Jan. 23 (Bloomberg) -- Julius Genachowski, chairman of the Federal Communications Commission, made an important speech last week calling for at least one “gigabit city” in all 50 states by 2015. For the U.S. to maintain its leadership in innovation, he said, a critical mass of communities must have networks capable of ultrahigh Internet-access speeds.
The U.S. lags far behind Japan, South Korea, Sweden, Australia and many other developed countries that have made ultrafast networks a priority. Unless we act, new ideas for using such networks will come from those countries -- not the U.S. As Genachowski said, “Ensuring the U.S. has a strategic bandwidth advantage -- ultrafast, high-capacity, ubiquitous broadband -- is critical to our global competitiveness.”
His point is welcome. The question is whether fair rules are in place that will allow the improvements he seeks.
Local cable monopolies have already installed a second-best technology in major U.S. cities -- cable wires that are capable of gigabit speeds only for downloads. These companies -- chiefly Comcast Corp. and Time Warner Cable Inc. -- are subject to almost no oversight and, according to Wall Street analyst Craig Moffett, are reaping 95 percent profits on their Internet-access business. And they can raise prices year after year, leaving unserved anyone who is unable to pay. About a third of Americans don’t sign up for wired Internet access at home, often because the price is too high. With no competition and in the absence of smart regulatory policy, the cable industry has the U.S. in a headlock.
Fiber-optic connections would allow for equally fast uploads and downloads, and they are almost infinitely upgradeable. This is why some cities have moved to install competitive fiber networks on their own. In many cases, however, they have been impeded by state laws that foreclose competition. In 2011, after years of lobbying by large cable and telephone companies, the North Carolina legislature passed a law making it almost impossible for cities to operate high-speed Internet-access networks.
Even when a competitive fiber provider has the legal headroom to offer a bundled TV and Internet-access service, it faces a highly concentrated programming industry that charges small players much more than it charges Comcast and Time Warner Cable for the same content. Google Inc., now rolling out a competitive fiber network in Kansas City, is complaining that Time Warner Cable is refusing to sell it access to two regional sports networks. Without local sports and other must-have programming, a fiber provider will have a difficult time competing with cable.
In his speech last week, Genachowski also mentioned the advent of 4G wireless Internet access as an occasion for national celebration. He is right that 4G may provide a substitute for slow cable connectivity. But data caps imposed by the dominant wireless carriers, AT&T Inc. and Verizon Wireless, make getting access to boatloads of data by way of a wireless device unimaginable for most Americans.
In any case, no one is claiming that 4G will bring gigabits to the U.S. In order to get even advertised 4G speeds, you have to be close to a tower, and there can’t be too many other people sharing the connection. True, there is discussion about developing very-high-capacity wireless connections that rely on stable, accurate point-to-point transmissions blasted across wide bands of radio frequencies not subject to interference from, say, leaves or rain. For anyone relying on a mobile device while moving through life, none of these conditions will be in place.
So wireless can never be a full substitute for a wired connection. More broadly, fiber policy is wireless policy: With competitive fiber installed in more American neighborhoods, we would all have better mobile data connections. As things stand, the incumbent cable companies have no particular competitive or regulatory incentive to install that fiber.
Given these realities as well as other obstacles -- for example, existing providers often control poles to which competitors need access -- Genachowski’s call for more “test beds” may not actually bring Americans cheaper, faster or better network access. At least, though, the FCC is now talking about gigabits.
(Susan P. Crawford, a contributor to Bloomberg View and a professor at the Cardozo School of Law, is the author of “Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age.” The opinions expressed are her own.)
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