The FCC recently opened a docket, at the prompting of federal legislation, that asks for examples of digital discrimination. The docket asks folks to share stories about how they have had a hard time obtaining or keeping broadband, specifically due to issues related to zip code, income level, ethnicity, race, religion, or national origin.
The big cable companies and telcos are all going to swear they don’t discriminate against anybody for any reason, and every argument they make will be pure bosh. Big corporations, in general, favor more affluent neighborhoods over poor ones. Neighborhoods that don’t have the best broadband networks are likely going to be the same neighborhoods that don’t have grocery stores, gas stations, retail stores, restaurants, banks, hotels, and a wide variety of other kinds of infrastructure investment from big corporations. The big cable companies and telcos are profit-driven and focused on stock prices, and they make many decisions based on the expected return to the bottom line – just like other large corporations.
There is clearly discrimination by ISPs by income level. It’s going to be a lot harder to prove discrimination by ethnicity, race, religion, or national origin, although it’s likely that some stories of this will surface in this docket. But discrimination based on income is everywhere we look. There are two primary types of broadband discrimination related to income – infrastructure discrimination and price discrimination.
Infrastructure discrimination for broadband has been happening for a long time. It doesn’t take a hard look to see that telecom networks in low-income neighborhoods are not as good as those in more affluent neighborhoods. Any telecom technician or engineer can point out a dozen of differences in the quality of the infrastructure between neighborhoods.
The first conclusive evidence of this came years ago from a study that overlaid upgrades for AT&T DSL over income levels, block by block in Dallas. The study clearly showed that neighborhoods with higher incomes got the upgrades to faster DSL during the early 2000s. The differences were stark, with some neighborhoods stuck with first-generation DSL that delivered 1-2 Mbps broadband while more affluent neighborhoods had been upgraded to 20 Mbps DSL or faster.
It’s not hard to put ourselves into the mind of the local AT&T managers in Dallas who made these decisions. The local manager would have been given an annual DSL upgrade budget and would have decided where to spend it. Since there wasn’t enough budget to upgrade everywhere, the local manager would have made the upgrades in neighborhoods where faster cable company competition was taking the most DSL customers – likely the more affluent neighborhoods that could afford the more expensive cable broadband. There were probably fewer customers fleeing the more affordable DSL option in poor neighborhoods where the price was a bigger factor for consumers than broadband speeds.
These same kinds of economic decisions have been played out over and over, year after year by the big ISPs until affluent neighborhoods grew to have better broadband infrastructure than poorer neighborhoods. Consider a few of the many examples of this:
- I’ve always noticed that there are more underground utilities in newer and more affluent neighborhoods than in older and poorer ones. This puts broadband wires safely underground and out of reach from storm damage – which over time makes a big difference in the quality of the broadband being delivered. Interestingly, the decision of where to force utilities to be underground is done by local governments, and to some degree, cities have contributed to the difference in infrastructure between affluent and low-income neighborhoods.
- Like many people in the industry, when I go to a new place, I automatically look up at the conditions of poles. While every place is different, there is clearly a trend to have taller and less cluttered poles in more affluent parts of a city. This might be because competition brought more wires to a neighborhood, which meant more make-ready work done to upgrade poles. But I’ve spotted many cases where poles in older and poorer neighborhoods are the worst in a community.
- It’s easy to find many places where the Dallas DSL story is being replayed with fiber deployment. ISPs of all sizes cherry-pick the neighborhoods that they perceive to have the best earnings potential when they bring fiber to a new market.
We are on the verge of having AI software that can analyze data in new ways. I believe that we’ll find that broadband discrimination against low-income neighborhoods runs a lot deeper than the way we’ve been thinking about it. My guess is that if we map all of the infrastructure related to broadband we’d see firm evidence of the infrastructure differences between poor and more affluent neighborhoods.
I am sure that if we could gather the facts related to the age of the wires, poles, and other infrastructure, we’d find the infrastructure in low-income neighborhoods is significantly older than in other neighborhoods. Upgrades to broadband networks are usually not done in a rip-and-replace fashion but are done by dozens of small repairs and upgrades over time. I also suspect that if you could plot all of the small upgrades done over time to improve networks, you’d find more of these small upgrades, such as replacing cable company power taps and amplifiers, to have been done in more affluent neighborhoods.
We tend to think of broadband infrastructure as the network of wires that brings fast Internet to homes, but modern broadband has grown to be much more than that, and there is a lot of broadband infrastructure that is not aimed at home broadband. Broadband infrastructure has also come to mean small cell sites, smart grid infrastructure, and smart city infrastructure. I believe that if we could map everything related to these broadband investments we’d see more examples of discrimination.
Consider small cell sites. Cellular companies have been building fiber to install small cell sites to beef up cellular networks. I’ve never seen maps of small cell installations, but I would wager that if we mapped all of the new fiber and small cell sites we’d find a bias against low-income neighborhoods.
I hope one day to see an AI-generated map that overlays all of these various technologies against household incomes. My gut tells me that we’d find that low-income neighborhoods will come up short across the board. Low-income neighborhoods will have older wires and older poles. Low-income neighborhoods will have fewer small cell sites. Low-income neighborhoods won’t be the first to get upgraded smart grid technologies. Low-income neighborhoods won’t get the same share of smart city technologies, possibly due to the lack of other infrastructure.
This is the subtle discrimination that the FCC isn’t going to find in their docket because nobody has the proof. I could be wrong, and perhaps I’m just presupposing that low-income neighborhoods get less of every new technology. I hope some smart data guys can find the data to map these various technologies because my gut tells me that I’m right.
Price discrimination has been around for a long time, but I think there is evidence that it’s intensified in recent years. I first noticed price discrimination in the early price wars between the big cable companies and Verizon FiOS. This was the first widespread example of ISPs going head-to-head with decent broadband products where the big differentiator was the price.
I think the first time I heard the term ‘win-back program’ was related to cable companies working hard not to lose customers to Verizon. There are stories in the early days of heavy competition of Comcast keeping customers on the phone for a long time when a customer tried to disconnect service. The cable company would throw all sorts of price incentives to stop customers from leaving to go to Verizon. Over time, the win-back programs grew to be less aggressive, but they are still with us today in markets where cable companies face stiff competition.
I think price competition has gotten a lot more subtle, as witnessed by a recent study in Los Angeles that showed that Charter offers drastically different online prices for different neighborhoods. I’ve been expecting to see this kind of pricing for several years. This is a natural consequence of all of the work that ISPs have done to build profiles of people and neighborhoods. Consumers have always been leery about data gathered about them, and the Charter marketing practices by neighborhood are the natural endgame of having granular data about the residents of LA.
From a purely commercial viewpoint, what Charter is doing makes sense. Companies of all sorts use pricing to reward good existing customers and to lure new customers. Software companies give us a lower price for paying for a year upfront rather than paying monthly. Fast food restaurants, grocery stores, and a wide range of businesses give us rewards for being regular customers.
It’s going to take a whistleblower to disclose what Charter is really doing. But the chances are it has a sophisticated software system that gives a rating for individual customers and neighborhoods based on the likelihood of customers buying broadband or churning to go to somebody else. This software is designed to offer a deeper discount in neighborhoods where price has proven to be an effective technique to keep customers – without offering lower prices everywhere.
I would imagine the smart numbers guy who devised this software had no idea that it would result in blatant discrimination – it’s software that lets Charter maximize revenue by fine-tuning the price according to a computer prediction of what a given customer or neighborhood is willing to pay. There has been a lot of speculation about how ISPs and others would integrate the mounds of our personal data into their businesses, and it looks like it has resulted in finely-tuned price discrimination by city block.
Is There a Fix for Digital Discrimination?
The big news in the broadband industry is that we are in the process of throwing billions of dollars to solve the ultimate case of economic discrimination – the gap between urban and rural broadband infrastructure. The big telcos completely walked away from rural areas as soon as they were deregulated and could do so. The big cable companies never made investments in rural areas due to the higher costs. The difference between urban and rural broadband networks is so stark that we’ve decided to cure decades of economic discrimination by throwing billions of dollars to close the gap.
But nobody has been seriously looking at the more subtle manifestation of the same issue in cities. The FCC is only looking at digital discrimination because it was required by the Infrastructure Act. Does anybody expect that anything will come out of the stories of discrimination? ISPs are going to say that they don’t discriminate. If pinned down, they will say that what looks like discrimination is only the consequence of them making defensible economic decisions and that there was no intention to discriminate.
Most of the discrimination we see in broadband is due to the lack of regulation of ISPs. They are free to chase earnings as their top priority. ISPs have no regulatory mandate to treat everybody the same. The regulators in the country chose to deregulate broadband, and the digital discrimination we see in the market is the direct consequence of that choice. When AT&T was a giant regulated monopoly we required it to charge everybody the same prices and take profits from affluent customers to support infrastructure and prices in low-income neighborhoods and rural places. Regulation wasn’t perfect, but we didn’t have the current gigantic infrastructure and price gaps.
If people decide to respond to this FCC docket, we’ll see more evidence of discrimination based on income. We might even get some smoking gun evidence that some of the discrimination comes from corporate bias based on race and other factors. But discrimination based on income levels is so baked into the ways that corporations act that I can’t imagine that anybody thinks this docket is going to uncover anything we don’t already know.
I can’t imagine that this investigation is going to change anything. The FCC is not going to make big ISPs spend billions to clean up broadband networks in low-income neighborhoods. While Congress is throwing billions at trying to close the rural broadband gap, I think we all understand that anywhere that the big corporations take the rural grant funding that the infrastructure is not going to be maintained properly and that in twenty years we’ll be having this same conversation all over again. We know what is needed to fix this – which is regulation that forces ISPs to do the right thing. But I doubt we’ll ever have the political or regulatory will to force the big ISPs to act responsibly.
Great article as always Doug! Regarding the statement at the end “We know what is needed to fix this – which is regulation that forces ISPs to do the right thing.” – I would argue that competition > regulation. We need more consumer choices.
Continuously giving gov’t grant money to the same multi-billion dollar ISPs, and letting them ‘protect their territory’ restricts competition. Any area with just 1 ISP choice, regardless of speed offered, should be considered underserved IMO.