FCC Chairman decries broadband market for slow speeds and lack of competition

Tom Wheeler, the chairman of the Federal Communications Commission, thinks Americans have too few choices when it comes to Internet service, particularly for truly high-speed broadband.

The answers to that problem — which could have broad implications for how the FCC analyzes potential mergers and other policy decisions going forward — are more competition and higher standards for service, he said.

“There is an inverse relationship between competition and the kind of broadband performance that consumers are increasingly demanding,” Wheeler said in a speech Thursday at the headquarters of 1776, a startup incubator in Washington, D.C. “This is not tolerable.”

He added: “Our challenge … is to do everything in our power to ensure that the United States has the world’s most dynamic and competitive broadband ecosystem with a virtuous cycle of new investment, new innovations, and new services.”

Wheeler has touted the benefits of increased competition before. And since the reign of Wheeler’s predecessor, Julius Genachowski, the FCC has recognized the lack of competition in the broadband market.

But Wheeler highlighted some specific shortcomings in the broadband market. And his statements come as the agency is weighing a number of moves that could impact the market, including a potential merger between the two largest broadband providers, Comcast and Time Warner Cable.

More than 85 percent of U.S. homes have a choice of between two or fewer providers for what the FCC considers basic broadband, which provides download speeds of 4 megabits per second, Wheeler noted. And the number of choices dwindles the faster the speeds get, he said. For speeds of up to 50 megabits per second, 61 percent of American homes have a choice of just one provider. Another 21 percent can’t get that speed at all.

That’s a problem because consumers are connecting more and more devices to the Internet in their homes, and each of them is demanding more and more data, he said. Also, the popularity of streaming video is just the first of many expected applications including telemedicine that will require consumers to have access to larger and larger amounts of bandwidth.

“High-speed connections are crucial not only for the kind of innovation that will educate our children and deliver quality health care, but also improve energy efficiency, fill the employment ranks, and maintain the United States as the world’s innovation leader for the 21st Century,” Wheeler said.

Wheeler suggested that one way to address that would be for the FCC to increase the speed requirement for what the agency considers broadband service. The FCC upped its definition of broadband speeds from 200 kilobits per second to 4 megabits per second (Mbps) in 2010. It now is considering raising that to 10 Mbps. And Wheeler said the agency should plan on raising the bar ever higher, perhaps to 25 Mbps next.

“A 25 Mbps connection is fast becoming ‘table stakes’ in 21st century communications,” he said.

Wheeler also focused on the lack of competition. Even markets that have two broadband rivals often aren’t truly competitive, he said. Long-term contracts with early-termination fees prevent consumers from easily jumping ship from one Internet provider to the next, he noted. So too do equipment rental fees. And, as noted in a recent blog post, service providers often make it exceedingly difficult for consumers to cancel their service.

The chairman offered several prescriptions to the problem of lack of competition. First off, he said, the agency wants to protect competition where it exists and promote competition where it doesn’t. In what could be a bad omen for Comcast and Time Warner Cable — not to mention any of the Big Four wireless providers who are considering another merger — Wheeler made a comparison to the cell phone business and explicitly stated that the agency has a policy of preventing that market from shrinking from four to three national competitors.

That policy has been implied in the past, especially as it moved to block a proposed merger between AT&T and T-Mobile and to discourage a mulled link-up between T-Mobile and Sprint. But the agency has largely avoiding making that policy explicit until recently.

That policy also suggests that the agency will, at the very least, look skeptically at the proposed Comcast-Time Warner deal. Although they generally don’t compete head-to-head, the two companies are the biggest broadband providers in the United States and their merger would do nothing to promote broadband competition and would arguably discourage it.

In a statement, Matt Wood, policy director at Free Press, a consumer advocacy group, praised Wheeler’s speech and urged him to follow through on it by blocking the cable mega-merger.

“Americans need faster broadband and real competition in the broadband market, and we welcome Chairman’s intent to bring his agency into the 21st century,” Wood said. He added, “The real proof will be in the agency’s actions and not just its speeches.”

Photo: File photo of FCC Chairman Tom Wheeler. (Alex Wong/Getty Images)

 

Troy Wolverton Troy Wolverton (274 Posts)

Troy writes the Tech Files column as the Personal Technology Columnist at the San Jose Mercury News. He also covers the digital media, mobile and video game industries and writes occasionally about Apple, chips, social networking and other aspects of technology. Previously, Troy covered Apple and the consumer electronics industry. Prior to joining the Mercury News, Troy reported on technology, business and financial issues for TheStreet.com and CNET News.com.