Why the “more competition” argument for better Internet service is misguided

Hardly a day goes by without calls for “more competition” as the elixir to make modern Internet-based telecommunications services more widely available and offering better value than those offered by the legacy incumbent telephone and cable companies. U.S. Federal Communications Commission Chairman Tom Wheeler has curiously joined the chorus calling for more competition -- even though his agency and its 2015 Open Internet rules are predicated on regulating Internet service as a natural monopoly common carrier utility.

The problem is telecom infrastructure by nature isn’t a competitive market defined as having many sellers and buyers. There are many buyers but there cannot be many sellers because it’s too costly and economically inefficient to have multiple providers building and owning infrastructure connecting homes and businesses. More competition isn’t a solution here. 

In the states, the legacy incumbents reinforce the notion of competition by blocking projects that would threaten their service territory monopolies. From their perspective, these projects represent competition because they would potentially steal away customers. Therefore, proponents reason, competition must be a good thing if the incumbents oppose it. This however illustrates the faulty reasoning of the “more competition” argument. 

The problem is the pro-competition proponents are buying into the incumbents’ concept of competition -- and not a consumer perspective. For the incumbents, any project that would build infrastructure in their service territories is competition. However, for consumers, having a choice among many sellers is competition. That’s not possible with telecommunications infrastructure. But it is possible if the infrastructure is publicly owned like roads and highways. That would open up Internet service to competition since multiple Internet service providers could offer their services over that infrastructure.

Redlined in Bradley County, Tennessee

Broadband providers battle over service in Bradley County | Times Free Press: Dr. Terry Forshee, president of Cherokee Pharmacy stores in Cleveland and Dalton, is eager for that growth. He said he can't get broadband at his South Bradley County home near Red Clay State Park.

"Charter Communications has had 27 years to bring cable down to me, but I'm still three miles away from service," he said. "I'm waiting, and I call every month to both Charter and AT&T, but I can't get anyone to come to my residence."

Forshee said he is trying to build his obesity education business, Take Charge, into a national company. But that's hard to do when he can't get high-speed Internet service at home.

Sandy Wallis lives in northern Bradley County, less than a quarter-mile from where Charter Communications and AT&T lines end.

"I've lived in my house for 30 years waiting on Charter and AT&T, and I've had to send my kids into town to do their homework (where broadband is available)," she told the Chamber gathering. "We need better service."

The U.S. Federal Communications Commission's Open Internet rules adopted earlier this year require Internet Service Providers fulfill requests for service under universal service and non-discrimination provisions of the Communications Act. Internet service is treated as a common carrier telecommunications utility under the rules. So far, however, there are no indications the FCC is enforcing these requirements in response to reports of ISP redlining such as these.

AT&T launches ultrafast Internet service in Cupertino - ContraCostaTimes.com

AT&T launches ultrafast Internet service in Cupertino - ContraCostaTimes.com: It's also unclear just who in Cupertino will be able to receive the GigaPower service. At launch, the service is available at "several thousand" homes in the city, said Terry Stenzel, vice president and general manager of the Northern California and Reno region for AT&T. But Stenzel declined to give an exact number or say what percentage of the 20,000 households in the city or what neighborhoods have access to the service, citing competitive reasons.

"They're unwilling to tell anybody. Not even me," Mayor Sinks said.

Cupertino doesn't have any commitment from AT&T to offer service to all areas of the city or to bring service to government buildings, schools or hospitals, Sinks said.

"They've stopped short of any commitment on that," he said.

Now that the U.S. Federal Communications Commission has adopted rules this month classifying Internet as a universally available common carrier telecommunications service, it's going to be more difficult as time goes on for dominant providers to cherry pick and redline neighborhoods as is being done here.

New Homeowner Has To Sell House Because Of Comcast’s Incompetence, Lack Of Competition – Consumerist

New Homeowner Has To Sell House Because Of Comcast’s Incompetence, Lack Of Competition – Consumerist

A sad tale of a consumer jerked around by incumbents and misled by the U.S. government's "broadband map" -- a major and useless component of the Federal Communications Commission's 2010 "National Broadband Plan."

And the consumer might find it hard to sell his home since not having an Internet connection is increasingly becoming like living off the grid.

Let's hope the FCC's recent policy deeming Internet as a common carrier telecommunications service requiring providers to universally serve all premises can help avoid these kinds of unfortunate circumstances that leave consumers high and dry.

Rhode Island universal Internet service bill introduced

GoLocalProv | Chippendale: Homes Without Internet Access Leave Students Unable to Excel in School: Representative Michael Chippendale (R-Foster, Glocester, Coventry) has introduced legislation that would bring broadband internet to households that currently have no means of accessing it. The bill stipulates that “any public utility providing phone, cable television, or broadband internet service to 75% of the eligible residents of any single city or town shall make available said phone, cable television, or internet services to the remaining 25% of the city or town.” Also, “any broadband service provider which provides internet service to any city or town that is part of a school district that utilizes portable internet devices for student learning at home and has broadband internet provided to at least 25% of the eligible residents of any single city or town, must provide broadband internet service for all residents of the city or town.”

While the U.S. Federal Communications Commission appears to be passing on a universal Internet service obligation in its forthcoming final rules deeming ISPs as common telecommunications carriers under Title II of the Communications Act, this could be the first of a state-based movement to impose such a requirement.

It should be noted this is a limited universal access measure and won't help localities in the all too common scenario where ISPs commonly serve only the doughnut hole of half of all premises -- those close to the center of town -- but not those outside of the center.

21st century needs new regulation for a new generation of telecommunications services

A major contributing factor to the current crisis over how to regulate Internet-based telecommunications is the passage of time. Lots of it. It's been more than four generations -- 80 years -- since the United States enacted the Communications Act of 1934 regulating telephone service as a common carrier utility.

A 1996 update of the statute incorporated Internet services. But they were so new then regulators -- the Federal Communications Commission -- didn't consider them as a common carrier telecommunications service. Internet was an optional additional service, accessed by special connections made over slow dial up modems to specialized information services such as CompuServe and America Online. Now two decades later, it serves as a all purpose telecommunications service providing data, voice and video over Internet protocol (IP).

In a little more than a month's time, the FCC will decide whether to regulate IP services as a common carrier utility under Title II of the Communications Act. Indications are it will do so -- most likely for landline delivered, premise Internet service. Along with the designation come rules designed to ease and promote the construction of infrastructure to serve all premises and not just selected ones as is the case under the present regulatory policy.

Twentieth century legacy telephone and cable companies have built their business models based on the current policy, models that will be disrupted with the shift toward regulating the Internet as a common carrier utility that must be offered to all and not just some Americans.

But out of disruption comes business opportunity for a generation of new providers. The federal government should put in place meaningful technical assistance and funding -- and not just "funding leads" given the importance of Internet infrastructure -- to help the new Internet telecommunications providers of the 21st century become established and financially viable for the long term.

USTelecom makes case for Title II common carrier regulation of Internet

Consumers Continue Shift Away From Landline – Regulations Are Behind | USTelecom

This telecom industry article helps make the case for regulating consumer Internet services as common carrier telecommunications services under Title II of the Communications Act. As the article notes, the existing common carrier regulations are designed for a bygone era of analog voice telephone service delivered over copper that is becoming increasingly outdated as landline technology shifts to fiber optic that can deliver voice and other services using Internet transmission protocols.

Lawrence Kansas mulls common carrier fiber infrastructure mandate

Lawrence City Hall struggles with what role to play in broadband competition / LJWorld.com: City commissioners are being asked to make a decision on a technical question commonly referred to as “common carriage" or "open access” of future fiber optic networks. Common carriage would allow for multiple Internet service providers to operate on a single network of fiber optic cables rather than each company burying its own set of cables.

It's difficult to understand why city staff is grappling with this question. So-called facilities-based competition is wasteful. There's no point in having redundant fiber optic infrastructure when a single strand of fiber can handle all the Internet traffic the city could possibly generate over the foreseeable. Open access common carrier infrastructure would also enable competing providers to offer Internet-based services, benefiting consumers.

Allowing a provider to build its own infrastructure rather than treating it as common carriage might well prove more financially expedient in the short term since private providers would be motivated to quickly build out fiber to serve neighborhoods deemed most immediately profitable. But once that's done, the rest of the city would likely be left unconnected. ("Hello, this is Lawrence via dialup. Is anybody there? Anybody at all?")

The policy question under consideration in Lawrence is being mirrored at the federal level as the U.S. Federal Communications Commission is considering placing Internet telecommunications under common carrier regulation under Title II of the federal Communications Act.