The Federal Communication Commission (FCC) has made an “Open Internet” ruling—reclassifying Internet service as a public utility. This could have a major impact on how Internet service providers (ISPs) do business. “There will be a referee on the field to keep the Internet fast, fair and open. Blocking, throttling, pay-for-priority fast lanes and other efforts to come between consumers and the Internet are now things of the past. The rules also give broadband providers the certainty and economic incentive to build fast and competitive broadband networks,” said FCC chairman Tom Wheeler in a statement on June 11.
The American Internet service provider industry has been cited for poor connection speeds for value, poor customer service, and a lack of competition. This lack of competition could give ISPs the incentive to innovate and create a faster Internet experience, along with providing customer service. Currently, the United States only ranks 28th in Internet download speed (36.83 Mbps). While it is the fastest in the Americas (save for Saint Pierre and Miquelon, a French overseas territory), it is still far behind many European Union countries and several East Asian countries.
When one accounts for cost per megabits per second (Mbps), the United States ranks only 35th at $3.52 per Mbps, and third in the Americas behind Canada ($3.12/Mbps) and Brazil ($3.35/Mbps). Bulgaria ($0.43/Mbps) tops the list for the best Internet speed for value. According to these numbers, the Internet bill for Americans is around $129.64, while the Internet bill in Bulgaria (26th, 37.97 Mbps) is only $16.32. Singapore, which has the fastest Internet speed (128.66 Mbps) but ranks only 22nd in cost per Mbps ($2.57), has an Internet bill of $330.65. If the United States had the same Internet download speed as Singapore, consumers would be shelling out over $400 a month, but if it had the same cost per Mbps value as Bulgaria, consumers would have an Internet bill of only $15.84.
Why the high Internet prices in America? Critics have pointed to market deregulation. This means that the market has a much bigger say in prices, but the FCC’s ruling could change that. “Americans pay so much because they don’t have a choice,” said Susan Crawford, a former technology and science advisor to President Barack Obama, citing a lack of competition in the market, and more importantly, a lack of government oversight. ISPs have not only gotten away with price gouging, but also left consumers high and dry in the customer service department, where ISPs ranked amongst the worst in customer service ratings.
While the FCC is responsible for regulating communications, it has left the high-speed Internet industry largely untouched for the past decade. “We deregulated high-speed Internet access 10 years ago and since then we’ve seen enormous consolidation and monopolies, so left to their own devices, companies that supply internet access will charge high prices, because they face neither competition nor oversight,” Crawford continued.
However, a serious blow to ISP consolidation happened when Time Warner and Comcast, two of the biggest American ISPs, failed to merge in April. The merger was opposed by regulators, consumers, and other ISPs, which signaled a turnaround in getting healthy competition back in the market, and more importantly, an open Internet which the FCC has espoused.
The big American ISPs have also prevented alternatives from rising in the past. According to a 2014 Ars Technica article, startup ISPs have been sued by Comcast and other large ISPs. While a startup ISP might look great on paper, it is also very expensive to start—the article states that these projects also require lots of capital, investors willing to wait for their profits, and consumers willing to make the switch. On top of the financials, they also have to acquire government permits, and hire construction crews to lay down fiber optic cables, and have a legal team that can reply to the lawsuits filed by the bigger competition. In essence, starting an ISP in America was (and still is) a David versus Goliath-type undertaking on financial, technical, bureaucratic, and legal fronts.
“The incumbents are notorious for frivolous delay lawsuits. They know perfectly well they’re frivolous, but it’s a delay tactic. They have an army of lawyers and a budget to support lawsuits the size of Godzilla. That’s one of their tactics, it always has been. It probably will continue to be so for many years yet to come,” said Don Patten, owner of MINET Fiber, a startup ISP in Oregon. “What they started to do was file frivolous lawsuit after lawsuit to try to basically bankrupt us so we couldn’t compete,” said Michael Wagner, former engineering chief for Falcon Broadband, a startup fiber ISP in Colorado.
The FCC’s ruling is especially beneficial for startup ISPs and consumers who are looking to get the best possible speeds from their ISPs. This will also change the game for big ISPs, who will have to start paying attention to their customer service and lower their prices in order to compete with other ISPs.