Why is the Internet slow and costly in the
U.S.?
By Patrick Marshall
In Tokyo, Seoul, and
Hong Kong, residents get bidirectional, gigabit
Internet for less than U.S. $40 a month. On the
other side of the globe, Parisians have a similar
deal, though their upload speed is only 200 megabits
per second (and much of the rest of France isn't so
lucky).
Most
of us in the U.S. would be happy with half that
bandwidth — even as we accept paying twice as much
as Internet subscribers in Asia and Europe. In
Seattle, I pay Comcast nearly $67 per month for a
50Mbps (6.2 megabytes per second — MBps)
connection.
So why is broadband such a bad deal in the
U.S.? What gives?
The answer lies at the uneasy intersection
of technology and politics, and the story begins in
1984, when Congress passed the Cable Communications
Policy Act (more
info). At the time, of course, personal
computers had only recently been introduced and the
public Internet didn't yet exist. (The precursor to
the Internet — ARPANET [more
info] — was carrying messages between
university and government researchers and had been
doing so since 1969.)
In those days of dial-up connections,
legislators probably had no inkling that most
consumer broadband Internet service would eventually
travel over cable-television lines. Their primary
concern was bringing some order to the burgeoning
cable-TV markets, ensuring both competitive pricing
(via deregulation) and standards in programming.
Government had some say in the matter because the
private-sector companies' cables had to traverse
public property. But there was a long debate over
which government agencies would implement the act:
federal, state, or local?
Congress cedes cable access to
local control
The Cable Communications Policy Act of 1984
gave municipalities primary authority to grant and
renew franchise licenses for local cable operations.
Generally, communities have given cable
companies access to public property in exchange for
agreements about such things as programming and
access to residences and businesses in specified
areas.
It also meant that cable service would vary
widely from one community to another.
In some cases, cable companies were granted
exclusive rights to a particular region. But even
without exclusivity, the first company to reach an
agreement with a community generally became the sole
provider because of the high cost of laying new
cables. Competitors faced the daunting task of
quickly making their own agreement with a local
government and then carving out enough subscribers
to pay for the huge investment.
And then the cable companies got lucky. Use
of the Internet exploded, and low-bandwidth
messaging became high-bandwidth streaming
entertainment. With customers demanding faster
Internet connections, cable immediately had a clear
advantage over dial-up, DSL, and other types of
Internet connections — it offered both speed and
broad coverage.
That gave cable companies a huge customer
base they didn't have to acquire. Moreover, the
cable companies weren't providing content; they
earned their money from the connection to the
Internet, not from selling streaming entertainment
to customers. That meant that the cable companies
had little incentive to improve service.
Municipalities try to cash in
on broadband
Frustrated by the lack of competition and
the quality of service provided by cable companies,
some communities opted to use their own
infrastructure to provide Internet service.
In 1999, after a storm wiped out much of
its communications infrastructure, the small town of
Bristol, Virginia, built its own fiber-optic network
for internal city government communications. In
2003, the town expanded that network to provide
Internet service to the entire community. The
nonprofit Optinet company formed by the city now
offers broadband services to other communities in
southern Virginia.
In the years since Bristol launched
Optinet, more than 130
communities — mostly smaller towns not well
served by cable companies — have followed suit,
providing services over city-owned fiber or cable
infrastructure. Some large cities, too, have shown
interest in providing Internet service to their
citizens.
Cable companies respond by
going up the chain
Not all public services have succeeded. The
island city of Alameda, California, for example,
adapted its fiber-optic infrastructure to provide
cable-TV and broadband Internet to local residents.
The service proved popular but faced a full-scale
marketing campaign by the only other significant
local service provider, Comcast. Eventually, the
city gave up the service, handing it over to …
Comcast.
Concerned about the growing
municipal-broadband movement, cable companies
appealed to a higher authority. As reported in a
Center for Public Integrity article,
the companies began an aggressive lobbying effort
directed at state legislators. And they were
surprisingly successful.
As noted in an Ars Technica story,
20 states have passed laws that ban or limit
the ability of municipalities to offer their own
broadband services.
Why would states want to do this? Much of
the reasoning seems implausible. For example, South
Carolina State Senator Thomas Alexander stated that
communities need to be protected from overspending
on projects (as reported in a ComputerWorld story).
There is likely another agenda. The
pre-emptive laws pushed by cable companies have, in
many cases, been drafted by the American Legislative
Exchange Council (ALEC), a conservative advocacy
group.
Noting that a growing number of cities are
providing broadband services themselves, the
organization's website argues that "ALEC disagrees
with [the practice] due to the negative impacts it
has on free markets and limited government. In
addition, such projects could erode consumer choice
by making markets less attractive to competition
because of the government's expanded role as a
service provider."
And why would markets be less
attractive to competition if a city provides
broadband? Opponents of public broadband would argue
that cities can always deliver the service at a
lower cost.
FCC takes a (small) stand on
public broadband
In February 2015, as the Federal
Communications Commission issued its ruling in favor
of net neutrality, it also issued a less-noticed
ruling that allows communities to build their own
broadband networks. The ruling was in response to
petitions by two cities — Wilson, North Carolina,
and Chattanooga, Tennessee — that had already
established municipal broadband but were barred by
state law from expanding into neighboring
communities.
The FCC's authority to trump state
legislatures was found in a provision of the
Telecommunications Act of 1996. Section 706 states
that the commission should regularly determine
"whether advanced telecommunications capability is
being deployed to all Americans in a reasonable and
timely fashion." If the commission finds barriers to
broadband deployment, the law directs the commission
to "accelerate deployment of such capability by
removing barriers to infrastructure investment and
by promoting competition in the telecommunications
market."
At this time, the FCC ruling applies only
to the two petitioning cities. But proponents of
municipal broadband will undoubtedly use it to
challenge pre-emptive laws in the 20 states that
have them.
Not surprisingly, those opposed to
municipal broadband are already fighting back. In
May, the state of North Carolina filed suit in the
U.S. Court of Appeals for the Fourth Circuit to
overturn the FCC's ruling. "Despite recognition that
the State of North Carolina creates and retains
control over municipal governments, the FCC
unlawfully inserted itself between the State and the
State's political subdivisions," North Carolina
Attorney General Roy Cooper wrote to the court (see
Scribd. post).
Local governments still face
daunting costs
Even if the FCC's position is upheld and
all U.S. communities are free to launch their own
municipal broadband services, there are still
significant hurdles. Just as the costs of installing
cable still deter other private companies from
competing against established providers for
municipalities, the task of finding sufficient
capital is even more daunting.
The city of Seattle has been trying for
years to set up a municipal broadband service. A
just-released study
commissioned by the city, however, determined that
the city would have to invest $480 million to $665
million to achieve the service levels it needs to
make the service viable. The report also found that
the service would have to acquire 40 percent of the
city's households and charge at least $75 per month
— a rate higher than that charged by existing
broadband providers for the same level of service.
"It presents too much risk to the city,"
stated Michael Mattmiller, the city's CTO, as
reported in a govtech.com post.
Mattmiller said the city was going to explore other
options, including possible partnerships with
private-sector partners.
Ultimately, public broadband might require
help through federal grants or subsidies. But the
focus for those funds will be to provide or extend
broadband service to underserviced communities —
primarily rural areas.
Another way that cities and towns are
expanding Internet access is via wide-area, public
Wi-Fi. It doesn't provide the bandwidth and speed of
broadband, but it's often free. Most of these
services use a public/private partnership — a
company provides the technology, and the city pays a
fee.
The only solution is public action.
For the U.S., faster and cheaper broadband Internet
service will come only with broadening competition —
in all forms: DSL, wireless, satellite, and so
forth. If having a choice is important to you, I
suggest actively supporting local, state, and
federal laws that create a level playing field — and
opposing those that don't.
If you're interested in more information
and ongoing news, a good resource is Community
Broadband Networks (site),
a nonprofit project of the Institute for Local
Self-Reliance funded by the Media Democracy Fund,
the Ford Foundation, and the Open Society
Foundation.
