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Why We Need Broadband Regulation

Anybody that reads my blog posts knows that I am in favor of broadband regulation. I’m sure ISPs read this and wonder why—because who doesn’t like being unregulated? My feelings on this go back to basic economics—monopolies must either be regulated or split up. By definition, monopolies always end up taking advantage of consumers—unregulated monopolies really can’t help this behavior because employees and management of monopolies will inevitably take advantage of monopoly market power.

Of course, I’m also fine with breaking up monopolies. It’s actually surprising that stockholders of companies like Comcast aren’t clamoring for this. Comcast stock would be worth a lot more if the entertainment, sports, and cable businesses were separated into separate stocks. We know from seeing the split-up of AT&T that the stocks would be worth even more if the Comcast ISP properties were broken up into regions. Unfortunately, cable companies have gained such a dominant monopoly position in most markets that breaking Comcast into a half dozen smaller ISPs would just result in smaller monopolies.

The only other alternative is to regulate monopolies. Such regulation needs to take the form of protecting the public from monopoly abuse. We know that regulation of broadband companies works. Back when telephone companies were regulated, the public had a favorable opinion of Ma Bell because regulation forced decent customer service and prices. AT&T was far from perfect, but everybody who worked at the company was aware that the company had to answer to regulators—and that’s what stopped the kind of poor treatment that cable companies heap upon the public. There are no repercussions for Comcast or other big ISPs to treat customers poorly today.

Recently we got a glimpse of why regulation works. Charter had asked the the Ajit Pai FCC to implement data caps two years early. The company was prohibited from using data caps until 2023 as part of its agreement to buy Time Warner Cable. When the administration flipped and Chairman Ajit Pai left the FCC, Charter quietly withdrew the request because they knew that the new FCC would reject the request. Just the mere hint of a regulator saying no was enough to stop Charter from asking to implement data caps two years early—which means a savings of millions for customers over the next two years. It’s not hard to imagine big ISP being better citizens if FCC regulation had any teeth.

There are stories in the press every week showing why we need regulation. The latest example I read is that Frontier raised its Internet Infrastructure Charge from $3.99 to $6.99 for every broadband customer. This fee is a great example of an ISP hidden fee. There is no basis for this fee—Frontier instead uses this fee to bill more for broadband so that the company can continue to advertise that it has inexpensive broadband. Hidden fees are dishonest because ISPs can advertise low base fees and then hit customers with the hidden fees on the first bill.

I’m hoping the new FCC implements truth in billing rules and does away with hidden fees. Frontier has every right to increase its broadband prices—but it should do honestly and tell customers the real cost of broadband. The big ISPs have hidden fees on all of the triple play services and get away with this because no regulator tells them to knock off the nonsense.

I opened up this blog saying that small ISPs probably wonder why I’m always asking for more regulation. There are two reasons. My primary reason is that the vast majority of the public has no choice but to buy broadband from one of the big ISPs.

But another important reason is that the vast majority of small ISPs have nothing to fear from basic regulation. They already treat their customers well and don’t engage in the shady practices of the big ISPs. Small ISPs will be better off if their big competitors must be truthful. How much easier would it be to compete against Comcast if the company had to honestly tell customers that standalone broadband costs nearly $90?

This is not to say that there are not bad actors among small ISPs. There are, and we’d all be better off if these companies are also brought to task. The basic premise of regulation is simple—regulators are supposed to protect the public against abuses by regulated companies. This is not to say that regulators can’t go too far in being too pro-public—because regulators’ second role is to foster the industry they are regulating. If regulators go too far, you’ll see me writing blogs about the regulators. But as long as regulators tackle the role of watching out for the public, paint me as pro-regulation.

By Doug Dawson, President at CCG Consulting

Dawson has worked in the telecom industry since 1978 and has both a consulting and operational background. He and CCG specialize in helping clients launch new broadband markets, develop new products, and finance new ventures.

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