A new study out of Harvard once again makes it clear why incumbent ISPs like Comcast, Verizon and AT&T are so terrified by the idea of communities building their own broadband networks.
According to the new study by the Berkman Klein Center for Internet and Society at Harvard University, community-owned broadband networks provide consumers with significantly lower rates than their private-sector counterparts.
The study examined data collected from 40 municipal broadband providers and private throughout 2015 and 2016. Pricing data was collected predominately by visiting carrier websites, where pricing is (quite intentionally) often hidden behind prequalification walls, since pricing varies dramatically based on regional competition.
In many markets, analysts couldn’t make direct comparisons with a private ISP, either because the ISP failed to meet the FCC’s 25 Mbps down, 3 Mbps up standard definition of broadband (a problem for countless telcos who refuse to upgrade aging DSL lines), or because the ISP prequalification website terms of service “deterred or prohibited” data collection.
But out of the 27 markets where they could make direct comparisons, researchers found that in 23 cases, the community-owned ISPs’ pricing was lower when the service costs and fees were averaged over four years.
“When considering entry-level broadband service—the least-expensive plan that provides at least 25/3 Mbps service—23 out of 27 community-owned [fiber to the home] providers we studied charged the lowest prices in their community when considering the annual average cost of service over a four-year period, taking into account installation and equipment costs and averaging any initial teaser rates with later, higher, rates,” they noted.
In these 23 communities, prices for the lowest-cost service meeting the FCC’s definition of broadband were between 2.9 percent and 50 percent less than the lowest-cost such service offered by a private ISP in that market.
Running an open access network (where multiple ISPs can come in and compete) usually dramatically ramps up this competition. In fact, a 2009 FCC-sponsored Harvard study found that open access networks routinely result in lower prices and better service. The more competition, the better the service, faster the speeds, and lower the rates.
That’s not particularly surprising. A lack of competition in countless US broadband markets consistently contributes to not only high prices and slower speeds, but some of the worst customer service ratings in any industry in America. This lack of competition is another reason why ISPs can get away with implementing punitive and arbitrary usage caps and overage fees.
Harvard’s latest study found that community-owned broadband networks are not only consistently cheaper than traditional private networks, but pricing for broadband service also tends to be notably more transparent, more consistent, and less confusing.
“We also found that almost all community-owned [fiber to the home] networks offered prices that were clear and unchanging, whereas private ISPs typically charged initial low promotional or 'teaser' rates that later sharply rose, usually after 12 months,” the researchers said.
ISPs like Comcast and Charter are currently facing numerous lawsuits for using sneaky fees to covertly jack up advertised prices post sale. Even when there is competition, incumbent ISPs often try to lock customers down in long-term contracts before said competition (most commonly Google Fiber or a municipal broadband provider) comes to town.
Again, the impact of competition on rates can be dramatic. For example, AT&T charges $70 per month for gigabit broadband in markets where they face competition from a municipal broadband network or alternative ISP like Google Fiber, but can charge up to $40 to $60 more for the same service in a less competitive market.
ISPs also have a nasty habit of trying to make direct price comparisons impossible as well, lest the public realize what a profound impact the lack of competition has on broadband pricing. It’s a major reason why the FCC spent $300 million in taxpayer dollars on a national broadband map that completely omits pricing data at incumbent ISP request.
“Language in the website “terms of service” (TOS) of some private ISPs strongly inhibits research on pricing,” noted the Harvard study. “The TOS for AT&T, Verizon, and Time Warner Cable (now owned by Charter), were particularly strong in deterring such efforts; as a result, we did not record data from these three companies.”
All told, the study found that direct price comparisons among broadband ISPs “is extraordinarily difficult because the U.S. Federal Communications Commission (FCC) does not collect any pricing data and does not track broadband availability by address.” Efforts to shore up this problem are consistently blocked by incumbent ISP lobbyists.
The data the FCC does collect still manages to indicate that two-thirds of American households lack access to the 25 Mbps service from more than one ISP. And while gigabit networks receive a lot of hype, the reality is this lack of competition is actually getting worse in many markets as telcos like AT&T and Verizon give up on upgrading DSL networks they no longer want, giving cable operators like Charter (Spectrum) and Comcast a stronger regional monopoly than ever.
To retain this status quo, ISPs have spent decades writing and buying state laws that prohibit towns and cities from exploring community owned and operated broadband networks. More than twenty-one states have passed such laws, which not only hamstring municipal broadband providers, but often ban towns and cities from striking public/private partnerships.
It’s also why ISPs like Comcast pay countless think tankers, academics, consultants, and other policy voices to endlessly demonize community-run broadband networks as an automatic taxpayer boondoggles, ignoring the countless areas where such networks (like in Chattanooga) have dramatically benefited the local community.
ISPs making this argument tend to ignore the fact that these communities wouldn’t be building their own networks if they were happy with the services and pricing being offered by entrenched incumbent ISPs. ISPs also like to ignore the fact that the decision to build such a network should rest with the communities’ themselves, not a duopoly ISP executive half a world away, whose only real motivation is to keep the broken status quo intact.
ISPs like Comcast could nip this movement in the bud by simply offering cheaper, better service. Instead, they’ve decided to buy protectionist laws, spread disinformation about how these networks operate, and sue local communities for simply trying to find creative solutions to the broadband monopoly logjam.
As we’ve noted previously, community owned and operated broadband networks are a fantastic alternative to the broken status quo. For those outraged by the Trump administration’s attempt to kill net neutrality (and soon all remaining oversight of the nation’s entrenched monopolies) building or supporting local broadband networks is one practical avenue for retaliation.
Correction: Due to a technical error, this article was originally not posted in its entirety, cutting off after the eighth paragraph. The full article is now posted. Motherboard regrets the error.