Communications / Technology

U.S. Broadband Competition: Will Chairman Wheeler’s Plan Be Effective?

During the past two weeks, one of the most catching statements on the American Internet service came from Tom Wheeler, the chairman of the Federal Communications Commission (FCC). The Chairman stated that Americans lack real choices among Internet service providers (ISP), with fewer than one in four American homes having access to two or more ISPs of 25Mbps, the broadband speeds that are quickly becoming “table stakes” for “21st century economics and democracy”.

Chairman Wheeler outlined a four-step agenda to ensure that “the United States has the world’s most dynamic and competitive broadband ecosystem.” His plans include protecting existed competitions, encouraging greater competition, creating meaningful competition, and promoting the deployment of broadband.

The Chairman’s agenda seems to be a pretty promising plan to create broadband competitions in the U.S., and ultimately to promote and protect a dynamic and competitive broadband ecosystem as he stated. However, a deep scrutiny could render the Chairman’s plan ineffective, even problematic.

In his speech, Chairman Wheeler proposed to update FCC’s broadband definition from 4Mbps to 10Mbps. In the meantime, 67 percent of households have a choice of either 2 or 3 broadband providers for 10Mbps service according to FCC’s own report on Internet Access Services released on December 2013. Therefore, the majority of U.S. Internet users have already enjoyed the benefits from broadband competitions as of the end of 2012 when the FCC data was collected. Regarding the data Chairman Wheeler used, Will Rinehart from the American Action Forum (AAF) pointed out “Much has changed since 2012.” Akamai State of the Internet Report reveals that the average U.S. broadband connection speed has reached 10Mbps in the third quarter of 2013, with an increase of 13 percent over the previous quarter and a 31 percent increase over the same period a year earlier. As a result of such rising Internet speed in a market with competitions, 96 percent of U.S. households now have access to speed equal to or greater than 10Mbps, a threshold broadband speed proposed by Chairman Wheeler.

Additionally, as Rinehart from the AAF stated, it is important to note that Japan, Hong Kong, and Switzerland, which rank at the top of international speed charts, all have average connection speeds around 13Mbps. Advocates of new broadband regulations often build their argument on Akamai survey, in which the U.S. ranks 10th worldwide in average national broadband speed. However, we should also be aware that the U.S. is the only large country with high urbanity given its geographical feature among the Top-10 countries in Internet speed. Everett Ehrilich of ESC Company found that the U.S. per capita investment in telecom infrastructure is 50 percent higher that of European Union, and as a share of GDP the U.S. broadband investment rate exceeds those of Japan, Canada, Italy, Germany, and France. As a result, the U.S. has the most affordable entry-level prices for fixed broadband in the OECD.

While Chairman Wheeler claimed in his speech that there are fewer competitors at faster speeds in the U.S. broadband market, many researchers, including Rinehart, pointed out that consumers are benefiting from faster Internet speeds as well as broadband competitions. Rinehart gave the example of AT&T’s upgraded network, which could allow “Huge swaths of the country to have access to an Internet speed of 75Mbps, above the 25Mbps mark that Wheeler brought attention to in his speech.” Moreover, Rinehart maintained that “Consumers will migrate and place further competition on rivals to upgrade” with more “fresh faces” coming into the competition, like Google Fiber which the chairman also mentioned during the speech.

As Rinehart explained, the choices and competitive marketplace in broadband look exceptionally robust. A broadband market lacking competition, that Chairman Wheeler’s four-step-agenda built on, was fundamentally problematic. On the other hand, the Chairman Wheeler’s plan depicted a broad plan to further regulations of broadband competition. Specifically, he said the FCC would block mergers that reduce competition, implement regulations that support a free and open Internet, and redirect universal service funds to balance the Internet access between rural and urban Americans. However, Chairman Wheeler did not respond to the voices that argue for regulating Internet access as a public utility, nor did he say anything about the Comcast/TWC mergers pending before the commission. He did not mention the local competition that could possibly be a crucial factor in ensuring broadband competition either.

In conclusion, without acknowledging the current competition in the U.S. broadband market and addressing the key issues of the market’s true interests, Chairman Wheeler’s four-step-agenda could be vague and ineffective.