Why "broadband competition" is a misnomer

Tell The Story We Know: Broadband Competition is Too Limited | Benton Institute for Broadband & Society: This is a familiar story, known to the members of CLIC but not given sufficient attention generally. The Benton Institute’s “Broadband for America’s Future: A Vision for the 2020s” calls for an ambitious goal. That every person in America have the ability to use High-Performance Broadband by the end of this decade. To achieve that goal requires success in each of four building blocks: more deployment, greater competition, emphasis on affordability and adoption, and empowerment of community institutions. The competition story needs to be told: We can expect people with only one choice to pay monopoly prices, and people with only two choices to pay the higher prices typically charged by duopolies. People with three or more choices typically pay less. Clearly, people who can barely afford to pay a competitive price, say, low-income Americans, are particularly vulnerable to artificially high prices.

Problem with reliance on competition is telecom infrastructure naturally tends toward monopoly. It favors first mover incumbents and high cost barriers make it impractical for a competitive market to exist. All providers face high labor costs for deploying infrastructure, giving none a cost advantage such that it could drive another out of business with ultra low pricing or serve a larger customer base.

That naturally high concentration and few providers also means buy side market forces cannot hold down prices over the long run. Providers know end users have little or no real choice to vote with their wallets and go with another. Particularly in the U.S. where large investor owned corporations own both the infrastructure and the services provided over it, making the equivalent of an electronic toll gate. Pay the toll or you don't pass.

It also makes little sense to have multiple premise fiber connections from different vendors. We don't have that for electric power connections for the same reason: it's economically inefficient and impractical. One fiber connection will do just fine now and for the foreseeable. Preferably publicly or consumer cooperatively owned open access fiber.

Assertions to the contrary can't alter underlying microeconomics: Advanced telecom infrastructure is a natural monopoly

Editor's Note: Welcome to the Roaring ’20s: Meanwhile, according to RVA LLC, 2019 proved to be a banner year for fiber to the home, and 2020 promises to be nearly as good. Broadband providers have now passed 46.5 million unique U.S. homes with fiber, up more than 6 million since the year before – not bad for a technology that got started just 20 years ago. In addition, nearly 3 million households can choose between two or more fiber connections. Not bad for what was once considered a “natural monopoly.”

Advanced telecom infrastructure remains a natural monopoly market due to high costs of entry that make it difficult for would be private sector competitors to challenge an established provider. If it weren't, most all American households would have had fiber connections at least a decade earlier in the 2000s -- when fiber was hardly a new technology -- and millions would not lacking them today.

Nor would there be a need for publicly and consumer cooperatively owned fiber to the premise infrastructure since competitive market forces would work to ensure nearly all homes were connected by investor owned players. That some providers opt to compete by cherry picking homes in what they consider "high potential" neighborhoods by inefficiently building multiple premise fiber connections doesn't alter the basic underlying economics.

Subsidizing copper "broadband" instead of fiber "silly."

Rural Colorado sees more broadband options, but not quickly: For years, the federal government has offered needy areas grants and loans through the Connect America Fund, which uses Universal Service Fund money collected from consumers in their monthly phone bills.

In Colorado, the largest recipient, CenturyLink, received $107.3 million from the federal program and has helped get service of at least 10 mbps to 31,620 rural households in Colorado by the end of 2018. That’s about 90% of CAF funds distributed in Colorado since 2015. But those households are unlikely to get upgraded to faster broadband, which the FCC now defines as 25 mbps down, 3 mbps up.

“That’s a copper-based network. When you’re trying to build out a future-proof fiber network, it slams so many doors on you for funding. As a national policy, It’s embarrassing,” Smith said. “Why wouldn’t you want your citizens of the United States to have the highest, best network in the world? But you keep subsidizing this old copper infrastructure and copper, to me, is silly.”

Silly indeed. Poor public telecom infrastructure policy. It's hard to advance to the 21st century supporting 20th century technology.

U.S. doesn't have a "broadband subscription" problem. It has an infrastructure problem.

Neighborhood broadband data makes it clear: We need an agenda to fight digital poverty: How would you feel if half of the homes your neighborhood didn’t have electricity? Or if a quarter didn’t have running water? It’s hard to imagine, mostly because the United States benefits from near-universal access to electricity and water.  That’s not the story for another crucial utility: broadband, or high-speed internet service. Digital platforms have transformed most parts of daily life, from how we talk to one another, to how we consume media, to how we travel. But those platforms are only meaningful if you can access them via broadband. In 2018, more than 18 million American households lived without a broadband subscription. This means that today’s digital economy is out of reach for far too many people.

A big part of this problem is continuing to see America's advanced telecom infrastructure deficiencies not as an infrastructure issue but rather a "broadband subscription" problem. As long as that term is used, it's going to be difficult to conceive of it as a "crucial utility" as described here.

It's a critical distinction and words matter. The term "broadband subscription" derives from the legacy incumbent telephone and cable companies that sold "broadband subscriptions" as a optional add on service and NOT as a utility. Moreover, these companies fight hard against classifying Internet service as a telecommunications utility regulated under Title II of the Communications Act of 1934, dubbed in the media as the battle over "net neutrality." Rather, they preferred it remain an optional subscription-based "information service" regulated under Title I of the statute and delivered through their vertically integrated proprietary premise connections and without the Title II requirement they honor all reasonable requests for service.

U.S. telecom infrastructure deficiencies inaccurately described as "rural broadband" problem

Neighborhood broadband data makes it clear: We need an agenda to fight digital poverty: The digital gap between urban and rural parts of the country tends to garner the most attention. However, our analysis of the Census Bureau’s American Community Survey (ACS) data tells another story: The majority of digitally disconnected households live in metropolitan areas, and the gaps are especially large when comparing neighborhoods within the same place. Effectively, some residents live in digital poverty even as their neighbors thrive.

Poor connectivity within metro areas has not gotten the attention it deserves, particularly as their residents seek more affordable housing in more distant suburbs and exurbs that typically lack modern fiber to the premise #FTTP telecom infrastructure. Much of the media narrative instead is based on a circa 1950 version of the United States. At that time, residential settlement was much more binary, divided among urban and rural areas. This has also led to outdated and inaccurate comparisons of poor "rural broadband" to lack of electric power and telephone infrastructure in rural areas in the early part of the 20th century.