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New FCC Data Indicates Future Broadband Access for Most Americans Will Be a Monopoly

DEEPLINKS BLOG
December 12, 2018

New FCC Data Indicates Future Broadband Access for Most Americans Will Be a Monopoly

Image with house in middle. On left, everything is grey and brown with one thin wire running underground to the house. On left, blue sky, three thick, bright wires run underground to the house

The Federal Communications Commission (FCC) produced its first Communications Marketplace Report, a biannual report recently required by Congress, to comprehensively assess the status of America’s communications and media market. And here’s the good news: if what you want is a choice of slow, outdated Internet, then the United States market looks great.

The major takeaway of this report, which provides policymakers in D.C. and the states a wide-ranging view of available data to see trends in the Internet, is that competition for broadband only looks good at slow speeds while a vast majority of Americans (EFF estimates at least 68 million) are facing monopoly or no access to high-speed broadband. In comparison to our international counterparts, the FCC currently ranks the U.S. in fifth place globally (an improvement from our 11th place showing last year) for fixed broadband speeds and 23rd place for mobile broadband speeds (yet curiously found that we have universal access to 4G LTE networks).

In short, we still do not have an accurate picture of how bad the broadband monopoly problem is. The methodology the FCC relies on for collecting information is flawed. Namely, if one household in a census block has broadband, the data reports that an entire census block has access to the same service. The agency acknowledges that this risks overcounting deployment, but does not describe its plan to improve data collection.

The FCC Has Acknowledged That Fiber to the Home Deployments Have Been Slowing Down in the U.S., Resulting in the Monopoly Problem

The faster the speed you want, the fewer choices are available to you until, like a majority of Americans, you effectively return to monopoly options or no options at all. The cause of this is tucked into the report where the FCC noted that new construction plans for fiber networks “appears to have slowed recently.” We at EFF wholeheartedly agree and submitted comments to the FCC for this report to raise the alarm and push back against AT&T’s and Verizon’s plan to make a bad situation worse.

This slowdown coincides with the complete deregulation of the ISP industry under the “Restoring Internet Freedom Order” and a massive tax cut stimulus from Congress to the tune of billions. We are the only advanced market in the world to take this approach to the broadband industry and the results of dwindling and declining competition for the future comes as no surprise.

EFF has been actively pushing for solutions to this problem such as promoting community broadband and for policymakers to focus on the promotion of fiber to the home construction. We should take stock of what is working well in the EU and advanced Asian markets where FTTH is aggressively being deployed well ahead of the United States. Unfortunately, virtually all of the attention has been spent on promoting 5G wireless, which is aggressively marketed by the wireless industry to help us ignore the cable monopoly issue for nearly 68 million Americans.

To make matters worse, the FCC appears to believe that monopoly doesn’t count if competition exists somewhere else. It thinks “spillover effects” mean that and that “Internet service provider facing competition broadly, if not universally, will tend to treat customers that do not have a competitive choice as if they do.” Notably, this belief—that monopolies can be disciplined without competition—underlies the rationale for the enactment of the Restoring Internet Freedom Order as well.

EFF has found no evidence to support such a claim. Instead, in a handful of markets we have reviewed, we find that the average price consumers pay ranges from 200% to 400% above competitive rates and that cable prices are established surgical precision in order to extract monopoly rents. For example, I myself would have to pay $159.95 for a gigabit service whereas my coworkers would pay $40 for a superior product.

Americans Hurt the Most by the High-Speed Broadband Monopoly Tend to Be Low-Income, Rural, or Both

Apparently, only wealthy neighborhoods within cities, away from low-income Americans and rural Americans, have competitive high-speed markets. In a perverse way, that essentially means Americans most in need of connectivity are more likely either to have no access at all, or to have it at exceedingly high prices. Whereas Americans that do have disposable income are given access to the latest advancements in broadband access speeds at cheap prices.

The FCC’s chart below breaks down the population into four parts, or quartiles, and rates them from most densely populated (like major cities) to least densely populated (very rural areas. The FCC does the same four-way division with income groups so we can distinguish between the upper 25 percent of Americans from the lower 25 percent.

By the numbers, the FCC has found that the most rural 25 percent of Americas have either have no high-speed access or a high-speed monopoly for an overwhelming 91.3 percent of people. The second quartile does not change matters much where that number drops to 77.6 percent of Americans. For low-income Americans, the first quartile 82.8 percent have no choices or a monopoly choice with the second quartile at nearly the same with 81.5 percent. Compare those numbers to the most densely populated areas (fourth quartile) where 40.3 have at least two high-speed options and 39 percent of wealthy Americans two or more high-speed options and you see not just a digital divide, but a next generation access divide.

What Is the FCC’s Plan for Fiber for All Americans?

With several hundred pages detailing the problem the U.S. market faces in obtaining a high-speed competitive market in order to keep pace with the EU and advanced Asian markets, you would think the FCC would begin to investigate how to course correct our current trajectory. However, the Commission, in detailing its response to the problem wrote no more than 4 paragraphs in its 181-page report that mostly reiterates its own faith in its current approach of abandoning oversight over the broadband industry and hoping it works out.

The result of ignoring this problem while the rest of the world rapidly deploys FTTH to their citizens is future Internet applications and services will eventually require more bandwidth than Americans can access or would be forced to go through a monopoly to utilize. Compounding this problem is an exorbitant amount of time regulators and policymakers are spending on 5G wireless that currently does not exist. If these trends continue, it will mean most Americans will be denied the future of broadband access for no other reason than we let it happen.

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