The Consequences of No Broadband Regulation

A few weeks ago when the COVID-19 pandemic became apparent we saw the ridiculous spectacle of an FCC chairman begging ISPs to not disconnect customers during a pandemic that would likely throw tens of millions of people out of work. Chairman Pai was reduced to begging because a few years earlier he had voted to strip the FCC if its power to regulate broadband. Before that decision, Chairman Pai could simply have ordered ISPs to be on their best behavior during the pandemic.

This is the most recent demonstrations of the negative impact of deregulating an industry that is controlled by a tiny handful of carriers. In most urban markets the big cable companies have become de facto monopolies – and even most markets that haven’t quite reached monopoly status are, at best, duopolies. There is little broadband competition in most major metropolitan areas, and even in many rural county seats.

It’s not hard to see that the ISP industry thinks it’s bullet-proof against regulation. Consider what’s happened with prices in just the past few years:

  • When comparing data prices around the world, the US has the highest data rates among industrialized countries. Our cellular data prices are nearly the highest anywhere in the world other than a few remote places like Antarctica and war zones.
  • All the major ISPs have raised broadband rates in the last year – when everybody in the industry knows that broadband is already a product with huge margins. These rate increases serve no other purpose other than padding the bottom line. What’s worse is that Wall Street analysts are pushing the ISPs to raise rates much higher.
    • ISP bills are now full of hidden fees. Consumer Reports said last year that the average monthly company-imposed fees for the bills they analyzed averaged to $22.96 for AT&T U-verse, $31.28 for Charter, $39.59 for Comcast, $40.16 for Cox, and $43.79 for Verizon FiOS. They estimate that these fees could total to at least $28 billion per year nationwide.
  • Some ISPs like AT&T, Comcast, Cox, and Mediacom are making big money on data caps. It’s clear that the argument of having data caps to protect networks against overuse has zero basis in fact. Data caps are just a quiet way to raise rates and billings. We now know that over 8% of homes now use over a terabyte of data per month – and that was before the COVID-19 pandemic.
  • ISPs feel brave to openly gouge customers, like Frontier that is billing a monthly fee for WiFi modems that the customers purchased. Even when challenged publicly, the company won’t remove the charges because they don’t fear regulatory retribution.

One of the worst things about the deregulation of broadband is that the average consumer has no idea this happened. The FCC was slick enough to bury the deregulation of broadband in the net neutrality topic. Most people don’t realize that when the FCC killed net neutrality that they also gave away their authority to regulate broadband. People still look to the FCC to correct broadband injustices, without realizing that when they file an FCC complaint against a broadband provider that the agency is powerless to intercede on their behalf.

The FCC will argue that they didn’t kill broadband regulation, but they instead handed the responsibility to the Federal Trade Commission. That claim falls apart quickly once you realize that the FTC has zero authority to regulate industries – they can’t write a rule that applies to all ISPs. The FTC’s power is limited to fining ISPs that have blatantly injured the public – and this must be done by an agency that is also overlooking all other US corporations.

Other than to dole out spectrum for 5G, it’s hard to even justify the FCC any longer. If the US isn’t going to regulate one of the most important industries in the country – many would say during the current pandemic the most important – then perhaps we ought to stop pretending to do so.

Only Congress can fix the problem and they’ve shown no inclination to do so. Congress hasn’t done anything meaningful concerning broadband since the 1996 Telecommunications Act that was signed just as people were subscribing to AOL and Compuserve.

The FCC should be taking drastic action during this pandemic. The agency could have been leading the charge looking for ways to get broadband to kids stuck at home. They could have been taking actions to make it easier for telemedicine in the last few months. They could have reacted to the pandemic with plans to finally solve the broadband gap. Instead, all we got was a powerless FCC Chairman politely asking ISPs to not harm people during a national emergency.

2 thoughts on “The Consequences of No Broadband Regulation

  1. Doug,
    I agree with most of your articles, but I think you may be using some statistics in this post that may not be completely relevant. The cost of internet in the U.S. may be higher but so are a lot of things. We have one of the highest average incomes in the world and prices tend to follow income. Also, if we compared the cost of telecommunications in 1960 to cost today, I believe it would be a smaller percentage of income now. When we decided that competition was good for telecommunications by deregulating everything from CPE, Long Distance, Local Service, corporations did what they are required to do by their fiduciary responsibilities: They put their money where it can make the greatest return and that is not serving rural areas of the U.S. Whether we would have gotten the innovative technologies from Bell Labs if we hadn’t broken up the Bell System will be debated forever, but we would have gotten consistent services across the country if they were regulated and required to maintain a consistent network. We have decided that it is better to let the market dictate prices and availability than to have regulation. I don’t think that regulation is the answer to many things, but it is if you want to have some control over industries that cannot be duplicated easily, like utilities. I live in a fairly affluent part of a city and the grocery prices are lower in my area than in less affluent parts of the city because we have multiple grocery stores interested in competing for my business. That works to drive down prices, but doesn’t reflect ability to pay.

    Also, the cost to construct network in the U.S. is higher than a lot of other countries. In one country we looked at years ago, the plan was to tell the residents of the town that if they wanted service to dig a ditch through town with ditches to the houses that wanted service before we got there. I can’t see that happening in most of the U.S.

    We are getting ready to offer wireless carriers $9B to build a 5G network in rural areas. I don’t know how they plan to design and build their networks, but if they plan to meet the 5G specs, they will need fiber to the cell sites which will be close together. I also don’t know how they plan to get the fiber there, but it would make the most sense to use the same fiber cables that will serve the rural homes and farms that would be passed. Unless the wireless carriers change their way of doing business they will build a separate network just for the wireless towers. Wouldn’t it make more sense to add most of the $9B to the RDOF Auction and require the winners to serve the towers at a “reasonable” cost to the wireless carriers. Of course, that would require that the RDOF Auction award the funds to the FTTH bidders.

    Enough of my ranting. I appreciate your thoughts and hope that we reach a compromise that makes long-term sense for everyone.

    David Hunt

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  2. Enjoy your Blog. Thanks
    Two things I have tried to get the sports fee removed from my charter/spectrum bill. They won’t do it.
    The second is that on the AVL Communications Law Blog dated 14 Jan they stated the
    following: Locations in Alaska and New York are not eligible for RDOF because of previously established programs to fund rural broadband in these states. I can’t find anything on the FCC Auction 904 website that says NY State is ineligible for the RDOF. Which do you think it is? Thanks. Karl

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