Internet giants Comcast and AT&T raised the monthly rates for many of their plans by a few dollars each beginning in March—sparking some activist groups to say this proves there is not enough competition in broadband. Industry analysts, however, say that’s not true and the activists’ proposed policies would suppress investment in broadband advancements.
Comcast’s price hikes include a $2 increase in Comcast Standard and Expanded plans—from $48.55 to $50.55 and $61.45 to $63.45 respectively. Digital Voice Basic service is now $11.95, up from $9.95; and Digital Voice Premium service rose from $18.95 to $21.95.
Meanwhile, AT&T, another leading Internet Service Provider (ISP), raised the rates on its Express broadband service (1.5 mbps) from $30 to $33 a month, its Pro (3 mbps) plan from $35 a month to $38 a month, and its Elite (6 mbps) plan from $40 to $43 a month.
Activist Critics Howl
Free Press, a left-leaning “public advocacy” group based in Washington, DC, argues these rate hikes confirm their claims competition in the Internet broadband market is poor and requires corrective action by the Federal Communications Commission (FCC).
“Consumers need price relief and are asking that the FCC do something bold and decisive to promote meaningful competition,” said Free Press policy director Ben Scott in a statement on the group’s Web site.
In March the FCC released a National Broadband Plan proposing hundreds of new regulations and performance standards for broadband Internet service providers, all purportedly aimed at increasing competition.
Though the FCC’s plan doesn’t explicitly call for it, the commission has also studied the possibility of demanding ISPs “unbundle” their physical broadband infrastructure, making it available for competitors to access it.
Right now every ISP owns the physical cables that convey its services to users’ homes and offices, and they claim exclusive rights to the broadband infrastructure they’ve built. Unbundling the physical infrastructure would remove the exclusive rights and make the infrastructure an open thoroughfare.
But the broadband market may be quite adept at creating more competition on its own, says the Telecommunications Industry Association (TIA). A slate of new Internet technology applications are likely to go to develop and bring many new providers into the ISP market in the next five years, TIA argues.
Stifling of Investment a Concern
“The Internet continues to evolve and gain intelligence in a way that the initial developers could never have imagined, particularly with respect to traffic management,” the TIA said in a filing with the FCC in March. “These developments have promoted user interests, openness, and transparency, and given rise to today’s robust Internet ecosystem.”
Robert Atkinson, president of the Information Technology & Innovation Foundation (ITIF), agrees with many of the TIA’s arguments. He is particularly critical of requiring networks to unbundle their services, arguing such a mandate would suppress broadband network investment.
“It means they’re not going to invest as much,” Atkinson said. “Why would you invest in a new wire if you’re going to have to sell it to your competitors?”
Are Two Competitors Enough?
In any case, two competitors might be all the competition the market needs, Atkinson says. Two competitors will compete very fiercely for the customer base, said he says, adding, “they have to in order to recoup the large amounts of capital they had to shell out to build network distribution grids.”
“If they don’t get a customer—say, if someone chooses Verizon instead of them—they lose almost all that money,” said Atkinson. “You can get a fair amount of competition when you have two competitors.”
Wireless Will Add to Competition
And additional competition is on the way, says Ryan Radia, an information policy analyst for the Competitive Enterprise Institute in Washington, DC.
He cites growing numbers of wireless household and office Internet connections as proof more consumers are turning to it as a cheaper alternative to broadband.
“Traditional models of broadband are not going to go away, but they’re going to decline in terms of market share,” Radia said.
New Companies Entering Market
As wireless technology develops, Radia said, we should not be surprised if new companies develop it into new, upstart Internet services that could rival today’s reigning ISPs.
“Wireless technology is improving rapidly, and that’s enabling new uses of the airways that weren’t possible before,” he said. “I think it’s really unclear how it’s going to play out, but it’s going to result in more broadband competition.”
Wireless has already demonstrably cut into traditional cable broadband’s profit margins, Radia said.
Competitive LTE Alternative
Atkinson foresees many new competitors making use of Long Term Evolution (LTE), a mobile wireless Internet protocol that gives users anywhere from 450 to 600 megabit-per-second connections.
Communities in Japan and Europe are deploying LTE now. Atkinson expects it to appear in the United States in the next three or four years.
“We could go from a situation of two competitors now to as many as six in the next three or four years,” said Atkinson.
Atkinson’s organization annually ranks every national broadband market for its competitiveness. This year’s report finds the United States is still one of the most competitive broadband markets around, currently ranking 6th out of 40. Singapore is number one.
Rick Docksai ([email protected]) writes from Washington, DC.