Tuesday, September 12, 2006

New Report Skewers Telco Spin on Competition

Why has the United States fallen behind the rest of the world in accessible and affordable broadband service?

The answer, according to a report released by Free Press, the Consumer Federation of America and Consumers Union, is marketplace failures wrought by phone and cable companies' near monopoly control of last-mile broadband markets.

The 44-page report, Broadband Reality Check II, exposes the truth behind America's digital decline: A marketplace controlled by the likes of AT&T, Verizon and Comcast has left Americans with higher prices, slower speeds and no meaningful competition for high-speed Internet service.

It exposes the falsehoods behind phone companies' repeated claims that the U.S. has a diverse marketplace, with myriad broadband choices for the consumer.

It decisively skewers the notion -- put forth by telco executives and their high-paid shills -- that "fierce competition" precludes Net Neutrality protections.

According to Broadband Reality Check II, a few cable and DSL providers account for 98 percent of the residential broadband market. Over 40 percent of U.S. ZIP codes have one or fewer DSL or cable modem providers providing service. In most cases, these are limited to services offered by just one or the other of the nation's largest phone and cable companies, all of which have stated their steadfast opposition to preserving an even playing field on the Internet.

"Our markets lack the competition to bring lower prices, higher speeds, and universal access. Our policies lack the imagination and potency to create real change," wrote the report's author, Derek Turner, research director of Free Press. "Meanwhile, Americans pay more money for less service than a dozen other nations. A third of U.S households are still stuck with dial-up, and another third lack Internet access of any kind. Our broadband problem is becoming a crisis."

Broadband Reality Check II also finds:
  • The 14 other OECD nations saw higher overall net growth in broadband adoption than the United States from 2001 to 2005.

  • Consumers in other countries enjoy broadband connections that are far faster and cheaper than what is available here. U.S. consumers pay nearly twice as much as the Japanese for connections that are 20 times as slow.

  • U.S. broadband prices aren't dropping: Cable modem prices are holding constant or rising, and DSL customers on average are getting less bandwidth per dollar than just a year ago.

  • The market share of "third platform" alternatives like satellite, wireless and broadband over powerline technologies has actually decreased over the past five years.
The report contradicts the rosy picture painted by the Federal Communications Commission, by exposing the agency's failure to rein in broadband monopolies -- an industry-friendly regulatory approach that has left Americans with higher prices, slower speeds and no meaningful competition for high-speed Internet service.

To remedy America's Broadband decline the report recommends that Congress "restore the non-discriminatory, open-access principles — such as Net Neutrality — that enabled the birth and historic proliferation of the Internet."

This is the last thing the nation's largest phone and cable companies want to hear. They have already spent more than $100 million on Washington lobbyists, ads and PR flacks to push legislation through Congress that will gut Net Neutrality and further consolidate their control of the marketplace.

In press releases after press release, public utterances and op-eds, these companies and their shills build their argument on a myth of competition.

Their script goes something like this:
  • "Why would phone and cable companies ever discriminate online?" [They conveniently ignore AT&T, Comcast BellSouth and Verizon executives who have stated their intention to do just that.]

  • "The marketplace for broadband is highly competitive." [They cite FCC stats that have been widely discredited -- by Congress and, even, the FCC.]

  • "If we discriminate online, consumers will simply choose another provider." [They willfully turn a blind eye to thoroughly-researched data that show minimal to no other broadband choice in markets across the country.]

  • "Net Neutrality legislation is heavy-handed new regulation." [They ignore its history as one of the Internet's guiding regulatory principles, which has made the Web a dynamic engine for new ideas, innovation and free speech.]

  • "Net Neutrality hurts consumers." [They can't recall that every major consumer group in the country supports Net Neutrality legislation and opposes the phone and cable companies' stance on the issue.]
"The simple fact of the matter is that the average consumer is lucky to have two providers and many don't even have that," said Mark Cooper, director of research for the Consumer Federation of America. "And what happens with two is that these corporations quickly figure out that it is not in their mutual interest to compete down prices and give consumers a better deal."

Despite the preponderance of evidence to the contrary, phone company shills -- such as the disingenuously named NetCompetition.org -- continue to parrot claims that broadband choice is "diverse" and "expanding rapidly." Yet, without real data to stand upon, these industry frontmen offer little more than a flimsy fa├žade of wishful lies, which they hope to prop up long enough to earn themselves yet another paycheck from AT&T.

But they're dead wrong. Net Neutrality is hardly government intrusion into the open marketplace of the Internet. It is a simple antitrust rule that keeps Internet companies from exploiting a lack of competition at the consumer's expense.

As more and more Americans come to the Side of Net Neutrality, Congress should abandon the shills and support it too.