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No Kidding? FCC Chairman Says Broadband Market Isn’t Competitive.

Still, Wheeler is willing to consider new regulations or conditions on the Comcast/Time Warner Cable deal to encourage competition.

Amy Schatz

Federal Communications Commission Chairman Tom Wheeler said Thursday that Americans don’t have enough choice when it comes to high-speed broadband providers and the government needs to do something about it.

More than half of Americans have only one choice of providers that can offer 25 Mbps download speeds, adding, “[T]here is simply no competitive choice for most Americans.”

Wheeler’s conclusion might seem like a no-brainer for most Americans who’ve shopped for lower-cost high-speed broadband service only to find they have just one pricy option. But it’s actually a fairly radical statement at the FCC, which hasn’t previously expressed an opinion on whether the U.S. Internet market is competitive.

Wheeler didn’t offer any new proposals Thursday. But his conclusion that the U.S. broadband market isn’t competitive could have serious implications for decisions the FCC makes this fall, as the agency considers whether to let the nation’s largest cable and broadband provider, Comcast*, grow larger, as well as deciding how to regulate Internet lines to prevent discriminatory behavior.

“Looking across the broadband landscape, we can only conclude that, while competition has driven broadband deployment, it has not yet done so in a way that necessarily provides competitive choices for most Americans,” Wheeler said Thursday during a speech at 1776, a D.C.-based tech incubator.

FCC broadband chart

Like a professor giving an overview of a course at the start of the fall semester, Wheeler hinted at themes but offered few details of what, if anything, the FCC will do.

There was a little something for everyone in the speech, which is why both industry and consumer groups praised it. It offered an acknowledgement that the broadband market isn’t competitive (for consumers) as well as assurances that the government considers more regulations the path of last resort (for broadband providers).

Internet activists and a growing list of small- and mid-size Internet companies are urging the FCC to re-regulate Internet lines under Title II of the Communications Act, which was written with old phone lines in mind.

Broadband providers are vehemently opposed to this idea. They don’t want their lines regulated under Title II because it could allow regulators to do things like set rates or require them to offer wholesale access of their lines to competitors. The companies argue this would discourage investment in new or upgraded broadband lines.

Wheeler offered broadband providers like AT&T and Verizon some solace during his speech, saying that “as must be clear by now, incentivizing competition should precede regulation.

“There is no doubt that regulation, even when necessary, imposes costs. Especially in a fast-moving sector, it is important that companies be free to develop better networks and to attract the investment necessary to do so.”

But he also clearly left open the door to consider going down the Title II route this fall when the FCC could take back up the issue of net neutrality rules, which would be designed to prevent providers from blocking or discriminating against traffic.

Wheeler’s initial proposal for rules, which would allow Internet companies to buy fast lanes to consumer homes, was met with loud protests. More than 1.3 million comments were filed with the agency. A study of 800,000 of those comments released this week by the Sunlight Foundation, a watchdog group, found that less than one percent of commenters were opposed to net neutrality rules.

Overall, Wheeler’s comments may be most problematic for Comcast, which is already the nation’s largest Internet provider and would get even larger if the FCC allows it to buy Time Warner Cable.

This deal would give the combined company control of more than half the residential Internet lines in the U.S. Comcast executives have argued that their market share wouldn’t be that high because wireless companies also offer high-speed broadband service. Current LTE or fixed wireless networks generally can’t offer the same sort of speeds offered by wired Internet connections, however.

“Today it seems clear that mobile broadband is just not a full substitute for fixed broadband, especially given mobile pricing levels and limited data allowances,” Wheeler said.

Comcast has argued that the broadband market is more competitive because of high-speed wireless Internet services.

During the speech, Wheeler mostly spoke about competition from the perspective of “last-mile” Internet connections to consumers homes. Netflix and other companies have also asked him to look at competitive issues that have come up in the middle-mile of the Internet, where large Internet providers exchange traffic.

But FCC officials have also asked for reams of information from Comcast about its interconnection deals with other providers as part of their review of the cable giant’s deal to buy Time Warner Cable.

In June, agency officials announced plans to investigate Netflix’s complaint with Comcast and Verizon that it shouldn’t have to pay the broadband providers more to ensure fast video delivery to subscribers.

Reed Hastings FCC tweet

Netflix CEO Reed Hastings praised the speech in a Facebook post, and a Netflix lobbyist said Wheeler “forcefully stated a hard truth — there simply is not enough competition to protect consumers and businesses who rely on the Internet.”

* Comcast’s NBCUniversal unit is an investor in Revere Digital, Re/code’s parent company.

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