Government Says Fewer Americans Have High-Speed Broadband, Making for Less Competitive Market

More than 50 million Americans no longer have access to high-speed wired Internet service. That’s because federal regulators upped the official definition of broadband to 25 Mbps Thursday.

Consumers who have DSL broadband service — with speeds more in the 3 to 7 Mpbs range — will no longer be considered blessed with high-speed after the change in definition.

In practice, the change doesn’t actually mean much for consumers. But it isn’t a great development for Internet providers — particularly cable companies — because it effectively means the government officially doesn’t view the broadband market as competitive. The change in definition not only means that fewer people have high-speed broadband but that there are fewer companies offering fast Internet, and is thus less competitive.

The change also gives regulators more ammunition to prompt the industry to build out faster Internet connections.

Many of the households without 25 Mbps service are in rural areas, and the Federal Communications Commission has already begun retooling a federal subsidy program to help cover the costs of offering broadband service in those communities.

Earlier this month, President Obama mentioned in a State of the Union preview speech that he also doesn’t think the broadband market is very competitive and said his administration supports making it easier for local communities to build out their own broadband networks. That’s significant because some states have laws that prevent local communities from building their own Internet networks. Some lawmakers were concerned about taxpayers being on the hook for millions if local networks fail. But the restrictions have also been backed by incumbent Internet providers that don’t want the extra competition.

The FCC is expected to take action next month to preempt state laws that restrict so-called muni-broadband networks.

But the president also echoed concerns already raised by FCC Chairman Tom Wheeler that the broadband market wasn’t competitive.

Wheeler said statements by Verizon and other Internet providers about how the current 4 Mbps definition is fine is different from the marketing materials on their websites, where they push 25 Mbps or faster connections.

“Our challenge is not to hide behind self-serving lobbying statements and recognize reality,” Wheeler said, noting that 20 percent of Americans — mostly in rural areas — don’t have access to 25 Mbps service. “Our challenge is to make that a reality to all.”

He was joined by the agency’s two other Democratic members in approving the change. “I think our new threshold should be 100 Megabits. I think anything short of that shortchanges our children, our future, and our digital economy,” said Democratic FCC Commissioner Jessica Rosenworcel.

The agency’s two Republican members didn’t agree and voted against the change. They argued the action wasn’t necessary since the agency wasn’t also considering wireless broadband and the effort was essentially aimed at justifying more regulation. The agency is “ignoring the consistent progress in Internet connectivity that’s obvious to anyone with a digital connection and an analog pulse,” said Republican commissioner Ajit Pai.

Last week, the cable industry complained the change wasn’t necessary and should have “no regulatory significance beyond the upcoming [FCC] report.”

That suggestion may be referencing the agency’s ongoing review of Comcast’s $45 billion purchase of Time Warner Cable. Comcast* is already the country’s largest Internet provider and would gain more broadband market share if it acquired Time Warner Cable. The combined company would have at least 40 percent of the consumer broadband market for speeds of 25 mbps or more, according to some estimates.

Comcast’s main defense of its deal is that it won’t decrease competition because it doesn’t already compete with Time Warner Cable in local markets. It’s not clear yet if regulators will look at the broadband market from a local or national level, but if it’s the latter the change today could be a problem for the cable giant.

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

This article originally appeared on Recode.net.

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