City Hall vs. Charter: The Fight Against the Internet Oligopoly
By: Matt Tibbitts
We are undoubtedly living in the age of technological advancements. Over the past few years, we have seen the rise of self-driving cars, 3D printing, and even the possibility of putting a man on Mars. Yet, there are still millions of Americans that are effectively stuck living in 1990, lacking one of the most basic technological needs of our time: broadband internet.
According to the Federal Communications Commission (FCC), over 19 million Americans—including one-fourth of rural Americans—lack access to broadband. While some may view this as a technological problem, it isn’t — it’s an economic issue. Arising from a handful of companies controlling one of the most vital resources of our time to create the internet oligopoly.
An oligopoly occurs when a handful of companies control the market leading to minimal competition. So while on the national level you see many companies like Comcast and Charter (Spectrum) competing for your internet service, when you examine the service map (Figure 1) you can see that Comcast and Charter barely overlap in service areas, only competing for around 1.5 million customers while giving over 100 million people to each other, competition-free. There are several more areas on the map that are not occupied by either Charter or Comcast but still experience the effects of the internet oligopoly via other internet service providers.
By limiting competition among themselves, the largest providers can charge prices that are greater than the price would be in a perfectly competitive market. This prevents many low-income households from being able to afford broadband and additionally stops the expansion of broadband to rural areas where it is not as profitable for these companies.
And while the solution to many anti-competition cases is to break up the companies, these companies have effectively already broken themselves up by dividing their service territories to purposely avoid competition. This unique situation does not require the traditional introduction of competition by new companies but instead necessitates finding a way to introduce the desire to compete into the market.
To achieve this, we need to insert a new competitor into the market, and since setting up expensive internet grids is a hefty barrier to entry, the most logical producer is the government.
If municipal governments were able to establish their own broadband services, we would not only increase competition and help lower the price for consumers but also address the absence of broadband in rural America. Municipalities would be able to provide broadband services at a fairer price by introducing more competition, while also expanding the network to include rural areas. While this will be expensive, the social payout — in the form of healthcare, employment, and general life quality — will make the investments worth the money.
Such was the case with the Coachella Valley Unified School District in California — the second poorest district in the United States. In 2014, only around 60% of families reported having internet access, so then-Superintendent Darryl Adams installed wifi routers on 100 school busses and parked them around the district. Since the implementation of this program, the district has seen a 14% increase in graduation rates. This example shows the significant impact that the internet provides to students and demonstrates a return on investment for the city in the form of a more educated and prosperous community.
The COVID-19 pandemic has also provided a prime opportunity to put this theory to the test as millions of students in rural and low-income neighborhoods suddenly needed reliable broadband to attend their classes online. While districts handed out millions of free laptops to students, there was a struggle to get broadband to students just as quickly. Although “band-aid” style fixes such as mobile hotspots or wifi on busses provided some short-term relief for urban students, many rural students were still left in the dark.
Yet, the fault lies not with the 25% of rural Americans or 35% of Americans living on less than $20,000 a year for not having broadband, but instead lies with the oligopolies. The companies like Comcast and Charter have consistently regulated investing in rural America because of high infrastructure costs and lower average incomes of the people living there. These companies have established a monopoly over more than 47 million people and only offer weak competition in the form of slow, unreliable DSL to another 33 million. Attempts at federal grants, like the Connect America Fund, have struggled due to poor oversight of these corporations installing the equipment, causing over $40 billion to go down the drain while leaving many Americans without reliable, affordable internet.
In his latest infrastructure package, President Joe Biden has called for $65 billion to pay for “universal broadband infrastructure” but has avoided discussions of municipal broadband in his Bipartisan Infrastructure Package. Instead, the bill relies heavily upon existing service providers to create new networks for rural America with federal grants. Yet, as history has shown, writing checks to the internet oligopolists creates limited results, and as we watch Republicans attempt to outlaw municipal broadband to protect corporate profits, moves on the federal level seem unlikely in this political climate. Thus, the bill does little to make a fundamental resource of the future more accessible for millions of Americans — instead placing the onus on states and municipalities to institute real, effective change.
The benefits of affordable, accessible broadband are obvious, and the need for a third-party provider to step in and provide competition where there is none is clear to the millions of Americans who can barely afford their internet bills. Only then will low-income and rural Americans no longer have to drive to the nearest McDonald’s or Starbucks to get work done. It is time politicians at all levels of government step in and invest in the communities and watch as test scores rise and unemployment drops. As healthcare reaches those in rural areas via telehealth programs, more and more social benefits will appear and drown out the costs that many opponents of these programs cite as their main concerns.
It’s time we create a system that services all people. It’s time we allow all people to better themselves and the community. It’s time that we finally bring the entire nation into the twenty-first century. It’s time for municipal broadband.