Groups Battle Trump FCC's Claim That One ISP In A Market Means There's Effective Competition

from the the-fix-is-in dept

While the lack of competition in residential broadband gets plenty of well-deserved attention, the business broadband market in the United States may be even worse. Just one of three companies (Verizon, AT&T, or CenturyLink) dominate what's dubbed the business data services (BDS) market, which connects everything from cellular towers to ATMs to the broader internet. According to the FCC's own data (pdf), 73% of the special access market is controlled by one ISP, 24% of markets usually "enjoy" duopoly control, and only a tiny fraction of markets have more than two choices of BDS providers.

This essential monopoly or duopoly allows these companies to overcharge numerous retailers and organizations for connectivity, and the regulatory capture in the telecom market means countless politicians work tirelessly to keep things that way. Case in point: back in April Trump's FCC announced it would not only be scrapping previous plans to try and make this market more competitive, but would be fiddling with data to try and distort the very definition of "competition." Under the FCC's new plan, countless markets will now be deemed "competitive" if businesses have access to just one broadband provider:

"Pai's definition of "sufficient competition" has drawn fire. The plan would treat an entire county as competitive "if 50 percent of the locations with BDS demand in that county are within a half mile of a location served by a competitive provider." A county would also be considered competitive if 75 percent of Census blocks in the county have a cable provider."

Distorting data and lowering the bar to ankle height to "solve" a lack of competition is part and parcel for Ajit Pai's FCC, which is also trying to weaken the definition of competition in the residential sector as well. Again, if you distort the data to make it look like the market is functioning perfectly, it's easier to justify your complete and total apathy to what -- if you've spent any time with Comcast -- is pretty clearly a broken market.

Needless to say, consumer advocates and the smaller companies harmed by these policies aren't particularly pleased with the FCC's recent decisions. They've been trying for the better part of a decade to fix the lack of competition in the special access and BDS markets, and were just on the cusp of making progress when the FCC dramatically changed course post-election. According to research by the Consumer Federation of America (CFA), roughly half of the $40 billion in revenue made in this market is courtesy of a lack of competition and monopoly over-charging of smaller businesses.

As a result, Public Knowledge and the Consumer Federation of America have filed an amicus curiae brief (pdf) urging the US Court of Appeals for the Eighth Circuit to vacate the FCC's BDS order. The filing argues that the FCC's actions here run in stark contrast to both FCC precedent and, you know, reality:

"The Court should vacate and remand the Order. The Order is arbitrary and capricious. The Commission departed from its past precedents without explanation or justification, and reached a conclusion that is contrary to the record in the Business Data Services docket. Further, the Order concludes, contrary to the record and established antitrust analysis, that duopoly markets are sufficiently competitive to discipline market power and prices, and that potential competition can effectively check market power, even by monopoly service providers."

Of course there's a reason giant ISPs like Comcast and AT&T employ an army of economists eager to distort, stretch, and otherwise mutilate data until it justifies policy that protects them from real competition. In fact, the groups at one point indicate that Ajit Pai's FCC tried to use concrete to justify its latest effort:

"The order cites studies analyzing three-firm and four-firm markets, but fails to explain how its analysis is relevant to the one-firm and two-firm markets the commission embraces as sufficiently competitive, Curiously, the Commission relies on a study involving ready-mix concrete for the proposition that the addition of competitors beyond a second has diminishing returns..."

There's numerous other slights of hand the FCC used to justify its total apathy to the broken BDS market, including claiming that wireless competition from fifth-generation (5G) networks will make everything magically work out -- while ignoring that just two companies (AT&T and Verizon) hold the vast majority of the spectrum needed to compete in that space. Granted if you've watched as the FCC abuses logic to justify dismantling everything from net neutrality to privacy protections, it's all par for the course for an agency that prioritizes incumbent revenues over consumers, competition, or the health of the market itself.

Filed Under: ajit pai, broadband, competition, fcc


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  1. identicon
    Anonymous Coward, 12 Oct 2017 @ 10:25am

    Re: Re: Re: Re:

    "However, I'm having trouble understanding how individuals, without a government regulatory agency, would accomplish this."

    You make all sorts of choices everyday without a government regulatory agency on things like which grocery store you want to buy food from, this is not regulated. The only things being regulated is "quality" and "zoning laws" so that Walmart can't buy 10 houses on your street doze them and build a store causing traffic on your block the roads were not designed to handle.

    "History has proven that corporations, left to their own devices, will inevitably engage in anti-competitive/anti-consumer behavior."

    Well yes, that is just human nature... the desire to own and control EVERYTHING! So regulations need to only focus on those and very little of anything else.

    "That's how we ended up with the FTC and anti-trust laws. There is little that individuals can do to stop it."

    You mean little that an "individual" can do. A lot of individuals can do a whole lot, like stop giving them money. This is the same classic con of collective bargaining rights for unions. The idea is always to have a power structure created to ensure that people follow the rules. As individuals we all wimp out and refuse to help each other out of fear even when we are making the problem worse.

    "If you have viable ideas as how to accomplish this, I would be very interested to hear them."

    There are actually multiple ways but here is are my favorites.

    #1. All buried conduits and poles participating in the primary part of infrastructure becomes public property. In other words, government regulated property. Businesses can only own the wires themselves, but if they become unused, wire must become public property for the next business to use, and no one is allowed to dig up any wire and return it to stock unless they are replacing it with upgraded wires.

    #2. Create regulation that prevents States & Local City Councils from creating any exclusive contracts with any ISP. Yes, even the cities/governments themselves are directly involved in the creation of these monopolies.

    #3. The last miles can either be fully public property or some form of easement type of arrangements or fully owned by property owners where the lines terminate outside of ISP communications stations. This here is the primary prevention of a natural monopoly developing. Under no circumstance should any business own or control any portion of the last mile.

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