August 10, 2020

COVID-19 Is Exposing A Virulent Strain Of Broadband Market Failure Denialism

By Karl Bode
A few weeks ago, the US telecom industry began pushing a bullshit narrative through its usual allies. In short, the claim revolves around the argument that the only reason the US internet still works during a pandemic was because the Trump FCC ignored the public, ignored most objective experts, and gutted itself at the behest of telecom industry lobbyists. The argument first popped up over at AEI, then the Trump FCC, then the pages of the Wall Street Journal, and has since been seen in numerous op-eds nationwide. I’d wager that’s not a coincidence, and I’d also wager we’ll be seeing a lot more of them.

All of the pieces try to argue that the only reason the US internet works during a pandemic is because the FCC gutted its authority over telecom as part of its “restoring internet freedom” net neutrality repeal. This repeal, the story goes, drove significant investment in US broadband networks (not remotely true), resulting in telecom Utopia (also not true). The argument also posits that in Europe, where regulators have generally taken a more active role in policing things like industry consolidation and telecom monopolies, the internet all but fell apart (guess what: not true).

Usually, like in this op-ed, there’s ample insistence that the US broadband sector is largely wonderful while the EU has gone to hell:

“Unlike here, European networks are more heavily regulated. This has led to less investment and worse performance for consumers for years. American consumers are being generally well served by the private sector.”

Anybody who has spent five minutes talking to Comcast customer support — or tried to get scandal-plagued ISP like Frontier Communications to upgrade rotten DSL lines — knows this is bullshit. Still, we penned a lengthy post exploring just how full of shit this argument is, and how there’s absolutely zero supporting evidence for the claims. The entire house of cards is built on fluff and nonsense, and it’s just ethically grotesque to use a disaster to help justify regulatory capture and market failure.

While it’s true that the US internet, in general, has held up relatively well during a pandemic, the same can’t be said of the so called “last mile,” or the link from your ISP’s network to your home. Yes, the core internet and most primary transit routes, designed to handle massive capacity spikes during events like the Superbowl, has handled the load relatively well. The problem, as Sascha Meinrath correctly notes here, is sluggish speeds on consumer and business lines that, for many, haven’t been upgraded in years:

“Right now, an international consortium of network scientists is collecting 750,000 U.S. broadband speed tests from internet service provider (ISP) customers each day, and we’ve been tracking a stunning loss of connectivity speeds to people’s homes. According to most ISPs, the core network is handling the extra load. But our data show that the last-mile network infrastructure appears to be falling down on the job.”

Again, your 5 Mbps DSL line might be ok during normal times, but it’s not going to serve you well during a pandemic when your entire family is streaming 4K videos, gaming, and Zooming. And your DSL line isn’t upgraded because there’s (1) very little competition forcing your ISP to do so, and (2) the US government is filled to the brim with sycophants who prioritize campaign contributions and ISP revenues over the health of the market and consumer welfare. And while there’s a contingency of industry-linked folks who try very hard to pretend otherwise, this is a policy failure that’s directly tied to mindless deregulation, a lack of competition, and, more importantly, corruption. In short, the complete opposite of the industry’s latest talking point.

For years we’ve been noting how US telcos have refused to repair or upgrade aging DSL lines because it’s not profitable enough, quickly enough for Wall Street’s liking. Facing no competition and no regulatory oversight, there’s zero incentive for a giant US broadband provider to try very hard. Similarly, because our lawmakers and regulators are largely of the captured, revolving door variety, they rubber stamp shitty mergers, turn a blind eye to very obvious industry problems, routinely throwing billions in taxpayer money at monopolies in exchange for fiber networks that are usually only partially deployed — if they’re deployed at all.

Meanwhile, US telcos that have all but given up on upgrading aging DSL lines have helped cement an even bigger Comcast monopoly across vast swaths of America. It’s a problem that the telecom sector, Trump FCC, and various industry apologists will ignore to almost comical effect. Also ignored is the fact that this results in US broadband subscribers paying some of the highest prices for broadband in the developed world:

“Numerous studies, including those conducted by the FCC itself, show that broadband pricing is the second-largest barrier to broadband adoption (availability is the first). It’s obvious that if people are being charged a lot for a service, they’re less likely to purchase it. And independent researchers have already documented that poor areas often pay more than rich communities for connectivity. Redlining of minority and rural areas appears to be widespread, and we need accurate pricing data from the FCC to meaningfully address these disparities.”

Try to find any instance where Ajit Pai, or anybody in this chorus of telecom monopoly apologists, actually admits that the US broadband market isn’t competitive and, as a result, is hugely expensive for businesses and consumers alike. You simply won’t find it. What you will find are a lot of excuses and straw men arguments like this latest one, designed to distract the press, public, and policymakers from very obvious market failure. Market failure that was a major problem in normal times, and exponentially more so during a pandemic where broadband is an essential lifeline.