FCC Chairman Says U.S. Lacks Competitive Broadband Service

FCC Chairman Tom Wheeler said that most Americans lack real choices for high-speed broadband service, a contrast to the picture advanced by many large providers that the marketplace is one of robust competition.

Comcast, seeking FCC approval of its merger with Time Warner Cable, has cited competition from wireless providers, telecommunications companies and Google Fiber, as well as the fact that the combination won’t be removing consumer choice in any one market.

Speaking to the startup organization 1776 on Thursday, Wheeler said that at 25 Mbps, “there is simply no competitive choice for most Americans. Stop and let that sink in… three-quarters of American homes have no competitive choice for the essential infrastructure for 21st century economics and democracy. Included in that is almost 20 percent who have no service at all.”

Even at lower speeds, 4 MbPs to 10 MbPs, Wheeler said, “the majority of Americans have a choice of only two providers. That is what economists call a ‘duopoly,’ a marketplace that is typically characterized by less than vibrant competition.”

While Wheeler said that Google’s entry into cities like Kansas City and Austin with a fiber alternative appear to have spurred cable and telco competitors to upgrade their services, such developments “are not yet pervasive.”

He said that “traditional DSL is not keeping up,” while mobile broadband “is just not a full substitute” for wired Internet service. Moreover, he said that consumers who sign on to a broadband service have limited flexibility to change providers afterward.

“As a result, even though there may be competition, the marketplace may not be offering consumers competitive opportunities to change providers, especially once they’ve signed up with a provider in the first place,” he said.

“Once consumers choose a broadband provider, they face high switching costs that include early-termination fees, and equipment rental fees,” he said. “And, if those disincentives to competition weren’t enough, the media is full of stories of consumers’ struggles to get ISPs to allow them to drop service.”

He didn’t mention Comcast by name, but the latter reference was to the posting online of consumers’ calls with overzealous sales representatives.

Comcast has argued that the merger with Time Warner Cable will give it greater scale needed to upgrade its service.

Wheeler did not mention the possibility of the FCC reclassifying broadband as a telecommunications service, a move that would give the agency greater oversight over the Internet but has been vigorously opposed by broadband providers. The FCC is trying to rewrite net neutrality rules for the Internet, but Wheeler said that FCC efforts to increase competition should precede regulation.

But he said that “no company should be held immune from competition that drives investment. As the same time, no company should be protected from public interest obligations, especially where meaningful competition is not present.”

He said that the FCC’s upcoming incentive auction will free up spectrum that could help wireless providers compete. He also noted that the FCC is reviewing petitions to preempt state laws that bar municipalities from offering their own broadband services. The FCC, he said, also is forced to “shoulder the responsibility” of spurring broadband deployment to rural areas where access to the Internet is limited.

“As we have seen today, there is an inverse relationship between competition and the kind of broadband performance that consumers are increasingly demanding,” Wheeler said. “This is not tolerable.”

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