September 5, 2014 - 1:13 pm
By Jon Sallet | General Counsel

Yesterday, Chairman Wheeler gave an important speech on the status and the future of broadband competition, emphasizing the increasingly limited choices emerging for American consumers for wired broadband connections at the higher speeds that consumers increasingly demand. He looked at the facts and the future, recognizing that “meaningful competition for high-speed wired broadband is lacking and that Americans need more competitive choices for faster and better Internet connections.”

The status of competition today is, of course, the sum total of past actions, including past policy perspectives on the nature of competition, which the Chairman also recognized.

As it happens, two large anniversaries in the past 12 months marked critical epochs in the history of America’s approach to communications industries and competition.

December 2013 was the 100th anniversary of the so-called Kingsbury Commitment, the antitrust settlement struck between American Telephone & Telegraph and the Department of Justice.  The Commitment set a national policy favoring regulated monopoly over competition but failed to consider the steps that government could have taken to boost competition, such as the establishment of interconnection obligations between competing local telephone companies. 

This was the Era of Regulation: when monopoly was considered an act of nature and government stood in the shoes of consumers. From 1913 until the early 1980s, the prevailing view favored just one telecommunications network – “Ma Bell” – with the government using regulation to do what consumers were not permitted to do – discipline their supplier and decide what’s best.

This year marks a second significant date:  the 40th anniversary of the filing of the complaint that led to the break-up of AT&T, an antitrust case initiated through a Department of Justice complaint signed by a then-junior attorney named Phil Verveer.  Today, Phil is a Senior Counselor to the Chairman of the FCC, lending the perspective born of that experience.  Earlier this year also marked the 40th anniversary of the filing of the MCI antitrust suit against AT&T alleging monopoly abuse.

This was the emergence of the Era of Competition – the recognition that competitive markets would yield the best outcomes and provide the greatest incentive for the deployment of innovative networks, to serve consumers better.  The FCC gave companies like MCI (where I once worked) the chance to compete in the long-distance market and create forward-looking rules of the road in proceedings like Carterfone and the Computer Inquiries. In the aftermath of concerted action by the FCC and the Department of Justice, new forms of competition flourished on the Internet, and consumers had, for the first time, competitive choices for telephony. Not surprisingly, long-distance prices dropped in the six years after the break-up of AT&T by more than 43%. Competition was embraced by a series of policies initiated while Chairmen Hundt, Kennard, and Powell were in office and carried forward under the Chairs that followed.

The lesson was powerful: Competition is the best way to encourage companies to deliver their best prices, quality and speedy innovation to consumers. 

Today, we find ourselves again confronting the bottom line question of what should be the role of government policy in the development of an environment of competitive high-speed broadband.  Technologies change, but the importance of competition endures.  In 1913, we were concerned about ensuring that all Americans had access to telephone service.  In 2014, we are concerned about the ability of Americans to choose among competing suppliers of high-speed broadband, the kind that consumers increasingly demand.

We have entered a new era, where we fervently believe that competition is better than regulation, but we carefully inquire whether competition does, or will, exist, and whether that competition is sufficient to deliver the public interest benefits outlined in what the Chairman calls the “Network Compact.”

In yesterday’s speech, the Chairman sounded the alarm about the lack of robust competitive choices for wired high-speed broadband.  At broadband speeds of 4 Mbps/1 Mbps – the FCC’s current benchmark for “broadband” – and 10 Mbps/768 kbps, the majority of American homes have a choice between only two providers: a duopoly.  At speeds of 25 Mbps down and 3 Mbps up, three-quarters of American homes had at most one broadband provider as of 2013.  Almost one in five had no provider at all

Recognizing the gravity of this situation, the Chairman has called for the creation of an Agenda for Broadband Competition – the ABCs of more choice. That includes the Commission, companies, and communities together. Because, as the Chairman said, “The best answer for limited competition is more competition, plain and simple.”

We are in a third era; call it the Era of Experience. We believe in competition, but we do not blind ourselves to the possibility that competition can be inhibited or that it may not exist in a form that best serves consumers.  We have learned that regulation should not displace competition, nor remove entrepreneurial incentives, while remembering that it was the law that established rules of the road to incent competition and the Commission that helped to put pro-competition rules in place.  

The Chairman has called for new ways of thinking about how to incent more competition. Under his instruction, FCC staff will be formulating suggestions for consideration by the Chairman and the Commission to further the goal of more competition and more competitive choice.