Misconceptualizing advanced landline telecommunications: not a competitive local market

America’s advanced telecommunications infrastructure gaps are not an inherently local problem. They occur all over the United States – in urban, suburban, exurban and rural areas. It is a nationwide issue requiring a national solution. A major impediment to addressing this issue from a national or regional perspective is telecommunications is typically conceived of as a local service offering rather than infrastructure that links localities to other localities, regions and states and nations – the way long distance telephone service did for decades. The root of this conceptualization has both old and new origins.

The older one is cable TV service. It got its start in the 1950s as definitively local service, serving localities that for reasons of distance and terrain could not reliably receive over the air television signals. Cable providers erected large community antennae to pick up and amplify the signals, delivering them over cables to customer premises. Hence its designation as CATV service -- Community Antenna Television. Local governments saw CATV – later fed with satellite delivered TV programming – as a local service and issued franchises to cable operators. Cable thus became to be thought of as a local service that varied from locality to locality.

The newer conceptualization of telecommunications as a local service comes courtesy of legacy telephone companies that delivered voice phone service over twisted pair copper for many decades starting early in the last century. Around 2000, telephone companies began providing Internet connections via Digital Subscriber Line (DSL) service. This technology is hyper local because of its limited range, able to serve customer premises only within about two and a half miles of phone company central office facilities. Consequently, localities ended up with some neighborhoods able to get DSL service while others too far from the central offices could not. That further reinforced the conception of advanced telecommunications as a highly localized service.

Then around 2005, cable providers began offering Internet protocol-based voice and data services. They realized local governments could require them to upgrade and build out their infrastructures to offer these advanced telecommunications services to all customer premises in a given local jurisdiction. Wanting to avoid the capital expenditures entailed with that, the cable companies championed legislation that took franchising authority away from the locals and transferred it to state public utility commissions. Consequently as with phone company DSL service, some neighborhoods are served while others not in cable companies’ desired service area “footprint” remain unserved.

Viewing advanced telecommunications as a local service offering – priced, advertised and sold in service bundles – naturally leads to an unrealistic expectation that it should be a competitive market like other widely advertised services. If Company X won’t serve my neighborhood, then I should be able to go to Company Y or Company Z. If Provider A doesn’t offer the service bundle at the price I can afford, then I should be able to shop Providers B, C and D for an alternative offer.

Problem is these service offers aren’t available because the other providers aren’t necessarily in the market, their advertising notwithstanding. The fine print in the ads from the legacy telephone and cable providers notes that service “may not be available in all areas.” That’s because in much of their nominal service areas, it costs too much and is too economically risky to support those other options under the dominant business model where the provider owns the infrastructure connecting customer premises that pay using recurring monthly subscriptions. The risk is not enough premises will subscribe or too many that do will close their accounts to justify the investment in high cost infrastructure. Any new providers who might compete with the incumbent providers face that risk and more since they would have to woo away customers from the incumbents as well as get their own.

That business case risk is unlikely to change if advanced landline telecommunications remains largely unregulated on a de facto basis and left to large, investor-owned legacy telephone and cable companies. They’re not promoting their ability to connect more and more customer premises and there is no enforced national regulatory policy that compels them to do so. Lately, their ads promote sports and entertainment content -- for the premises they choose to serve with landline infrastructure -- and mobile devices.