The American dilemma: Competition, or fast broadband? Pick one

It's Groundhog Day for the US broadband industry

Analysis A report out today into internet access in the United States has concluded – yet again – that the majority of netizens have a hard choice between competition or broadband speed.

Thus, you can either have a decent number of ISPs to choose from, or one or two really fast ones.

The study – Profiles of Monopoly: Big Cable and Telecom – takes a deep dive into the provision of fast internet across the US and concludes, as many have before, that the market has been carefully divided up between a small number of large companies who barely compete with one another, leaving most subscribers with little real choice.

The report [PDF] was produced by The Institute for Local Self-Reliance (ILSR), a non-profit focused on providing solutions for everything from banking, energy, and waste. With some discomfort, the institute used official reports provided by ISPs to America's Federal Communications Commission (FCC) to develop its analysis – reports even the US government accepts are inaccurate.

The ILSR notes straight off the bat that the ISPs' reports are a poor source of information since they drawn upon figures at a census block level, resulting in a much higher estimate of broadband availability than reality. An ISP is able to say that an entire census block is served with broadband if anyone within that block can get it, even if no one actually subscribes, and even if service is not available to the rest of the block. There are typically between 30 and 500 people in any given block.

The end result is that ISPs can claim to cover a much large percentage of the US with fast internet access than they really do, and, crucially, to claim competition where there really isn't any.

If, for example, someone in one part of a census block only has a single choice for broadband – say, Comcast – and someone in a different part of the block also only has a single choice of a different ISP – say, Charter – the FCC and cable industry agree that this means both consumers have a choice, when in reality, they do not.

Reality distortion

The reason this distinction is important is because the cable industry persistently argues that there is lots of competition in the broadband market – even arguing that there is "too much competition" – when the reality is that the comms giants go to great lengths to ensure that competition is kept to a minimum, allowing them to keep prices high and benefit from greater profits.

"The market has spoken: the market is broken," argues the ILSR. Based on the FCC data, there are a potential 110 million customers for the US's largest residential ISP, Comcast. Thirty million of them have no choice but Comcast for broadband access, and the other 80 million may have a choice, but we don't know whether they really do. Amazingly, Comcast manages to scoop up 65 million of the total potential 110 million customers: 60 per cent.

It may be that Comcast does such a fantastic job offering internet access that everyone flocks to the company. But the fact that the cable and ISP industries have received the lowest marks in customer satisfaction across the entire economy every year for the past 15 years would suggest otherwise (even the health insurance market scores higher).

This carefully coordinated series of monopolies plays out across the entire industry. Charter has a potential market of 101 million people, and achieves a similarly incredible 57 million customers from that. Of those 101 million, 38 million have no choice but Charter and the remainder may have a choice. But its incredible success in picking up customers suggests that many do not.

The same holds true for the other main ISPs: AT&T has 40 million customers out of a total potential of 122m (33 per cent); Verizon has 12m out of 55m (22 per cent); CenturyLink 13m out of 49m (26 per cent); Frontier 10m out of 33m (30 per cent).

This approach of minimal competition is extremely profitable, the report notes: Comcast raked in $84bn in revenue in 2017 – $14.8bn of which came from high-speed internet subscriptions – netting $22.7bn in profit while spending just $8bn on maintaining and expanding its network. Charter took $40bn in revenue, including $14.1bn from internet subs, netting $9.9bn in profit while spending $8.7bn. And so on.

Need for speed

On top of making huge profits from a seemingly coordinated lack of competition, while claiming the opposite, the ISP industry also provides misleading data over the actual speed provided to customers.

A separate study into connectivity claimed by ISPs in their reports to the FCC and the actual speeds experienced by customers revealed – you guessed it – that the reality is quite different from the rosy picture painted.

The Measurement Lab (M-Lab) gathers data from real users across the US, and non-profit media organization The Daily Yonder compared it to official figures.

"While residents of nearly every city on the list are shown as having at least 25Mbps available to them, the median speeds of actual connections are below 10Mbps in all but two cities," it revealed. "In seven cases, the median speed is below 5 Mbps – even though the FCC depicts them as having 25Mbps available."

It highlights the worst example it uncovered: "In Steuben, Maine, the maximum reported speed was 87Mbps; however, the median user (out of 119 observations) only experienced speeds of less than 2Mbps."

As for the conclusions drawn by The Institute for Local Self-Reliance following its deep dive, hold on to your hats, you aren't going to believe it.

It concludes that competition – actual competition where folks have a real choice between more than one company that offers broadband speeds – drives investment.

It gives the example of Google Fiber which entered several markets (before finally giving up) and sparked massive investment by incumbents in response. "Investment by the large ISPs is correlated to competition rather than the regulatory environment," it concludes.

Say what?

Second mind-blower: Big Cable dominates the market. And third, Big Cable is focused on urban market, where they can get more bang for their buck. "About 98 percent of the urban population (254 million people) have access to broadband. About five million urban residents, however, remain without broadband access. In rural areas, only 69 percent of the population (43.6 million people) have broadband access, leaving 19.3 million rural residents without high-speed Internet access," the institute notes.

The obvious conclusions to draw from both reports is that cable companies need to be obligated to provide different and more granular data to reveal the true reality of broadband provision in the US, and then be obliged to offer real competition in more markets as a result.

And there is a regulatory body that is supposed to do just that, and which is empowered to force companies to expand their offerings if they are not providing a sufficient level of competition. It's the FCC.

And there were signs that it was prepared to do just that: increasing the benchmark of broadband to a more realistic 25Mbps and threatening to use its powers to increase competition. But that was under the previous FCC chairman Tom Wheeler. Since former Verizon lawyer Ajit Pai has taken over as FCC boss, the regulator has:

• Tried to lower the broadband benchmark
• Buried the 2017 Broadband report so it can ignore the fall in competition
• Bent the 2018 Broadband report around a single, fallacious metric to claim there is sufficient competition
• Undermined efforts to provide faster internet access to schools
• Turned a blind eye to cable company efforts to strangle municipal broadband efforts
• Stacked a Broadband Deployment Advisory Committee with cable industry figures
• Let the cable industry publish straight-out-false competition claims using FCC figures without saying a word
• Promoted the views of the cable industry and changed policy documents to reflect those views while actively ignoring other voices

In other words, America, you are being screwed by Big Cable: you know it, we know it, and every new report that doesn't come from the FCC points it out in stark detail. ®