Intentionally Slow Providers
President Franklin Roosevelt upended the growing market for radio and telephone wiring by passing the Communications Act of 1934. In its first section, the act established its primary purpose of, “[making] available, so far as possible, to all the people of the United States...a rapid, efficient, nationwide, and worldwide wire and radio communication service with adequate facilities at reasonable charges.” Roosevelt foresaw a nation where both large cities and rural areas of America received equally efficient wire communications. His vision was executed flawlessly. Alongside the construction of wiring nationwide, the bill established the Federal Communications Commission (FCC) to monitor the market for telephone and radio.
Roosevelt had created a fair, reliable market for telecommunications. But sixty years later, a new market exploded within telecommunications: the internet. It would come to reshape the telecommunications industry and its regulation. In doing so, it threatened the very core of the Communications Act of 1934: rapid, efficient telecommunications coverage throughout the nation.
The Telecommunications Act of 1996
By the 1990’s, communications technology had significantly advanced, culminating in the fledgling stages of the World Wide Web. With a presence of monopolies within each sub-industry, the Clinton Administration sought to open up competition within telecommunications. Thus, the Telecommunications Act of 1996 was passed with the intended goal of allowing major corporations within one sector of telecommunications to expand their businesses across every sector within the industry.
This, ideally, would create a greater competition between the dominant corporations and further grow the industries. Unfortunately, the act’s major flaw was its timing. With an untapped internet industry on the brink of blowup, the companies that emerged from competition were set up to dominate one of the most important markets of the 21st Century.
The Market for Broadband
While internet access was limited in the 1990s with dial up, the industry expanded its accessibility with the development of broadband connections. Broadband refers to any high-speed internet connection that is always accessible. With broadband, customers can always connect to the internet, and with the development of different delivery methods such as digital subscriber lines (DSL) and fiber optic technologies, internet speeds grew almost exponentially. But with the relaxed telecommunications regulations, large corporations rushed to offer broadband connections and set prices.
By 2011, the broadband market was dominated by two cable companies in the United States: Comcast and Time Warner. Both already had big hands in telecommunications, with Comcast owning NBC Universal and Xfinity, while Time Warner owned Turning Broadcasting System, HBO, and Warner Bros. But they wanted to broaden their business models to the increasingly crucial internet industry. With the development of smartphones and more powerful laptops and computers, humans were connected to the internet all the time. Internet service was no longer just a valuable luxury; it was a necessary commodity.
Internet Monopolies
As the internet service market developed through the 2010s, the two broadband behemoth’s got even bigger. Comcast agreed to buy out a majority share in Time Warner Cable from Time Warner and then transferred that share to Charter Communications. Before the merger between Time Warner Cable (renamed Spectrum) and Charter was approved, Charter owned just a 10% market share for internet service providers (ISPs). After the deal was approved in 2016, Charter possessed a market share of 38%, and Comcast and Charter held a combined market share of 80%. This amount of industry dominance created a dangerous level of control among Comcast and Charter.
Not only did it allow them to influence market prices, but internet offerings and packages as well. Between 2002 and 2013, the download speeds Comcast was able to offer jumped from just 1.5 Megabits per second (Mbps) to 505 Mbps. This rapid speed required special equipment to offer, so by 2013, Comcast offered 505 Mbps speeds at its premium price: $399 per month. But the real concerns show in its second tier packaging. The next fastest internet speed Comcast offered in 2013 was 105 Mbps. For this they charged $115 per month. But the infrastructure that they offered the 105 Mbps speeds at was the same as the one they offered their lower 50 and 20 Mbps speeds. In other words, Comcast had the technological capabilities to offer customers faster internet speeds, but withheld that technology for additional gain.
So why are Comcast and Charter able to do this? Why can they withhold internet service speeds at no consequence? It is because in the areas where they operate, they have no competition. There is minimal overlap in where internet is offered by Comcast and Charter. Comcast and Charter split up major areas in the United States between them like it’s a board game. Because of this, each company can unnecessarily divide its offerings of internet speed into different-priced packages, a practice known as price discrimination. This results in slower internet for a large portion of lower-class individuals who cannot afford to pay $100 a month for internet. Comcast and Charter are fundamentally discriminating against the working class. With the internet becoming more and more vital, ISPs are using whatever unfair tactics they can, no matter the expense of others, to become more profitable.
Net Neutrality
Since the rise of broadband internet, the most important regulation in communications has been net neutrality. Internet service providers like Comcast and Charter don’t just have the ability to offer faster or slower internet overall; they could purposefully speed up or slow down speeds to specific sites if they wanted to. For years, net neutrality stopped them from doing this. Net neutrality establishes that internet service providers must treat all internet content equally, and thus must offer it all at the same speeds. This allowed for fair markets among online industries and promoted faster internet on all sites for consumers. Net neutrality protects the consumer. But it also harms ISPs.
The Telecommunications Act of 1996 established that telecommunications companies could expand their businesses across multiple industries. Thus, companies like Comcast moved into internet service, while still preserving its place in other industries, such as cable TV (Comcast Xfinity) and television programming (NBC Universal). These other industries compete with some online services such as in the fight between cable television and streaming services. Without net neutrality, Comcast could slow access to streaming services like Netflix or Hulu in order to essentially force customers into buying cable packages. To legally defend from these tactics and protect internet equality, the FCC under Obama passed a strict net neutrality law in 2015.
Unfortunately, with the transition into the Trump presidency came a new FCC Commissioner and a new age of deregulation. In his first month in office, Trump appointed Ajit Pai, a former employee for telecommunications giant Verizon, as the new Commissioner of the FCC. Pai immediately promised a reversal of the net neutrality rules passed in 2015. He argued that net neutrality was an unnecessary regulation that stunted broadband growth. In reality, the broadband growth he referred to was the profitability of internet service providers. By mid-2018, net neutrality was repealed by the FCC. Comcast and Charter were granted the freedom to not just price people into lower internet speeds, but slow down access to the sites of direct competitors.
The Ongoing Fight against ISPs
With the FCC failing to act as a proper regulator of the internet industry, local towns and cities have started taking matters into their own hands. As of January, 2019, over 500 communities nationwide have voted to fund municipal networks of their own, and 300 more have cooperative broadband networks. With ISPs offering lower internet speeds to these towns due to price discrimination, the communities have decided to drop those ISP’s altogether. This allows for everyone in these communities to access the fastest internet speeds the town is capable of providing at all times. They are no longer forced into either paying extra for faster internet or swallowing slow speeds. Furthermore, municipal broadband has no need to discriminate against certain sites since they are not competing in other industries. Thus, they naturally maintain net neutrality for consumers as well.
Comcast and Charter are afraid of the growth of municipal broadband. When threatened with losing an entire area of internet subscribers, they are forced to offer their fastest internet speeds at fairer prices in order to compete. But doing this does not maximize profitability for Comcast or Charter, so at all costs they are fighting to prevent the spread of municipal broadband. In 2018, telecommunications companies spent $92 million on lobbying against municipal broadband. This sadly has succeeded, as 25 states now either banning or roadblocking municipal broadband. Communities have provided a method to force telecommunications companies to compete, but those companies are fighting back.
It is urgent to protect the fairness of our markets. Otherwise, we see major corporations purposefully discriminate against poor, disadvantaged communities. This directly contradicts the first section of the Communications Act of 1934, which required the offering of rapid communications to “all the people of the United States.” In an age where the internet practically runs our lives, both in business and at home, empowering companies to deprive people of access to that fundamental good is unacceptable and unlawful. As states begin to thwart community efforts to push back, it is time for the federal government to put an end to this malpractice.
Sources
Communications Act of 1934: as amended by telecom act of 1996. FCC, n.d. https://transition.fcc.gov/Reports/1934new.pdf.
Telecommunications Act of 1996. FCC, https://transition.fcc.gov/Reports/tcom1996.pdf.
“Types of Broadband Connections.” Federal Communications Commission, June 24, 2014. https://www.fcc.gov/general/types-broadband-connections.
“ISP Subscriber Market Share 2019.” Statista. https://www.statista.com/statistics/217348/us-broadband-internet-susbcribers-by-cable-provider/.
Snider, Mike. “Comcast Sheds Customers in Charter Deal.” USA Today. Gannett Satellite Information Network, April 28, 2014. https://www.usatoday.com/story/tech/2014/04/28/comcast-charter-reach-deal/8381783/.
“ISP Subscriber Market Share 2019.”
Lee, Tim. “These Charts Show Comcast Acting More and More like a Monopolist.” The Washington Post. WP Company, April 23, 2019. https://www.washingtonpost.com/news/the-switch/wp/2013/10/01/these-charts-show-comcast-acting-more-and-more-like-a-monopolist/.
“Cable Availability Maps and Cable Provider Coverage Maps.” CableTV.com. Accessed October 30, 2019. https://www.cabletv.com/blog/cable-availability-maps.
Finley, Klint. “Net Neutrality: Here's Everything You Need To Know.” Wired. Conde Nast, October 30, 2018. https://www.wired.com/story/guide-net-neutrality/.
Ibid.
Ibid.
“Restoring Internet Freedom.” Federal Communications Commission, October 3, 2019. https://www.fcc.gov/restoring-internet-freedom.
“Community Network Map.” community broadband networks. Accessed October 30, 2019. https://muninetworks.org/communitymap.
Chamberlain, Kendra. “Municipal Broadband Is Roadblocked Or Outlawed In 25 States.” Broadband Now, September 23, 2019. https://broadbandnow.com/report/municipal-broadband-roadblocks/.
Communications Act of 1934.