I recently learned that several state legislatures are considering bills that are contrary to the deployment objectives of the Broadband Plan. For example, in North Carolina, the state legislature is currently evaluating legislation entitled ‘Level Playing Field/Local Government Competition.’ ... This piece of legislation certainly sounds goal-worthy, an innocuous proposition, but do not let the title fool you. This measure, if enacted, will not only fail to level the playing field; it will discourage municipal governments from addressing deployment in communities where the private sector has failed to meet broadband service needs. In other words, it will be a significant barrier to broadband deployment and may impede local efforts to promote economic development.
Lack of Competition Creates Capped Connections
Last month my colleagues and I at the the Open Technology Institute released a paper titled “Capping the Nation’s Broadband Future?” The paper examines data caps, an increasingly common practice where internet service providers charge individuals a fee if they exceed a monthly threshold on the data they use. The paper discusses how data caps are not a solution to network congestion concerns, nor a reflection of increased costs due to more people being online. A review of public financial documents for Comcast shows their broadband network operating are decreasing. Other costs, like bandwidth transit, are decreasing as well. Instead, data caps are a reflection of a lack of competition in both the home and wireless broadband market.
As if to hammer home the larger point about a lack of competition, a few days after releasing the paper I received the following flyer in my mailbox. It is a promo piece from a joint marketing agreement between Comcast and Verizon Wireless where they promote each others’ services. Signing up for Verizon Wireless service will give me a discount on my home Comcast subscription.
Although this agreement was approved by the FCC and Department of Justice, this kind of chummy behavior between supposedly rival companies is hardly a sign of aggressive competition. Verizon FiOS is often cited as the main competitor to incumbent cable companies, even though Verizon officials have stated the company is not expanding FiOS to new markets.
At a recent public event, Vint Cerf, recognized as one of the creators of the internet, stated that since the days of dial-up service competition among broadband providers has “evaporated.” Perhaps most telling for the American broadband market are recent developments in China, where new buildings are required to be wired with fiber optics if there is a larger fiber network in the area. The article touts how individuals will have their choice of internet providers. By adopting open access policies such as these on a large scale, customers in China -- a country that has embraced capitalism but is still nominally communist -- could end up enjoying greater free market competition than customers in the U.S.
The lack of broadband competition in the U.S. has led more and more telecom policy leaders to worry that instead of competing and building state-of-the-art networks, internet service providers are increasingly focused on “harvesting” higher revenues from their customer base. Indeed, recent trends seem to confirm these fears, as providers have begun implementing data cap overage charges, introducing new modem rental fees, and entering into joint marketing agreements.
It is important to have a discussion around data caps and what they mean for online innovation, commerce and consumer behavior. However, data caps are merely the manifestation of a larger problem: the lack of robust competition among U.S. internet providers. New entrants like Google Fiber in Kansas City or municipally-owned networks in other cities are offering faster broadband speeds and typically without data caps. Policymakers in Washington must focus on ways to encourage these local examples of innovation on a larger national basis in the broadband market.