from the if-you-get-caught,-just-lie-lie-again dept
We’ve long discussed how if you really want to understand how the highly monopolistic U.S. broadband industry really works, you should look at regional phone monopoly Frontier Communications. Especially in states like West Virginia, where the company has spent decades lagging on fiber upgrades and DSL and phone repairs under a regime of regulatory capture that rarely holds them accountable for fiber under-investment, outright ripping off taxpayers, or failing to adhere to even basic quality standards.
Since then, Frontier has been engaged in a kind of image reclamation effort, in which it admits that under-investing in fiber was a big part of its downfall, and claims that it will stop doing all of the things that brought it to this point. Yet if there’s no real competition in many of the markets the company services (83 million Americans live under a monopoly), there’s no organic incentive to truly improve.
Enter telecom regulators, who, in functioning economies and democracies, step in to nudge things along when the market fails, even if that is largely little more than a few belated wrist slaps. For example the FTC last week announced it would be taking action against Frontier because the company routinely advertised broadband speeds its aging DSL network couldn’t actually provide:
“Frontier lied about its speeds and ripped off customers by charging high-speed prices for slow service,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Today’s proposed order requires Frontier to back up its high-speed claims. It also arms customers lured in by Frontier’s lies with free, easy options for dropping their slow service.”
The FTC’s original complaint and lawsuit against Frontier, filed just about a year ago, was jointly filed with the AGs of Arizona, Indiana, Michigan, North Carolina, and Wisconsin, and the district attorneys’ offices of LA County and Riverside County, California. All pointing out that the company routinely, for years, advertised DSL speeds it knew its network wasn’t delivering.
As a result of the deal Frontier needs to adopt more transparency in its pricing. But most of the benefits are exclusive to users in California. Frontier has to dole out $8.5 million in civil penalties and costs to the Los Angeles County and Riverside County District Attorneys’ offices on behalf of California consumers. But it also has to upgrade 60,000 California customers on crappy DSL to fiber at a cost of $50 to $60 million.
Granted the FTC’s authority here is limited. It can only act when something is very clearly “unfair and deceptive” under the FTC Act. And the FCC’s ability to police a lot of this stuff was curtailed courtesy of the Trump FCC’s net neutrality repeal.
A telecom giant simply has to engage in a small bit of creativity in order to rip off captive U.S. subscribers with relative impunity (see: various surcharges with bullshit names affixed to your cable and broadband bills, or technically unnecessary monthly usage caps). Still, accountability usually finds its way through the haze of lobbying-induced apathy.
The Minnesota AG blasted the company for routinely failing to upgrade or repair its aging network. Washington State’s AG fined Frontier for ripping off subscribers with bogus fees. These efforts have a positive impact overall, but they’re often too scattered to meaningfully derail such practices industry wide. And again, notice that Frontier customers in West Virginia (or other states) see no accountability.
The financial penalties Frontier will face are nothing compared to the money made off the back of captive customers without any competitive alternatives to flee to. Policymakers could avoid these outcomes by tackling the real source of the problem: monopolization and the corruption that protects it. But given that creates political risk, the U.S. instead likes to apply band-aids after the fact, and consider the case closed.