In 1973, the Edgar Winter Group scored a Top 20 hit with “Free Ride.” In 2016, Competitive Local Exchange Carriers (CLECs) are trying to score a free ride from the FCC via heavy regulation of special access rates.
While the CLECs like to claim there is a monopoly in the business broadband market, investment numbers say otherwise. Hundreds of billions are being invested in broadband networks, and all that money is not coming from CLECs. No wonder they want the FCC to impose heavy regulations on special access. The CLEC business model is to rely on the regulatory hammer to give them access to networks others have built, and as networks across the nation are upgraded to run on all-IP — and businesses require ever-faster broadband — the CLECs are quickly finding their business model is on thin ice — with spring around the corner.
Still, they continue to bend the FCC’s ear, which is why I continue to write about special access. It’s also why the organization US Telecom has launched a new initiative called “Innovate With Us” to remind policymakers that the broadband market in America is thriving across the board, and in order to keep the good times — and investment dollars — rolling, sensible regulations need to be in place. Or, as US Telecom succinctly put it in the intro to the initiative:
[T]he FCC should champion pro-investment policies that work for business customers, not specific companies, and look beyond yesterday’s technologies toward the networks of the future.
“Competition” is one of those words that make policymakers tingle. And yet, time and time again, private industry finds itself wrestling with regulations that not only harm competition but — in the most extreme cases — actively benefit one party over another.
Case in point: wireline broadband competition. Providers have invested billions to expand the reach and speed of their networks, and yet recent actions taken by the FCC are threatening to stifle ongoing investment. But don’t just take my word for it. Check out this latest study from the American Consumer Institute titled “Concentration by Regulation: How the FCC’s Imposition of Asymmetric Regulations Are Hindering Wireline Broadband Competition in America.”
Yes, that title is quite the mouthful (as most study titles are), and to be honest, unless you’re someone who enjoys diving into studies (with charts) on regulations, investment, and the economy, you might find the report’s 18 pages a bit of a slog. But those of us who do read through ACI’s study will find a convincing — and rather damning — case that the FCC is mistepping rather badly as it continues to amass more and more power over broadband. For example, here’s what the report has to say about one of the biggest regulatory marks the Commission made in 2015:
Title II regulations are preserving and maintaining duplicative and costly copper networks. That cost is an impediment to fiber deployment that keeps ILECs more reliant on older copper-based DSL technologies. Instead of the FCC relieving non-dominant ILECs of Title II regulations in more competitive markets, the FCC has recently chosen to make broadband service providers subject to Title II regulations.
Unless there is action soon, the shift in concentration is likely to be permanent. A decade ago, the rollback of asymmetric regulations permitted modest rebound in broadband services for ILECs, because there was brisk growth in subscribers. Today, because the broadband market is so widespread, growing slower and more mature, asymmetric broadband regulation will likely have longer term consequences that could permanently displace and weaken wireline competition. Even if a rebound is possible, ILECs will face a major cost to win back customers. Regulations are costly and delays in lifting these regulations will be even more costly.
Translation: Old regulations that effect some providers and not others are forcing companies like Verizon and AT&T to invest billions in the copper networks of old. Meanwhile, other providers don’t face such regulatory roadblocks, even as they aim to invest in the very same thing legacy providers are investing in — fiber-backed, high-speed broadband networks. Not exactly the spirit of competition, is it?
The ACI study isn’t all doom and gloom for America’s communications infrastructure, though, for the group has thoughtfully included a three bullet points that can help level the playing field:
• Policymakers need to end Title II regulations for all providers.
• There needs to be less emphasis on regulation of wholesale services. Less regulation will encourage more facility-based investments, which will lead to the natural development of a healthy, wholesale market; and
• If regulators truly believe that some regulation of wholesale services is necessary – and that may be the case in some rural markets – then regulators need to apply these regulations on a symmetrical and competitively neutral basis.
In short, get rid of the bad regulations, be careful when imposing new ones, and make sure everyone is playing under the same rules. Wise words, but the question is: Will the FCC listen?
In advocating for new regulations, Net Neutrality proponents have consistently made clear that any new rules should not include rate regulation over Internet access services. For example, when President Obama announced his support for regulating the Internet as a Title II service under the Communications Act, he explicitly stated that such effort should include “forbearing from rate regulation.” Likewise, in applying Title II to broadband last May, FCC Chairman Wheeler stated that the Commission’s net neutrality effort would “forgo sections of Title II that pose a meaningful threat to network investment” and specifically declared that the “goal is not to have rate regulation.” Tomorrow, the House Energy & Commerce Subcommittee on Communications & Technology will consider the bill H.R. 2666, “No Rate Regulation of Broadband Internet Access Act,” aimed at codifying these clearly stated intentions into law.
President Obama and Chairman Wheeler were right to reject rate regulation. Any attempt to introduce pricing rules over the dynamic broadband sector would harm consumers by retarding future network investments. Such actions would also strike a blow to the American economy with lost jobs and decreased productivity. H.R. 2666, authored by Rep. Kinzinger, offers a smart, protective measure to help continue the virtuous cycle of innovation that has fueled the Internet’s success. If enacted, his bill would turn the stated intentions of President Obama and Chairman Wheeler into law.
And adopting that law would remove a substantial part of the uncertainty stemming from Title II reclassification of broadband and have the highly positive effect of giving broadband providers greater confidence to increase network investments.
Technological advancement is synonymous with American ingenuity. Successful bi-partisan, light-touch regulatory policies over the past two decades have made the American technology sector the envy of the world, increasing competition, spurring innovation and inviting greater private investment. These polices opened the door to Gigabit level network deployments by AT&T, Comcast, CenturyLink and Google Fiber, and these advances have increased broadband throughput tenfold and made high-bandwidth streaming easier for consumer connected devices.
The subcommittee should approve H.R. 2666, which would bar the FCC from regulating the prices charged for broadband. Without legislation, no guarantee exists to prevent future Commissions from rate regulating the Internet. Congressional action in this area is welcome given that promises are mere words until they are set in stone by statute.
In the latest installments of our “Let’s Get Nerdy” video series, our Co-Chairman Jamal Simmons talks about our recent Cost Campaign study and why it’s more important than ever to close the digital divide.
Simmons also discusses the progress being made through ConnectED and the Lifeline program, and how policymakers can still do more to close the digital divide.
• 67% of Americans have broadband at home, which is actually down from the 70% reported in 2013.
• 15% of Americans now describe themselves as “cord cutters,” relying on broadband for television rather than cable/satellite.
• 13% of Americans are smartphone-only, meaning they rely on a mobile device for Internet access.
One other finding from the Pew report, one that shows the value of encouraging investment in broadband networks: 69% of Americans believe not having broadband is a “major disadvantage.” That number is 13% higher than in 2010.
Early this week, we released an updated version of our 10 Ways Broadband Saves You Money research. In it, we found the average household can save an average of $11,944 per year on spending by using the Internet. You can find an infographic with our findings, along with the methodology used, here.
According to new numbers from Sandvine, 70% of Internet traffic during peak hours is now driven by streaming video and audio. As Jillian D’Onfro of Business Insider reports:
Netflix, YouTube, and Amazon Video are the top three sources of video traffic, with ~37%, ~18%, and ~3% respectively. Although traffic from Amazon’s video offering still pales in comparison to Netflix’s, this is the first year it broke into the top three.
For context, streaming video and audio accounted for a mere 35% of peak traffic just five years. That’s quite a leap in half a decade. More on Sandvine’s research can be found here.
In the final installment of Larry Irving’s Title II discussion, he talks about the role he believes Congress should play in preserving the open Internet, and whether Congress should seek a bi-partisan compromise on net neutrality.
Our Co-Chairman Larry Irving has recorded a series of videos for our Let’s Get Nerdy series on net neutrality, Title II, and the potential for Congressional action. Here, he talks about the approach to tech policy during his time with the Clinton Administration, and whether there are lessons from then that should be applied today.
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