Monday, March 15, 2010

The most important thing left out of the National Broadband Plan

The Executive Summary of the National Broadband Plan was released today by the FCC (PDF link), and what's been proposed is largely in line with what was leaked in the last few weeks. The FCC wants to get affordable broadband service with 100 Mbps download and 50 Mbps upload speeds into at least 100 million homes by the end of this decade. The Plan proposes lots of ways to get there, from subsidizing expansion of wired Internet connections in rural communities to reallocating 500MHz of wireless bandwidth to broadband service. However, for all the platitudes in the plan about lowering costs and making broadband service more affordable, there's precious little (at least in the executive summary) proposed to actually back up that intent.

A few years ago, when I was an industry analyst covering the IPTV market, I regularly traveled to Europe. My visits to France were particularly enlightening. There were multiple service providers offering IPTV, high-speed Internet and local & long distance phone service at the equivalent of around $30 a month; less than one-third the price of the $99 triple-play deals offered in the U.S., with similar or better channel selections and Internet speeds. As you can imagine, the French services were wildly popular.

So why was triple-play service so much less expensive in France (and so much better)? The French Government required France Telecom to make its lines available to competitors at wholesale prices. Far from slowing down the growth of broadband access, the French Government's decision caused usage of broadband services to explode for everyone, including France Telecom.

Telephone companies in the U.S. were once required to provide their lines available to competitors on a wholesale basis, and the U.S. had a healthy competitive market for DSL services. Cable operators, on the other hand, were never required to make their networks available to competitors. In the Clinton Administration, the same team that drafted the National Broadband Plan allowed telephone companies to stop making their networks available to competitors as part of the Telecommunications Act of 1996, ostensibly to encourage phone companies to make bigger investments in their networks and further the growth of broadband.

We saw what happened: Most of the phone companies that were originally part of AT&T got consolidated back into AT&T. As a practical matter, most U.S. households have a choice of broadband service from two suppliers--the incumbent telephone company and cable operator. There's no meaningful price competition. U.S. households pay much more for much slower Internet service than do households in many other countries.

I'm not saying that the National Broadband Plan doesn't have merit, or that it shouldn't be taken seriously. What I am saying is that the thing that's most likely to increase competition, lower costs and make more broadband access available is to open up the existing cable and telecom networks for wholesale availability. That idea is nowhere to be found in the National Broadband Plan, and there's no surprise why.

Update, March 22, 2010: The Berkman Center for Internet & Society at Harvard University did an extensive study of broadband in the U.S. and the rest of the world for the FCC, and released the report, "Next Generation Connectivity" in February, 2010. The report speaks to the points that I made in this blog post, plus much more. Click here to access the entire study, or visit this article at the New York Times for a summary of the relevant points.
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