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The FCC Chairman Admits US Broadband Is a Mess. Will He Fix It?

"Three-quarters of American homes have no competitive choice" for high-speed internet, Wheeler says. No shit.
September 4, 2014, 8:10pm
FCC Chairman Wheeler speaking at the NCTA show earlier this year. Image: The Cable Show/Flickr

The United States broadband market lacks robust competition, particularly for high-speed internet service, Federal Communications Commission Chairman Tom Wheeler declared on Thursday.

This is not news.

It's been well documented that US consumers have fewer choices for broadband service, at higher prices but lower speeds, compared to dozens of other developed countries, including throughout Europe and Asia.

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In a speech at 1776, a Washington, DC tech incubator, Wheeler outlined the nation's lack of competition for high-speed internet service, and described a broad strategy aimed at boosting competition. Wheeler's comments contradicted top executives at the nation's largest cable and telecom companies, who for years have insisted that the US broadband market is characterized by healthy competition.

But despite his frank assessment of the state of the US broadband market, Wheeler offered virtually no insight into what actions he and his colleagues intend to take to address the problem. Public interest groups that have been skeptical about Wheeler's background as a cable and wireless industry lobbyist praised Wheeler's comments, and urged him to back up his rhetoric with action.

"Chairman Wheeler has the right diagnosis for our broadband ills; now we need to see the cure," said Harold Feld, senior vice president at Public Knowledge.

"The real proof will be in the agency's actions and not just its speeches," added Free Press Policy Director Matt Wood.

The FCC is at a crucial juncture. The agency presently faces three intensely politicized issues that could determine the nature and contours of the US broadband market for a generation.

First, the FCC faces a thorny choice about whether to issue tough new Open Internet rules that would subject broadband companies to strict regulation designed to ensure that they don't violate net neutrality, the principle that all data should be treated equally. The FCC's current proposal would open the doorway to so-called "paid prioritization," which many public interest groups argue would effectively destroy net neutrality.

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"In a market where today's broadband providers have a stranglehold on the future, allowing any kind of paid prioritization is an invitation for broadband providers to act as Internet gatekeepers and toll collectors," said Feld.

WE ARE NOT GETTING THE BROADBAND SPEEDS WE NEED AT PRICES WE CAN AFFORD

Second, the FCC must decide whether to approve, block, or impose strict conditions on Comcast's proposed $45 billion purchase a Time Warner Cable, a deal that would combine that nation's two largest cable companies to create a corporate behemoth with immense market power.

Comcast argues the deal should be approved because the two companies don't compete in the same market, but critics warn that deal would give Comcast unprecedented "gatekeeper" power over broadband access in huge swaths of the country.

"If the FCC allows the Comcast merger to happen, the problems cited by Chairman Wheeler would only get worse," said Delara Derakhshani, policy counsel for Consumers Union. "Comcast is already the nation's biggest broadband provider, with a lousy reputation for value and customer service. Under the merger Comcast would become a national gatekeeper for the Internet with control over nearly half of the residential broadband customers."

Third, the FCC must decide whether to preempt state laws that ban or pose barriers to community broadband networks, which are popping up around the country as cities race to boost Internet speeds for citizens. Cable and telecom giants—and their allies in Congress—oppose such networks, which they claim pose unfair competitive threats. But Wheeler has made clear that he believes the agency has the authority to preempt such laws, which are now on the books in 20 states.

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In lieu of any indication of how the FCC intends to act on these issues, the bulk of Wheeler's speech amounted to a dispiriting account of the sad state of competition in the US broadband market. Harold Felt of Public Knowledge says that identifying the problem is the first step toward fixing it.

"Chairman Wheeler becomes the first FCC chairman to acknowledge what American businesses and consumers have known for a very long time—we are not getting the broadband speeds we need at prices we can afford," said Feld. "We loudly applaud Chairman Wheeler for defying an army of broadband industry lobbyists to speak the truth about our slow and uncompetitive broadband market."

Three-quarters of American homes have no competitive choice for the essential infrastructure for 21st century economics and democracy

Citing data from the National Telecommunications Information Administration, Wheeler observed that at the 4 Mbps to 10 Mbps service level, the majority of Americans have a choice of only two broadband providers. "That is what economists call a 'duopoly,' a marketplace that is typically characterized by less than vibrant competition," Wheeler said.

But 10 Mpbs "doesn't fully capture the increasing demand for better wired broadband," Wheeler said. That's why the agency views 25 Mpbs as the new baseline—or what Wheeler referred to as "table stakes"—for broadband service.

But at that level, the competitive landscape is bleak indeed. "At 25 Mbps, there is simply no competitive choice for most Americans," Wheeler said. "Three-quarters of American homes have no competitive choice for the essential infrastructure for 21st century economics and democracy. Included in that is almost 20 percent who have no service at all!"

Furthermore, DSL and wireless service offered by phone companies like AT&T and Verizon are not adequate substitutes for fixed broadband service, Wheeler said. This is a very important statement, because industry executives have held up DSL and wireless service as alternatives to fixed internet access as they make the argument that broadband competition is healthy.

Not so, said Chairman Wheeler. "In the end, at this moment, only fiber gives the local cable company a competitive run for its money," Wheeler said.

Wheeler, whose self-proclaimed mantra is "competition, competition, competition," says his goal is to "protect," "encourage," "create," and "promote" competition in the broadband industry throughout the country. It sounds good on paper. Over the next several months, Wheeler will have ample opportunity to translate those principles into action.