Americans Still Have Few Choices for Broadband at Higher Speeds, Commerce Department Says

At download speeds of 3 Mbps, 98 percent of the U.S. population has a choice of at least two mobile ISPs, and 88 percent could choose from two or more fixed ISPs, a department news release said. “However, when multiple household members consume video streaming services, music streaming, and online games, 3 Mbps can quickly become inadequate,” the department said. “To understand download speed at 3 Mbps, it takes approximately 2.25 hours to download a 6 gigabyte movie. The same movie would take only 16 minutes to download at 25 Mbps.”

Choices decline as speeds increase, the department said. At speeds above 10 Mbps, 37 percent of Americans had a choice of two or more fixed-service providers, and at speeds of 25 Mbps or greater, only 9 percent had three or more choices. Four out of 10 Americans live in areas without 100 Mbps or higher service, the report said. The numbers are from December 2013.

“In sum, the report finds that the number of broadband providers from which consumers can choose varies by speed; there are multiple providers of lower speed broadband but this number dwindles at higher speeds,” said Sue Helper, Commerce Department chief economist, in a blog post. “All else being equal, having fewer competitors at a given speed is likely to drive up prices. As a result, some consumers will decide not to adopt Internet at all, some will choose a slower speed and some will economize in other ways.”

University of Pennsylvania Law School professor Christopher Yoo said the report on the whole is positive and shows steady progress. FCC data tracking the availability of 10 Mbps service, as measured by the percentage of people living in census tracts receiving that level of service, “shows that the level of competition for 10 Mbps service has skyrocketed in recent years,” Yoo told us. “This is confirmed by the Commerce Department’s report ... . The level of competition in 25 Mbps service is not yet where we would like, but the trends suggest that unless changes dampen incentives to invest, that gap should close in the coming years as well.”

The release of the study underscores the need for the government to develop and seek comment on a comprehensive and peer-reviewed market study, said former FCC Commissioner Robert McDowell, now at Wiley Rein. “I've called for this for several years and the FCC and Commerce Department could have produced several since this debate started but chose not to,” McDowell said. “The administration has an incentive to issue outcome-driven reports to support its predetermined, but erroneous, conclusion that more regulation in the broadband space will produce abundance. History teaches us time and again that the opposite is true: needless regulation leads to market stagnation and rationing. Nonetheless, the Commerce report tacitly admits that mobile broadband is becoming a substitute for fixed broadband. This admission undercuts the pretext for net neutrality regulations."

The report likely overstates the level of competition since data by address is not available, said Public Knowledge Senior Vice President Harold Feld. “For example, in urban areas, many providers may in theory serve a specific multi-dwelling unit, but face barriers to providing service because of special deals between landlords and incumbent providers,” Feld said. “Wireless providers may claim speeds for large geographic areas, but factors such as terrain may severely limit those speeds in people's homes or apartments.”

The report “underestimates just how bad the picture is,” said Matt Wood, Free Press policy director. “That's because the Commerce Department continues to rely on deeply flawed availability data that overstates the number of wireline competitors.” Wood said NTIA shows Platinum Equity, the parent of MegaPath and Covad, as serving “a whopping 44 percent of the country,” which would make it the largest wireline ISP in the U.S., he said. “Needless to say, that's not a very accurate portrayal of reality,” he said.

Coleman Bazelon, economist at The Brattle Group, said he saw few surprises. The report said at least 88 percent of Americans have at least two options for 3 Mbps service and that correlates to the fact that 83 percent of the population lives in urban areas, he said. “Since the report says there is a lot of competition, but there could be more, I suspect it will be read a bit like a Rorschach test,” he said.

The report misses that because of the cost of network investments “there is a fundamental tradeoff between efficiency and competition,” said Doug Brake, telecom policy analyst at the Information Technology and Innovation Foundation. “Broadband competition, especially wired broadband, is not an unalloyed good -- a fact,” he said. The best way to ensure higher speeds is by promoting “effective intermodal competition -- not policies to subsidize static competition over service,” Brake said.

The FCC should not draw the wrong lessons from the report, agreed Randolph May, president of the Free State Foundation. “ISPs have been investing billions of dollars on an ongoing basis to expand and upgrade their networks so more and more people have access to higher and higher speeds,” he said. “The important question is how to further incentivize such continued investment in high-capacity build-outs. I'm quite sure the answer is not to adopt more burdensome regulations, including rigid net neutrality regulations."