THE COMMISSION SHOULD CALIBRATE ITS RULES IN A MANNER THAT PRESERVES STRONG INCENTIVES FOR PRIVATE SECTOR INVESTMENT.
Consumers across the nation routinely enjoy access to the open Internet that is one thousand times as fast as the dial-up access that was prevalent when the Telecommunications Act of 1996 became law. Consumers today obtain broadband Internet access service from cable companies, telephone companies, wireless companies, and even satellite companies. The vast increase in speeds, and the growing choice among providers, flow directly from the willingness of broadband providers to invest and innovate.
Since 1996, broadband providers have invested a staggering $1.2 trillion in their networks in the United States, which they have used to provide consumers in virtually every corner of the country with increasingly robust access to the open Internet.6 For its part, Comcast offers broadband to over 50 million homes and business, has increased broadband speeds 13 times in the last 12 years, and now provides its residential subscribers with speeds up to 505 Mbps and its commercial customers with speeds up to 10 Gbps.7 These investments are the foundation of the “virtuous circle,” giving edge providers a platform to develop and offer innovative applications that utilize greater and greater amounts of bandwidth. Broadband providers’ decisions to make these investments have been driven not by government intervention, but by vision, opportunity, competition, and consumer demand. In designing its rules, it is essential that the Commission strike an appropriate balance between ensuring effective oversight and maintaining strong incentives for infrastructure investment.
A. Broadband Providers Have Strong Incentives To Continue Providing Increasingly Robust Access to the Open Internet.
As the NPRM notes, the Commission previously found that broadband providers may have some incentive to “limit Internet openness” under certain circumstances.8 But as the Commission attempts to regulate conduct theoretically flowing from any such incentive, it must bear in mind the marketplace realities of the broadband industry. Providing access to the open Internet has become an essential component of cable operators’ and other broadband providers’ businesses, and consumers have come to expect and demand the ubiquitous and unrestricted access that these companies have consistently offered them. If a provider were to block or degrade Internet applications or content, the provider would incur substantial subscriber losses and reputational harm. Thus, in order to undertake such a strategy, a broadband provider would first need to conclude that any theoretical benefits of the strategy outweigh these very real costs.
In light of the significant and still-growing level of competition in the broadband marketplace, it is hard to envision a situation in which this would be the case. As Comcast has documented elsewhere, it faces competition from companies providing broadband Internet access services across a range of technological platforms. ILECs provide fiber-to-the-premises services to a growing number of American households and are upgrading their DSL-based services, in many cases by building fiber-to-the-node, to offer faster speeds across the country. Cable overbuilders, new entrants like Google fiber, municipal providers, fixed wireless providers, and satellite broadband providers also exert significant competitive pressures. And well-capitalized and aggressive nationwide mobile broadband providers now offer services that provide speeds comparable to many of the fixed broadband services that consumers purchase.
Indeed, even during the short period since the Commission adopted the 2010 Open Internet Order, consumer demand for Internet-based content and applications has skyrocketed, and broadband providers have raced to give consumers the best access to the content and applications that they demand. For example, in 2010, AT&T offered only traditional ADSL service to the significant majority of the 76 million households in its wireline footprint13 and had announced no plans to upgrade its network in these areas. Today, AT&T is well into the process of deploying a mix of fiber-to-the-premises, fiber-to-the-node, IP-DSLAM, and fixed wireless broadband technologies to as many as 70 million customer locations. Google, CenturyLink, Cox, and others have also announced ambitious plans to roll out fiber-to-the-premises networks and have begun to set these plans into motion.15 In 2010, none of the four nationwide mobile broadband providers had even begun to deploy LTE networks until Verizon began its deployment in December of that year. Now, all four major wireless providers operate LTE networks that collectively blanket the nation.
These competitive developments are reflected in the Commission’s Form 477 data. In the 2010 Open Internet Order, the Commission relied on the December 2009 iteration of this data to assess the level of competition among fixed broadband providers. The most recently released round of this data is from June 2013 and thus does not account for significant additional progress that has been made in the past year. But even the June 2013 data reveal a remarkable increase in competition since the Commission’s previous review:
Furthermore, in the 2010 Open Internet Order, the Commission concluded that, based on the 2009 data, “[i]ncluding mobile broadband providers does not appreciably change these numbers.” The same cannot be said today:
This heightened competition undoubtedly raises the costs to a broadband provider of attempting to limit Internet openness.
Moreover, there is no reason to believe that “switching costs” would prevent a consumer from changing among these competitors if a provider were to interfere with his or her connection to the open Internet. Although certain advocates for regulation allege that subscribers are “captive” to their broadband providers, they have failed to provide any evidence indicating that churn rates are lower for broadband than they are for other services such as video or voice. Indeed, a recent survey conducted by Consumer Reports found that 71 percent of respondents would be inclined to switch to a competing broadband provider if their provider were to “block, slow down, or charge more” for certain high-bandwidth content or applications. And as the data above demonstrate, consumers seeking to do so could choose among a growing number of competitors.
B. Broadband Providers Have Demonstrated Strong Commitments to the Open Internet.
The Internet ecosystem has been growing and evolving rapidly for decades, with astonishingly few difficulties. Although advocates for heavy-handed regulation have repeatedly predicted the demise of the open Internet, none of their predictions has ever come true. Despite the fact that the open Internet rules were only in effect from November 2011 until January 2014 (a period of 26 months), openness and pro-consumer practices have consistently flourished throughout the history of the Internet. Indeed, the “virtuous circle” has been enabled by broadband providers’ strong and continuing commitments to openness.
And no company has been more committed to the openness of the Internet than Comcast. Comcast ultimately supported the 2010 Open Internet Order because it struck “a workable balance between the needs of the marketplace and the certainty that carefully-crafted and limited rules can provide to ensure that Internet freedom and openness are preserved.”27 In connection with the acquisition of NBCUniversal, Comcast voluntarily committed to abide by the rules in that Order regardless of judicial challenge thereto. Thus, in the wake of the Verizon decision, Comcast is now the only broadband provider in America that is legally bound by the no-blocking and nondiscrimination rules adopted in the Order. This commitment will automatically extend to systems Comcast acquires from Time Warner Cable and Charter upon the approval and consummation of the transactions now pending before the Commission.
Although other providers are not similarly bound, they and their representatives have been vocal about their commitments to openness as well:
• NCTA: “The cable industry has always embraced the principles of an open Internet and the Court decision will not change that. Consumers have always been entitled to enjoy the legal web content of their choosing and they will continue to do so. An open Internet is good for our customers, and good for our business.”
• AT&T: “AT&T has built its broadband business, both wired and wireless, on the principle of Internet openness. That is what our customers rightly expect, and it is what our company will continue to deliver. That is also why we endorsed the FCC’s original rule on net neutrality, and is why we pledged to adhere to openness principles even after the recent court decision.”
• Verizon: “Verizon has long been committed to an open Internet for a simple reason: Our customers demand it. This was true before the FCC ever considered putting rules in place, and serving our customers will ensure our commitment to an open Internet regardless of what the FCC does in the future.”
• USTelecom: “Our industry has long operated in a manner consistent with the Federal Communications Commission’s Internet freedoms, and nothing about [the Verizon] decision changes that. We will continue to offer consumers the highest quality broadband experience.”
• CTIA: “As we have said many times, CTIA’s members share a longstanding commitment to an open Internet and a vibrant wireless ecosystem because that’s what wireless customers demand, not because of regulation.”
Comcast supports the Commission’s effort to adopt new, strong, effective, common- sense rules, but it is key that the Commission not disrupt the pro-consumer incentives that are already driving the broadband industry today. Unnecessarily applying regulations that are more intrusive than those adopted in 2010 would risk doing just that.
