The Federal Communications Commission (FCC) declared that too many Americans have no access to broadband. This complaint arrives one year after the FCC raised the definition of “broadband” to 25 Megabits per second (Mbps ) up from 10 Megabits per second. That redefinition of what qualifies as broadband is the cause of the broadband shortage that the FCC complains about. It doesn’t require a law degree to know that unilaterally setting a higher standard will result in fewer homes meeting the standard.
The FCC is blaming Internet Service Providers (ISPs) for the shortage because they did not build out “broadband” to all remote areas. The FCC’s statistics indicate areas unserved by 25 Mbps broadband were 10 percent of all households in 2014, and since 2012 the shortage area had been cut from 20 percent – a compound 41 percent annual improvement. Unfortunately, just “fixed-line” providers (not satellite and probably not mobile wireless) can meet the 25Mbps downward and 3Mbps upward standard for broadband.
Reaching the last few percent of homes will be challenging and costly because construction will need to scale mountains, snake along valleys, and crawl across desert plains — just to present broadband “availability” to very few homes per mile of construction. The low headcount of eventual new broadband customers will make it make it difficult for ISPs to ever breakeven financially on broadband for the new frontier.
The FCC is expecting to stimulate residential demand for broadband by changing a low-income telephone subsidy program to permit using the subsidy to buy home Internet. The FCC’s propensity to invent new subsidies is routinely funded from fees and taxes on the unsubsidized customers of other service providers. For examples, $2 billion is collected for Obama Phones, and a 17.4 percent tax on all interstate consumer charges is collected for the FCC’s “universal service” fund.
Raising the standard of broadband speed to lower the percent of households with broadband access is a slick way to illustrate the need for more government “investment” in broadband. As part of its campaign to infuse 25 Mbps service into all rural areas, the FCC is also expected to disburse more federal money to support some construction projects. The FCC’s Connect America Fund (CAF) is an example of the FCC’s high tech financial chicanery. Phase I of CAF committed $438 million for building broadband in rural areas. The second phase of CAF is expected to commit an additional $1.5 billion. On the surface, it looks worthy of Robin Hood, but CAF’s funding comes from removing subsidies for rural telephone service. The victims of CAF are “over one million rural Americans [who] can expect their local telephone rates to increase by up to 46 percent as the rate floor rises from $14.00 to $20.46 per month.”
The FCC encourages taxpayer funded “municipal Internet networks” that are not required to cover their costs or pay taxes when competing against private sector ISPs. The FCC has tried to interfere with state laws that restrict these municipal networks, but, in 2004, the US Supreme Court ruled the FCC cannot use Section 253 of the Communications Act to preempt state laws restricting municipal broadband ownership. But, that legal technicality did not stop the FCC in 2015 from granting the petitions of two municipally-owned networks from doing just that, and in total opposition to existing state law that leaves such operations to the discretion of voters. Unless this FCC action is overturned by the courts, municipal taxpayers will be on the hook to bailout these failing government operations, as broadband municipalities always have in past.
The FCC ignored multiple court decisions preventing it from implementing Network Neutrality. Declaring a broadband “shortage” is a ruse for marshalling government ownership and control of broadband. We can expect the FCC to discover new loopholes for controlling broadband and the myriad entitlements the FCC expects it to carry.
So now we have net neutrality regulations, Title II regulations, new USF subsidies, government spending and FCC-sanctioned government-owned ISPs. As long as the FCC keeps moving the goalposts, onerous Internet regulations will continue to grow.
Alan Daley writes for the American Consumer Institute, a nonprofit educational and research organization. For more information, visitwww.theamericanconsumer.org or follow us @ConsumerPal.