The FCC will soon contemplate changes to the 1996 Telecommunications Act that could erode the already dismal state of US broadband competition even further. Small ISPs state the proposed changes will only hamstring their efforts to compete with larger, deeper-pocketed competitors.
A key part of the 1996 Act required that entrenched ISPs needed to sell access to their copper-line infrastructure—also known as unbundled network elements (UNEs)—to smaller competitors at regulated rates. The goal was to foster broadband competition by giving small ISPs a leg up in a market with often impossible barriers to entry (both political and financial).
And initially those efforts worked. Competitive local exchange carriers (CLECs) popped up in the late 90s and early aughts to do battle with incumbent local exchange carriers (ILECs), often providing cheaper, less-restrictive alternatives to ILEC product offerings.
But the dream was short lived. ILECs like AT&T and Verizon traditionally made getting access to their networks as cumbersome and difficult as possible, then pointed to the resulting difficulties as evidence the plan wasn’t working. ILEC lobbyists also eroded many of the sharing requirements for telco fiber and cable networks with the help of the Supreme Court.
As the United States slowly discarded the line-sharing plan, other countries embraced it to great success. It’s a major reason why someone in Paris can now get 100 Mbps broadband, TV, and phone service for around $60 per month (or less), while Americans now pay some of the highest prices in the developed world for the same services.
Recently USTelecom—a trade association backed by large, incumbent ISPs like AT&T, Verizon, CenturyLink and Frontier Communications—proposed “forbearance” from any remaining sharing requirements. In a May petition to the FCC, the group argued the rules were no longer necessary because US broadband is simply too competitive.
“Maybe there were some reasons for these rules in 1996 when Congress created them,” the group proclaimed. “But those days are long gone. Cable companies and other providers have built networks, and consumers have benefitted from the competitive marketplace that today is thriving.”
“It no longer makes sense to single out a few companies and make them share their networks with their competitors,” the lobbying organization wrote. “In fact, it’s unfair.”
But FCC data shows the US broadband competition at higher speeds is virtually nonexistent, something that’s only getting worse as telcos like AT&T and Verizon refuse to upgrade aging DSL lines, giving cable operators like Comcast and Charter a greater broadband monopoly in countless markets nationwide. That lack of competition in turn drives sky high prices, terrible customer service, and even net neutrality violations.
Meanwhile, smaller ISPs say the rules remain an essential stopgap effort toward helping them slowly build their own networks, something incumbent ISPs are clearly opposed to.
“Consumers have too little choice in broadband and telecom today, and this forbearance, if granted, would be a deadly blow for many competitive carriers who are deploying fiber,” says Dane Jasper, CEO of San Francisco-based Sonic. Sonic’s one of just a few smaller, regional ISPs that survived years of industry consolidation and incumbent lobbying.
Jasper disputes USTelecom’s claim that the rules are a relic of a bygone era, noting that access to these copper lines remain a useful on ramp and an “investment ladder” for smaller competitors, especially in markets where entrenched providers have yet to upgrade their own broadband services to fiber.
“Deployment takes time,” Jasper tells Motherboard. “It can take six to twelve months to build fiber to a business customer, and even longer to build to every home. But a copper service can be delivered in three days, providing a critical interim service while fiber is built.”
Jasper says the rules also incentivize existing providers to upgrade their networks.
“When incumbents build fiber to the homes and businesses themselves, they can retire copper and eliminate the competitive unbundling obligations,” he notes, creating a “race to build.” “If incumbents can eliminate competitive access without themselves building fiber, that will set communities back, and slow deployment by both incumbents and competitors,” says the CEO.
Should the rules be dismantled, customers on smaller ISPs would likely not only lose access to their existing services, incumbent providers would be incentivized to raise rates even further. In a June letter to US Senator John Thune, smaller providers warned that AT&T is seeking price hikes as high as 15% on broadband services should the petition be approved by the FCC.
Representatives from Sonic and six other regional ISPs recently made their way to Washington to urge the FCC to keep the rules. But given the current FCC’s favoritism toward larger providers (as the net neutrality repeal and other efforts make abundantly clear), smaller ISPs are wise to be worried about what the future might hold.