Companies like AT&T, Comcast, and Verizon are going around to state legislatures and telling them that any laws they pass that protect consumers will harm their ability to deploy networks in rural America. They claim that any legislator eager to protect their constituents from the nefarious things that can be done by companies that control access to the Internet is somehow hurting residents most desperate for an Internet connection. But their lack of willingness to invest has nothing to do with laws like net neutrality or privacy, because today they are nearly completely deregulated, sitting on a mountain of cash, and have no shown intention of connecting rural Americans to high-speed Internet while their smaller competitors take up the challenge.
The Tax Cuts from Congress Gave Them Billions in New Profits Followed by No New Plans to Roll out New Networks
Congress cut corporate tax rates last year and substantially increased the profit margins of large ISPs. In total, the top three major ISPs expect to receive an additional $8.8 billion in profits just from the tax cuts alone for 2018 (Verizon – $4 billion, AT&T – $3 billion, Comcast $1.8 billion) on top of the more than $34 billion (their profits in 2016) they are expected to collect in profits. What has happened with a vast majority of that new money has not been invested in expanding or upgrading their networks to fiber to the home (FTTH), which is necessary to have a network able to handle the coming advancements in Internet services, but rather in stock buybacks. That is to say that they are not using their money to improve things for their customers but to increase the share of the profits each shareholder gets all while leaving rural America to languish.
To give you context as to how much infrastructure potential $8.8 billion represents alone, it is more money than the entire budget Congress spent in 2009 to build broadband networks in its economic recovery package known as the American Recovery and Reinvestment Act. With a little more than $7 billion, Congress was able to fund 553 projects across the country including fiber optic roll out in rural America. Even then AT&T and Verizon stated that including consumer protection conditions in federally funded projects will result in fewer networks being built, but thousands of applicants showed up to wire the toughest to serve markets in America.
So we know that these companies have a lot of money. And we know that money is being used to give money to the company’s owners and not to better their services. And we know exactly what that money could have done. But somehow, ISPs want to blame net neutrality and privacy for their choices.
ISPs that Support Consumer Protections Are Deploying Next Generation Fiber in Rural Markets
Not only do we know what these large ISPs aren’t doing with their money, we know that nothing about consumer protections prevents them from using that money to reach new customers in rural areas. We have concrete examples of smaller ISPs, with substantially less cash on hand, are doing just that.
In Maine, a small ISP called Axiom has deployed fiber to local communities that major incumbents ignored. When the island community of Chebeague, Maine approached other ISPs about building a faster alternative to dial-up Internet access, nothing happened. But when local residents, working together found private and institutional investors, they were able to make progress in a very difficult market. To date, Axiom has deployed 30 miles of fiber optic gigabit connections and continues to deploy today. In California, a small ISP (Spiral Internet) that supports the state’s net neutrality legislation is aggressively working on deploying a fiber optic network in Nevada County, a rural part of the state.
These ISPs are part of nearly half of the FTTH deployments that are happening across the entire and are also part of the dozens of small ISPs that opposed the FCC’s decision to completely deregulate the industry. That is because regulation of their business practices has nothing to do with their ability to deploy networks in difficult to serve markets. In fact, they were important to promote competition, which in turn promotes greater investment in networks as ISPs fight for customers.
The Challenge to Connecting Rural America is Infrastructure Barriers, Not Business Practice Regulation
The same barriers that faced near-universal access to electricity, water, telephone, and the roads decades ago apply to high-speed broadband in rural America. Those barriers being that rural areas are sparsely populated (thus fewer potential customers) and are in challenging terrains such as forests, mountains, and large open spaces. At no point has deregulation of consumer protections or the absence of consumer protections resulted in a grand investment into rural markets. Rather, the problem is the industry wants to treat broadband access as a luxury only accessible to those who can pay ever-rising costs as opposed to a necessity of life.
Real, and continued, concrete investments of public dollars are needed to address the areas where no private market could make a business case alone. Markets that lack access or upgrades that are profitable need more competition. Ultimately meeting this challenge has always been a joint effort of private and public dollars historically and remains so today. Policymakers can also explore new models to distribute fiber optics such as wholesale models that allow private market actors to spread the costs of deployment, which has lowered the entry costs into rural markets internationally. Until our policies look at the problem as an infrastructure challenge as opposed to a question of business practice regulation, rural American’s lack of high-speed Internet access will persist. The worst possible outcome would be for legislators to fall for the shell game perpetrated by the major ISPs where we eventually connect rural Americans but deny them the guarantees under the law that they get a free and open Internet that urban Americans have enjoyed for decades.
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Author: Ernesto Falcon