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Why Broadband is Not a Public Utility

The data and evidence show that broadband is not a public utility warranting economic regulation of prices, terms and conditions; this is contrary to the assertions of net neutrality proponents: the Markey-Eshoo Bill, FreePress, the Open Internet Coalition, and Google's Internet Evangelist Vint Cerf, among others.

Why is broadband not a public utility? 

First, it is a competitive service, not a natural monopoly service.

A public utility presumes "natural monopoly" economics where economies of scale and scope preclude the possibility of competitive facilities/services. 

  • The roughly $200b in private risk capital invested in financially-successful U.S. competitive broadband facilities over the last several years is incontrovertible evidence that broadband does not enjoy natural monopoly economics.

Second, users have choice of access providers.

Comcast-Clearwire 4G Rollout Spotlights Vibrant U.S. Facilities-Based Broadband Competition

Comcast-Clearwire's 4G WiMax rollout starting in Portland today, as part of broader national launch this year, is powerful evidence of the vibrancy and dynamism of the facilities-based broadband competition trajectory in the U.S.

  • This latest announcement provides an excellent opportunity to take stock of both the current state of broadband competition in the U.S. and the competitive trajectory of how the U.S. broadband market is getting increasingly more competitive.

Contrary to the parade of imperfection horribles claimed by anti-competition groups to try and justify a wide variety of new net neutrality-related regulations, the U.S. has more real and growing facilities-based broadband competition than any nation in the world.

The Comcast announcement provides powerful proof points of all the good aspects of vibrant facilities-based competition.

The Data Show Competition Works! Building Upon a Strong Broadband Foundation -- Part II

First quarter financial results prove that the success of the broadband sector's facilities-based competition, is an exceptionally strong foundation on which to build a National Broadband Strategy.  (See 1Q09 results: AT&T, Verizon, Comcast and Time Warner Cable, companies are listed by revenue size.) The results show:

The Flawed Economics of Broadband Open Access in the U.S.

A post by a Google policy analyst yesterday attempted to make the economic case for open access in the U.S. and suggested reasons why American infrastructure providers should embrace a mandated open network model. This proposed theory warrants a strong practical rebuttal. This proposed case for the economics of open access does not hold up to close scrutiny, because it has fatal flaws in both logic and economics.


I.                   The fatal flaw in logic in the case for the economics of open access:


Since the post assumes broadband markets everywhere are basically the same, it concludes that the open access experience in some European countries is relevant and applicable to the U.S. situation. The fatal flaw in logic here is the core assumption that European and U.S. markets are factually analogous. They are not. They are substantially different factually and structurally as I will explain in detail.

Congress' rejection of open access/net neutrality rewarded with new private broadband investment

Markets and competition work!

  • Comcast and Verizon separately announced major investment/deployment plans for broadband within days of Congress' rejection of calls for open access/net neutrality regulation and dictated broadband speeds in the just-passed $800b stimulus package.

Congress wisely appreciated that encouraging and respecting private investment and inter-modal broadband competition is critical to:

  • Spurring economic growth and job creation,
  • Keeping the communications sector a healthy engine of the economy; and
  • Getting the fastest broadband service to the most Americans soonest. 

Even in a severe recession, Comcast and Verizon are proof that companies will make private investments to expand broadband speeds and access, if their capital is welcome, and the government does not discourage investment and deployment by forcing open access network sharing and mandated net neutrality in the absence of any definable or measurable problem. 

Comcast announced today that it "plans to reach more than 30 million homes with faster speeds,"  and is "doubling speeds for most existing customers for no additional charge" in 2009. 

Comcast Successfully Rebuts Latest FCC Staff Inquiry into Reasonable Network Management

To the extent the FCC is fair and remains focused on encouraging competition and innovation, Comcast's response to the FCC staff's latest inquiry -- asking for clarification of Comcast's reasonable network management practices-- should largely put this particular matter to rest.

  • By way of background, two days before the transition of Administrations, FCC staff sent Comcast a letter asking for clarification of why Comcast's competitive voice offering uses a different part of the network than Internet-driven VOIP services; and if it does use a different part of the network, why that competitive service should not then be regulated as a telecommunications service.
  • In a nutshell, Comcast's response showed that it is operating precisely as the law/FCC/Supreme Court has directed and allowed. 

I am writing about this from a Net Competition perspective, because this isolated staff inquiry appears to:

Competition works when regulators let it -- Comcast is doubling speeds; adding new superfast tiers

The professional complainers who assert there is little broadband competition, or that the U.S. is falling behind on broadband, will no doubt ignore the indisputable facts -- that Comcast just announced major speed upgrades for most of its users and a new set of superfast or wideband tiers for high-end users.  

  • Competition works!
    • Just like cable modems competitively prompted telecom providers to roll out faster and cheaper DSL, Verizon's fast Fios service is prompting Comcast and others to roll out faster network speeds and offerings. 
    • Competition for broadband customers is alive and well!
  • The reality is that competitive markets respond much better and faster to changes in demand, supply and innovation than regulators could ever hope to achieve with their red tape. 
  • I expect a muted response from net neutrality and national broadband policy proponents -- because the fact that competition  is succeeding in increasing speeds and lowering effective prices -- just isn't part of their complaining narrative and their broadband sky is falling outlook. 
    • The Open Internet Coalition, Save the Internet and Free Press will somehow find bad news in this great news story for consumers -- or they will "ostrich" and ignore it happened so they can continue to complain uninterrupted by reality or the facts.    

The Comcast DCOSIS 3.0 upgrade will "enable Comcast to double speeds for the majority of existing high-speed  customers at no additional cost."

Exposing the Biases in the Broadband Policy Debate -- My new white paper

Invited to speak at the ITIF forum on ITIF's white paper: "It's Time to End the Broadband Policy Wars" -- I so strongly disagreed with the framing bias of that white paper and the broadband policy debate in general that I decided I needed to counter it by writing my own white paper:

  • Don’t be Fooled by the National Broadband Policy “Straw Man”


    Exposing Three Hidden Policy Biases of Broadband Policy Proponents

The abstract of my six page paper is below:

Is Internet Bandwidth Infinite? Not!

FreePress is in utopian fantasyland in objecting to Comcast's new bandwidth-usage caps -- charging Comcast is profiting from "artificial scarcity" from a lack of broadband competition.

  • Artificial Scarcity!
  • Internet bandwidth is not infinite -- despite FreePress' utopian fantasy that bandwidth somehow should be infinite in FreePress' perfect world.
    • Any reasonable person understands Internet and broadband networks can not have infinite bandwidth and are not free.
    • Like any infrastructure, Internet/broadband networks are expensive to build and operate, and also require a constant investment of billions of dollars to keep pace with exploding demand.

FreePress is making another big strategic mistake in screaming "artificial scarcity!" in a crowded and congested Internet.

How the FCC Comcast Decision Limits Net Neutrality

Contrary to conventional wisdom, the FCC's order on Comcast's network management practices, reined in the net neutrality movement much more than it advanced their agenda.

  • The old adage is true here, be careful what you ask for -- FreePress/Public Knowledge. 

At its rawest level, the chest-beating petitioners got the FCC to: reiterate what the FCC has long said it would do, and also order Comcast to do what Comcast already publicly committed to do.

  • When the dust settles and the rhetoric cools, the petitioners will better understand the old adage: be careful what you ask for.
  • In this instance, they hoped to advance their agenda for sweeping net neutrality legislation and regulation, and what they ended up with was the expert agency taking much of the wind out of their sails. 

How does the FCC Comcast decision limit Net Neutrality?

First, the petition proved the existing system/process works -- seriously undermining any legitimate rationale for new net neutrality legislation or regulation. (Unfortunately, for the neutralists, the public takeaway from the resolution of this petition was not that legislation is needed, but that there is a government process in place more than able to handle consumers' concerns.)  


Q&A One Pager Debunking Net Neutrality Myths