The FCC’s 15th Annual Broadband Deployment Report

The FCC just released its most recent annual report on the state of US broadband. This report is mandated by Section 706 of the Telecommunications Act of 1996 which requires the FCC to “determine whether advanced telecommunications capability is being deployed to all Americans in a reasonable and timely fashion”. The FCC concludes in this latest report that broadband deployment is reasonable and that actions taken by this Commission are helping to close the broadband gap.

I take exception to several findings in this latest report. First, everybody in the country now understands that the FCC’s conclusions are based upon dreadfully inaccurate 477 data reported by ISPs. There have been numerous studies undertaken at the state and local levels that show that the FCC maps undercount households without broadband. Even USTelecom, the group mostly representing the largest telcos showed that the FCC maps in Missouri and Virginia classified 38% of rural homes as being served when in fact they were unserved. Microsoft has been gathering credible data showing that well over 150 million homes aren’t connecting at the FCC’s defined broadband speed of 25/3 Mbps.

For the FCC to draw any conclusions based upon inaccurate 477 data is ridiculous. A few years ago the FCC could have claimed to not understand the extent to which their data is flawed, but they’ve been shown extensive evidence that the 477 data is incredibly bad, and yet they still plowed forward in this report pretending that statistics based upon 477 data have any meaning. There is not one number in this report that has even the slightest amount of credibility and the FCC knows this.

With the knowledge that the FCC now has about the inaccuracy of their data, this FCC should have humbly admitted that they don’t know the number of households that don’t have broadband. The report could have discussed ways that the Commission is trying to fix the bad data and described steps they have taken to improve rural broadband. But for this report to lead off with a claim that the number of homes without broadband fell by 18% in 2018 is a joke – there is zero chance that’s an accurate statistic. This report should have stated that external analysis has shown that the state of broadband is a lot worse than what they’ve reported in prior annual reports.

I also take exception to the opening statement of the report where the FCC claims that its top goal is “closing the digital divide and bringing the educational, healthcare, social, and civic benefits of connectivity to all Americans seeking broadband access.” This FCC’s top goal is clearly to eliminate regulatory rules that create any obligations for the largest carriers. This FCC already completely deregulated broadband – something an agency would never do if their goal was to improve broadband access. Most of the major dockets that have been approved by this FCC have made it easier for the big carriers to deploy 5G or to otherwise avoid any regulatory burdens.

It’s insulting to the American people for the agency to state that their top goal is improving broadband when their actions show that their priorities are elsewhere. Regulatory agencies are not supposed to engage in propaganda, and this document reeks of self-promotion.

Finally, this report trots out the oft-repeated message that broadband is improving because of this FCC’s effort to remove barriers to broadband investment. I don’t think Chairman Pai makes a speech or writes an opinion that doesn’t bring up this disproved argument. We know by now that those without broadband fall into two categories – rural homes that don’t have access to a broadband connection and urban households that can’t afford broadband. The big telcos aren’t spending any of their cash to solve these two problems.

There has been a lot of fiber built in recent years. AT&T built fiber to pass 12 million homes as a condition for its merger with DirecTV – an effort the company announced was done this past summer. Verizon has been building fiber to bolster their cellular network, including an expansion of small cell sites – largely as a way to reduce their reliance on paying transport to others. These fiber efforts have nothing to do with the repeal of net neutrality and the ending of broadband regulation. Chairman Pai probably ought to cut back on making this claim, because his real legacy is that he’s emboldened the big cable companies to begin regularly increasing broadband rates since there’s no threat of regulatory oversight. Chairman Pai and his light-touch regulation will get the credit for why broadband costs $100 per month a few years from now.

What is ‘Light Touch’ Regulation?

The new FCC Commissioner Ajit Pai has made several speeches in the last month talking about returning to ‘light-touch regulation’ of the big ISPs. He is opposed to using Title II regulation to regulate ISPs and wants to return to what we had in place before that.

His argument is that the Internet has grown and thrived under the prior way that it was regulated. And he has a point – the Internet has largely been unregulated since its inception. And in many ways the industry has even received preferential regulatory treatment such as the way that Congress has repeatedly exempted broadband services from taxes.

It’s certainly hard to argue with the fact that the Internet has thrived. It’s a little harder to draw the conclusion that light regulation was the cause for this, as the Internet has primarily grown because people love the online content they find there.

But we are now at a different point in the broadband industry than we were when it was in its infancy. Consider the following:

  • The vast majority of homes now have broadband. While the industry is still adding customers there aren’t that many more households that can get broadband that don’t have it.
  • Look back just ten years ago and there was a lot more competition for broadband. In 2007 cable modems and DSL served roughly the same number of customers with similar products in terms of speed. But today cable broadband has become a near-monopoly in most markets.
  • One of the drivers towards implementing net neutrality was the explosive growth of video. Just a few years ago there were many reports of the big ISPs slowing down Netflix and other video traffic. The ISPs were trying to force video providers to pay a premium price to gain access to their networks.
  • While broadband prices have held reasonably stable for a decade, both the cable TV and voice products of the large ISPs are under fire and it’s widely expected that the ISPs will have to start raising broadband rates every year to meet earnings expectations.
  • The ISPs have changed a lot over the last decade and all of the big ones now own content and are no longer just ISPs. This gives them competitive leverage over other competitors.
  • The Internet has become a far more dangerous place for consumers. Hacking and viruses run rampant. And the ISPs and web services like Google and Facebook routinely gather data on consumers for marketing purposes.

I would be the first to agree that hands-off regulation probably contributed to the growth of the Internet. But this is no longer the same industry and it’s hard to think that any of the big ISPs or transport providers need any further protection. These are huge companies with big profits.

It seems to me that the Chairman’s use of the term ‘light-touch regulation’ is code for basically having no regulations at all. And since that was the state of the industry just a few years ago we don’t have to stretch the imagination very far to know what that means.

Before Title II regulation the FCC had almost no power over the big ISPs. The most they could do was to encourage them to do the right thing. Interestingly, in the two or three years leading up to the Title II order it was the threat of coming regulation that kept the ISPs in line more than anything else. The FCC tried to intercede in disputes between the ISPs and video providers and found that they had no leverage on the ISPs. The FCC also didn’t like data caps but they had no power to do anything about them. However, since the ISPs feared price regulation under Title II most of them raised data cap limits to defuse the public outcry over the issue.

So my recollection of the past five years is that it was the threat of coming regulation that kept the big ISPs in line. Because at the end of the day a big ISP could challenge the FCC on broadband issues in court and win every time. So the FCC’s best way to influence the ISPs was to hold the threat of regulation over their heads.

If we go back to that same regulatory place (which is what would happen if Title II is reversed) then there will no longer be any leverage at the FCC. ISPs will be free to do almost anything they want in the broadband arena. The FCC has already let them off the hook for consumer privacy, and that is just the beginning.

You can expect without regulation that the ISPs will do all of those things that net neutrality was supposed to protect against. They all say today that will never happen, and that they believe in the core tenets of net neutrality. But I think we all know that is public relations talk and that the big ISPs will pursue anything that will make them money. That means discriminating against traffic and demanding payments from video providers to get unimpeded broadcasts. It means the ISPs favoring their own content over content of others. And it means a return of price caps and broadband price increases with no fear of FCC intervention. I have a hard time thinking that ‘light-touch’ means anything other than ‘no-touch.’