FCC Chair Admits There Is Nowhere Near Enough Broadband Competition

This chart presented by Wheeler shows how little competition there is for broadband, especially at increased speeds.

This chart presented by Wheeler shows how little competition there is for broadband, especially at increased speeds.

In spite of what Comcast would have you believe, there is very little actual competition among broadband providers in the U.S. And this morning, FCC Chair Tom Wheeler publicly explained the woeful state of competition for America’s Internet users.

“Our economic future is inexorably tied to the continued expansion of the Internet,” said Wheeler at a speech in D.C. this morning. “My goal is not to criticize, but to recognize that meaningful competition for high-speed wired broadband is lacking and Americans need more competitive choices for faster and better Internet connections, both to take advantage of today’s new services, and to incentivize the development of tomorrow’s innovations.”

As you can see from the chart above, presented by Wheeler, the faster the service, the fewer options available. And the 10Mbps tier — what many believe should now be considered the lowest acceptable definition of broadband — more than one-third of the country has fewer than two options for service, and 8.4% of America doesn’t even have the option of getting this level of service. Fewer than 10% of the country has at least three choices for 10Mbps service.

And it just gets worse as you increase the speeds. More than 1-in-5 Americans don’t have access to the highest tier shown on the chart, and nearly 2/3 of the country has only one provider to choose from. A mere 1.6% have the luxury of selecting between three providers.

Wheeler says too much focus has been put on merely providing people with the minimum level of service.

“We need to keep moving to the right on the chart,” he explained.

Things are particularly bleak in rural America, where nearly 25% of residents (around 14.5 million people) don’t even have access to the lowest level of broadband service. And as for the argument that wireless broadband is a viable competitor for rural markets — a notion we’ve already shown to be complete hokum — Wheeler points out that only 37% of rural consumers are covered by enough 3G or 4G mobile wireless providers to say the market is competitive.

“The simple lesson of history is that competition drives deployment and network innovation,” said Wheeler. “That was true yesterday and it will be true tomorrow. Our challenge is to keep that competition alive and growing.”

And while he applauds efforts like Google Fiber and AT&T’s recently announced expansion of its gigabit Internet service, the Chair said there is still much to be done.

“Looking across the broadband landscape, we can only conclude that, while competition has driven broadband deployment, it has not yet done so a way that necessarily provides competitive choices for most Americans,” explained Wheeler.

He also cautioned against simply looking at the number of available options as a way of defining competition.

“Counting the number of choices the consumer has on the day before their Internet service is installed does not measure their competitive alternatives the day after,” said the Chair. “Once consumers choose a broadband provider, they face high switching costs that include early-termination fees, and equipment rental fees. And, if those disincentives to competition weren’t enough, the media is full of stories of consumers’ struggles to get ISPs to allow them to drop service.”

“Now,” Wheeler asked, “all of this raises the question: What is the FCC prepared to do in the face of this competitive reality?” He then answered his own question: “the best answer for limited competition is more competition, plain and simple.”

To that end, the Chair outlined four major principles for the FCC:

  1. “Where competition exists, the Commission will protect it.” As an example of preserving competition, Wheeler pointed to the failed AT&T/T-Mobile merger that would have reduced national wireless competition from four providers to three.
  2. “Where greater competition can exist, we will encourage it.” Here, Wheeler cited not only the FCC’s next wireless spectrum auction — which will hold a certain percentage of spectrum in reserve for smaller providers — but also the entire net neutrality rulemaking process, which he said “is about ensuring that the Internet remains free from barriers erected by last-mile providers.”
  3. “Where meaningful competition is not available, the Commission will work to create it.” Wheeler considers the current fight over the legality of municipal broadband projects to be part of this work, saying that was why “we are looking at that question so closely.”
  4. “Where competition cannot be expected to exist, we must shoulder the responsibility of promoting the deployment of broadband.” Wheeler acknowledged that just because “something works in New York City doesn’t mean it works in rural South Dakota,” and renewed his pledge to be sure to consider the needs of rural Americans are considered under the FCC’s universal broadband plan — “by whomever steps up to the challenge.”

Although most Americans would agree with Wheeler that competition for high-speed broadband is lacking at best, in terms of the Washington political game Wheeler’s speech today could well translate as, “come at me, bro.”

Wheeler already faces considerable opposition both inside the FCC and also in Congress for suggesting the FCC has the authority to pre-empt state laws regarding municipal broadband. And as for reducing competition, comments about — and money agitating for — the merger of Comcast and Time Warner Cable are flying fast and furious all over. The FCC has not yet made a decision on the merger, nor will for several months, but it’s hard not to read animosity to it in Wheeler’s speech, as mergers are the essence of reduced competition.

Delara Derakhshani, policy counsel for our colleagues down the hall at Consumers Union, applauded Wheeler’s remarks, saying, “The Chairman’s right – the market for high-speed Internet service isn’t nearly competitive enough.”

Derakhshani added, “That’s why it’s so critical for the FCC to reject Comcast’s merger with Time Warner Cable. If the FCC allows the Comcast merger to happen, the problems cited by Chairman Wheeler would only get worse. Comcast is already the nation’s biggest broadband provider, with a lousy reputation for value and customer service. Under the merger Comcast would become a national gatekeeper for the Internet with control over nearly half of the residential broadband customers. Allowing Comcast to get even bigger and more powerful would chill the competition that the Chairman is seeking. We applaud the Chairman’s call for greater broadband competition, and we believe rejecting the Comcast merger is essential to meeting that goal.”

You can read the full text of Chairman Wheeler’s remarks here (PDF).