Is this the sound of Comcast’s merger hopes dying? FCC Chairman declares U.S. broadband uncompetitive

Federal Communications Commission (FCC) Chairman Tom Wheeler listens during an open meeting to receive public comment on proposed open Internet notice of proposed rulemaking and spectrum auctions May 15, 2014 at the FCC headquarters in Washington, DC. The FCC has voted in favor of a proposal to reform net neutrality and could allow Internet service providers to charge for faster and higher-quality service. (Photo by Alex Wong/Getty Images)

FCC Chairman Tom Wheeler Thursday said what everyone who pays a broadband bill outside a few select cities already knows: the country lacks a competitive broadband market. In a speech delivered at 1776, a startup incubator in Washington, Wheeler said, “meaningful competition for high-speed wired broadband is lacking and Americans need more competitive choices for faster and better Internet connections.”

I’m sure the Chairman felt brave as he said those words. I still recall the kerfuffle among carriers and in Congress when the agency didn’t actually call the wireless industry uncompetitive, but merely pointed out that it couldn’t declare it competitive. This is one of those cases where the rest of the country will feel the huge disconnect in what passes for taking a stand in D.C. versus anywhere else.

But before we mock this, recall that Washington politics is all about signaling and these words could have considerable impact. For example, given that the nation’s top two cable providers are attempting to merge in a deal that would be horrendous for U.S. broadband and pay TV subscribers, is the agency perhaps telling Comcast that its efforts to say the deal is all about pay TV aren’t holding water? Or reminding everyone that the cable companies, barring a few planned gigabit networks, are the purveyors of the dominant form of high speed broadband access in the U.S.?

The FCC, in other words, is specifically calling out the lack of competition when it comes to higher speeds. Wheeler’s speech included the following chart to drive home this point:

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Outside of the hidden messages, the Chairman offered clear statements. He called on the FCC to create principles to increase competition that are as follows:

Protect existing competition: The chairman pointed to the agency’s efforts to oppose wireless mergers as an example of this and said that, when it comes to transitioning from older copper networks to newer IP networks, the shifts should not reduce competition. He did not mention Comcast’s planned merger, which is the elephant in the room.

Encourage competition where it can exist: In wireline, Wheeler mentioned both the power of last-mile providers and ensuring that last-mile access remains free from barriers. In wireless, he mentioned setting aside spectrum in the Broadcast Incentive Auction for alternative options which I’m guessing refer to white spaces and Wi-Fi.

Create competition where none exists: He against referred to unlicensed spectrum as well as the current fight for Chattanooga’s Electric Company to help provide gigabit services to nearby towns — something currently forbidden by state laws that were drafted with help from telecoms companies.

Provide broadband where competition can’t exist: This was Wheeler’s shout out to rural America, where wireline is both expensive to lay and there’s little incentive to invest. In those cases he said Universal Service Funds should help offset those costs to ensure that we don’t get a digital divide between rural America and everywhere else.

The principles aside, Wheeler also derided the agency’s current definition of broadband at 4 Mbps. Speaking of the chart higher up in the story, he said:

The bar on the left reflects the availability of wired broadband using the FCC’s current broadband definition of 4 Mbps. But let’s be clear, this is “yesterday’s broadband.” Four megabits per second isn’t adequate when a single HD video delivered to home or classroom requires 5 Mbps of capacity. This is why we have proposed updating the broadband speed required for universal service support to 10 Mbps.

He went further, indicating that 25 Mbps was really the current “tablestakes” goal for minimum broadband and pointed out that while a majority of American homes have access to 100 Mbps broadband, 40 percent do not. He called that unacceptable, while essentially tossing the efficacy of DSL lines out the window as a quality broadband option.

So long, copper!

So long, copper!

“Traditional DSL is just not keeping up, and new DSL technologies, while helpful, are limited to short distances. Increasing copper’s capacity may help in clustered business parks and downtown buildings, but the signal’s rapid degradation over distance may limit the improvement’s practical applicability to change the overall competitive landscape.”

The telcos have known this for more than a decade, but only when the threat of competition from cable companies deploying faster speeds and now Google’s gigabit plans have prompted them to move faster in upgrading their networks. The Chairman said essentially the same things the Gig.U report I covered last month said: that gigabit isn’t just fast, but it’s spurring competitive investment that otherwise may never have happened.

Wheeler likely irked the telco’s further in explaining that mobile broadband isn’t an adequate substitute for fixed broadband, “especially given mobile pricing levels and limited data allowances.” We’ve said this all along, and it’s not like agency hasn’t realized this for years, but saying it so publicly is a nice first step.

RIP net neutrality

So what’s driving Wheeler to tell off the industry his agency regulates? My guess is that he realizes that creating any kind of meaningful network neutrality is impossible, so he has to go for the nuclear option. Not reclassification, but calling out the industry for the lack of competition that is why we need network neutrality in the first place.

This is the first of several speeches the FCC will offer on this topic, we’ll have to wait and see how the agency lines up its ideals on competition with policy-making. It’s much harder to say all of these things and then approve a merger that would put more American’s under a broadband data cap and reduce the number of wireline broadband competitors or say no to a request to broaden the options businesses have for faster broadband access.

But the chairman was also very clear that he’s aiming to incentive competition, not mandate it. Which means the behind-the-scenes negotiations between the agency and the ISPs may put the lie to Chairman’s pro-competition rhetoric today in ways the average citizen won’t see or understand until they are stuck paying $90 a month for 50 Mbps broadband that comes with a data cap.

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