February 12th, 2015
In the following video, President Obama announced several steps his Administration is taking to encourage municipally-owned broadband networks, as well as the rationale for taking them.
A few weeks after the president’s January 14 speech, the FCC announced it would be voting on a similar approach to municipal broadband at its February 26 meeting, where it will also vote on a proposal to classify broadband access as a Title II common carrier. Since community broadband is a topic I hope to write about here in the future, and the Commission’s meeting is only two weeks away, I thought I’d share some initial thoughts on the subject, using the President’s plan and its significance as a focal point.
As always, feedback (especially from those who see this issue differently) is welcome…
Nearly all of us would agree that free markets are fundamental to the strength of the American economy. But we sometimes forget that markets need real competition to be truly “free.” A good example is the local farmers market, where we can compare the quality and price of each vendor’s produce before deciding what to buy. A vendor offering poor quality at a premium price won’t attract much business, since shoppers can readily find substitutes with better quality and/or lower prices.
When it comes to Internet access, however, competition and choice are sorely lacking for most Americans. President Obama understands this, and on January 14, he announced a set of initiatives aimed at increasing competition in the Internet access market. The main thrust of his program is to make it easier for underserved communities to invest in their own state-of-the-art fiber optic network. These are the kind of networks that dominant ISPs rarely build, but that experts and local communities are recognizing as essential 21st century infrastructure.
A key part of the President’s agenda is to remove laws in the roughly 20 states that make it impossible or nearly so for communities to invest in this kind of advanced network. In most cases, the impetus for these laws came from lobbying funded by the state’s dominant cable and telephone companies. Though claiming to support competition, they’ve spent heavily to block it.
These large ISPs argue that competition and choice is already abundant in the Internet access market. But the evidence says otherwise.
As many of us are reminded every time we wait on hold, or for an installer or repair tech to arrive, or for service to return after the latest outage, Internet access in most American cities is nothing like the farmers market described above. As study after study has shown, the dominant ISPs are among the least popular companies in the nation, and have remained so for years. In a truly competitive market, companies like Comcast and Time Warner Cable, which consistently rank at or near the bottom in customer satisfaction, would not at the same time be claiming the lion’s share of customer growth. But that is the case for high-speed Internet, where competitive options– especially for very high speeds–are too often not available.
The lack of competitive options seems pretty clear when you look at data compiled by the FCC and NTIA. For example, a paper accompanying the President’s announcement noted that more than 55% of U.S. households have only one option if they want Internet download speeds of 25 Mbps (in most cases that provider is a cable operator), while more than 19% can’t get those speeds from ANY provider. That’s roughly 75% of homes without competitive options for the kind of speeds increasingly in demand thanks to the growing popularity of services like Netflix, Hulu, YouTube and Skype, which provide competitive alternatives to the TV and phone services provided by the dominant ISPs. On top of this is the proliferation of multiple devices per household, and the potentially massive bandwidth requirements of new applications with potential to transform our nation’s education, healthcare and manufacturing sectors. [For a more extensive analysis of competitive dynamics, feel free to check out this draft report I prepared last year based on industry data as of YE2013]
There are, however, some exceptions to this lack of competition, and some of the most notable ones are in cities that have taken the initiative to invest in state-of-the-art fiber optic network infrastructure. These networks provide powerful competition to incumbent service providers, offering gigabit (1,000 Megabit) speeds at attractive prices, and high-quality customer service provided locally, not from some distant location in another state or country.
And “Gigabit Cities” such as Chattanooga, TN and Lafayette, LA are thriving, becoming hot-beds of entrepreneurial activity and innovation in technology, education, healthcare and government services, and rich with civic pride and sense of community.
The president’s action is reminiscent of similar steps taken by past presidents from both parties who recognized the essential role of world-class infrastructure in keeping our nation strong.
Imagine where we’d be today if FDR, a Democrat, hadn’t mobilized federal support for expanding electricity to America’s small towns and farms via cooperatives and municipal utilities when private power companies didn’t see enough profit in serving these areas. Or if Eisenhower, a Republican, decided it was best to wait until private investors saw healthy profits in building an interstate highway system. We might still be waiting, or paying highway tolls that increase as fast as our cable TV bills!
Federal policies to encourage community-owned networks–as reflected in President Obama’s speech and the FCC’s upcoming vote– reaffirm two national priorities that helped make our country the envy of the world for more than two centuries: strong support for truly competitive markets, and a commitment to make world-class infrastructure available to all our citizens as they pursue a better life for themselves and their children.