The U.S. Broadband Market is Deeply Anticompetitive

On Friday, OTI filed comments at the Federal Communications Commission (FCC) on the state of the market for fixed broadband service. Spoiler alert: it’s not good. The market is stagnant at best, marked by low competition, high costs, and opaque service quality.

OTI’s comments, which were coauthored by the Institute For Local Self-Reliance, the National Association of Telecommunications Officers and Advisors, the National League of Cities, and Next Century Cities, outlined the myriad ways in which competition is thwarted, both by industry practices and legal restrictions, and offered suggestions for action from the FCC.

First, the federal government lacks good data about the broadband market. Currently, the government is practically fully dependent on self-reported data from internet service providers (ISPs), which results in a poor understanding of where broadband is deployed, how much it costs, and whether the advertised speeds match the actual performance. The FCC must improve its system for gathering data about the broadband market.

Second, many states have laws on the books that thwart or outright prohibit the development of municipal broadband. These laws prevent communities from investing in their own networks and competing with incumbent ISPs.

Third, ISPs employ a host of tactics to stifle competition and leave millions of Americans with only one choice for fixed broadband. Fixed broadband providers decline to compete against each other in local markets across the country, create high switching costs to prevent consumers from taking their business elsewhere, and enter into anti-competitive deals with landlords of multiple tenant environments to stop competition.

Finally, the FCC is likely to hear some arguments that future 5G networks will compete with fixed broadband as a viable alternative. These claims are extremely premature, as 5G technologies are years away from large-scale deployment, and consumers are, in turn, years away from assessing for themselves whether the 5G experience mirrors that of fixed broadband. Further, 5G service is likely to focus on urban areas and rely heavily on fixed backhaul—which could enhance the market power of fixed ISPs.

Ultimately, the nation’s fixed broadband market is beset with limited choice, high costs, and anticompetitive conduct, but the Commission can and should take steps to remedy the situation. By collecting better data, empowering communities to invest in their own competitive networks, and eliminating practices that disempower consumers and enshrine monopolies, the Commission could create a broadband market that is competitive, innovative, and accessible.