White House and FCC announce big, broken solutions to America's pitiful broadband

Why fight an oligopoly when you can subsidize it?

broadband

The White House and the Federal Communications Commission (FCC) have both announced big plans to expand broadband internet access across the United States.

In the first, the Trump Administration has highlighted a new report drawn up the Department of Commerce that aims to use federal resources to jumpstart flagging internet speeds. In the second, the FCC has finalized the details around a $1.5bn auction-based fund for expanding broadband access.

In both cases, the efforts will likely achieve the intended plan for expanding fast internet access in rural areas but both also possess the same fundamental flaw: the federal government will effectively lock in place the current oligopoly that has led to poor rollout and slow speeds at high prices.

The American Broadband Initiative (ABI) report, pulled together by the DoC's National Telecommunications and Information Administration (NTIA), is focused on removing barriers to deployment and takes a decidedly free-market economy approach to the issue.

Most significantly, it details how federal permitting processes can be improved and simplified so companies can get their equipment installed in a faster, more consistent and predictable fashion.

That is good news to both small and large ISPs who find that the paperwork and bureaucracy involved in installing network equipment is a significant brake on rollout plans. But while the federal government does own huge tracts of lands, it is only a partial solution because it doesn't reach everywhere.

What's really needed is nationwide consistency, although recent efforts by the FCC to force a one-size-fits-all solution on cities all over America for the rollout of 5G networks has been widely condemned by those cities for ignoring on-the-ground realities.

Shafted by poles

There is also the unpleasant reality that the physical poles are not owned by the federal government, and carry broadband and fiber equipment owned by companies that have a keen interest in limiting their competitors' access.

A second drive in the NTIA report is in providing federal funds to subsidize future rollouts, and a third is to make sure those funds are used as effectively as possible.

In that respect, the FCC's transition from its Connect America Fund to a new Connect America Fund (CAF) Phase II Auction is also intended to more efficiently use federal dollars to drive broadband investment. Under the latest plan, $1.5bn in funds will be "targeted to areas where the incumbent provider declined a 2015 offer of CAF Phase II model-based support."

The idea is to focus funds on areas that need it most and introduce more competition, with the goals of creating a market that drives higher speeds and lower costs through greater provision.

All of which is good in theory but both the NTIA/White House and the FCC are willfully ignoring the reality of internet provision in the United States in their recommendations and programs.

It is notable that the NTIA relies heavily on broadband data that even it accepts is wildly inaccurate. "As of 2016, more than 92 per cent of the US population had access to fixed land-based broadband at speeds of 25 Mbps/3 Mbps," the report notes despite knowing that the figures it relies on to make that claim are completely wrong.

The NTIA has repeatedly asked for funds from Congress to hire organizations to get accurate data and recently announced a plan to do exactly that because the current figures are provided by the dominant market players and it has been repeatedly and extensively demonstrated that those companies distort the data gathering process to make themselves and the market look far more extensive and competitive than it really is.

Anti-competitive

It is also a simple statement of fact that the dominant suppliers of internet access in the United States spend an enormous amount of time and resources ensuring that they do not compete too extensively with one another and fights on numerous front to prevent other smaller companies from getting into the market and stealing their customers.

While the US government chooses to ignore the fact that most of the country is served by a carefully coordinated series of local monopolies, all of its policies will serve only to reinforce the status quo.

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And so, for example, we end up in the ridiculous situation where the industry and lobbying group for Wireless Internet Service Providers Association (WISPA) argues that the FCC should ignore its own broadband speed requirements and fund the rollout of slower networks in rural areas. In other words, spend huge sums of federal money helping to provide internet speeds from a decade ago; the antithesis of a forward-thinking strategy.

What WISPA inadvertently highlighted however was the fact that the federal government is perversely incentivizing Big Cable to roll out minimum-speed internet.

If a large telco introduces 25Mbps down/ 3Mbps up networks (the current minimum definition of wired broadband) it will cost far less than gigabit networks to install while also giving it control of the wires that go into people's homes. Because it owns the wires, a large telco can in future expect more federal funds to offer a speed increase. And it will still own the network.

Neither the White House nor the FCC address the bigger barriers in the way to a truly competitive market: control of existing networks and a mesh of rules and laws that make it extremely difficult for competition to flourish.

Just one example is the glut of state laws that prevent cities from setting up their own municipal networks. Taxpayer-owned networks would be able to pick and choose their ISPs and even offer access to multiple suppliers if the market was large enough to accommodate them.

Why get one fiber cable when you can have four?

The fact that the US continues to insist that the best solution to universal broadband is to have every ISP install their own network, rather than create open access rules that allow competitors to also use their network, or set up hybrid markets with a focus on increased competition, is what is causing the greatest barrier to effective deployment.

While this new report and new program are well intentioned, they are literally throwing money at the problem without addressing the main underlying problem (there is also, by the way, a third federal broadband fund, this time run by the Department of Agriculture). Experts are divided over what the best solution is, especially as the next-generation fiber network won't even have the competitive protections that the current phone network does.

But one thing is clear: the federal government's conscious myopia about what has caused broadband provision in the US to fall so far behind the rest of the world is only kicking the can down the road. We will almost certainly end up with more broadband to more customers by cutting red tape and offering subsidies but it is a short-to-medium term solution.

Without tackling the root causes, in 10 years' time, Congressmen and women will again raise their constituents' concerns about slow internet speeds and the federal government will again be asked to explain what it is doing. ®

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