FCC Says Broadband Deployment Lacking; Redefinition (25M/3M) Has Huge Implications for AT&T, Verizon & Comcast
In its 2015 Broadband Progress report, released January 29th, the FCC states that U.S. broadband deployment, especially in rural areas, is failing to keep pace with today’s advanced, high-quality voice, data, graphics and video offerings.
In an effort to stimulate deployment, the FCC voted 3-2 to change the definition of “broadband” for wireline networks in Section 706 of the Telecommunications Act of 1996 . The redefinition is from 4 Mbps downstream and 1 Mbps upstream (set in 2010) to 25 Mbps downstream and 3 Mbps upstream. The 2010 broadband hurdle rates were said to be “inadequate for evaluating whether advanced broadband is being deployed to all Americans in a timely way,” the FCC found.
“Using the new higher broadband rate benchmark, the 2015 Broadband Progress report finds that 55 million Americans – 17% of the population – lack access to advanced broadband. Moreover, a significant digital divide remains between urban and rural America. Over half of all rural Americans lack access to 25 Mbps/3 Mbps service. The divide is still greater on Tribal lands and in U.S. territories, where nearly 2/3 of residents lack access to today’s speeds. And 35% of schools across the nation still lack access to fiber networks capable of delivering the advanced broadband required to support today’s digital-learning tools.”
Using the new broadband definition, approximately 20% of U.S. wired Internet connections today do not qualify as broadband, including many (mostly DSL connections) that formerly did qualify. For example, this author and many others have AT&T U-Verse Internet, which typically provides downstream rates of either 11Mb/sec or 22Mb/sec (the Uverse Upstream rate is not stated by AT&T). Others have 4Mb/sec and higher ADSL based Internet access. As of yesterday, we don’t have broadband anymore!
The change is designed to protect consumers by ensuring that cablecos (MSOs), telcos, and other Internet access providers don’t offer subpar download speeds as call them “broadband.” It’s also meant to stimulate the telecom/cableco industry into offering higher-quality services to the one-fifth of the population that has little or no Internet access, according to FCC Chairman Tom Wheeler. “We have a problem” when 20 percent of the U.S. doesn’t have access to the new speed. And we have a responsibility to that 20 percent,” Wheeler said.
It appears the FCC is paying more attention on cable’s growing broadband monopoly, as AT&T and Verizon back away from unwanted ADSL Internet access markets to focus on their triple play offerings (U-verse and FiOS, respectively) and 4G-LTE nationwide wireless access. Not only do those telcos not want to upgrade their DSL lines, they’re paying for state laws that ensure nobody else can either. It’s a paradigm that’s needed changing for most of the last decade, and few thought that Wheeler would try to do that. It remains to be seen if AT&T will upgrade U-verse Internet customer speeds as they are almost always served by DSL (only some greenfield U-verse deployments get fiber to the building). Verizon FiOS uses fiber access, which already provides higher speeds than 25M/3M to all its customers.
The redefinition also creates a huge problem for Comcast. Suddenly, the company’s share of the broadband market becomes a lot larger — and that gives regulators and politicians concerned about market concentration/monopoly power more cause to closely scrutinize Comcast’s plans to merge with Time Warner Cable. If that merger closes, approximately 63% of U.S. households would have only one choice for a broadband provider at the new faster speeds, according to a December 2014 memo from the FCC.
Time Warner Cable CEO Rob Marcus said he didn’t think the commission’s “somewhat arbitrary” definition would affect the deal with Comcast. “I don’t anticipate that that has any practical implications for life going forward or for the (the Department of Justice) analysis of the deal,” Marcus said in an earnings call Thursday, January 29th.
Comcast has said its market share would grow by less than 1% because Time Warner Cable has virtually no broadband customers at speeds above 25 Mbps. No customer will have fewer choices after the merger because Comcast and Time Warner Cable serve different areas, Comcast has repeatedly stated.
There’s still the chance that regulators could block the transaction or seek specific concessions before approving it. The reviews by the FCC and Justice Department, which is evaluating the merger’s impact on competition, have already been delayed several times as the anniversary of the deal’s announcement nears.
“The market suggests that odds of the deal closing are no higher than 50-50,” Craig Moffett, an analyst at Moffett Nathanson, said in a note to clients Thursday. The merger “has lost its air of inevitability,” he said. Earlier this month, Moffett had said he expected regulators to sign off on the deal. “But if it is rejected, combined Comcast’s share of the broadband market would be the reason,” he wrote in Jan. 8th note to clients.
Comcast says it’s better to measure broadband by including slower speeds, giving it about 35.5% market share in the U.S.
Meanwhile, the debate over a new downstream/upstream rate definition for broadband service mirrors the battle lines over network neutrality. The big Internet content companies including Google, Facebook, Yahoo and Netflix favor strong net neutrality action by the FCC, while the cable and telecommunications companies want the FCC to refrain from reclassifying broadband as a regulated service under Title II of the Communications Act. Earlier this month, Wheeler strongly hinted that Title II will be the basis for new net neutrality rules governing the broadband industry. Title II lets the FCC regulate telecommunications providers as common carriers. President Obama urged the commission to use Title II to impose net neutrality rules that ban blocking, throttling, and paid prioritization (AKA “paid peering).
In a filing with the FCC last week, Matthew Brill, counsel for the National Cable and Telecommunications Association, called the proposed broadband reclassification as “arbitrary and capricious.” He termed the assumptions behind it “hypothetical” that “dramatically exaggerate the amount of bandwidth needed by the typical broadband user.”