Policy Director Ben Scott and Communications Director Craig Aaron work in the Washington office of Free Press, the national, nonpartisan media reform group. Research assistance provided by S. Derek Turner.
Shortly after being named chairman of the Federal Communications Commission in 2001, Michael Powell scoffed at the notion of a “digital divide” in high-speed Internet access. "I think there's a Mercedes Benz divide,” he quipped. “I'd like one, but I can't afford it."
High-speed Internet access may have seemed a luxury back then. But it is rapidly becoming a necessity. Our children cannot succeed at school without computer literacy. Small businesses cannot grow without affordable access to their customers and suppliers. Soon all media—TV, radio, telephone and the Web—will be delivered over the Internet.
Powell may be gone, but the FCC still doesn’t get it. Their answer to anti-competitive practices—which have left two-thirds of American households without broadband connections—is to reward the cable and telephone industry dinosaurs with sweetheart policies that make a mockery of the free market and undercut any serious commitment to solving our technology woes.
New FCC Chairman Kevin J. Martin took to The Wall Street Journal op-ed page last week, touting U.S. advances in high-speed Internet services and claiming speedy broadband deployment to be his “highest priority.” But while Martin pays lip service to “universal, affordable broadband,” his policy prescriptions promise to stifle competition, hinder innovation and eliminate consumer choice.
Martin’s article hailed the Supreme Court’s recent decision in the Brand X case—which upheld a 2002 FCC ruling that cable companies (like Comcast or Time Warner) should not be required to sell access to their wires to independent Internet service providers, or ISPs (such as Earthlink and Brand X). The decision gives cable a permanent monopoly on network services over their systems—slamming the door on competitive ISPs.
Telephone companies, however, are still required by “common carrier” regulations to offer open access to their wires—which is why consumers can choose from competitive DSL providers that keep costs down. But companies such as Verizon and SBC are already rushing to the FCC to demand their own exemption from the regulations, which Martin appears all too eager to provide “so that they can fairly compete in the marketplace.” But without open access, the only competition left will be cable. Two companies per market is hardly competition; it’s an invitation to collusion.
If the phone companies succeed, the Brand X case will stand as the trigger that reversed a century of communications policy and undermined the bedrock principle of democratic media—nondiscriminatory access for all. Every major technology in the history of this nation designed to facilitate the transport of goods, services and information has operated as an open access network. The railroads, the highway system, the telegraph, the telephone and the Internet all have followed this principle. And in all of these instances, open access rules increased competition.
The FCC’s plans—with the blessing of the high court—would permit cable and telephone giants to cement their control over the communications infrastructure and cut out their competitors. The cozy duopoly of cable and DSL that controls more than 90 percent of the broadband market will be entrenched for a generation. There will be no competitive broadband carriers. There will be no independent ISPs. The thriving new market for Voice Over Internet Protocol (VOIP) telephone service may be destabilized. The owners of the wires will be handed the Orwellian power to determine which content is appropriate to travel over their networks.
None of this seems to trouble Martin. He trumpets the FCC’s latest report on broadband deployment, which counts 38 million subscribers to high-speed Internet in America. But his article doesn’t mention that the FCC defines “high-speed” as 200 kilobits per second—a pathetic rate about five times slower than a standard DSL line, 10 times slower than a cable modem, and 25 times slower than a normal connection in Japan or South Korea. It is a classic agency trick—if the facts don’t fit, lower the standards.
Moreover, Martin ignores the fundamental reality for most American households that broadband availability is not the same thing as broadband affordability. High-speed Internet service in the United States is simply too expensive for the vast majority of Americans. While half of all households with incomes above $75,000 per year have broadband at home, half of all households with incomes below $30,000 do not have any form of Internet access. A Pew survey last year found that just 10 percent of people living in rural areas had broadband connections at home. And a recent study by New California Media reported that more than 75 percent of Hispanics have no Internet access whatsoever.
In response to the failures of the telephone and cable companies, hundreds of towns and cities across the country have been forced to build their own Community Internet projects in the hope of extending access to all their citizens. These new enterprises represent the true spirit of innovation, local ingenuity and competitive enterprise. But without guarantees of open access eliminated by the Brand X decision, they too are at risk. Common carrier rules guaranteed that competitive broadband providers serving rural areas and low-income urban neighborhoods would be able to connect with the wider Internet. After Brand X, they’re at the mercy of the cable and telephone cartel.
It’s up to Congress to remedy the FCC's misguided judgment, re-establishing rules that protect open access to communications networks. Far from granting the phone companies the same exemptions, Congress and the FCC should write unambiguous statutes and regulations guarding communications networks from monopoly domination. And they should support the bipartisan Community Broadband Act recently introduced by Sens. John McCain, R-Ariz., and Frank Lautenberg, D-N.J., which would protect the rights of cities and towns everywhere to offer high-speed Internet service to their citizens.
The United States has slipped to 16th in the world in broadband penetration, according to the latest survey by the International Telecommunications Union, and American consumers are forced to pay far more for slower speeds than those in other leading countries. As Thomas Bleha noted in a recent issue of Foreign Affairs : “Today, nearly all Japanese have access to ‘high-speed’ broadband, with an average connection speed 16 times faster than in the United States—for only about $22 a month.”
Martin’s pledge to do away with “undue regulation” in the broadband market will leave behind a government-sanctioned duopoly that promises higher prices, slower speeds and lousy service. It’s the Benz divide all over again.
Michael Powell was right about one thing: We can’t afford it.
