Why The FCC’s Free-Market Argument For Repealing Net Neutrality Doesn’t Hold Up

In making the case that most Americans have multiple, competing broadband providers, the government acknowledges that up to almost 50 percent of them do not.

Why The FCC’s Free-Market Argument For Repealing Net Neutrality Doesn’t Hold Up
FCC Chairman Ajit Pai [Photo: Andrew Harrer/Bloomberg via Getty Images]

On December 14, the Republican-majority FCC will likely vote to dismantle regulations that enforce internet neutrality safeguards–such as preventing ISPs from blocking or slowing access to some sites and services or charging extra to improve access to others.


Beyond reams of esoteric legalese in the 210-page proposal by chairman Ajit Pai are its free-market economic arguments. Chief among them is that competition obviates the need for regulation. If one ISP messes with your free access to the net, you can just go to another. Competition for customers will keep ISPs on good behavior. But that depends on competition actually existing, on one ISP not becoming way more powerful than others.

Deep in the document, on page 71, are figures on how much choice Americans currently have for different levels of landline broadband service (based on data the FCC last collected from ISPs in December 2016). The figures are oracle-like, though; the answer changes depending on who is reading the tea leaves and what qualifies as sufficient broadband. How many Americans have two or more choices of broadband providers? It could be 79.7%, or it could be 51.1%. How many live under a one-provider monopoly, or have no broadband access at all? It could be 20.2%, or 48.9%.

These discrepancies depend on each interpreter’s interpretation of “broadband.” The optimistic views say that broadband could be as slow as 3 megabits per second downstream and a curiously precise 0.768 Mbps upstream—just enough to stream a video at DVD quality, according to Netflix.

The pessimistic assessments assume that “broadband” has to achieve at least 25 Mbps down/3 Mbps up to qualify as real broadband access—enough for streaming five HD videos or at least one Ultra HD/4K video.

[Image: FCC Restoring Internet Freedom order]
It seems hard to imagine that a sub-par experience with Netflix, which  accounts for over a third of all landline internet traffic in North America, (according to Sandvine) counts as real “broadband.” And Cisco reckons that video in general, beyond only Netflix, made up 73% of consumer internet traffic in 2016 and will reach 82% by 2021. However, not many people are currently streaming video in 4K, so the 25Mbps threshold for broadband may be a bit high.

Splitting the difference, at 10 Mbps down and 1 Mbps up, the FCC reckons that still 26.3% of Americans have only one landline provider, and 5.9% have none.


That’s only for landline internet access, though.

What About Wireless?

Wireless internet covers most of the country, the FCC’s new order notes. In fact, 99% of Americans have access to at least two 4G/LTE providers, and 88.6% have four or more options, based on an FCC report from September. Average 4G download speeds in the U.S. are 22.69 Mbps, according to data collected by Ookla Speedtest. 5G service, which is expected to begin rolling out to the U.S. in 2018, aims to start out around 1,000 Mbps. 5G is also expected to be used for “fixed wireless”–beaming broadband directly to homes and maybe obviating the need for landlines.

But does fast wireless make up for lousy landlines today? The FCC said no in its 2016 Broadband Progress Report, published a year before Donald Trump took office.

In its new proposal to scrap net neutrality regulations, the FCC touts the rise of “unlimited” wireless data plans from all the big carriers (an argument also made by ISPs). But they are not really unlimited, typically throttling bandwidth after people use around 20-30 GB per month. Landline broadband caps, when they exist, are often around a terabyte–up to 50 times greater.

Some carriers do exempt video, from some providers, from the data caps. The previous FCC was investigating whether programs from AT&T, T-Mobile, and Verizon were fair to all video providers—i.e. net neutral. Ajit Pai’s FCC dropped the investigations.

Will the shortfalls of wireless go away with the upgrade from 4G technology? “5G may change this,” says Hernan Galperin, associate professor at the University of Southern California, “but at the moment there are several questions regarding commercial 5G deployment at a significant scale.” In fact a recent study on wireless tech by Morgan Stanley says that companies may have overestimated demand for faster 4G service and, having lost money on network upgrades, might be shy about spending on 5G. “Use cases that require significant network investment…are not likely to be realistic until after 2025,” says the report about 5G


So, will the free market preserve a free internet? Pai’s FCC argues it will, but its own numbers raise some doubts. If you consider “broadband” to require landlines, there’s a good chance that upholding net neutrality is at the discretion of your one provider, under no competitive pressure to deliver the best service for consumers. If you count your current wireless plan, or optimism for future wireless, you have more chances–but still no legal guarantee–that the free market will preserve a free internet.


About the author

Sean Captain is a Bay Area technology, science, and policy journalist. @seancaptain.