More than 35 years ago, an American entrepreneur challenged the monopoly power and anti-competitive practices of AT&T - at that time the nation’s dominant provider of telephony services. Today, government leaders and entrepreneurs are challenging the dominance of cable companies who control broadband networks and operate as internet service providers (ISPs). Today’s challenge is driven by the digital divide and a digital equity shortfall in the U.S. which places many low-income households, students, small businesses, unemployed and rural citizens at a disadvantage.
The Verge reports “most Americans live under the shadow of regional cable monopolies that dominate the broadband market with high prices, sadistic data policies and poor customer support.” It isn’t for lack of effort or investment that the divide has not been closed. The federal government spends an estimated $5 billion annually on bridging the divide, and “while big ISPs have raked in profits, accessibility and affordability have stagnated.”
All U.S. states have created a task force or authority to coordinate broadband innovation and digital equity improvements. Some states established initiatives “to provide input on the development of a statewide broadband framework. At least 26 states have enacted these initiatives and authorities through legislation.”
The American Jobs Plan (AJP) - with an estimated $65 billion in broadband infrastructure funding - offers new hope of closing the digital divide. Closing (or at least narrowing) the divide means more than access to affordable broadband and internet services. This is just one side of the coin. The other side requires that people have skills in using digital devices and online services. Those with digital shortcomings are unable to reach a level of digital equity that others enjoy. They cannot take full advantage of the benefits of online usage.
The federal government’s post-pandemic broadband funding is a step in the right direction, but uncertainties remain about how the funding will be allocated and whether local governments will have the authority and resources to pursue equitable broadband solutions. Powerful stakeholders and politicians have already pushed back on the AJP’s broadband goals, especially regarding municipal networks.
Lessons learned - past and present
Before the 1980s, AT&T controlled virtually all aspects of U.S. telephony services and charged exorbitant per-minute fees for long-distance calls. Enter Bill McGowan - once described as the “most famous business leader you’ve never heard of”. McGowan arrived on the scene as the CEO of Microwave Communications Inc. (MCI) with an aggressive plan to challenge AT&T’s dominance. Using all the legal arguments in its arsenal, AT&T attempted to block MCI’s market entry. AT&T’s chairman insisted competition would lead to higher rates and quality-of-service degradation. McGowan proved him wrong. After a regulatory dispute and antitrust actions, the government ruled on AT&T’s divestiture - opening the way for MCI and Sprint (another new entrant) to steadily increase their respective market shares, alter the industry’s competitive landscape and deliver long-distance voice services at more affordable rates.
Within a decade, customer needs had evolved from making voice calls to using networks for information, data, and message services - and broadband inequities were soon apparent. In the mid-1990s, the National Telecommunications and Information Association (NTIA), released “Falling through the Net: A Survey of the ‘Have Nots’ in Rural and Urban America.” This was the first time the U.S. government addressed the nation’s broadband shortfall and recognized that “the economics of broadband spawned availability, adoption, and affordability disparities.”
At the turn of the century, a policy brief from the Brookings Institution presented a case for structural reforms in broadband policies because of the slow pace of broadband deployment - a problem exacerbated by “the monopolistic structure, entrenched management and political power of incumbents.” Unfortunately, the problem of a digital divide and digital equity gap persisted as the broadband sector shuffled along an anti-competitive path. It took a national health emergency in 2020 to act as a wake-up call and expose the risks of not closing the divide.
Long before the pandemic, many small U.S. communities learned how to deliver affordable broadband services over locally-owned networks. But this success did not extend to larger U.S. cities, as it did in other cities in the world, such as Amsterdam, Stockholm, and Seoul - all of which have fast, affordable broadband services delivered via publicly owned networks.
Publicly-owned networks have taken off in Europe. This is largely to do with the fact that governments have been quick to realize the long-term benefits of providing equitable internet access to their citizens beyond profit generation. While private companies must undertake a rigorous cost-benefit analysis before installing costly infrastructure, governments aren’t required to chase profits. By installing broadband internet, they are providing a necessary public service, and profit and revenue generation is a secondary goal.
According to BroadbandNow, an internet research firm, state legislators in the U.S. can create barriers to municipal broadband innovation by mandating cost structures that make municipal services less competitive or limiting public funds for broadband partnerships. In San Francisco, dominant ISPs use political power to sway legislators against municipal broadband and to avoid sharing physical infrastructure with competitors.
In a debate reminiscent of the MCI versus AT&T conflict, the cable companies and others oppose the disruption of the current industry structure. The Information Technology & Innovation Foundation (ITIF) believes “advocates of broadband ‘revolution’ must do everything they can to impugn the current system, which is working well, to make it look like it is really failing.” Critics of municipal broadband networks believe local governments are "not well-suited to providing broadband service" and do not invest enough in innovation. Conversely, municipal network advocates say the less-than-innovative cable giants have been promising faster upload speeds for years but are stuck at speeds far below a 21st-century definition of high-speed broadband (e.g., 100 Mbps for upload and download services).
A damaging divide
Even without a national emergency, the digital divide is detrimental to multiple aspects of society and quality of life. Critics of dominant broadband companies believe antitrust measures should have been taken years ago to reduce prices and improve internet access for disadvantaged customers.
A BroadbandNow report says an estimated 42 million U.S. residents did not have broadband internet access in 2020 - three times the number estimated by the federal government. According to a Smart Cities Dive article, BroadbandNow claims the Federal Communications Commission (FCC) “overreported the deployment of every technology that provides internet access, including cable, fiber, and fixed wireless”. Students without reliable internet connectivity “were forced to scavenge bandwidth outside libraries and Taco Bells to complete virtual school assignments.” Much of the debate on the digital divide concentrates on rural areas, and an estimated five million rural households in the U.S. do not have broadband access, but census data reveals this problem is three times as large in urban areas.
Cable companies dominate broadband access mainly due to cost advantages, control of infrastructure, and legislation that maintains anti-competitive policies. The Institute for Local Self Reliance (ILSR) says “the market power of the biggest cable companies allows them to lock customers into overpriced, underperforming internet service contracts.”
In 2019, Pew Research reported that high costs were cited as a major cause for half of all American households without broadband internet services. Pew also discovered “only 56 percent of Americans who earn less than $30,000 per year have home broadband internet” - compared to more than 90 percent for those who earn at least $75,000. In 2020, the FCC established an Emergency Broadband Benefit program to help eligible families with broadband affordability issues during the pandemic.
A bridgeable divide
In a post-pandemic era, what can government leaders and policymakers do to bridge the digital divide?
Build municipal networks based on proven models
Numerous local governments in North America have turned to implementing public solutions when incumbent network operators failed to meet the needs of the local community. Tennessee is known for some of the most innovative public solutions in the nation, with municipal networks such as Chattanooga’s EPB Fiber network and Morristown’s FiberNet. However, municipal broadband deployment is restricted by anti-competitive regulations in more than 20 U.S. states.
North of the border, Canada offers a model of municipal network success. In Manitoba, Broadband Communications North (BCN) - a non-profit community-owned entity - operates a broadband network and delivers services in more than 50 rural, northern and remote communities. As a publicly-owned ISP, BCN deploys a wide range of technologies including satellite, fixed wireless, microwave, and fiber to deliver connectivity and access to e-government, telehealth, distance learning, remote work, and e-commerce services.
UTOPIA Fiber was established by a group of Utah cities in 2004 to deploy and operate a broadband fiber network for residential and business customers. Rather than delivering internet services, UTOPIA provides the infrastructure that allows customers to choose from a variety of ISPs. With this open access model, customers benefit from a more competitive environment and avoid getting locked into a single ISP. UTOPIA says it is the fastest-growing open-access network in the U.S. with residential fiber availability in 15 Utah cities and business services in 50. Driven by increased demand in 2020 - including 10,000 new residential customers and 500 new business customers - UTOPIA deployed more than a million feet of fiber cable.
As governments all over the world are embracing digitization, citizens must be provided with fast and efficient access to online services. In Europe, many governments have embraced publicly-owned infrastructure not only to help boost social equity but to provide a trustworthy and safe network that can be used by innovators and entrepreneurs to help stimulate better public services. By directly owning the infrastructure, governments are ensuring tech sovereignty, providing equal access to services, and developing smarter solutions to urban challenges.
Invest in middle-mile infrastructure
The middle mile which connects an operator’s core network with a local network (the ‘last mile’) is a capital-intensive investment - and prohibitively expensive - for most broadband startups and non-incumbent ISPs. When infrastructure sharing with incumbent operators is not available, government initiatives are needed to build middle-mile infrastructure that is available for private and public entities.
In California, innovative legislation is designed to make it easier for new and existing ISPs to overcome middle-mile barriers. The state legislature approved plans to build an open-access fiber network to serve as a middle-mile solution. “California's decision to make the middle-mile network open-access means it will provide non-discriminatory access to eligible entities on a technology and competitively neutral basis."
Encourage and facilitate private solutions
In addition to government initiatives, smart city leaders should consider all possible remedies for closing the divide - including promotion of an ecosystem of startups, other private companies, and public-private ventures who can shrink the divide while increasing competition and improving the quality and affordability of internet services.
WeLink, a startup firm, states they are “taking power out of the hands of big internet monopolies … by creating a new wave of internet service” and delivering high-speed broadband to residential customers. With the deployment of mesh networks and base stations that use fixed wireless access (FWA) and 5G technologies, WeLink is expanding in the metro areas of Las Vegas, Phoenix, and Tucson. Other private companies serving as alternatives to the big cable companies include Empire Access (rated as the fastest ISP in the country by PC Magazine), Allo Communications, Sonic, Viasat, and Google Fiber.
For urban households in areas with 5G coverage, a home broadband subscription from a mobile operator is another option, although affordability might be a concern for low-income families. With this service, the customer uses a 5G-enabled router that connects to a local 5G network and supplies high-speed broadband to digital devices in the home.
Beyond the divide - equitable digital participation
The recent history of the U.S. telecommunications and internet industry is filled with inspiring stories of digital innovation - while at the same time plagued by inequitable outcomes, as the digital divide reveals. The pandemic highlights how internet access combined with digital skills empower citizens to work remotely, operate an online business, use e-government and telehealth services, and attend virtual events and classes. In a post-pandemic era, cities and rural areas need leaders and innovators who can bridge the digital divide with affordable, sustainable broadband solutions and safeguard equitable participation in the digital world.
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