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U.S. consumers suffer from a dearth of choices among broadband providers.
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At the turn of the millennium, the U.S. had some of the best broadband access in the world. It reached more homes, and at a lower price, than most every other industrial country. Ten years later the U.S. is a solid C-minus student, ranking slightly below average on nearly every metric.
Just how the U.S. lost its edge and how it plans to get it back are the issues before the Federal Communications Commission as it prepares to launch the most significant overhaul of network policy since the birth of the Web. As part of last year’s stimulus package, Congress provided $7.2 billion to expand broadband access to every American. It also required the FCC to outline a plan for how to make that happen. The outcome of the FCC’s deliberations, due February 17, could determine not just control over the broadband infrastructure but also the nature of the Internet itself.*
Today about 51 percent of U.S. households have broadband access, and those that do pay roughly $45 per month. Contrast that with South Korea, where 94 percent of households browse the Web at $37 per month (and at download speeds on average eight times quicker). According to an October report to the FCC from the Berkman Center for Internet & Society at Harvard University, the decline in the adoption, pricing and speed of broadband in the U.S. can be traced back to a series of key decisions made by the FCC nearly a decade ago.
These decisions limited most Americans to one or two choices of Internet service provider (ISP)—either the cable company or the telephone company. This is not the case in the rest of the industrial world. There so-called open-access policies mandate that the company that owns the physical infrastructure must sell access to those lines on a wholesale market. For example, France Telecom owns the telephone lines, yet consumers can choose from a number of different Internet service providers, each of which leases access from France Telecom’s infrastructure.
In the U.S., that competition doesn’t exist. The reason is that in early 2002, then FCC commissioner Michael Powell reclassified broadband Internet services as “information services” rather than “telecommunications services.” The ruling allowed DSL (digital subscriber line) and cable operators to avoid falling under the open-access rules mandated by the 1996 Telecommunications Act. At the time, Powell justified the decision by saying that it was the best way to fast-track greater broadband deployment.
The evidence to date has not supported this strategy. “When we look at the countries that have the highest speeds and the lowest prices,” says Yochai Benkler, a professor at Harvard Law School and lead author of the Berkman report, “there is a clutch of competitors who entered over the past seven or eight years using open access to build their own competing advantages—agile, innovative competitors that catalyze the market.” By reclassifying broadband services yet again, the FCC could bring those advantages to the U.S.
The upcoming FCC report is also expected to address the controversial matter of “Net neutrality.” “Why has the Internet proved to be such a powerful engine for creativity, innovation and economic growth?” asked Julius Genachowski, chair of the FCC, in a recent speech. “A big part of the answer traces back to one key decision by the Internet’s original architects: to make the Internet an open system.” The structure of the Internet allows any user to access any site—and any entrepreneur to reach any user. It’s now a cliché, but Web giants like Facebook and Google were started by students in bedrooms. They never could have flourished without access to an open-distribution system.
That openness has recently come under threat from some Internet service providers. Citing the strain on their infrastructure from peer-to-peer file sharing, ISPs have expressed an interest in blocking or degrading some content as it passes through their lines. Yet this ability would open a Pandora’s box. What if Comcast, the anticipated new owner of the media company NBC Universal, decides to throttle back video from its competitor CBS? Or what if it requires all video purveyors—even shoestring start-ups—to pay a monthly transmission fee, lest their videos suffer delays in transit? Genachowski’s comments suggest that the FCC will formalize the information agnosticism that has been built into the Web from its birth.
The final report is expected to touch on a huge swath of other issues, from wireless spectrum allocation to television set-top boxes. Some recommendations will have to go through Congress, whereas others could be enforced by the FCC on its own. Whatever the outcome, the broadband landscape should look very different in a year, in way that the next generation of Internet entrepreneurs hope will be level and fair.
*Editor's note (2/3/10): After this story was published, the FCC said it would miss its February 17 deadline and requested a one-month extension.
Note: This story was originally printed with the title "Bigger, Better Broadband"
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