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White House Says U.S. Broadband Market Needs More Competition

President Obama says it should be easier for cities to offer their own broadband services so there can be more competition and lower prices.

White House

President Obama said Tuesday night that he wants to make it easier for local communities to build their own high-speed Internet networks because U.S. broadband services are too expensive and there isn’t enough competition in many areas.

In a video posted on YouTube to preview a broadband-related event in Iowa Wednesday, President Obama said that every community should “be able to make the investments they need to speed up broadband, bring in more competition [and] give consumers more choice.”

In reality, the White House isn’t offering much new. Federal Communications Commission chairman Tom Wheeler is already expected to approve requests from two cities in coming months to preempt state laws limiting local communities from building their own networks. And while White House officials announced the Agriculture Department will provide $40 million to $50 million in loans this year to rural broadband providers, that agency has offered similar loans for years.

White House officials declined to comment on what their concern about the lack of competition in the broadband market means for Comcast’s* $45 billion deal to acquire Time Warner Cable, which would give the cable giant upward of a 38 percent share of the national consumer high-speed broadband market.

But President Obama’s trip to Iowa Wednesday to promote the administration’s efforts to improve U.S. broadband service and its inclusion in next week’s State of the Union can’t be great news for Comcast or other U.S. broadband providers, which are still reeling from the president’s November endorsement of stricter net neutrality rules for Internet lines. Wheeler is expected to propose those rules in early February.

“What we’re saying is that Americans should have options for better, faster broadband,” said Jeff Zients, director of the National Economic Council, in a call with reporters.

In a fact sheet, the White House noted that “three out of four Americans have no competition or no service at speeds increasingly required for many online services.” That echoes remarks Wheeler made last September when he called the market uncompetitive. Last week, the FCC suggested lifting the current definition of broadband service from four megabits per second to 25 Mbps.

President Obama will be in Cedar Falls, Iowa, on Wednesday to announce a variety of proposals aimed at improving broadband access and affordability for more Americans, mostly by making it easier for communities to build their own competing networks or partner with companies like Google, which is slowly expanding its fiber network.

Cedar Falls Utilities is a locally owned municipal broadband service that launched years ago. It began providing gigabit Internet speeds to local residents two years ago and has been held up as a model program by municipal broadband advocates trying to encourage the spread of locally owned networks.

Internet providers have mostly fought such locally owned systems, particularly ones that would be built in areas where local phone and cable companies offer services. Thanks in part to lobbying by Internet providers, there are laws in 19 states restricting municipalities from funding competing systems.

Aside from concerns by competitors, there have been a few cases where locally owned systems have run into financial trouble, since it’s extremely expensive to build fiber networks and incumbent Internet providers in some cases have cut their prices to retain customers.

In a case study last year about the Cedar Falls system, two New York Law School researchers concluded that the city’s municipal broadband project could be difficult for other areas to replicate. Cedar Falls officials were willing to risk taking on “a significant amount of debt with limited evidence that consumers wanted ultra-fast Internet connections,” which resulted in financial volatility and a credit downgrade, they said.

White House officials announced Tuesday night that 50 cities have joined a coalition to push for expanding municipal broadband service. The White House also plans to hold a summit in June focused on expanding locally owned broadband networks.

* Comcast owns NBCUniversal, which is a minority investor in Revere Digital, Re/code’s parent company.

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