ISPs Push for ‘Big Tent’ View of Market Competition

Mobile providers, FAANG companies should be included, operators say
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WASHINGTON — The Federal Communications Commission is currently making its periodic assessment of just how competitive the market for communications services is, with an added impetus from Capitol Hill.

ISPs are all for including edge providers, such as Google, in their competitive landscape. Pictured: Google’s campus in Mountain View, Calif.

ISPs are all for including edge providers, such as Google, in their competitive landscape. Pictured: Google’s campus in Mountain View, Calif.

There is a lot riding on the answer, particularly in an increasingly over-the-top video marketplace. Comcast’s $38 billion-plus purchase of control of Sky, for example, is being billed more as about assembling a collection of programming assets that can be combined with other over-the-top offerings than it is about a satellite video service, MoffettNathanson principal and senior analyst Craig Moffett said.

At stake in the inquiry is how much regulatory power the FCC can wield over internet service providers, and how much the wired and wireless broadband markets can consolidate without running afoul of antitrust laws.

The FCC, even under the deregulatory Republican chairman Ajit Pai, has not rushed to declare that the competitive broadband marketplace includes both wired and wireless service — not for a lack of trying by both of those constituencies.

Two-Track Inquiry

But the agency is taking comments from stakeholders as part of a dual-track inquiry. The first track is the annual Section 706 report on whether advanced communications are being deployed in a reasonable and timely manner, conducted per a longstanding congressional directive.

The other is a new report mandated by the FCC’s recent reauthorization legislation that requires a report on the state of competition in the communications marketplace by year-end. That report must be published on the agency’s website and sent to Congress.

Cable and telco broadband providers have argued that their respective markets — fixed and mobile wireless broadband — are already competitive. They also argue that they’re competing with each other, and that will be even more the case with the advent of the 5G wireless specification and its increased data-delivery speeds.

The FCC has yet to concede that wireless is a substitute for wired broadband, given slower wireless speeds, but that’s only a tentative conclusion until all the comments are in and the reports are released.

If the FCC does not conclude that advanced services are being deployed to all Americans in a reasonable and timely manner, Congress has given the agency the power to achieve that end — including by regulating price and conditions. If it concludes that either the fixed or wireless markets are not competitive, industry players will have a harder time justifying mergers that reduce the number of competitors.

By contrast, an FCC finding that wireless and fixed broadband providers are market competitors enlarges the market and makes it easier to combine companies.

While the newly created report on market competition the FCC is producing is focused on competitiveness in the fixed broadband marketplace, NCTA–The Internet & Television Association saw no problem in pitching the agency on including wireless in those market calculations.

In fact, NCTA said the FCC has missed the mark by narrowing the inquiry. “Although the Notice only asks for information regarding fixed broadband services, RAY BAUM’s Act has no such limitation and, in fact, requires the commission to prepare a comprehensive analysis that addresses all facets of the communications marketplace.” (RAY BAUM’s Act, or the Repack Airwaves Yielding Better Access for Users of Modern Services Act of 2018, is the FCC reauthorization legislation passed earlier this year.)

The specific language of the act does require the FCC to “consider all forms of competition, including the effect of intermodal competition, facilities-based competition, and competition from new and emergent communications services, including the provision of content and communications using the Internet.”

USTelecom, representing Verizon Communications, AT&T and other mobile broadband providers, agreed. “The commission should not limit analysis narrowly to ‘fixed’ broadband, because mobile technology is increasingly competing for fixed broadband business and traditional notions of fixed broadband are changing,” the trade group told the FCC.

Given that charter, cable operators said, the FCC needs to look at the over-the-top competition as well, given that Google, Facebook and Amazon “are among the largest, most dominant companies in the world.”

Add the so-called FAANG companies (Facebook, Apple, Amazon, Netflix and Google) and wireless behemoths like Verizon and AT&T to the relevant competitive market for broadband and cable services, and there would arguably be plenty of room for further consolidation.

The NCTA even argues that the more ISPs increase their network reach, the stronger competitors that edge providers will become in provisioning video and data. That’s because they are riding on network buildouts to build their audiences.

“As broadband providers continue to increase the reach and capability of their networks, these online service offerings will only become more potent competitors to regulated voice and video services,” the NCTA told the commission.

Edge providers are showing up just about everywhere ISPs are talking to the government about the current regulatory landscape.

Cable operators and other service providers are tired of being targeted as the snake in the internet garden, and want the FAANG companies to be recognized as 800-pound competitive gorillas. Even Congressional Democrats, who’ve long talked up thegarage-innovator status of edge providers, are starting to see them that way.

Now it will be up to the FCC to help decide who is competitive with whom.

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