Purpose of public option advanced telecom infrastructure is to ensure access and affordability

The half a dozen or so large telecom companies that provide internet service to most homes and businesses in the U.S. today have for years “cherry-picked” neighborhoods to maximize their profits. Although they’re returning record dividends to investors, they’ve also been helping themselves to billions from the feds over the years. And what does the taxpayer get in return? The U.S. still lags behind other countries in Europe and Asia in broadband deployment. Talk about a “risky” investment of taxpayer dollars! This has led to market failure as most localities in the U.S. are served by monopolies or duopolies.

https://www.sltrib.com/opinion/commentary/2021/07/15/roger-timmerman-open/

Market failure in advanced telecom infrastructure is baked in because of high cost barriers to competitor entry and first mover advantage. As such, as Mr. Timmerman writes, it tends toward monopoly -- or duopoly at best. It's thus unreasonable to expect any meaningful degree of competition.

Public policymakers should think twice before describing public and consumer cooperative owned telecom infrastructure as envisioned in the Biden administration's American Jobs Plan as enhancing competition. Its essential purpose is to provide a public option to counter private market failure that exists in a natural monopoly market in order to ensure access and affordability.

Investor owned legacy telephone and cable companies complain public option infrastructure represents unfair competition. But as discussed, it is not intended to take market share from them. That's market competition. The better term is disruption of the status quo with only about a third of all American homes having access to modern fiber connections. And the disruptive goal is to ensure all Americans have affordable access when due to structural market issues that result in monopoly or duopoly, competitive market forces cannot.

Public option FTTH infrastructure offers potential advantage of ending FCC back and forth over regulation of IP delivered services

With public option fiber to the home (FTTH) advanced telecom infrastructure proposed in the Biden administration’s infrastructure package, a key advantage would be a potential end of the shifting back and forth policy positions of the Federal Communications Commission regarding how to regulate Internet protocol delivered services.

Since they would be delivered on the service layer of FTTH infrastructure owned by public entities and consumer cooperatives, they would conform to the current FCC regime of treating them as lightly regulated information services falling under Title I of the Communications Act. It would also be consistent with the administration’s policy to promote competition in advanced telecommunications services. Information service providers would compete on a relatively level playing field if affordable fiber connections built to a national infrastructure quality standard reached nearly every American doorstep.

U.S. telecom infrastructure also needs a "public option"

Market forces have rendered telecommunications infrastructure in the United States a balkanized, crazy quilt patchwork. Investor-owned internet service providers naturally gravitate toward locations where there are high concentrations of households with healthy incomes that can afford their service offerings. Since those services are typically vertically integrated wherein the ISPs own the infrastructure, infrastructure is built only where it can generate robust profits over the short term. Everyplace else is left to twist in the wind, redlined off the internet because there is no infrastructure to deliver telecommunications services.

That has led to a deepening crisis as telecommunications continues its rapid shift to internet-based services as legacy telephone companies abandon their copper cable plants constructed many decades ago to support voice phone service.

A similar market dynamic exists in the payer side of health care. Like telecommunications infrastructure, it takes lots of capital to enter the market. Health plan issuers must have millions of dollars set aside to cover the cost of care of their members, particularly if costs exceed projections. They naturally will offer coverage in areas where there are plenty of premium paying members to generate those dollars. In less densely populated areas, those with fewer health care providers and lower population health status, health plan issuers have less incentive to offer a greater variety of plans.

President Barack Obama called out this circumstance in a recent article published in The Journal of the American Medicine Association (JAMA). The president noted that 12 percent of enrollees in states where the federal government operates state health benefit exchanges live in areas where they can choose from among only one or two health plan issuers. For such areas, Obama suggests policymakers revisit the concept of a government operated health plan – the so-called “public option” – that was jettisoned leading up to the enactment of the Patient Protection and Affordable Care Act in 2010. Obama’s call for taking another look at government-operated health plans serving the individual and small group markets comes as one of the law’s mechanisms designed to ensure greater access to coverage -- consumer operated and oriented (CO-OP) health plans – is faltering with most co-ops undercapitalized and deemed insolvent. 

Given that some 34 million Americans are unserved by modern, internet-based telecommunications infrastructure capable of delivering high-quality voice, data, graphics and video to their homes and small businesses  according to figures released by the U.S. Federal Communications Commission in early 2016, it’s also time for policymakers to seriously consider a public option for telecom infrastructure.

In my recent eBook, Service Unavailable: america’s Telecommunications Infrastructure Crisis, I propose the formation of a government chartered 501(c)(1) nonprofit, the National Telecommunications Infrastructure Agency, to engage in a crash program to build modern fiber to the premise telecommunications infrastructure connecting all American homes and businesses. That’s where America needs to be in the 21^st century. Market forces are not up to fully accomplishing the job or as rapidly as needed.

Obama administration seeks public option for Internet infrastructure - The Washington Post

Obama wants to help make your Internet faster and cheaper. This is his plan. - The Washington Post: Frustrated over the number of Internet providers that are available to you? If so, you're like many who are limited to just a handful of broadband companies. But now President Obama wants to change that, arguing that choice and competition are lacking in the U.S. broadband market. On Wednesday, Obama will unveil a series of measures aimed at making high-speed Web connections cheaper and more widely available to millions of Americans. The announcement will focus chiefly on efforts by cities to build their own alternatives to major Internet providers such as Comcast, Verizon or AT&T — a public option for Internet access, you could say.

The public option is certainly needed given Internet telecommunications infrastructure is to the 21st century what roads and highways were to the 20th. Relying totally on commercial, investor-owned providers won't build that needed infrastructure. There simply isn't enough investment capital to get it done. And to get the choice and competition for Internet services the administration seeks, that infrastructure must be open access fiber to the premise, selling access on a wholesale basis to service providers who compete to offer services to businesses and consumers.

Like building the highways of the 20th century, that infrastructure won't come cheap. For the public option to become a reality rather than aspirational rhetoric, it will have to be backed with billions of dollars in funding to help regions of the United States build fiber to the premise Internet infrastructure on a par with telephone lines in the last century that served all Americans no matter where they made their homes or operated a business.

FCC's Wheeler: US needs more high-speed broadband competition | PCWorld

FCC's Wheeler: US needs more high-speed broadband competition | PCWorld: U.S. residents lack meaningful choices for broadband providers that offer 25Mbps or faster download speeds, and the U.S. Federal Communications Commission will push for more competition, the agency’s chairman said Thursday.

While more than 93 percent of U.S. residents have access to a broadband provider, fewer than 15 percent can buy service from more than two wired providers that offer “yesterday’s broadband” with 4Mbps download speeds, FCC Chairman Tom Wheeler said during a speech at Washington, D.C., startup incubator 1776.

“At the low end of throughput ... the majority of Americans have a choice of only two providers,” Wheeler said. “That is what economists call a duopoly, a marketplace that is typically characterized by less than vibrant competition.

As long as Internet service providers own the infrastructure that connects customer premises, there will never be any meaningful degree of competition, owing to the fact that telecommunications infrastructure due to high costs and barriers to entry functions in a natural monopoly market. As Andrew Cohill wrote in his 2010 white paper, that's about as inefficient and senseless as having FedEx or UPS operate proprietary roads to serve neighborhoods that are closed to competing shipping services.

The policy of the United States has been to preserve this very market structure of which the Federal Communications Commission chair laments. What's needed to achieve any level of real competition is to encourage and fund the construction of publicly owned open access fiber to the premise networks where ISPs compete to sell services to customer premises. Call it the public option for telecommunications in the Internet age.