A Blog by Jonathan Low


Oct 16, 2017

Federal Communications Comm. Claims That One ISP Per Market Offers 'Sufficient Competition'

Sufficient for whom, exactly? JL

Karl Bode reports in Tech Dirt:

According to the FCC's own data, 73% of market are controlled by one ISP, 24% of markets "enjoy" duopoly control. A county would be considered competitive if 75% of Census blocks in the county have a cable provider Half of the $40 billion in revenue made in this market is courtesy of a lack of competition and monopoly over-charging of smaller businesses.
While the lack of competition in residential broadband gets plenty of well-deserved attention, the business broadband market in the United States may be even worse. Just one of three companies (Verizon, AT&T, or CenturyLink) dominate what's dubbed the business data services (BDS) market, which connects everything from cellular towers to ATMs to the broader internet. According to the FCC's own data (pdf), 73% of the special access market is controlled by one ISP, 24% of markets usually "enjoy" duopoly control, and only a tiny fraction of markets have more than two choices of BDS providers.
This essential monopoly or duopoly allows these companies to overcharge numerous retailers and organizations for connectivity, and the regulatory capture in the telecom market means countless politicians work tirelessly to keep things that way. Case in point: back in April Trump's FCC announced it would not only be scrapping previous plans to try and make this market more competitive, but would be fiddling with data to try and distort the very definition of "competition." Under the FCC's new plan, countless markets will now be deemed "competitive" if businesses have access to just one broadband provider:
"Pai's definition of "sufficient competition" has drawn fire. The plan would treat an entire county as competitive "if 50 percent of the locations with BDS demand in that county are within a half mile of a location served by a competitive provider." A county would also be considered competitive if 75 percent of Census blocks in the county have a cable provider."
Distorting data and lowering the bar to ankle height to "solve" a lack of competition is part and parcel for Ajit Pai's FCC, which is also trying to weaken the definition of competition in the residential sector as well. Again, if you distort the data to make it look like the market is functioning perfectly, it's easier to justify your complete and total apathy to what -- if you've spent any time with Comcast -- is pretty clearly a broken market.
Needless to say, consumer advocates and the smaller companies harmed by these policies aren't particularly pleased with the FCC's recent decisions. They've been trying for the better part of a decade to fix the lack of competition in the special access and BDS markets, and were just on the cusp of making progress when the FCC dramatically changed course post-election. According to research by the Consumer Federation of America (CFA), roughly half of the $40 billion in revenue made in this market is courtesy of a lack of competition and monopoly over-charging of smaller businesses.
As a result, Public Knowledge and the Consumer Federation of America have filed an amicus curiae brief (pdf) urging the US Court of Appeals for the Eighth Circuit to vacate the FCC's BDS order. The filing argues that the FCC's actions here run in stark contrast to both FCC precedent and, you know, reality:
"The Court should vacate and remand the Order. The Order is arbitrary and capricious. The Commission departed from its past precedents without explanation or justification, and reached a conclusion that is contrary to the record in the Business Data Services docket. Further, the Order concludes, contrary to the record and established antitrust analysis, that duopoly markets are sufficiently competitive to discipline market power and prices, and that potential competition can effectively check market power, even by monopoly service providers."
Of course there's a reason giant ISPs like Comcast and AT&T employ an army of economists eager to distort, stretch, and otherwise mutilate data until it justifies policy that protects them from real competition. In fact, the groups at one point indicate that Ajit Pai's FCC tried to use concrete to justify its latest effort:
"The order cites studies analyzing three-firm and four-firm markets, but fails to explain how its analysis is relevant to the one-firm and two-firm markets the commission embraces as sufficiently competitive, Curiously, the Commission relies on a study involving ready-mix concrete for the proposition that the addition of competitors beyond a second has diminishing returns..."
There's numerous other slights of hand the FCC used to justify its total apathy to the broken BDS market, including claiming that wireless competition from fifth-generation (5G) networks will make everything magically work out -- while ignoring that just two companies (AT&T and Verizon) hold the vast majority of the spectrum needed to compete in that space. Granted if you've watched as the FCC abuses logic to justify dismantling everything from net neutrality to privacy protections, it's all par for the course for an agency that prioritizes incumbent revenues over consumers, competition, or the health of the market itself.


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