Is Ultrafast Broadband a Novelty?

FCC Commissioner Michael O’Reilly recently said that ultrafast broadband is a novelty. He specifically said, “The outcry for things like ultrahigh-speed service in certain areas means longer waits for those who have no access or still rely on dialup service, as providers rush to serve the denser and more profitable areas that seek upgrades to this level. . . Today, ultrafast residential service is a novelty and good for marketing, but the tiny percentage of people using it cannot drive our policy decisions.

These statements are not surprising coming from Commissioner O’Reilly. He voted two years ago against setting the current 25/3 Mbps definition of broadband and thought that number was too high. In a dissent to that ruling he said the 25/3 definition was unrealistically high and said, “While the statute directs us to look at “advanced” telecommunications capability, this stretches the concept to an untenable extreme. Some people, for example, believe, probably incorrectly, that we are on the path to interplanetary teleportation. Should we include the estimated bandwidth for that as well? “

I don’t understand why Commissioner O’Reilly is still taking this position today. Most of the big ISPs have climbed on board the big bandwidth wagon. Comcast and Cox and other cable companies are upgrading their cable networks to DOCSIS 3.1 in order to provide gigabit speeds. CenturyLink built fiber past almost a million homes last year. Altice says they are tearing out their coaxial networks and replacing them with fiber. AT&T claims to have plans to build fiber to pass 12 million homes and businesses. Numerous small overbuilders around the country are offering gigabit speeds.

You don’t have to go back too many years to a time when the big ISPs all agreed with O’Reilly. The big cable companies in particular repeatedly made it clear that people didn’t need any more bandwidth than what the cable companies were delivering. The cable companies fiercely resisted increasing data speeds for many years and many cable networks kept data speeds in the 6 Mbps download range even though their networks were capable of delivering higher speeds without the need for upgrades.

Part of the old reasoning for that position was that the ISPs were afraid that if they gave people faster speeds then they would then use those speeds and swamp the networks. But Google came along and upset the whole ISP world by offering an inexpensive gigabit product. The cable companies in cities like Kansas City and Austin had little choice and increased speeds across the board. And once they increased in those markets they had little choice but to improve speeds everywhere.

The cable companies found the same thing that all of my clients have found when increasing data speeds. Generally a unilateral increase in customer data speeds does not cause a big increase in data usage unless the customers were throttled and constrained before the increase. Most customers don’t use any more data when speeds get faster – they just enjoy the experience more.

Of course, customers want to download more data every year and the amount of total download doubles about every three years. But that phenomenon is separate from data speeds. All of the things we do on the web requires more bandwidth over time. You scroll through a Facebook page today and you encounter dozens of videos, for example. But having faster speeds available does not directly lead to increased data usage. Speed just gets the things done faster and more enjoyably.

Commissioner O’Reilly thinks it would be better if ISPs would somehow invest to bring mediocre data speeds to everybody in the country rather than investing in ultrafast speeds to urban areas. No doubt that would make the FCC’s life easier if rural people all had broadband. But it’s fairly obvious that big ISPs wouldn’t be investing in their urban networks unless those investments made them more money. And it’s just as obvious that the big ISPs have figured out that they can’t make the profits they want in rural America.

I’m not sure what constituency Commissioner O’Reilly is trying to please with these statements. Certainly any urban customers that are happily buying the ultrafast speeds he is referring to. Certainly the ISPs investing in faster data speeds think it’s a good business decision.

I think Commissioner O’Reilly and others at the FCC would like to see the rural broadband issue go away. They hope that the CAF II investments being made by the big telcos will make the rural areas happy and that the issue will evaporate. They want to be able to claim that they fixed the broadband problems in America by making sure that everybody gets at least a little bit of bandwidth.

But it’s not going to work that way. Certainly many rural customers who have had no broadband will be happy to finally get speeds of 10 – 15 Mbps from the CAF II program. Those kind of speeds will finally allow rural homes to take some part in the Internet. But then those folks will look around and see that they still don’t enjoy the same Internet access as folks in the urban areas. Instead of solving the rural broadband problem I think the CAF II program is just going to whet the rural appetite for faster broadband and then rural folks will begin yelling even louder for better broadband.

Is the FCC Squelching Web Innovation?

FCC_New_LogoI am always intrigued when politics enters the telecom realm, because the vast majority of issues we wrangle with are still handled in the traditional way. Engineers innovate and regulators regulate and generally, in the telecom world, the best technical solutions have always made it to the top and good ideas have generally won their way to the market.

Recently there was a guest editorial written for Forbes by Senator Steve Daines of Montana and FCC Commissioner Michael O’Reilly. This editorial took the FCC to task for squelching innovation by creating what they called a ‘permissionless culture’ of overregulation that is stopping innovation from happening on the web. The editorial goes on to talk about how web innovation has created a trillion dollar annual economy in the US and praises such ventures as Uber, Facebook and the iPhone. They go on to talk about how companies like GroupMe didn’t require any regulatory approval to try new ideas.

What seems to have them incensed is that the FCC recently called in Comcast, AT&T and T-Mobile to talk about each of their zero-rating schemes where they favor certain content by not making it part of their data caps. And this is where their analogy starts to break apart. It starts looking like a stretch to me to call Comcast or AT&T innovators. Comcast and the other large cable companies are very close to being broadband monopolists in the vast majority of their markets, and are at best a duopolist in other markets. AT&T and T-Mobile are two of only four wireless companies with any national reach in a market that is clearly an oligopoly.

If the FCC isn’t supposed to regulate the monopolists, duopolists and oligopolists then who are they supposed to regulate? It’s clear these two guys don’t like net neutrality, and probably not regulation in general. It also seems a bit extraordinary to me to see a sitting FCC Commissioner so heavily lobbying against his own agency in public.

The key accusation they have made is that the FCC is somehow stopping innovation by discussing net neutrality with these three large carriers. Is there any chance that they are?

I think it’s a huge stretch to compare Comcast and AT&T to GroupMe and the iPhone. The particular issues that prompted the editorial are essentially billing issues and these carriers aren’t being innovative and haven’t created anything new with zero-rating.

The huge number of filed comments in the net neutrality case made it very clear that the innovators in Silicon Valley are worried about the power of carriers like Comcast and AT&T. They fear that those companies who act as the ISP for most Americans can pick winners and losers among the GroupMe’s of the world by favoring a handful of large established web companies over everybody else. Those comments made it clear that the people who are the actual innovators want the FCC to insure that new web companies and new ideas be given a fair chance in the marketplace.

And so this is where politics enters the argument. Probably one of the oldest techniques used in politics is to call something the opposite of what it really is. Do that loudly enough and often enough and many people will start believing the opposite of what is really true.

In this case the FCC is doing exactly what it is supposed to do. They haven’t taken any actions yet, but they might. They are looking into whether the various zero-rating schemes of these three companies are anti-competitive. There is no guarantee on what they will decide since the three companies are trying different ideas. But what is clear is that companies like these three have the power to pick winners and losers among web content providers.

I find it disingenuous to be calling the FCC anti-competitive and accusing them of squelching competition when the FCC is investigating companies that actually have the power to do exactly that. I guess these kinds of editorials are written to stir up people outside of the telecom industry, because I suspect most industry insiders understand the issue clearly and just shake their heads when politics enters our universe.