A Record-Breaking Year for Fiber Broadband Buildout

On December 13, the Fiber Broadband Association (FBA) filed a brief report with the FCC, "The State of the North American Fiber Deployment." As observed in the report, from September 2023 to September 2024, all-fiber broadband network availability to U.S. households climbed 13% to 76.5 million households. During that period, there reportedly was a record annual growth in fiber-to-the-home (FTTH), totaling 10.3 million households. Additionally, all-fiber availability has grown from less than 40% of households in 2020 to almost 60% today. The report acknowledges the significant buildout efforts by several providers, including AT&T, which reportedly plans to reach 50 million households with fiber by the end of 2029. 

The 13% year-to-year fiber passing figure is remarkable and benefits consumers with access to significantly improved broadband Internet service capabilities compared to older-generation networks. It is widely acknowledged that fiber broadband networks are capacious and readily capable of delivering gigabit download speeds that easily meet the FCC's current benchmarks for defining broadband Internet services (currently 100 Mbps upload/20 Mbps download). 

 

FBA filed the report in the FCC's proceeding for the forthcoming 2024 Communications Marketplace Competition report, due by the end of this year. In June of this year, the Free State Foundation filed public comments in the Commission's proceeding, and in July, FSF filed reply comments. In those comments, FSF President Randolph May and I argued that there is compelling evidence that the broadband market is effectively competitive. The report filed by FBA provides further confirming evidence for FSF's view.

 

Credit goes to the super-informed and knowledgeable Ted Hearn of Policyband for calling attention to FBA's filing.

FCC Opens New Inquiry into the State of Broadband Deployment

On September 6, the FCC announced that it was opening its eighteenth inquiry on the state of broadband in the U.S., which is expected to culminate in the next iteration of the Commission’s Section 706 report. Under Section 706(b) of the Telecommunications Act of 1996, the Commission is required to annually determine "whether advanced telecommunications capability is being deployed to all Americans in a reasonable and timely fashion." In other words, for the upcoming report, the Commission is required to assess whether broadband Internet access service – an advanced telecommunications service under the statute – is being timely deployed to all Americans.

Earlier this year, the Commission initiated a proceeding for its forthcoming Communications Marketplace Competition report – a different report that includes an assessment of the broadband market over the previous two years. In public comments filed in June of this year, Free State Foundation scholars wrote: "In 2022 and 2023, overall conditions in the broadband Internet services market were effectively competitive, in many instances even more so than in 2020 and 2021 when this was already the case." FSF's comments cited publicly available data points, including broadband provider quarterly reports and analyst estimates, about fiber deployments, cable broadband network upgrades and footprint expansion, nationwide 5G network upgrades and new deployments, 5G fixed wireless access (FWA) entry in the residential broadband market, cross-platform competition from cable-hybrid wireless providers, and improvements in satellite broadband capabilities to support that conclusion. 

 

The pro-deployment trends from 2022-2023 identified on FSF's comments in the 2024 Communications Marketplace Competition Report proceeding appear to support an affirmative answer to the question that the Commission is addressing in its upcoming Section 706 report. Yet the Commission's just-opened Section 706 proceeding will provide a forum for considering more recent data about availability and deployment progress and enable a more definitive determination about the current state of ongoing broadband deployment. 

 

Expect Free State Foundation scholars to have more to say this year about the state broadband deployment to all Americans. FSF's public comments from December 2023 that were filed in the Commission's previous Section 706 report proceeding can be found on FSF's website.

Media Advisory: FSF Comments Demonstrate the Competitiveness of the Communications Marketplace

Media Advisory

June 7, 2024

Contact: Randolph May at 301-984-8253

Free State Foundation President Randolph J. May and Seth L. Cooper, Director of Policy Studies and Senior Fellow, submitted comments yesterday in the Federal Communications Commission's proceeding requesting comments on the state of competition in the communications marketplace. The extensive data-rich comments demonstrate that the broadband and video services markets are effectively competitive. 

The complete set of the Free State foundation comments, with footnotes, is here.

Immediately below are the opening paragraphs of the "Introduction and Summary" to the comments, without the footnotes.

Introduction and Summary

These comments are offered in response to the Commission’s Notice requesting comments for the agency’s upcoming report on the state of competition in the communications marketplace. The primary focus of these comments is on the broadband Internet and video services markets. As these extensive comments demonstrate with an extraordinary amount of data from 2022 and 2023, the conclusion that the broadband and video services markets are effectively competitive is compelling. Indeed, in the face of the compilation of data included in these comments, it almost would require an act of malfeasance for the Commission to conclude anything other than that the broadband and video services markets are effectively competitive.

 

Of course, the preparation of the Commission’s Competition Report is not intended to be a theoretical or academic exercise. It’s intended to guide the agency’s actions so that they comport with current marketplace realities, not bygone market realities. In other words, the Competition Report findings, if they are true to what the data herein convincingly demonstrate, dictate that the agency implement market-oriented regulatory reform and actions.

 

Specifically, the Commission should make more mid-band spectrum available for commercial wireless services and refrain from rate regulation of broadband that harms financial returns and incentives for new network investment and prevent states from doing the same. Also, the Commission should decline to move forward with the agency’s proposed restrictions on video service pricing options that undermine market freedom and low-cost opportunities for consumers. Instead, the agency, even if now belatedly, should reduce its legacy regulation of multi-channel video programming distributors (MVPDs) that put those services at a competitive disadvantage relative to dominant online streaming video services.

Greater Video Competition Should Prompt Less Regulation, Not More

Dormant for nearly a decade, the FCC's misguided proposal to expand the definition of "Multichannel Video Programming Distributors" (MVPDs) – a category limited to facilities-based offerings such as cable, Direct Broadcast Satellite, and telco TV – recently has received renewed attention. In a letter dated March 24, 2023, responding to an inquiry from Senator Charles Grassley (R - IA), FCC Chairwoman Jessica Rosenworcel pointed to statutory definitions as the basis for not subjecting MVPDs that stream content over the public Internet – that is, "virtual MVPDs" (vMVPDs) such as YouTube TV, Hulu + Live TV, Sling TV, and DIRECTV STREAM – to legacy regulations.

This is the right outcome, of course. However, the justification put forth overlooks the forest for the trees. The dramatic rise of vMVPDs, as well as the multitude of other Online Video Distributors (OVDs) that make video content available to consumers – think Netflix, Amazon Prime Video, Hulu, Disney+, Apple TV+, HBO Max, Paramount+, and so on – has rendered the video programming marketplace robustly competitive. Consequently, the goal of the Commission in 2023 should be to identify opportunities to eliminate outdated rules that apply to traditional MVPDs, not extend them to the new entrants whose competitive influence obviates any justification for regulatory intervention.

I, as well as other Free State Foundation scholars, document regularly the rapid growth of streaming services at the expense of traditional MVPDs. Recent examples include "On Video, the FCC's Competition Report Falls Short," a January 2023 Perspectives from FSF Scholars, and "A Tale of Two Trends: Traditional Video Distributors Shrink While Streaming Video Grows," a Perspectives published in September 2022.

In the latter, I followed these changed circumstances to their logical conclusion, writing that:

[I]t is past time for the Commission and Congress to take all necessary steps to eliminate one-sided burdens that impede competition – such as set-top box regulations, program access and carriage requirements, and the network non-duplication and syndicated exclusivity rules [that apply solely to facilities-based MVPDs] – and instead rely on the efficient operation of marketplace forces to drive down prices and expand consumer choices.

Chairwoman Rosenworcel did acknowledge the current competitive reality in her letter to Senator Grassley, highlighting the fact that "the video marketplace has changed significantly with the introduction of streaming services." Nevertheless, and as was the case with the 2022 Communications Marketplace Report, she failed to articulate an appropriate deregulatory response.

While it is true that vMVPDs do not deliver video content within "a portion of the electromagnetic frequency spectrum which is used in a cable system" and therefore do not fall within the statutory definition of an "MVPD," it is equally true that, given the vast array of competitive options available to consumers, regulations premised upon that technical distinction have outlived whatever utility they once may have had and should be eliminated.

Consumer Preferences Steadily Shift to Streaming Video

During the second half of 2022, the percentage of U.S. households with a pay TV subscription (think: "cable") fell below half for the first time. When presented with the choice between accessing a specific show on a linear channel or a subscription video-on-demand (SVOD) service, consumers increasingly opt for the latter – and not just to avoid ads: younger Americans, in particular, "emphasize that SVOD is the place where they already watch shows most of the time." And speaking of SVOD, one analyst expects SVOD services to add 40 million new subscriptions in 2023 – an impressive feat given current economic conditions.

Indeed, each passing week seemingly provides additional evidence that consumers prefer their video streamed – and that, as a result, in 2023 no justification exists for regulations that single out traditional providers of video content. Far from gatekeepers, cable operators and other facilities-based Multichannel Video Programming Distributors (MVPDs) find themselves uniquely stymied by legacy rules predicated upon marketplace conditions that simply do not exist today.

In Comments and Replies filed in the 2022 Communications Marketplace Report proceeding, Free State Foundation scholars (1) documented the rapid consumer migration from traditional MVPDs to Internet-based alternatives, and (2) and argued persuasively that, consistent with its statutory responsibility to identify "laws, regulations, [and] regulatory practices [that]... pose a barrier ... to the competitive expansion of existing providers of communications services," the FCC should take swift steps to eliminate outdated and one-sided carriage- and equipment-related rules that constrain competition, arbitrarily pick winners and losers, and, ultimately and consequently, harm consumers.

However, as I pointed out in "On Video, the FCC's Competition Report Falls Short," a January 2023 Perspectives from FSF Scholars, the ensuing Report failed to articulate an appropriate deregulatory agenda in response to the markedly transformed video programming landscape that it described. (Keep in mind, too, that that Report focused on the years 2020 and 2021 – a lifetime ago given the pace at which video distribution is evolving.)

Going forward, Free State Foundation scholars will continue to highlight data points compelling Commission deregulatory measures that afford every participant in the vibrantly competitive video programming marketplace an equal opportunity to compete.

On Intermodal Competition for Broadband, the FCC's Competition Report Falls Short

On January 24, Free State Foundation published Senior Fellow Andrew Long's Perspectives from FSF Scholars, "On Video, the FCC's Competition Report Falls Short." In that incisive paper, Mr. Long focuses on the 2022 Marketplace Competition Report's treatment of the competitive market and Commission policy for video programming distribution. The evidence of video programming distribution market transformation brought about by the observable ongoing subscriber declines for multi-channel video programming distributor (MVPD) services and by continuing increases in subscriptions for Internet-based alternatives is overwhelming. This transformation has uprooted the perceived analog cable distribution bottleneck upon which the legacy video regulatory apparatus depended. Yet many outdated restrictions on MVPD services remain firmly in place. And Mr. Long makes a strong case that the FCC's report is not fully compliant with the RAY BAUM's Act of 2018's requirements that the Commission identify laws and regulations that pose barriers to competitive expansion of existing providers of communications services and that the agency lay out an agenda for addressing those challenges.

But there is another area in which the FCC's 2020 report comes up short: assessing intermodal competition in the broadband Internet services market. As acknowledged by the report, the RAY BAUM's Act states: "As part of its evaluation, the Commission must consider all forms of competition, including 'the effect of intermodal competition, facilities-based competition, and competition from new and emergent communications services.'" Yet the report never engaged in any substantive assessment of the effects of competition across different broadband technology platforms. Perhaps the closest the report gets is in paragraph 157, which touches on wireline/wireless substitutability:  

Many households continue to subscribe to both fixed and mobile broadband service, suggesting that these separate services offer benefits that are either complementary or independent of each other. Technological innovation in and increased deployment of both the mobile wireless and fixed broadband services markets have broadened consumers’ possible choices of how to access the Internet. 

This shortcoming of the 2022 report is the subject of Commissioner Brendan Carr's statement partially approving and partially concurring in the report: 

When we adopted the Commission’s prior Communications Marketplace Report in 2020, I voted to approve in part and concur in part because, in my view, we could have gone further in recognizing the converged market for connectivity. I continue to have that view this go around. 

FSF's comments to the FCC for its 2020 Communications Marketplace Report also called for a shift away from the siloed approach to discrete service technologies and toward a more serious intermodal competition assessment. To that end, FSF scholars recommended that the Commission adopt a product market definition that encompasses different technologies that provide broadband Internet services. (Those same views were expressed in short form in comments filed by FSF for the 2022 report.) FSF's comments for the 2020 report regarding intermodal competition assessments could double as a critique of the 2022 report, as competition from and among fiber, 5G, FWA, and cable MVNOs continues to increase. 

Communications Marketplace Report Nears Release

On December 13, the 2022 Communications Marketplace Report was put on circulation at the FCC, indicating that the report is nearing approval. The Commission is required to prepare and release the report by the end of the year.

Free State Foundation President Randolph May, Senior Fellow Andrew Long, and I filed comments and reply comments in the FCC's 2022 Communications Marketplace Report proceeding. As FSF's July 2022 comments stated available data from 2020 and 2021 support the conclusion that the broadband and video services markets are effectively competitive" and that "each of these markets increasingly is characterized by effective intermodal competition." Regarding the broadband Internet access services, our comments cited a host of data regarding competing provider coverage, next-generation network deployment, speeds, and pricing that point to the competitive and innovative state of the market. 

 

In the time since FSF's comments were filed, news stories and reports – about fixed broadband speed improvements, fiber broadband subscriber growth, fixed wireless access (FWA) service subscriber growth, multi-gigabit cable broadband"10G" network rollouts by Comcast and by Charter Communications, subscriber growth in cable competitive mobile virtual network operator (cable MVNO) services, projected growing demand for 5G mobile data, mobile wirelessbroadband affordability, fixed broadband speed improvements, strong wireless network investment, speed increases for 5G wireless networks, and more – appear to confirm the effectively competitive state of the broadband market.

 

Furthermore, FSF's August 2022 reply comments emphasized policy actions that the FCC should take to promote continued investment, innovation, and competition in the broadband and video markets. Regarding broadband inputs, the reply comments emphasized repurposing of spectrum for commercial use, particularly in the lower 3 GHz, the 4 GHz, 7 GHz, and 12 GHz bands. And on the infrastructure siting front, FSF's reply comments recommended that the Commission: (1) declare that fees charged by local governments for deploying wireline facilities in rights-of-way that exceed reasonable costs effectively prohibit broadband services, contrary to Section 253(a); and (2) adopt presumptive reasonableness timeframes of 60-days and 90-days for local governments to act on permit applications involving existing and new wireline facilities in rights-of-way. 

 

Hopefully, the 2022 Communications Marketplace Report will recognize the continuing reality of the competitive state of the broadband market (as well as the video market). Expect to hear more from Free State Foundation scholars following the release of the forthcoming report.

Cable Mobile Wireless MVNOs Set Record With New Subscribers

On October 27 and 28, Comcast and Charter Communications each released their third quarter results for 2022. Both Comcast's Xfinity Mobile and Charter's Spectrum Mobile posted record numbers of net subscriber additions for their cable mobile virtual network operator (MVNO) wireless services. Comcast reported 330,000 wireless net subscriber additions during the third quarter, bringing Xfinity Mobile's total subscribership to 4.95 million. And this last week Xfinity Mobile announced that it has surpassed 5 million subscribers. Meanwhile, Charter reported 396,000 net subscriber additions, bringing the total number of Spectrum Mobile subscriber lines up to 4.7 million. 

Cable MVNO services – which include Altice – combine cable network facilities, including Wi-Fi hot spots, with spectrum leased from Verizon Wireless. This hybrid model enables cable MVNOs to serve subscribers outside of their respective traditional cable video geographic footprints. As described in the Free State Foundation's July 2022 comments to the FCC for its forthcoming 2022 Communications Marketplace Report, these mobile wireless offerings by cable MVNOs are an increasingly important source of intermodal competition, giving consumers an attractively-priced wireless alternative to mobile wireless carriers. Cable MVNO wireless offerings include 5G wireless, and they also are offered to consumers in bundles with fixed broadband as well as with cable video. 

As observed in my May 2 blog post, cable wireless MVNOs are continuing to pursue strategies for offloading mobile wireless traffic onto their own licensed spectrum in select geographic areas, creating cost savings from reduced reliance on leased spectrum. The future prospects for cable MVNOs appear to remain strong, and American consumers stand to benefit from their innovative and competitive offerings. 

Study Finds Fixed Broadband Adoption and Speed Increases Spur Economic Growth

A study released in June 2022 titled "The Contribution of Fixed Broadband to the Economic Growth of the United States Between 2010 and 2020" found that fixed broadband adoption and higher speeds have spurred economic growth and benefitted consumers. 

As observed in the Telecom Advisory Services' study – authored by Raul Katz and Juan Jung of Telecom Advisory Services, LLC – the U.S. economy grew at an average annual rate of 3.3% between 2010 and 2020. Households with fixed broadband average download speeds of at least 25 Mbps grew from less than 1% in 2010 to over 65% in 2019. As a result, fixed average download speeds rose from about 10 Mbps in 2010 to about 174 Mbps in 2020. The study sought to isolate the contributions of those developments in broadband adoption and speeds to the growth of the U.S. gross domestic product (GDP) over ten years.

Notably, the Telecom Advisory Services study found that fixed broadband adoption drove nearly 11% of the accumulated growth in U.S. GPD, with speed improvement contributing an additional 11.5%. According to the study, "if broadband adoption and speeds had remained at 2010 levels, in 2020 the US GDP would have been $1.3 trillion lower ($19.6 trillion, rather than $20.9 trillion). This is equivalent to almost $4,000 annual dollars less for the average American." Additionally, as a result of fixed broadband infrastructure deployments and speed increases, "consumers receive[d] a surplus linked to the fulfillment of a whole new range of applications in the areas of communications, entertainment and information." The study found that "[a]ggregated consumer surplus at the national level increased to over $186 billion in 2020 (up from $81.6 billion in 2010) as a result of increased connectivity," and an additional $186.2 billon of consumer surplus was realized through fixed broadband speed increases.  

Importantly, fixed broadband deployment and fixed broadband speeds also have improved since the end of 2019. Data points showing increased access to broadband services over the last two years, including fiber services, are summarized in the Free State Foundation's July 1 comments to the FCC for its 2022 Communications Marketplace Report proceeding. The comments are available at FSF's website. 

Mobile Broadband Speeds Now Match 2020 Fixed Speeds

When the Free State Foundation filed Comments in the FCC's 2020 Communications Marketplace Report proceeding, average fixed broadband download speeds were roughly 130 Mbps, according to Ookla. Today, the most recent Ookla data (May 2022) shows that average mobile broadband download speeds are 130 Mbps. So, in just two short years, mobile broadband speeds caught up to the performance of fixed networks in 2020. Of course, today speeds for fixed networks are higher than they were in 2020.

This fact highlights the growing senselessness of the Commission's continued refusal to recognize intermodal competition in the broadband marketplace. Rather than acknowledge that broadband providers of all stripes compete with each other, the Commission slices the broadband marketplace into separate techno-functional categories. Mobile wireless is its own market in the Commission's view, and that market excludes any competition from high-speed wireline deployments by cable and fiber providers.

The accelerating network performance of mobile broadband, likely driven by the rollout of 5G service, makes clear that broadband providers compete intermodally. Of course, as noted above, the speed of fixed networks also improved over the last two years, and now exhibit average download speeds above 220 Mbps, per Ookla's May 2022 data. But even if they hadn't, and mobile network speeds were par with fixed network speeds, it is more than reasonable to assume that many customers might have canceled their fixed subscriptions. The improvements made by mobile networks may have driven fixed networks to make their own upgrades to maintain their speed advantages.

That's clear evidence of intermodal competition.

The Commission should abandon its techno-functional categories and instead assess competition in the "broadband marketplace." That broader market definition would account for intermodal competition between fixed, mobile, satellite, and any other types of broadband providers. It will be increasingly difficult to ignore intermodal competition as more evidence of it emerges from the competitive broadband market conditions today.