Fixing The Broadband Market And Protecting Net Neutrality By Prying Open Incumbent Networks To Meaningful Competition

from the your-promised-broadband-Utopia-never-arrived dept

While Title II is the best net neutrality option available in the face of a lumbering broadband duopoly, it still doesn't fix the fact that the vast majority of customers only have the choice of one or two broadband options. It's this lack of competition that not only results in net neutrality violations (as customers can't vote down stupid ISP behavior with their wallet), but the higher prices and abysmal customer service so many of us have come to know and love. Stripping away protectionist state laws can help a little, as can the slow rise of services like Google Fiber. But even these efforts can only go so far in blowing up a broadband duopoly, pampered through regulatory capture and built up over a generation of campaign contributions.

One solution is the return to the country's barely-tried implementation of unbundling and network open access, or requiring that the nation's subsidy-slathered monopolists open their networks to allow other competitors to come in and compete. There are many variations of this concept, and it's something Google Fiber promised in its markets before backing away from it (much like their vocal support of net neutrality). Obviously being forced to compete is an immensely unpopular concept for the nation's incumbent ISPs. Given that those companies dictate and often literally write the nation's telecom laws, these requirements were eliminated in a number of policies moves starting in 2001 and culminating in the FCC's Triennial Review Remand Order of 2004 (pdf).

This was amazingly presented at the time as a way to improve competition and spur investment, but primarily resulted in a bloodbath as dozens of consumer-friendly, smaller independent ISPs and CLECs were killed off, perpetuating and further cementing the noncompetitive duopoly we have today.

One of the few small ISPs to manage to run that gauntlet and survive it was California's Sonic.Net, which has since proceeded to not only build a sizable regional network of its own in California, but to manage to treat consumers well while doing it (Sonic has been praised by the EFF repeatedly for consumer-friendly data disclosure policies). In a blog post last week, Sonic.net CEO Dane Jasper notes that neutrality issues are just a symptom of the lack of competition, and to fix these we're going to need to start thinking differently:
"Lets call it like it is: in most of America, we’ve got a broadband duopoly at best. And it’s simple economic theory and best-practice capitalism that in an unregulated near-monopoly, you will see manifestations of policies, practices and behaviors that are not always customer friendly. If we accept that high speed Internet access is essential for modern life, the fact that we need a set of controls that assure that an entrenched operator won’t use their captive audience in an unreasonable way shouldn’t come as a surprise.

While neutrality is the topic of the day, the real fix is to reinvigorate competitive Internet access in America. Competitive access in Europe supported by legislation similar to The 1996 Act has resulted in lower costs for consumers and far more choices in Europe. What Michael Powell decided to do hasn’t worked out as well for Americans. Today’s FCC should return to the roots of the Telecom Act, and reinforce the unbundling requirements, assuring that they are again technology neutral. This will create an investment ladder to facilities for competitive carriers, opening access to build out and serve areas that are beyond our reach today."
This isn't just a pipe dream. While we pretended to try open access as a concept, we never tried very hard. For the few years it was attempted, incumbent ISPs repeatedly made cooperation impossible for a smaller carriers, intentionally sabotaging installs, delaying support calls, and generally doing their very best to make sure that the concept didn't work. Carriers paid regulators to nap on these issues before then FCC boss Michael Powell (now the top lobbyist for the cable industry) ultimately decided to kill the idea for good. This is, opponents of the idea will insist, somehow proof positive that the concept of open access doesn't work.

Except real-world data has repeatedly shown the open access model results in more competition and lower prices. This Berkman Center study (pdf) commissioned by the FCC (which the agency promptly ignored) showed the positive benefits of an open access model in a significant number of countries, including France. The result? French consumers, awash in competition, pay among the lowest prices anywhere for telecom services. This Venture Beat report from last week conveniently illustrates how an American that was paying Comcast and AT&T $230 every month had his mind blown by the experience of real competition:
"Now we live in the city center of Toulouse, France, in an apartment where I’m a broadband customer of a company called Numericable. Here’s what I get for $63 per month: 100 Mbps download speed, 250 cable channels, a home telephone with unlimited international calling, and a mobile phone that includes unlimited minutes and 3GB of data usage each month. (The only tradeoff was losing my unlimited AT&T data plan; but I also never come close to using 3GB.)...Separately, I’m getting ready to sign my wife up for a $20-per month mobile plan with mobile provider Free that comes with unlimited calling and 3GB of data."
Despite the fact this model clearly works, it's never considered in policy discussions as a serious possibility. Why? Quite simply because the incumbent providers don't want it. Through the use of their various PR folk, astroturfers, think tankers, fauxcademics and assorted hired mouthpieces, they've successfully managed to utterly vilify the concept, painting it as the very worst sort of government meddling in (not actually) free markets. Instead, we've chosen to head down the path of letting the nation's duopolists dictate telecom policy, and the end result should at this point be painfully obvious to everyone. Well, except the industry lobbyists who still somehow insist we're all living in a competitive broadband Utopia.
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Filed Under: dane jasper, line sharing, net neutrality, network open access, open networks, unbundling
Companies: sonic.net


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  1. identicon
    Anonymous Coward, 22 Nov 2014 @ 9:00am

    Competition Not Title II

    Carl:

    It looks like you have been reading my blogs. Title II is never the way to go if you believe in freedom and competition. Government regulation and freedom are oxymorons. Do you recall what Title II has in it? I've lived under Title II and it stifles innovation and free speech. It is not the answer; competition is the answer and we can have it here in the U.S. Finally Title II cements the role of incumbents and makes it unattractive for new entrants into the market.

    We both agree that a duopoly is not competition. We also know that due to the high costs of building a last-mile network that having more than two facility providers in a market is not economically sustainable. The incumbents are acting predictable given the market conditions. I don't fault them or have any animosities against them, but I do feel that we can have better service at lower prices than our current situation.

    Government intervention or takeover will only make the situation worse. Competition is the answer. Open-access of last-mile networks is the answer. I have been professing this philosophy since the mid-90s. I don't think that anyone will argue with stating that three or more service providers in a market will lower prices, improve service quality, and offer more choices. There are plenty of examples worldwide to back up this statement.

    There are several models which open-access can be achieved and there isn't one way that is any better than the next which is why municipalities/counties should be able to choose the model right for their situation. Notice that I am saying that decision on how to build the open-access infrastructure should be on a local level. Evidence has shown that the chances of success are better when left up to cities to decide what will work for them. The only involvement from the federal level or FCC should be to help remove barriers that promote free and open competition.

    I met with the Google Fiber folks in the early days before they decided to become a service provider. They were going to try these different business models and share the results freely. Too bad that they changed their minds, because it would have been very helpful in spreading the open-access concept.

    Cities should pursue open-access infrastructure models to promote broadband competition in their communities. The should allow service providers to get together to build and share common network infrastructure. They should abandon outdated concepts like franchise fees and look offering reasonable right-of-ways and poll attachment fees. Local and state laws preventing competition should be eliminated.

    I don't agree with cities entering the communications business because it is the reign of private enterprises. Also, the technology changes too rapidly for bureaucracies to keep up. History has shown a dubious success record for municipal broadband efforts. Cities are good at building infrastructure though. They are good at building and maintaining long-term projects like water, sewer, and road systems so why not build a fiber-based infrastructure? I would fully support that cities build, maintain, and sell on a non-discriminatory basis access to a last-mile broadband fiber network. The endeavor should be run as a separate taxpayer neutral enterprise. My studies have shown that if they approach a greater than 60% fill rate, they can actually become cash flow positive in 5-7 years while providing coverage across the city. Eventually incumbents will take advantage of this network to reduce the capital expense of having their own network.

    This is a win-win-win situation for all without the impact of what federal regulation will bring. Net Neutrality will be inherent because no carrier will want to be accused at blocking certain sites. Customers will see the benefit to having different traffic types prioritized. Open-access will not happen overnight, but it can happen over the next couple of decades if cities realize that they can divorce the network from the service.

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