Fair Play? The State of Competition in the Business Broadband Marketplace

The Wireless Future Project and the Open Technology Institute hosted a lively discussion at the New America Foundation about the regulatory future of America’s broadband marketplace.  

“Increasingly broadband, like electricity, is an input into everything else in the economy,” Michael Calabrese, the director of the Wireless Future Project, began. “Fast and affordable broadband is essential to the productivity of not just big firms, but of small firms and medium-sized firms, from branch banks to local health clinics.”   Has the Federal Communications Commission done enough to foster ubiquitous and affordable broadband service?  

At the moment nearly one third of America’s homes lack access to broadband access, and according to a recent reportby the Open Technology Institute, the U.S. ranks far behind other nations when it comes to connection speeds, broadband adoption, and Internet penetration, among other factors. 

Former FCC Commissioner Michael C. Copps offered introductory remarks.  Commissioner Copps reminded that the 1996 Telecommunications Act made it clear that, “The FCC’s mission is to encourage the delivery of the most advanced telecommunications feasible to every citizen in the land, no matter who they are, where they live, or the particular circumstances of their individual lives.”  Copps continued, “Reasonably comparable services at reasonably comparable prices for all are the clear mandate of the law.” 

The Telecommunications Act of 1996 was intended to encourage competition and likewise foster innovation, recounted Chip Pickering, current spokesman for the Broadband Coalition and Former U.S. Representative (R-Miss) who was influential in the implementation on the 1996 Act.  Pickering warned that AT&T proposal made at the end of August 2012 takes away the ability for competitors to remain in the broadband marketplace.

Speaking up for AT&T, Hank Hulquist, the vice president of regulatory affairs for the company, pointed out AT&T has invested heavily in building a broadband infrastructure.   He pivoted the discussion from market competition to investment, stating that to encourage investment the nation must “remove barriers to entry.”  He claimed that AT&T has faced battles with local permitting authorizes that have hindered infrastructural broadband build out. 

Lawrence Spivak, President of the Phoenix Center for Advanced Legal and Economic Public Policy, also spoke in favor of incumbent broadband service providers, arguing, “We should get out of these questions of how many chickens does it take to make a market competitive.”  He continued, noting that creating regulations on the price of broadband service will likely not help to increase the broadband infrastructural build outs. 

Spivak stressed the importance of encouraging investment in regulatory broadband policy as a mode of increasing the availability of broadband in the country. Echoing Hulquist, Spivak called “policy relevant barriers to entry” opposed to the FCC’s national broadband plan.  He then criticized the current FCC’s regulatory initiatives, such as network neutrality, as hindrances to industries that aim to receive returns on their investments, and thus further discouraging investment in future broadband infrastructure. 

On the other side of the spectrum, Joseph Gillan, a seasoned telecommunications consultant, joined the discussion.  Pushing away from the argument that encouraging infrastructural build outs is the primary correct regulatory response to the broadband market, “New networks are not being built de novo; they are heavily dependent and extensions of the exiting architecture,” Gillian argued. 

“This isn’t some new wires, new worlds scenario,” Gillian continued.  “This is the old network that is going to evolve into a new architecture.  Big chunks of that old network are going to be used in the new architecture.”  According to Gillian, the question moving forward is not whether or nor broadband infrastructure should be deployed.  Rather it is important to ask what these incumbent companies, like Verizon and AT&T, should be held to in order to carryover a competitive marketplace into the broadband transition underway.

From a user perspective, the broadband market has been trending more towards a monopoly.  Gene Kimmelman, who served in the Antitrust Division in the United States Department of Justice, reminded the panel that this lack of competition might be responded to in multiple ways.  The government can either provide strong oversight or allow for the forces of the market to take over.  Kimmelman asked, “What will U.S. policy makers do today, in an environment where we confront market failure and a lack of competition?”

-April Glaser

Participants

Opening Remarks
Michael C. Copps
Former Commissioner, Federal Communications Commission (2001-2011)

Panelists
Hank Hulquist
Vice President for Federal Regulatory Affairs, AT&T

The Hon. Chip Pickering
Spokesman, The Broadband Coalition and Former U.S. Representative (R-Miss.)

Gene Kimmelman
Senior Associate, Global Partners and Former Chief Counsel for Competition Policy, U.S. Department of Justice

Todd Thibodeaux
President and CEO, CompTIA

Lawrence J. Spiwak
President, Phoenix Center for Advanced Legal and Economic Public Policy Studies 

Joseph Gillan 
Consulting Economist and CEO, Gillan Associates

Moderator
Michael Calabrese
Director, Wireless Future Project, Open Technology Institute, New America Foundation