Lowering the Official Speed of Broadband

The FCC’s intention to kill net neutrality is getting all of the headlines, but there is another quieter battle going on at the FCC that has even bigger implications for rural America.

The last FCC under Chairman Tom Wheeler raised the definition of broadband in 2015 to 25/3 Mbps, up from the archaic definition of 4/1. In doing so the FCC set the speed based upon the way that an average household uses broadband. At the time many people argued that the FCC’s way of measuring broadband need was somewhat contrived – and perhaps it was because it’s really a challenge to define how much broadband a home needs. It’s not as easy as just adding up the various web connections as I described in a recent blog.

The FCC is now considering lowering the definition of broadband down to 10/1 Mbps. That would be a dagger to the heart of rural broadband, as I will discuss below.

One only has to look at the big ISPs to see that the FCC is ignoring the realities of the market. The big cable companies have all set minimum broadband speeds above the 25/3 Mbps current FCC broadband definition. Charter’s base broadband product for a new customer is 60 Mbps. Depending upon the market Comcast’s base speeds are 50 Mbps or 75 Mbps. AT&T says they are starting to back out of their DSL business because their fastest U-verse product only has speeds up to 50 Mbps. These big ISPs all get it and they know that customers are only happy with their broadband connection when it works without problems. And providing more speed than 25/3 Mbps is how these companies are satisfying that customer demand.

Unfortunately the FCC’s definition of broadband has huge real life implications. The big urban ISPs won’t change what they are doing, but a lower threshold could kill attempts to improve rural broadband. The FCC has a mandate from Congress to take steps to make sure that everybody in the country has adequate broadband. When the FCC increased the definition to 25/3 Mbps they instantly recognized that 55 million people didn’t have broadband. And that forced them to take steps to fix the problem. Since 2015 there has been a lot of rural broadband construction and upgrades made by cable networks in small town America and the latest estimates I’ve seen say that the number of those without 25/3 Mbps broadband is now down to around 39 million. That’s still a lot of people.

If the current FCC lowers the definition to 10/1 Mbps then many of those 39 million people will instantly be deemed to have broadband after all. That would take the FCC off the hook to try to solve the rural broadband gap. To really show that this is just a political decision, the FCC is also contemplating counting a cellular broadband connection as an acceptable form of broadband. In doing so they will then be able to declare that anybody that can get this new slower speed on a cellphone has an adequate broadband solution.

Of course, when I say this is all just politics there are those that said the same thing when the Wheeler FCC raised the definition to 25/3 Mbps. At that time critics might have been right. In 2015 there were a lot of homes that were happy with speeds less than 25/3 Mbps and that definition might have been a little bit of a stretch for the average home.

But when you take all of the politics out of it, the reality is that the amount of broadband that homes need keeps growing. Any attempt to define broadband will be obsolete within a few years as broadband usage continues on the path of doubling every three years. A home that needed 15 or 20 Mbps download in 2015 might now easily need more than 25/3 Mbps. That’s how the math behind geometric growth is manifested. .

It is disheartening to see the FCC playing these kinds of political games. They only need to go visit any rural kid trying to do homework to understand that 10/1 Mbps broadband on a cellphone is not broadband. The FCC only needs to go talk to somebody in rural America who can’t take a good-paying work-at-home job because they don’t have good broadband. They only need to go and talk to farmers who are losing productivity due to lack of a good broadband connection. And they only need to talk to rural homeowners who can’t find a buyer for their home that doesn’t have broadband.

This is too critical of an economic issue for the country to let the definition of broadband change according to the politics of the administration in office. Rather than political haggling over the official definition of broadband we ought to try something new. For example, we could set a goal that rural America ought to at least have half of the average speeds of broadband available in urban America. Using some kind of metric that people can understand would take the politics out of this. This is a metric that companies like Akamai already quantify and measure. The amount of broadband that homes needs is a constantly growing figure and pinning it down with one number is always going to be inadequate. So maybe it’s time to remove politics from the issue and make it fact based.

New Settop Box Rules

roku-3-2Chairman Tom Wheeler proposed new settop box rules last week for the eight largest cable companies. The proposal reverses much of the Chairman’s last settop box proposal that would have required each cable company to find a way to support a common cable box that customers could buy.

The large cable companies lobbied hard that the first proposal added a lot of costs without much public benefit (and they were right). The new proposal is based partially on recommendations made by the large cable companies.

The core of the new proposal is that the large cable companies will have to offer free apps that would allow customers to receive their cable signal on a variety of devices such as a Roku box, a smart-TV or a SONY Playstation.  Any customer electing to use the app could return their settop boxes and avoid the expensive fees (which have grown to as high as $10 per box).

I’m guessing that the cable companies will make the app option pretty vanilla and it will provide a channel line-up as well as a way to easily tune between channels. The big question will be if the cable companies will give away their more advanced features for free as part of the apps. For example, today many of these companies have cloud-DVR and other advanced services and we’ll have to see if the companies will make customers lease a settop box to get these additional features.

And as I wrote in an article last week, a few of the biggest cable companies like Comcast have put a lot of development into new features for their latest settop boxes. Having a free app alternative might nudge the cable companies to lower settop box prices compared to today to entice people to instead use the box.

The proposed new rules also have a requirement that the cable companies must include other sources of programming in their search guide. For example, if a customer is looking for a movie not available at the cable company, the search might show that the movie is instead available at Hulu or Netflix. Comcast is already doing this today on a limited basis by bringing Netflix into their line-up as another ‘channel’.

This is a very odd requirement that would seem to favor OTT providers the most. It will be curious to see how customers like idea of constantly being offered programming to which they may not be subscribed. I can foresee one consequence of this move in that it might prompt cable companies and OTT providers to work together to create an ‘on-demand’ product for OTT content. That could benefit both companies.

The FCC will be establishing some kind of clearing house for the apps. They learned a lesson with the cable card order many years ago that if the cable companies are left to their own they will make it hard for customers to find the new alternative. The FCC wants to approve apps and somehow bless them, in a process that would need to be worked out.

These new requirements will not apply to smaller cable providers – which is good since it’s hard to imagine them having to do the work needed to create apps for a wide variety of ever-changing devices. But that doesn’t mean that there won’t be consequences for smaller companies.

If it turns out that customers love the free apps there will be pressure on smaller companies to somehow do the same thing. And perhaps these app, once developed will be made available to the smaller cable providers. But it’s likely that the apps are going to be written for two platforms – standard HFC cable networks and satellite TV. That means that there will probably be nobody writing similar apps for fiber or DSL-based cable systems.

One would also think over time that, if successful, these new rules will lower the demand for settop boxes. Over time that might drive up the cost of settop boxes for everybody else. However, to some extent we are already on that path since the biggest cable companies like Comcast and DirecTV have already migrated to custom settop boxes and don’t buy from the normal industry vendors.