Naked Broadband

cheetah-993774I suspect the word ‘naked’ got a few of you reading this far. Naked broadband refers to broadband that is sold as a standalone product and that does not require bundling with something else.

There has been some regulatory pressure in the past to require naked broadband. In the early 2000s several states like Florida, Georgia, Kentucky and Louisiana tried to force BellSouth to offer naked DSL. At that time BellSouth required that anybody who bought DSL also had to buy a landline telephone service.

BellSouth challenged the states’ ability to regulate broadband in that manner and in 2005 the FCC agreed with BellSouth and overturned the state rulings that required naked DSL. At that same time the FCC opened a Notice of Inquiry into the issue, but I don’t believe that docket was ever acted upon or closed.

Since then the market has reacted to what customers want and both AT&T and CenturyLink widely offer naked DSL. Verizon offers it in some places but charges a premium to buy naked DSL versus bundled DSL.

One of the main reasons that the FCC sided with BellSouth was that the agency didn’t really have the authority to regulate broadband in that manner. But with the FCC’s new Title II regulation of broadband they probably have this authority today. So I ask the question – should the FCC require cable companies and fiber providers to offer naked broadband?

This is a valid question considering that we are now seeing a lot of households trying to cut the cord. In my own situation, Comcast will sell me a standalone connection to their slowest broadband products, but in order to get a faster broadband connection I have to bundle the Internet with a cable TV product. In order to get 100 Mbps broadband I have elected to buy the smallest basic cable product available and I pay over $100 a month for the bundle. I have a settop box sitting in a closet somewhere since we don’t even have a TV. I thought I might finally have a use for this package during the Olympics, but the NBC Olympic web sites still wouldn’t give me access since I don’t subscribe to the USA Network.

I feel that I am paying an extra $30 a month for something I really don’t want. And Comcast counts me (and probably a whole lot of people like me) as cable customers when we are only reluctantly so. I wonder how bad the cord cutting statistics might be if people like me could drop a cable product we don’t want?

There are some providers that offer naked broadband. Verizon sells standalone Internet connectivity on their FiOS network. Google is glad to sell you a data-only connection. And a number of municipalities and fiber overbuilders also offer data as a standalone product. But there is no rule that makes any of these companies do this and tomorrow they could decide to force people into a bundle.

I know many smaller telcos and cable companies that also force a bundle. I fully understand the desire to do this – these companies are trying to preserve revenues at a time when telephone and cable subscriptions are dropping. But these companies really have to ask themselves if they want to force customers to buy products they don’t want. These kind of practices create resentment, and in the long run this is probably not the signal that should be sent to customers. This is a dilemma, and perhaps the right answer is to price naked broadband at a price that is required to sustain your business.

It is pretty easy to make an argument that it is anticompetitive for large cable companies to not sell naked broadband. In many markets they are the only ISP with fast broadband and failure to sell standalone broadband is a barrier for people to cut the cord for cable programming. After Comcast and the other big cable companies finish their DOCSIS 3.1 upgrades over the next few years they will have the vast majority of fast broadband connections in the country.

This issue is one of many that can now be raised since the FCC brought broadband under Title II regulation. I think that this new authority also lets them look at price caps and perhaps even at broadband pricing (although Chairman Wheeler promised Congress he would not do that). It will be interesting to see how the FCC uses the new authority it has claimed. I know there are a lot of households in the country that would love to just buy a fast standalone broadband connection and be done with the bundle.

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