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Broadband Denied in Trump Country

Without a high-speed connection to the Internet you might as well be teleported back to 1995 — and dial-up Internet. Which is what the Federal Communications Commission appears determined to do to about 23 million rural Americans via a bureaucratic rule change[1] being pushed by lobbyists for large cell phone carriers such as T-Mobile that will make access to high-speed broadband service where these people live much more expensive. Broadband is a spectrum, like the AM/FM dial — and both are regulated by the FCC.

As on your radio dial, there is limited space available on the broadband spectrum and the FCC’s mandate is to allocate this limited space in a manner that’s as fair as possible to all and in the public interest. What the FCC is being pressured to do will not be fair to those 23 millions rural Americans. But it will benefit certain private interests.

Currently, slots of bandwidth are parceled out by the FCC based on a regional population density basis called “census tracts” and — under the existing (2015) FCC rules the “tracts” were small enough that smaller, regional Internet Service Providers in less-populated areas had a shot at securing bandwidth for their customers. This included local co-ops, which are very common in rural areas and give the locals the option of doing business locally. The existing rules also took into account demographic and technological changes by licensing these “tracts” for a relatively short three-year span.

This fosters competition — and thereby helps keep prices low. Well, the Bigs — large cell phone companies, chiefly — want the FCC to expand the size of the “tracts” so that most if not all of them will swallow up the rural areas and subsume them with much larger, more densely populated urban and suburban areas. This will effectively force the people living in rural areas to do business with the not-local Bigs, who will be able to shut down the small providers via artificially imposed economies of scale.

The smaller service providers aren’t in a position to offer service outside of the areas where they currently do business — in far-away densely populated urban/suburban areas. They are local operations. If the FCC increases the size of the “tracts,” it is effectively requiring them to compete on a much larger scale — which means they won’t be able to compete.

It is like imposing a law that says your local coffee shop can’t sell you a £1 cup of coffee unless it also offers that same £1 cup of coffee in the Big City, where it would have to first invest in a coffee shop in order to sell you that cup of coffee. The Bigs also want to lock down the licenses on these expanded “tracts” for a decade — more than three times as long as the current licenses last. This would very effectively lock-down their hold on these “tracts,” since smaller competitors literally wouldn’t even be allowed to try to compete with the Bigs for so long that very few would contemplate making a run at it.

The capital investment required would be prohibitive and with little to no chance of recouping them, most won’t bother. In economics, this scam is known regulatory capture. The Bigs — who have the resources to do it — lobby the government to impose a regulation they can deal with — and profit from — but which the smaller operators can’t deal with.

A good example of this is federal crash-testing requirements for new cars. The Big automakers don’t object — indeed, they actively support the test requirements — because they can afford to destroy a few dozen brand-new cars in crash tests. But an upstart car company just trying to gain a toehold in the marketplace can’t afford to destroy a dozen new cars, just to comply with the regulation.

The upstart company, which might have a better — and less expensive — car, is thereby effectively prevented from offering the car to prospective buyers. The competitive pressure that would have been brought to bear on the Bigs is diffused; the Bigs can charge more for their cars — and the upstart company doesn’t get to sell any cars at all. This is what’s at issue with the bandwidth/licensing rule changes being pressed on the FCC by the mobile phone and ISP Bigs, who want to use regulatory capture to cage the high-speed Internet market for themselves.

And once they have caged it, they will almost certainly charge more for it. Because — as Dr. Evil remarked about his North Korean flunky, Random Task — it’s what they do.

The irony is the FCC’s command authority is now populated by Republicans — including Ajit Pai, the new FCC chairman appointed by President Trump. And President Trump was elected largely by the support of… rural voters. If the Bigs succeed in pressuring the FCC to alter the bandwidth allocation rules to their liking, it will be paid for by the very people whose support is directly responsible not only for Donald Trump being the president rather than Hillary Clinton — but also for Pai being FCC chairman rather than his Democrat-appointed predecessor, Tom Wheeler.

And that will not sit well with the rural Americans who had hoped for more — and voted expecting something different — from President Trump and his Republican appointees.

References

  1. ^ rule change (transition.fcc.gov)

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