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Time Warner Cable Inc
Last June, Julius Genachowski, chairman of the Federal Communications Commission, issued a challenge to the audience at a cable industry conference in Chicago. “You’ve connected two-thirds of Americans to broadband, and I applaud you for that,” he said, “Now, let’s work together to connect the last third.” Later that night Genachowski had dinner with cable executives and, according to the commission, asked them for help.
They obliged. On Nov. 9, the FCC announced “Connect to Compete,” a program designed to bring lower-income Americans online. In 2010, 31 percent of Americans lived in areas where broadband was available but chose not to pay for it. Of these, slightly more than a third cited cost of service and devices as the main reason. Now households with at least one child in the federal free school lunch program can buy broadband Internet access for $10 a month and relatively new, fast, refurbished computers for $150. (To qualify for free lunches, a family of four must have income below $29,055.) The commission estimates the program could reach between 15 million and 25 million Americans—and won’t cost taxpayers anything.
“We talked to every service provider under the sun,” says Josh Gottheimer, Genachowski’s senior counselor. “The cable industry decided to step up.” Given the reflexive intransigence the FCC often encounters with the companies it regulates, this was no mean feat. Fourteen cable providers, including Comcast (CMCSA), Cox Communications (COX), and Time Warner Cable (TWC), will provide Internet access at well below market rates.
There is a catch: That access is also well below market speeds. Typical introductory packages begin at 15 megabytes per second. The FCC has been reluctant to pin itself down to a definition of “broadband,” but in documents generally puts it at 4 mbps. For the discounted $10 rate, the cable companies offer 1 mbps, too slow for reliable video streaming or Internet telephone service, both of which compete with other cable industry products. “It’s not good for downloading movies, I give you that,” says Gottheimer, “but that’s not the ultimate goal of this program.”
The commission says it hopes people will use the Internet access to apply for jobs, do schoolwork, and use government Web sites. The speed is “not ideal,” he says but the program is “certainly a very important step and it’s going to help a lot of people.” The contracts will also waive installation, activation, and modem rental fees, which have been a significant barrier to entry for lower-income groups. The cable companies have committed to the offer through 2014.
The $150 laptops and PCs—which come loaded with Microsoft (MSFT) Office—may be the program’s more enduring legacy. The FCC struck a deal with Redemtech, an Ohio-based business that helps companies sell their used computers or donate them to charities like Habitat for Humanity for a tax write-off. These businesses can now donate them to the FCC program as well. The price reflects the cost of refurbishing the machines. Jill Vaské, Redemtech’s executive vice-president, estimates the company can provide 150,000 to 200,000 computers in 2012, and 1 million the year after.
The FCC will also offer training through nonprofits already working on digital literacy. Joe Karaganis, who works on digital issues for the American Assembly, a think tank at Columbia University, finds much to like about Connect to Compete. “Training, provision of computers, those are all important,” he says. Yet Karaganis, who co-authored a 2010 report for the commission on Americans without broadband, worries it fails to address the underlying problem: a lack of competition in broadband, which keeps prices artificially high for all income groups. The FCC has already picked fights with the industry recently—think Net Neutrality—and seems to have little stomach for a new one. Connect to Compete is a series of small, reasonable steps that go at least some of the distance toward closing the digital divide. “There are two big facts staring at us,” says Gottheimer. “There’s no silver bullet, and there’s no government money.”
The bottom line: Through a deal the FCC struck with cable companies, low-income families can get $10-a-month Net access at no expense to taxpayers.