Connect with us

Broadband's Impact

Expert Opinion: Broadband Adventures in Wunderland: The (Expensive) Myth of Competition

The National Broadband Plan won’t do jack until more folks in Wunderland acknowledge and aggressively address one stark truth – broadband competition is mostly a myth, expensively maintained through lobbyists, think tanks and easily-influenced politicians. Until we get meaningful competition, a significant part – though mercifully not all – of Wunderland’s policies will result in dabbling around the edges rather than a meaningful advancement of broadband in the U.S.

Case in point: the misguided attempt by some of Wisconsin’s state legislators to prevent their state universities from using federal stimulus money to advance broadband is purely about AT&T clawing to maintain its near monopolistic hold over broadband there. In this and other states’ legislatures we see cable and telco duopolies roadblocking federal and local efforts to get communities the broadband they want and need.

Published

on

The National Broadband Plan won’t do jack until more folks in Wunderland acknowledge and aggressively address one stark truth – broadband competition is mostly a myth, expensively maintained through lobbyists, think tanks and easily-influenced politicians. Until we get meaningful competition, a significant part – though mercifully not all – of Wunderland’s policies will result in dabbling around the edges rather than a meaningful advancement of broadband in the U.S.

Case in point: the misguided attempt by some of Wisconsin’s state legislators to prevent their state universities from using federal stimulus money to advance broadband is purely about AT&T clawing to maintain its near monopolistic hold over broadband there. In this and other states’ legislatures we see cable and telco duopolies roadblocking federal and local efforts to get communities the broadband they want and need.

Counterproductive legislation is just one element of the fallout from a lack of competition. High prices, low network service quality, abysmal customer service and just plain lack of access plagues many rural and urban communities. Furthermore, policymakers’ dreams of a future in which broadband enriches the U.S. economically or otherwise are on shaky ground without the pressure of real competition to force/entice buildouts of networks capable of delivering on those dreams.

Incumbents and their apologists are loud and swift proclaiming the industry, particularly mobile broadband, is “vibrant” in its competitiveness. They shout, “we’re a veritable font of innovation!” (accompanied by loud chest thumping). They repeat that mantra “almost every America has dozens of providers from which to choose,” I guess – assuming we easily confuse quantity with quality.

Let’s look at the reality of broadband competition. You have to tear away two curtains hiding the man at the PR controls.

First, just because there are a lot of providers in a state doesn’t mean you have competition that leads to better broadband for a better price. Last year I partnered with data analytics firm ID Insight to release an analysis of competition within all 50 states based on data from millions of Internet users nationwide. We ranked the states based on how closely the market share of their respective top 10 competitors came to 10 percent for each competitor. The viability of competition depends on more than market share, of course, but we took this approach to give the discussion of competition some context and consistency.

Even in the 10 states where the competitors are most evenly matched in market share, as you go down the list the combined market shares of the top three competitors moves into the high 70s. In Michigan and Iowa, states that ranked 21 and 22 on the list, the combined market share percentages of the top three competitors break solidly into the 80s.

In state 24, Wyoming, and on down the list we have what are pretty much duopoly states. The top two competitors’ market share percentages collectively are in the mid 70s moving toward the 80’s (often one’s a wireless and one’s a cable provider, and it’s questionable they really compete with each other that much). For the bottom five states (Delaware, Colorado, Maryland, Hawaii and Rhode Island), their duopolies range from 89 percent to 95 percent market share.

If you practice the fine art of rational thinking, you’ll be hard pressed to believe that 60 or 70 providers in a state means you have anything resembling “robust” competition if 50 or 60 of them are fighting for 15 percent of the market. Drill down to the county level and often you don’t even see three or four of the top ten providers. Sometimes two, occasionally just one, at which point their market share is even greater.

It’s at this local level you find frequent stories such as this from Sibley County, Minn. For more than two-and-a-half years, these communities pleaded with providers to partner with them, offering incentives that included most of the network’s sales revenues. They offered to put up the money to build the network. Yet the best broadband these towns currently receive is DSL service at 256 kilobits per second (Kbps) downstream and 128 Kbps upstream. However, let one competitor pop up on the scene offering fiber services, these incumbents fall all over themselves with special offers and high speeds. We see it happen time and again.

Here’s where you yank away the other curtain around the competition myth. To do so, you need to get into the market and the mind of the people who actually pay for and use what passes for broadband services in their area. Wunderland is fixated with broadband adoption, but many folks miss the boat completely when it comes to broadband utilization. Utilization means using broadband to perform tasks and run applications important to economic development, education, job skills improvement, delivering better medical services, etc. It matters little if you adopt a broadband service that’s inadequate for the utilization needs at hand.

In numerous areas competition is low or effectively nonexistent when you look at how few Internet access providers have any meaningful clout within those areas. But when you look at the more important question of, can a community get broadband that’s sufficient to do the tasks deemed important for its economic enrichment, you see the true lack of competitive forces. Slip out from under the debilitating influence of industry lobbyists with their fairy tales of robust competition and spend some days visiting communities and listening to their stories.

Over 130 communities, such as Chattanooga, Tenn., own their own broadband networks, plus communities that have formed co-ops and nonprofit entities to run their networks. Look at the collective benefits Chattanooga’s gigabit community network offers its constituents (part 2 of the story here). You see that achieving communities’ various economic dreams requires a lot of broadband capacity, but competition to provide this kind of capacity is nonexistent in so many parts of the U.S. That’s why several thousand communities (not hundreds, thousands) are champing at the bit to be like Chattanooga, Powell, Wyo., Ontario County, N.Y., Santa Monica, Calif. and the others. They want to provide the competition that addresses utilization, not just adoption.

More people in Wunderland have to grab this bull by the horns, or some other vital area, and kick it in the butt. People need to take a two-by-four and beat back these attempts to undermine and circumvent programs that fund broadband efforts that introduce much needed competition. Let’s see some profiles in courage and toss this AT&T/T-Mobile merger out the back door. Encourage (incentivize) companies like Google and Corning to partner with communities to put fiber infrastructure in place. If you’re going to do more than just pretend to reform USF, take that $4 billion that comes directly out of taxpayers’ pockets and put it into communities to solicit and fund the best solutions they can find someone willing to provide.

Either we get serious about competition or we stop pretending we’re serious about broadband.

Craig Settles is a broadband business strategist, marketing expert, author and internationally renowned speaker.  Craig helps organizations use broadband technologies to improve government and stakeholders’ operating efficiency, as well as local economic development.

 

 

 

 

Craig Settles conducts needs analyses with community stakeholders who want broadband networks to improve economic development, healthcare, education and local government. He hosts the radio talk show Gigabit Nation, and is Director of Communities United for Broadband, a national grass roots effort to assist communities launching their networks. He recently created a guide to help librarians uncover patrons’ healthcare needs, create community health milestones and effectively market telehealth.

Digital Inclusion

Catherine McNally: The Digital Divide is an Equality Issue

To work toward equal access, more affordable options must be created, including community-based solutions.

Published

on

The author of this Expert Opinion is Catherine McNally, editorial lead for Reviews.org

Per the latest U.S. Census numbers, about one in four American households is stuck without internet. And a quarter million people with home internet still listen to the dial up screech when they hop online.

The majority of folks lacking home internet live in states with large rural populations and high rural poverty rates, like Mississippi, Arkansas and Alabama.

In Mississippi, as an example, 60% of homes don’t have broadband, satellite or dial up. And 53% of the state’s population is considered rural with a rural poverty rate of 23%.

Limited options and slow speeds top the list of reasons why rural states are home to high numbers of disconnected households. But steep costs are the most imminent barrier to home internet in rural areas.

According to a 2020 report on worldwide internet pricing by Cable.co.uk, the U.S. is the most expensive country for internet out of all developed Western nations. Here, internet costs an average of $60 a month. Internet in the cheapest country, Ukraine, costs an average of $6.40 a month.

Digital divide deep dive: Issaquena County, Mississippi

Issaquena County is Mississippi’s least-connected county with only 20% of homes paying for an internet connection. The median income there is $14,154 per individual in 2019, compared to a $31,133 national median income. The overall poverty rate in the county is 29%, which is about 16% higher than the U.S. as a whole.

That is a glaring contrast to the most-connected county in the most-connected state: Morgan County, Utah. Morgan County is home to 95% of households with an internet connection, the median individual income there was $37,091 in 2019 and the overall poverty rate is 3%.

Residents of Issaquena County are lucky if they can get download speeds of 25 Mbps, which is the Federal Communication Commission’s current definition of “high speed internet.” The slowest speeds available, 5–12 Mbps, are barely enough to stream in HD, let alone connect to a Zoom call.

If we narrow down our view to Valley Park, a town of just over 100 people in Issaquena County, we see that some residents have the option of a single AT&T DSL internet plan.

The AT&T plan costs $660 a year for speeds of 25 Mbps, which barely keep up with critical modern-day online tools like online learning and telehealth.

Our case study of Issaquena County and Valley Park, Mississippi, highlights further opportunities tied to home connectivity and equality:

  • Access to online learning. About 23.7% of Issaquena County residents have obtained a high school degree, while 3.2% have no schooling. Online education allows individuals to expand their knowledge and further their careers.
  • Greater access to livable wages.5% of residents earn a household income of $10k or less. This is further divided by race: In 2019, Black and African American residents earned a median household income of $21,146, while white residents earned a median household income of $52,188.
  • More employment opportunities. The employment rate in Issaquena County has steadily declined since 1990. Now, 10.6% of residents are considered unemployed.
  • Better access to health care. The U.S. Health Resources and Services Administration found that half of Mississippi’s residents live in counties with more than 2,000 patients per primary care physician. Issaquena County has been designated a Medically Underserved Area since 1978, meaning the county has a shortage of primary care, dental and/or mental health providers. Better access to telehealth also enables residents who cannot make the drive to the nearest hospital or clinic.

Solving the digital divide

To work toward equal access, more affordable options must be created. The Emergency Broadband Benefit fund is one option, but it remains largely untapped by American households. Subsidies like Lifeline may also lower barriers to internet access, but participation remains low.

Community-focused solutions are likely a better answer, such as Land O’Lakes’s American Connection Project. The project opened more than 2,800 free public Wi-Fi locations in spots like the Tractor Supply Store in Spooner, Wisconsin, in order to keep farming communities connected.

Also significant is this year’s infrastructure bill, which calls on states to determine localized needs and strategies for improving affordability and access to the internet.

State sponsored projects may also solve the severe lack of competition between U.S. broadband services. This should reduce costs last-mile providers incur to connect to middle-mile networks, which could, and should, pass savings down to households. Case in point: California recently introduced an open access middle-mile project with the goal of providing nondiscriminatory access. The bill passed unanimously.

A modernized definition of what qualifies as “high speed internet” would also benefit rural households. Currently, the standard of 25 Mbps download speeds and 3 Mbps upload speeds shorts rural users of opportunities tied to telehealth, online learning and remote work.

This outdated definition allows service providers to complete minimum-viable network expansions and mark areas as “connected.” It also de-incentivizes providers to improve existing-but-subpar networks, such as the 10 Mbps DSL line I found offered in nearby Morton, Mississippi.

One thing is clear: The way the U.S. has approached internet access in the past does not work. New strategies and policies are required to repair the digital divide. Internet access is a right, not a privilege in today’s world.

Catherine McNally is an Editorial Lead for Reviews.org, where she reviews internet service providers across the US. She has a passion for using data to highlight the need for better internet access across the US and believes that internet is a critical lifeline in today’s world. She has also published speed test and pricing reports to help everyday consumers make informed decisions. This piece is exclusive to Broadband Breakfast.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views expressed in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

Continue Reading

Education

National Non-Profit to Launch Joint Initiative to Close Broadband Affordability and Homework Gap

EducationSuperHighway is signing up partners and will launch November 4.

Published

on

Evan Marwell, founder and CEO of Education Super Highway.

WASHINGTON, October 18, 2021 – National non-profit Education Super Highway is set to launch a campaign next month that will work with internet service providers to identify students without broadband and expand programs that will help connect the unconnected.

On November 4, the No Home Left Offline initiative will launch to close the digital divide for 18 million American households that “have access to the Internet but can’t afford to connect,” according to a Monday press release.

The campaign will publish a detailed report with “crucial data insights into the broadband affordability gap and the opportunities that exist to close it,” use data to identify unconnected households and students, and launch broadband adoption and free apartment Wi-Fi programs in Washington D.C.

The non-profit and ISPs will share information confidentially to identify students without broadband at home and “enable states and school districts to purchase Internet service for families through sponsored service agreements,” the website said.

The initiative will run on five principles: identify student need, have ISPs create sponsored service offerings for school districts or other entities, set eligibility standards, minimize the amount of information necessary to sign up families, and protect privacy.

The non-profit said 82 percent of Washington D.C.’s total unconnected households – a total of just over 100,000 people – have access to the internet but can’t afford to connect.

“This ‘broadband affordability gap’ keeps 47 million Americans offline, is present in every state, and disproportionately impacts low-income, Black, and Latinx communities,” the release said. “Without high-speed Internet access at home, families in Washington DC can’t send their children to school, work remotely, or access healthcare, job training, the social safety net, or critical government services.”

Over 120 regional and national carriers have signed up for the initiative.

The initiative is another in a national effort to close the “homework gap.” The Federal Communications Commission is connected schools, libraries and students using money from the Emergency Connectivity Fund, which is subsidizing devices and connections. It has received $5 billion in requested funds in just round one.

Continue Reading

Broadband's Impact

Steve Lacoff: A New Standard for the ‘Cloudification’ of Communications Services

The cloudification of communications services makes it easy to include voice, data, SMS, and video within any existing service.

Published

on

The author of this Expert Opinion is Steve Lacoff, general manager of Avalara for communications

The line of demarcation between what has traditionally been considered a telecommunications service was once very clear. It was tangible – there were wires, end points, towers, switches, facilities. Essentially, there was infrastructure required to relay voice or data from point A to point B.

Today that line is fuzzy, if not invisible. The legacy infrastructure remains, but an industry of cloud-based services that don’t require the physical connections has exploded. Voice, data, SMS, and video conferencing can now be conveniently delivered OTT. Enabled by simple API integrations, businesses can embed just one of these services or a complete communications platform-as-a-service (CPaaS) into an app, service, or product.

Cloudification is a game changer

This “cloudification” of communications services makes it easy to include voice, data, SMS, and video within any existing application, product, or service. These are essential components for many business models.

Consider these services we have come to rely on in our daily lives: food or grocery delivery, ride services, and business and personal communications. These require multiple methods of communication with shoppers, drivers, co-workers, watch party groups, and external business partners.

The exciting news is there is no end in sight. Use cases will continue to evolve and growth will continue to skyrocket. The scale cloud delivery accommodates is massive. These untethered, easy to embed communications services are a critical differentiator for both business-to-business and business-to-consumer buyers, and the lifeblood of the businesses providing both the end user subscriptions and the APIs.

In fact, one industry juggernaut saw H1 YoY video application service demand grow nearly 600% in 2020.

Not surprisingly, as business demand for these services increases smaller CPaaS players continue to enter the market to quickly snag market share. According to a recent IDC study, “the global market revenue for CPaaS reached $5.9bn in 2020, up from $4.26bn in 2019, and is expected to reach $17.71bn by 2024.”

Merger and acquisition activity is aligned with this hockey stick growth forecast. Large telcos, SaaS providers, and even other CPaaS providers are all on the hunt. Whether they want to add additional features to punch up their products or eliminate the competition in a very tight, nuanced market, the end game is clear – as the market expands, the players will ultimately contract leaving only the most competitive offerings.

Don’t let communications tax take you by surprise

One of the least understood risks when adding cloud-based voice, data, SMS, or video conferencing to an existing product or service is new eligibility for and exposure to the complex world of communications taxation. Making mistakes can get costly very quickly.

Here are some of the key pitfalls to keep an eye on:

  • Expanded nexus: Understanding communications tax nexus is different – and exceptionally more complicated – than sales tax. There are approximately 60,000 federal, state, local, and special taxing jurisdictions, each with uniquely complex rules that tend to change at their own pace. Rules are very different for each service.
  • More complex calculations: The more communications services you provide via API, the more complicated communications taxes will be. Each feature can be taxed at different rates in each individual jurisdiction, or the whole bundle can be taxed at one rate. It’s critical to monitor monthly to avoid audit issues.
  • Maintaining overall compliance: Just as tax rates and rules need to be maintained, so must tax and regulatory filing forms in each jurisdiction. Some of these are very long and require significant detail.  They must be filed in a timely, accurate cadence to avoid additional audit risk.

Bottom line: Don’t assume, be prepared! As these communications services become more pervasive a larger swath of technology providers will find themselves liable for communications tax. The more your business falls behind, the more it can cost you.

It pays to be proactive and prepared. Tax and legal advisory experts can help determine your level of risk, and tax and compliance software providers can help you keep up with changing rules and regulations. Don’t underestimate the ongoing value of networking with peers who are either struggling to answer the same questions or have already overcome the hurdles you’re facing today.

Steve Lacoff is General Manager of Avalara for Communications. With a focus on data, VoIP, and video streaming, Steve has spent 15 years in various product and marketing leadership roles in communications and technology industries, including Disney’s streaming services and Comcast technology solutions. Steve now drives business strategy on today’s changing industry landscape and associated tax impacts. This piece is exclusive to Broadband Breakfast.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views expressed in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

Continue Reading

Recent

Signup for Broadband Breakfast

Get twice-weekly Breakfast Media news alerts.
* = required field

Trending