the statistics show an increase of speeds over time. For example, the number of connections sold that are 100 Mbps or faster rose from 9.5 M in 2014 to 15.4 M. The number of connections between 25 Mbps and 100 Mbps grew from 34.0 M in 2014 to 39.3 M. And the slowest connections under 3 Mbps shrank from 8.1 M in 2014 to 5.8 M. The FCC bases nationwide performance on these numbers and they put out a proud press release when they estimated that more than 50% of households in the country had speeds greater than 25 Mbps, their definition of broadband.

The report also looks annually at the state of competition, which might be the most important statistic for households since we know that competition generally means lower prices. One interesting statistic is the number of census blocks that have 3 or more providers competing at various speeds. The statistics count all satellite providers as if they were one provider. The FCC shows that 78% of census blocks nationwide have at least three ISPs offering 3 Mbps. 66% of census blocks have 3 providers offering at least 10 Mbps. But the numbers drop drastically when looking at higher speeds and only 4% of census blocks have 3 or more providers offering 25 Mbps  or faster. Less than 1% of census blocks have three providers offering 100 Mbps or higher – and that has to be a handful of places like Kansas City or Austin TX.

At the other end of the scale, 29% of all census blocks don’t have any ISPs offering 25 Mbps or faster. And a gigantic 53% of all census blocks have no ISP offering 100 Mbps or faster.

The report also looks at landline broadband by technology. The number of households by technology are: 59.7 M on cable modem, 28.2 M on DSL, 10.5 M on fiber, 2.1 M on satellite and 1.0 M on fixed wireless. The fiber number is up 1.3 M since 2014. I was surprised by the DSL number since the FCC shows DSL connections dropping only 400,000 since 2014. Other industry sources show DSL is bleeding customers.

The final FCC statistic tracked is the number of ISPs offering the various technologies. There are 958 providers of DSL, 390 cable companies, 984 FTTP providers, 969 fixed wireless providers, 11 satellite providers, and 97 cellular companies. It should be noted that some companies operate more than one kind of network.

Speed Matters

slow-downPark Associates just published the results of a survey that looks at why consumers switch broadband providers. The survey showed that 9% of households changed broadband providers last year. The company surveyed households that had changed and categorized their responses into seven categories.

It turns out that the number one reason that people changed providers was to get faster speeds and 35% of households listed the need for faster speeds as their primary motivation.

Of course, there are still households that care about price. 18% of households that changed broadband providers did so because they could buy comparable speeds at a lower price. But almost nobody changed providers to accept a slower speeds, even with a savings.

The survey results are backed-up by real world statistics. In most markets in the US today there is still duopoly competition between the cable company and the phone company, with the cable company generally having faster speeds. There has been a steady exodus for years from phone company DSL to cable modems and in 2015 alone the cable companies added 3 million new customers, while DSL continued to decline.

There is a lesson to be learned from these statistics. While the news is full of talk of gigabit fiber networks, not all fiber networks offer blazingly fast speeds. I know of a number of owners of fiber networks that offer speeds that are not much faster than the cable modem products they compete against. Those networks are not capitalizing on their technological advantage.

One thing that most of my clients have learned over the years is that increasing customer speeds doesn’t cost them very much. I’ve followed up on hundreds of network speed increases and almost universally ISPs report that customers use the Internet the same after a speed increase than before – but customers always say they love the faster speeds. And so, to the extent that faster speeds don’t cost much to implement, a fiber owner ought to always have speeds faster than their cable competitors – why would you not?

One issue that continues to confound customers is the different between advertised speeds and actual speeds. I have one client whose basic product on fiber is 30 Mbps and they deliver that speed very solidly all of the time. They are competing against a cable modem product advertised as ‘up to 60 Mbps’. And yet, in that market, the fiber product is demonstrably faster than the cable modem product. But this advertising discrepancy creates confusion in the minds of consumers.

There might be some help coming in this area since the FCC will soon be requiring the large broadband providers to disclose more information to customers about their broadband products. But I guess we’ll have to wait to see how truthful they really become.

My company conducts surveys and one thing we’ve found is that that only a small percentage of consumers actually know the speed they are supposed to be getting or the speed they are actually getting. But what they do understand is when their speed is not fast enough to do what they are trying to do.

We know that overall that the amount of data used by the average household has been doubling about every three years. What that means is that people will buy a data product and within a relatively short number of years they will start bumping against that speed and realize they need something faster.

I think the cable companies understand this issue. Comcast has upped speeds across the boards for data customers at least twice this decade that I can recall. Increasing speeds periodically stops customers from hitting their speed ceiling and keeps them happy with the product they have. If you are operating a network that can provide faster speeds you should be increasing speeds from time to time also. You don’t want many of your customers to be in the 9% looking for a new broadband provider.

The Widening Rural Broadband Gap

FunkstownThe gap between urban and rural broadband is widening quickly these days. Up until the late 1990s access to the Internet was the same for everybody using dial-up. But within a short period of time in the late 90s both DSL and then cable modems hit the market.

I remember back in the early 90s how jealous I was of friends who had Internet access at work using a T1. But then DSL became available and all of a sudden we could all get the equivalent of T1 access at our homes. At the time DSL felt amazingly fast, and it was at 20 – 30 times the speed of dial-up. The big limitation with dial-up was that it took several minutes to see a picture that accompanied a news story and it could take hours to download a software update. But DSL and cable modems fixed those problems and images became much faster and file downloads didn’t take half of the night.

But these new technologies were only available in towns and cities and that was the start of the urban / rural broadband gap. Over the years both technologies got faster. In most big cities it became routine to be able to buy DSL at speeds up to 15 Mbps, a nice improvement over the first generation. But cable modems improved even more and over the last decade became capable of speeds much faster than DSL.

What I found odd was that for the longest time the cable companies didn’t take advantage of their extra capabilities. They offered cable modem speeds that were just slightly faster than DSL. I can remember the CEO of Comcast telling people that they would supply the speed that people ‘needed’. But even at 15 Mbps the speeds were 250 times faster than the dial-up that many people rural people were still stuck with.

But over the last five years the cable companies woke up and started unilaterally raising speeds to be faster than DSL, and in doing so they started capturing the vast majority of the market. It was hard to justify staying on 6 Mbps DSL if you could get a 25 Mbps cable modem for the same price. The cable companies have generally offered speeds over the last five years up to 100 Mbps, although the vast majority of urban customers have opted for something slower. But even 25 Mbps is 450 times faster than dial-up.

Not all rural people have had dial-up as their only option. There have been several satellite companies that offered faster speeds, but the service was really expensive and there was so much latency in the signal that a lot of things other people could do on the Internet are not possible on a satellite connection. So a lot of rural people still use dial-up – or often just go without a connection – because on today’s web, dial-up can do little more than read emails.

In the last year or so the cable companies have really kicked it up a notch and they clearly now are competing with speed – probably as a way to fight off having somebody else build fiber. Late last year Comcast doubled the speed on my home connection from 50 Mbps to 100 Mbps, an eye-opening 1,800 times faster than dial-up.

And the cable companies aren’t finished. They are now talking about upgrading to DOCSIS 3.1 which will enable them to offer speeds up to a gigabit. But that is not the real news concerning the new technology, because Comcast says that they plan to increase speeds across the board again. So my 100 Mbps connection might become 150 Mbps to 200 Mbps. Or 3,500 times the speed of dial-up.

But there are cities that are really lucky and which have widespread gigabit speeds. Google and a few others are using fiber to provide a real competitor to cable modems. And customers on a gigabit are nearly 18,000 times faster than dial-up.

So rural folks with no broadband alternative have seen the people in the towns and cities around them climb over time from 20 times faster up to many thousands of times faster. I really don’t think most urban people understand how colossally terrible it is to be on dial-up. They remember all of the things that they could do on dial-up in the 90s and they don’t stop to think how the whole web has migrated to video. Imagine trying to look at Facebook or Pinterest or any other popular site on dial-up, or even on 1 Mbps rural DSL and you can quickly understand why rural areas are getting desperate and are willing to do almost anything to get faster broadband.

Make it Faster

Cable modem Motorola SurfBoard for broadband i...

Cable modem Motorola SurfBoard for broadband internet (Photo credit: Wikipedia)

Whenever I look at my client’s data products I almost have the same advice – make it faster. I am constantly surprised to find companies who deliver small bandwidth data products when their networks are capable of going much faster. I have come to the conclusion that you should give customers as much bandwidth as you technically can deliver, within any technical restraints.

I know that networks are operated largely by engineers and technicians and very often I hear the engineers warn management against increasing speeds. They typically are worried that faster speeds mean that customers will use more bandwidth. They worry that will mean more costs with no additional revenue to pay for the extra bandwidth.

But the experience in the industry is that customers don’t use more data when they get more speeds, at least not right away. Customers do not change their behavior after they get faster data – they just keep doing the same things they were doing before, only faster.

Of course, over time, internet data usage is steadily increasing on every network as customers watch more and more programming on the web. But they are going to increase usage regardless of the speed you deliver to them as long as that speed is fast enough to stream video. Going faster just means they can start watching content sooner without having to worry about streaming glitches.

The engineers do have one valid point that must be taken into consideration, in that many networks have chokepoints. A chokepoint is any place in a network that can restrict the flow of data to customers. Chokepoints can be at neighborhood nodes, within your network backbone, at devices like routers, or on the Internet backbone leaving your company. If your network is getting close to hitting a chokepoint you need to fix the issue because the data usage is going to grow independently of the speeds you give your customers. When I hear worry about chokepoints it tells me that the network needs upgrades, probably sooner rather than later.

Historically telecom companies were very stingy with data speeds. The first generations of DSL didn’t deliver speeds that were much faster than dial-up and even today there are many markets that still offer DSL with downloads speeds of 1 Mbps. Then cable modems came along and they upped speeds a little, with the first generation of cable modems offering speeds up to 3 Mbps. And over time the telcos and the cable companies increased data speeds a little, but not a lot. They engaged in oligopoly competition rather than in product competition. There are many notorious quotes by the presidents of large cable companies saying that their customers don’t need more speed.

But then Verizon built FiOS and changed the equation. Verizon’s lowest speed product when they launched service was 20 Mbps, and it was an honest speed, meaning that it delivered as advertised. Many of the DSL and cable modem speeds at that time were hyped at speeds faster than could be delivered in the network. Cable modems were particular susceptible to slowing down to a crawl at the busiest times of the evening.

Over time Verizon kept increasing their speeds and on the east coast they pushed the cable companies to do the same. Mediacom in New York City was the first cable company to announce a 50 Mbps data product, and today most urban cable companies offer a 100 Mbps product. However, the dirty secret cable companies don’t want to tell you is that they can offer that product by giving prioritization to those customers, which means that everybody else gets degraded a little bit.

And then came Google in Kansas City who set the new bar to 1 Gbps. Service providers all over the country are now finding ways to 1 Gbps service, even if it’s just to a few customers.

I am always surprised when I find a company who operates a fiber network which does not offer fast speeds. I still find fiber networks all the time that have products at 5 Mbps and 10 Mbps. In all of the fiber-to-the-premise technologies, the network is set up to deliver at least 100 Mbps to every customer and the network provider chokes the speeds down to what is sold to customers. It literally takes a flick of a switch for a fiber provider to change the speed to a home or business from 10 Mbps to 100 Mbps.

And so I tell these operators to make it faster. If you own a fiber network you have one major technological advantage over any competition, which is speed. I just can’t understand why a fiber network owner would offer speeds that are in direct competition with the DSL and cable modems in their market when they are capable of leaping far above them.

But even if you are using copper or coax you need to increase speeds to customers whenever you can. Customers want more speed and you will always be keeping the pressure on your competition.