Competition/Antitrust

With high-speed internet access in West Virginia’s rural areas seriously wanting, Sen Shelley Moore Capito (R-WV) is pushing policy proposals favored by players on the right and left. According to the Federal Communications Commission, the Mountain State ranks 48th in the nation for broadband coverage. That helps explain why Capito co-chairs the Senate’s Rural Broadband Caucus, and why she’s willing to try practically anything. Last week, Sen Capito joined Sen Kirsten Gillibrand, (D-NY), in introducing the Broadband Connections for Rural Opportunities Program Act, which would channel as much as $50 million in grants annually to build out broadband infrastructure through a Department of Agriculture entity, the Rural Utilities Service.

The legislation introduced by Sen Gillibrand would provide as much as 75 percent of the construction and select deployment costs of a high-need broadband project, and it mentions prioritizing applicants such as state, local and tribal government stakeholders and nonprofits. Typically, low-interest loans and grants made through the Rural Utilities Service have gone to local co-ops and utilities.

A trade association is asking the Federal Communications Commission to give apartment building tenants more choices when it comes to internet and cable providers. Incompas, which lobbies on behalf of smaller service providers, said the FCC should take up a new rule that would effectively ban rental property owners from giving preferential treatment to certain companies.

While it’s illegal to prevent apartment building tenants from signing up with the service provider of their choice, landlords have a lot of leeway to ensure that only certain providers have access to their properties. In some cases they also have an incentive to favor one provider over another. Property owners are allowed to enter into revenue-sharing agreements with companies like AT&T and Comcast, for instance, which provide kickbacks whenever their tenants sign up for service. “It’s time for the FCC to set the 30 percent of Americans living in apartment and condo buildings free from broadband monopoly control,” said Incompas CEO Chip Pickering. “They should not be forced to pay more for slower speeds when new broadband competition is knocking on the front door."

Cable companies were mostly up and the top telecommunications companies all were down in high-speed Internet subscriptions during the second quarter 2017. In all, the top 14 providers – companies that serve about 95 percent of the market – netted almost 230,000 new US broadband subscribers, according to an assessment by the Leichtman Research Group. “Cable companies added about 3.1 million broadband subscribers over the past year, while Telcos had net losses of about 550,000 broadband subscribers,” said Bruce Leichtman, president and principal analyst for Leichtman Research Group. “At the end of 2Q 2017, cable had a 64% market share vs. 36% for Telcos. The broadband market share for cable is now at the highest level it has been since the first quarter of 2004.” The cable industry still dominates, with 59.9 million broadband subscribers compared to the telcos’ 34.2 million.

Anxiety about the health of competition in the US economy — and elsewhere — is growing. The concern may be well founded but taking forceful action will require economists to provide some practical ways of proving and measuring the harm caused by increasing market power in the digital economy.

The forces driving concentration do not affect the US alone. In all digital markets, the cost structure of high upfront costs and low additional or marginal costs means there are large economies of scale. The broad impact of digital technology has been to increase the scope of the markets many businesses can hope to reach. In pre-digital days, the question an economist would ask is whether the efficiencies gained by big or merging companies would be passed on to consumers in the form of lower prices. Another key question was whether it would still be possible for new entrants to break into the market. Digital platforms make these questions harder to answer.

• One much-needed tool is how to assess consumer benefits.
• A second issue is how to take into account the interactions between markets, given that most platforms and tech companies steadily expand into other activities and markets.
• A third issue, perhaps the most important, is the effect increasing concentration has on incentives to innovate and invest.

[Diane Coyle is professor of economics at the University of Manchester]

We measure households’ willingness-to-pay for changes in key home broadband Internet connection features using data from two nationally administered, discrete choice surveys. Both surveys include price, data caps, and download and upload bandwidth, but only one includes latency. Together, these surveys allow us to measure tradeoffs between bandwidth and other connectivity features such as price and data caps, and perhaps most notably, provide the only empirical evidence to date of tradeoffs between bandwidth and latency. We find that households' valuation of bandwidth is highly concave, with relatively little added value beyond 100 Mbps.

For example, households are willing to pay about $2.34 per Mbps ($14 total) monthly to increase bandwidth from 4 Mbps to 10 Mbps, $1.57 per Mbps ($24) to increase from 10 to 25 Mbps, and only $0.02 per Mbps ($19) for an increase from 100 Mbps to 1000 Mbps. We also find households willing to pay about $8.66 per month to reduce latency from levels obtained with satellite Internet service to levels more common to wired service. Household valuation of increased data caps is also concave as caps increase from 300 GB to 1000 GB, although consumers place a significant premium on unlimited service. Our findings provide the first relative valuation of bandwidth and latency and suggest that current U.S. policy may be overpenalizing latency relative to reductions in bandwidth and data caps. For example, we find that in its CAF Phase II Auction, the FCC is imposing a bidding penalty for latency that is about five times higher than what our WTP estimates suggest it should be relative to bandwidth offered.

In a recent perspective, I reviewed a report authored by Dr. Christopher Hooton of the Internet Association on the impact of Net Neutrality regulation on broadband infrastructure investment. My earlier review of the IA Report focused mainly on Dr. Hooton’s difference-indifferences (“DiD”) model, which from an empirical perspective is the only analysis he offered that could plausibly quantify the effects of the regulation since it involves a counterfactual.

In this perspective, I return to Dr. Hooton’s analysis. My interest in further analysis stems from Dr. Hooton’s claim that his evidence leans in the direction of a positive investment effect in that his “regression coefficients of interest were positive in all but one case.” (That negative case being his primary DiD analysis.) Closer inspection of these “positive” cases reveals errors as severe, if not worse than, the errors plaguing his DiD analysis, including the fabrication of much of his data.

With few alternatives, many households are choosing to simply cancel the services they need. A 2015 study found that 15% of American adults had abandoned their paid cable or satellite television service. Meanwhile, only 67% of adults had broadband service at home, down from 70% from just two years prior. This case study aims to examine a community absent from telecom companies’ field of view. The subject of this study is a working-class couple in their late 50s....Americans have been vocal about their opposition to increasing TV and internet prices, sometimes opting to cancel their services altogether. As service providers start to recognize the threat of losing customers, they must acknowledge the extent to which their practices have harmed elderly, immigrant, and working-class households in particular. Most importantly, policymakers must take advantage of the role they may play in advocating for these communities through promoting competition among telecom companies.

Speedtest has long been the go-to for measuring internet speed, and now it’s launched the Speedtest Global Index, a monthly global ranking that allows you to see how your country stacks up when it comes to internet speed. The Global Index compiles data from the billions of tests consumers run on the service, and shows both mobile and fixed broadband speeds from around the world. Set to be updated monthly, each country’s ranking shows both its average download speed, as well as any difference in rank from the previous month. Click through on an individual country, and view both its average download and upload speed.

A Federal Communications Commission decision to eliminate price caps in much of the business broadband market can remain in place after a federal judge denied a petition to halt the FCC order. The FCC's Republican majority in April imposed a new standard that deems certain local markets competitive even when they have only one broadband provider. In those markets, incumbent phone companies like AT&T, Verizon, and CenturyLink will be able to charge higher prices for business data services that are delivered over copper-based TDM networks. Companies that will have to pay higher prices sued the FCC. They asked for a stay that would halt the elimination of price caps pending the outcome of the case.

But Aug 7, the US Court of Appeals for the 8th Circuit denied the motion for stay. The order provided no explanation for the denial. The FCC's decision eliminates price caps in a county if 50 percent of potential customers "are within a half-mile of a location served by a competitive provider." A county is now also considered competitive if 75 percent of Census blocks have a cable provider. (There are no price caps for cable-based business data services.)

The US residential median broadband price was $80 per month during the second quarter of 2017, according to research from Point Topic. Globally, the average residential download speed was 135 Mbps and the average monthly charge was $105. The best value was provided by fiber (208 Mbps for $94) and the worst by copper (14 Mbps for $68).

The range between high and low prices for broadband service tend to be more extreme in some countries than in others, according to Point Topic’s data. India (a high/low range of about $120/$5), Brazil (about $115/$20) and Turkey (about $118/$20) have a higher range, while Germany (about $50/$22), Japan (about $35/$3), South Korea (about $55/$30) and Russia (about $30/$5) tend to have less of a gap between high and low broadband speeds. The midrange seems to be comprised of China (about $60/$5), the United States (about $85/$15), France (about $55/$10) and the UK (about $55/$5).