The Obama administration’s long-awaited National Broadband Plan is out, and, boy, is it a stinker when it comes to shaking up the highly profitable, yet highly selective broadband industry. Broadband providers build what they want, where they want, and largely make a fortune from so doing. (Qwest may be the exception.)
The “plan” is a document that explains precisely how the FCC and the administration are going to provide money to the same companies that have failed to bring broadband to everyone already on the firms’ own dimes.
I expected this was coming based on an interview on C-SPAN in December 2009 with Blair Levin, the FCC Omnibus Broadband Initiative’s executive director, in which he dismissed the idea out of hand that increased (or, perhaps, any) competition was an important component of the plan. (See “Speed Control,” December 24, 2010.)
Already, seemingly awaiting broadband grants, Verizon has halted new markets for its fiber-optic Fios system (available in some areas the Northeast and odd markets Verizon still owns through the old GTE network, such as Kirkland and parts of Oregon). Verizon doesn’t want to spend its own good money when the government is giving out largess.
The plan is a heavily footnoted 376-page report that explains how we get from low-end broadband for many to high-end broadband for most. The FCC wants 100 million homes to have access to 100 Mbps downstream and 50 Mbps upstream by 2020, with an interim goal of 50 Mbps down and 20 Mbps up by 2015.
The plan isn’t connected with the funding mechanism to make this happen. That’s a separate operation. The plan is designed to direct how to figure out how money will be spent over many years to achieve the goals. That’s quite indirect.
The National Broadband Plan is best at explaining the current problem and what needs to change in terms of resources, infrastructure, and regulation to get there. But it doesn’t propose anything on the wire-in-the-ground side that will get us to its laudable goals.
We start off with the fact that the incumbent telephone and cable companies are the ones that will primarily receive the benefit of these dollars. Carriers can’t be forced to provide broadband coverage; there’s only universal access rules regarding telephone service, not Internet access. The plan wouldn’t change that.
The broadband industry has done a remarkable job of preventing the government from gathering and disseminating precise information about the availability of broadband to a neighborhood level, and the prices that such services cost.
The FCC relied on a terrible Zip code test for years, in which a single home subscribing to Internet service in a Zip code area meant the entire area “had” broadband. Incumbents loved to cite a percentage in the high 90s for broadband access based on this test.
Incumbents circumvented such data collection, because they don’t want public outrage to drive legislator and executive action to enable regulation of the Internet industry. Telephone and cable television are highly regulated; broadband is very lightly touched.
A carrier could opt to provide 100 Mbps to every other home in a subdivision should it so choose with no explanation necessary as to why the others must rely on dial-up modems. In many other countries with market economies and profitable telecom providers, mandates require heavy buildouts in urban areas and subsidized buildouts in rural areas.
For instance, while the United Kingdom is relatively small in area compared to the US, it has plenty of rural regions across England, Wales, Northern Ireland, and Scotland, yet DSL is now available to 100 percent of homes (99.9 percent in Scotland), with the vast majority having rates above 2 Mbps. The UK required its dominant carrier, BT, to split its infrastructure division, which now sells only wholesale access to hundreds of companies, which in turn sell to customers. BT’s retail DSL business is just one of those.
Compare this to the remarkable graphic in the National Broadband Plan that had me gasping when I first saw it: a supposed county-by-county colored chart showing that 95 percent of the US population has access to “terrestrial, fixed broadband infrastructure” (cable, DSL, or fiber) “capable of supporting actual download speeds of at least 4 Mbps.” But it goes on to note, “Of those, more than 80% live in markets with more than one provider capable of offering actual download speeds of at least 4 Mbps.”
Which is to say that there may be the wire in place to offer 4 Mbps downstream, which is a very low bar by most developed countries’ standards, but 15 percent of those people don’t have a provider who does, in fact, offer such service, plus the 5 percent of Americans overall who lack access to such infrastructure altogether. There’s a big hunk of the urban/suburban divide from rural by population right there.
The competition section of the National Broadband Plan is ludicrous. It has a lot of notes about studying, coordinating, data collecting, measuring, reviewing, ensuring, and so forth.
A sample: “The FCC should ensure that special access rates, terms and conditions are just and reasonable.”
Yeah, yeah, that’s great, but you have no enforcement power (removed by courts, executive fiat, and the legislature), and no will to enforce over these matters, stretching way back into the Clinton administration. As Obama makes clear, this is not a Democratic or Republican Party issue: it’s about money (lots of it), lobbying, and profits.
Here’s an impenetrable paragraph for those not insiders on this issue that I’ll explain, too:
“The FCC should comprehensively review its wholesale
competition regulations to develop a coherent and effective framework and take expedited action based on that framework to ensure widespread availability of inputs for broadband services provided to small businesses, mobile providers and enterprise customers.”
No force in the United States requires incumbents, which have a monopoly over the telephone or cable wire which they own, resell access for any purpose at non-discriminatory wholesale prices. One might think that having a baseline regulated industry (cable TV or telephone service) over which the wire base has been amortized and out of which the cost of upkeep are paid, that a government-regulated monopoly might be put in the position of offering wholesale access to competitors on a level playing field.
No such luck now, and this paragraph just talks the talk, but the FCC has never walked the walk. It doesn’t quack like a duck at all.
The report has many, many marvelous recommendations and suggestions, so don’t get me wrong. There’s also a strong emphasis on freeing up more wireless spectrum, and relying partly on wireless to spur competition since no sensible entrant into the market would attempt to compete over incumbents’ wires or put their own new wire into the ground.
The lack of a mechanism by which any firms other than those that have brought us to this juncture will receive any benefit, whether from rules, laws, or subsidies, means that it’s going to be more or less the same old thing.
Incumbents have decades of history and institutional knowledge on accepting subsidies for work that is never fully accomplished, and then later begging for more dollars to finish the work that they never did in the first place.
