Bigger is better -- for telecom companies, not Internet users

Charter Communications' merger further consolidates an industry characterized by scant competition and unacceptably slow Internet access speeds

"Bigger is better" is the reigning trope among U.S. broadband companies, as Charter Communications this week gobbled up Bright House Networks for $10.4 billion. But better for whom? Certainly not U.S. Internet users, as the latest broadband reports peg lack of competition for causing high prices that have stalled Internet adoption rates and left more than 60 percent of Americans with unacceptably slow access speeds.

Charter, the fourth-largest cable company, and Bright House, the sixth largest, would together form the second-biggest cable operator in the United States, behind only Comcast. Charter's deal, in turn, is contingent on Comcast's acquisition of Time Warner Cable -- which would transfer 3 million subscribers to Charter as part of that mega-billion-dollar consolidation -- and the expiration of Time Warner's right of first offer for Bright House's 2.5 million subscribers. Is it any wonder that users are left feeling like mere pawns in a high-stakes Game of Cable Thrones?

But while U.S. telecom giants wheel and deal, Akamai's quarterly report on the state of broadband shows the United States falling further behind the global broadband elite. Where the United States was, on average, ranked 12th globally in the first half of 2014, by year's end it was sitting at No. 16. 

Mighty Delaware boasts the country's top average speeds and top penetration (68 percent) of access speeds at 10Mbps or above. But overall, the United States comes in 17th for national Internet access speeds, with only 39 percent of U.S. connections meeting a threshold of at least 10Mbps. 

In other words, fewer than two out of five Americans have broadband connections that allow them to seamlessly participate in a 21st-century economy featuring telecommuting, long-distance learning, or remote medicine. Granted, that figure represents a 20 percent increase from last year, but it still doesn't come close to meeting the FCC's new minimum threshold of 25Mbps for broadband Internet.

What's worse, a new Center for Public Integrity analysis shows the adoption rate for broadband access in the United States has slowed over the past several years, "due to the high cost of broadband and the lack of competition that leads to those high prices."

The analysis of Internet prices in five U.S. cities and five comparable French cities found U.S. prices were as much as 3.5 times higher than those in France for similar services. Not coincidentally, Internet users in France typically can choose among at least six providers for high-speed Internet access; users in American cities are lucky to have two. The report, complete with eye-popping maps of the service areas of U.S. providers, found that "telecommunications companies appear to carve up territory to avoid competing with more than one other provider." 

Charter CEO Tom Rutledge has stated that further consolidation is important to the cable industry because it "would help cable companies control costs." But don't hold your breath waiting for those lower costs to be passed on to users.

A clear link between competition and lower prices was on display this week, as AT&T rolled out its promised gigabit broadband in Silicon Valley -- albeit "for a steep price premium compared to the cost of its GigaPower service in cities with gigabit Internet competition." In those regions of the country where AT&T competes with Google Fiber -- such as Kansas City, Austin, and Raleigh, N.C. -- AT&T's prices are $40 lower than it is charging in Cupertino, Calif. It seems "Google Fiber's absence from Silicon Valley may be good for AT&T, but it [is] bad for the wallets of Cupertino residents."

There's also a hitch: That lower price is only available to users who sign up for AT&T Internet Preferences -- a monitoring service that collects users' search and browser history in order to deliver targeted ads.  As The Verge notes, "the message seems to be that without competition, you not only pay more, you also give more away."

The introduction of Google Fiber is pushing the likes of AT&T to finally deliver on promises of faster service. Another path to better service is to encourage the spread of municipal broadband. The FCC last month voted to overturn state laws that ban the building of municipal networks, but telecoms have lobbied hard against municipal competition -- even in places where they have no interest in providing service -- and congressional Republicans didn't take long to attack the FCC's vote

The FCC's decision on whether to approve the Comcast/Time Warner merger is expected the middle of this year. Charter's attempt at further consolidation would be another step in the wrong direction for an industry that sorely needs more competition.

Copyright © 2015 IDG Communications, Inc.

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