Written Statement for the Reimagine New York Commission
Thursday, August 27, 2020
Written Statement for the Reimagine New York Commission Meeting
August 10, 2020
My name is Jonathan Sallet, and I am a Senior Fellow at the Benton Institute for Broadband & Society. In October 2019, the Benton Institute released a report, of which I was the lead author, entitled Broadband for America’s Future: A Vision for the 2020s. This October, we will be releasing a follow-up to that report.
The Benton perspective is this: Everyone in America should be able to use High-Performance Broadband, by which I mean broadband connections to the home that are robust and futureproof.
The State of Competition
Broadband competition is more important than ever because—in our current crises and beyond—America has fast-forwarded into its broadband future. Yet, New York, like the nation, has too little competition in fixed broadband to ensure that all people have the advantage of competitive pricing, quality, customer service, and innovation.
By fixed broadband, I mean the kind of connections that go to homes and small businesses, like the typical connections offered by cable TV companies.
Federal Communications Commission data purport to tell us where broadband is offered at a typical cable speed—100 Mbps down/10 Mbps up. That FCC analysis overstates deployment, but even it demonstrates that there is a problem: In New York State, at the typical cable speed, about 9% of rural and 22% of tribal lands have no broadband at all, which is a deployment problem.
The competition problem arises from the fact that, as of the most recent FCC data from June 2019, about 30% of New Yorkers live in a monopoly market and another 50% face a duopoly—both short of what is generally considered a competitive market. For example, in the related markets for mobile broadband, the Department of Justice would not allow a merger of T-Mobile and Sprint to reduce the market to less than four providers.
Even that 80% doesn’t describe the full extent of the competition problem, because competition at these typical cable speeds is highly concentrated in New York City, which contains the two counties (Kings and New York) in which more than half of New Yorkers have a choice of three or more broadband providers. About thirty counties in New York entirely lack a third competitor.
Potential Impacts on Low-Income Customers
Normal effects of this lack of competition disproportionately impact low-income subscribers. Here, I am not referring to people who cannot afford broadband at all. In a recent op-ed for the Boston Globe, former FCC Commissioner Mignon Clyburn and I recommend the creation of a permanent broadband credit for those who cannot afford a broadband subscription.
Rather, we are addressing the plight of low-income households that do subscribe. Broadband has become a must-have good, which means that demand for broadband is likely inelastic, much in the way that parents at the supermarket will continue to buy milk for their children even if the price of milk increases 5-10 percent.
Evidence from the National Digital Inclusion Alliance shows that broadband providers have engaged in “tier flattening,” eliminating their cheaper rate tiers for low- and mid-speed Internet access. Last year the Wall Street Journal reported that “Americans in low-income neighborhoods and rural areas get slower broadband speeds even though they generally pay similar monthly prices as their counterparts in wealthy and urban areas.” This trend towards effectively higher prices thus risks disproportionately impacting Americans with lower incomes. And all this is against a backdrop of rising income inequality, which has increased for the last 40 years.
If there’s a problem, what’s the solution? Here are five solutions that I urge you to consider, reflecting our competition agenda.
1. Recognize what is really competitive “broadband”
Recent research by industry analysts at MoffettNathanson suggests that we are approaching a time when only fiber will be competitive with cable. The researchers attribute this change to increased demand for higher speeds, especially as COVID-19 forces Americans to stay home.
The FCC’s definition of broadband, 25/3, is already too slow. In this crisis, many people began to use video applications to work, learn and even visit doctors (as I did for the first time in 2020). In a world of symmetrical video applications, the upstream speed of 3 Mbps is not plausible for a family conducting multiple online video session simultaneously. In order to ensure steady performance, one report recommends that users of such video applications should have an upstream speed of 5.7 Mbps, almost twice the FCC current standard, or even higher.
2. Encourage new, competitive entrants and local experiments in private-public collaboration
The formula for competition is simple: The more the merrier.
New entrants can provide unique value propositions to residential and small-business users, such as pricing, quality, capacity, and customer service. New entrants can make their small size work to their advantage: Small ISPs are able to compete on consumer-friendly customer-service and simplified pricing. Net neutrality and privacy can also be a differentiator for ISPs.
- Support municipal experimentation
No one size fits all. Different models can and should be used based on local conditions, resources, and needs. Good examples of municipal experimentation exist around the nation in states like Idaho, Maryland, Ohio, North Carolina, and Tennessee.
Colorado is a good example of diverse approaches. Fort Collins’ municipal utility is currently building out a full network and has already begun providing service to community members. But in other places in Colorado, local governments have focused on open-access, middle mile networks.
- Support open-access, middle-mile networks
The Pew Charitable Trusts, in research led by Kathryn de Wit and Anna Read, concludes that “investment in middle-mile infrastructure facilitates last-mile deployment.”14 New York City, too, has recognized the value of open-access, middle-mile. The city’s Internet Master Plan calls for building open-access infrastructure. Minnesota supports funding for both last-mile and middle-mile construction and Benton has proposed that “middle-mile and backhaul facilities constructed with government support [be] open and available to multiple broadband providers.”
Our own research on open-access, middle-mile networks, which we expect to publish in September, collects information about such networks in places like Illinois, Maine, Virginia, and Washington. For example, we find that community support, including political support, shared economic goals, and strong partnerships, can give the open-access, middle-mile network a secure foundation. ISPs need to be able to see a sustainable business strategy to partner with the network. Networks have, for instance, surveyed consumer demand to demonstrate the business case for ISPs. But networks will not attract ISP partners when they demand unrealistic business terms, as was the case in Arlington, Virginia.
3. Expand competition for residents of multi-tenant locations
Thirty percent of Americans live in apartment building and other multi-tenant environments (MTEs). New York has the highest percentage of apartment dwellers of any state in the nation.
Residents of MTEs should be able to choose from providers that want to serve them; not forced to buy service from providers they don’t want to use.
Encouraging competition in MTEs should reduce broadband prices—including for low-income subscribers. The annual incomes of MTE dwellers tend to be only about 54% of median homeowner income, so they are at greater risk of not being able to afford broadband.21 My Benton colleague Ryland Sherman has provided a detailed list of recommendations.
4. Gather pricing data and other information necessary to promote and assess competition
Competition cannot be measured without public access to broadband pricing and terms of service. Opaque, non-transparent pricing is a limit on competition by itself, and these practices also limit the ability of consumers to make intelligent choices.
That’s why New York should protect consumers with a Broadband Consumer Disclosure Label, which will help consumers understand the offers being made to them. The FCC had one. It went away. It should come back.
5. Where public funds build a network, require a “competitive” and a low-income price for real broadband
When networks receive public dollars, program guidelines must ensure that anyone can afford to use the network. The State of New York required recipients of broadband deployment funding to offer standalone 25/4 Mbps plans for $60 per month (adjusted annually for inflation).
Benton proposes that government-funded networks should offer a $50/month option for all customers (for example, 50/50 Mbps with unlimited capacity) and a $10/month plan to provide the same service for low-income customers.
Implementing these solutions will not be fast, and it will not be easy. But it is important for consumers to get the benefits of lower prices, higher quality, faster innovation, and better customer service—especially given the potential for disproportionate burdens on low-income subscribers in an era of increasing income inequality.
The Benton Institute for Broadband & Society is a non-profit organization dedicated to ensuring that all people in the U.S. have access to competitive, High-Performance Broadband regardless of where they live or who they are. We believe communication policy - rooted in the values of access, equity, and diversity - has the power to deliver new opportunities and strengthen communities.
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