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Expanding the Role of Competition in US Broadband Policy to Achieve Faster Speeds and Lower Prices

Idaho was recently designated the slowest state in the US in terms of Internet connection speeds. The Internet is so slow in Idaho that it takes its residents nearly three times as long to download a standard music file as residents of Rhode Island, the state with the fastest Internet speeds in the country. The challenges faced by Idaho in achieving higher connection speeds are common in the US, which has many rural areas.

This phenomenon is just one reason why the US has fallen behind the rest of the world in the quality, speed and price of broadband services. The Organization of Economic Cooperation and Development (OECD) found that among its 34 member states, the US is ranked fourteenth in the percentage of its citizens with home broadband access. In fact, only 68 percent of citizens in the US have home broadband connections — compared to over 97 percent of South Koreans. A recent study of average download speeds by country concluded that the US has the twenty-sixth fastest download speed in the world (616 Kbps), only barely faster than the average worldwide download speed (580 Kbps). The top-ranked country, South Korea, had an average download speed of 2,200 Kbps.

The US has also failed to achieve broadband prices that are as low as other OECD nations. A study measuring the prices of broadband access found that between 2007 and 2009 prices in the US rose by two percent. In most other OECD countries, however, prices actually fell, and some countries — France and Belgium — prices fell by over 40 percent. In addition, the US is far behind other countries in terms of providing cheap access to high-speed broadband. For connection speeds of 45 Mbps or higher, the median monthly subscription in the US is $122.45, while the same connection subscription costs $45.10 in Japan.

An important factor in poor US broadband performance is the lack of robust competition among broadband providers in the US. TheNational Broadband Plan, released in 2010 by the Federal Communications Commission (FCC), found that 78 percent of the US population lives in areas with only two broadband providers. This lack of competition provides existing companies with no (or little) incentive to improve their services, provide faster download speeds or lower prices.

The FCC has taken a relatively hands-off approach in this area. Under Title II of the Telecommunications Act of 1966, the FCC has the authority to regulate competition among companies who provide telecommunications services as defined by the law. However, products classified as information services are exempt from such regulation under Title II. In 2005, the FCC issued anorder classifying broadband services as information services. As a result, broadband has been largely exempt from the express provisions of the Telecommunications Act which allow the FCC to implement regulations regarding competition.

However, up until 2010, the FCC had still attempted to regulate broadband under its ancillary jurisdiction. The US Supreme Court has stated that this doctrine allows the FCC to take regulatory action — even in the absence of express authorization by Congress — so long as the action is “reasonably ancillary to the effective performance” of FCC responsibilities. However, in 2010, the US Court of Appeals for the District of Columbia Circuit issued a ruling in Comcast v. FCC that called into question the FCC’s authority to regulate broadband using its ancillary jurisdiction. In that case, the court stated that the FCC can only take action under its ancillary jurisdiction to carry out a duty that is expressly addressed in a statute. Because the Telecommunications Act does not expressly authorize the FCC to regulate broadband competition, this forecloses any possibility of the FCC using its ancillary jurisdiction to regulation in this area.

In response to the Comcast decision, the FCC has proposed to reclassify broadband as a telecommunications service, under itsThird Way Plan. Under this proposal, the FCC would be able to subject broadband to its Title II authority. However, it has made clear that it would not seek to impose regulations designed to regulate competition among broadband providers under this plan. Rather, it would grant broadband providers an exemption from such regulations. Therefore, the FCC’s latest proposal regarding broadband will not result in the increased competition necessary to promote faster broadband speeds and lower prices.

Because the current legal framework leaves little room for FCC action, Congress should enact legislation giving the FCC the authority to promote competition by facilitating the growth and development of new broadband companies entering the market. The FCC should remove barriers to entry such as the cost of constructing the new facilities necessary to provide access to consumers. If existing broadband providers were required to grant access to their facilities to new competitors, then the competitors would be able to enter the market without the high investment costs needed to build infrastructure. In addition, the legislation should allow the FCC to regulate the terms of the leasing agreements between existing providers and competitors to ensure they do not charge access rates that are excessively high. Having new competitors enter the market by leasing existing facilities will allow them to more readily raise capital and create a customer base. Once it is financially feasible, these new companies can build their own infrastructure.

This competition will give existing broadband providers an incentive to improve the services they offer by either increasing broadband speeds through infrastructure upgrades or reducing prices charged to consumers. We cannot afford to take a hands-off approach to broadband. Rather, we should take steps to promote high-speed broadband access that is affordable and reaches all Americans. Enacting legislation to spur competition in the broadband market is a significant step towards achieving that goal.

Image from luisventura. Used under Creative Commons – Attribution 2.0 Generic.

Andrew Lipkowitz was an Executive Notes and Comments Editor with the Journal of Civil Rights and Economic Development ’12-’13, and is interested in telecommunications law and policy. His work experience includes internships with the New York State Attorney General, the City of Long Beach Corporation Counsel, and the Honorable Joanna Seybert of the US District Court for the Eastern District of New York.