Last week, the Chairman of the FCC, Julius Genachowski, discussed some proposals regarding net neutrality and some policies he believes need to be adopted to protect consumers and competition. We expected the Chairman would initiate this discussion at some point and look forward to providing the facts the Chairman asked for during his speech.
A wide number of blog posts were filed in response to the speech of the Chairman and the Washington Post published an editorial that strongly questions the idea that the FCC needs to intervene.
But I wanted to respond to the post by Vint Cerf. His comments reflect those of many of the advocates who support net neutrality rules. They focus on concerns about an alleged lack of competition in the broadband market, the potential that broadband providers might act anti-competitively and speed connections for services they favor, and fears that somehow broadband providers might interfere with speech.
To me, it seems to be a very heavy set of “gloom and doom” concerns about the broadband market and the Internet ecosystem it is a part of. I find it very hard to square these concerns either with what has been accomplished so far in the evolution of the high speed Internet ecosystem or with regard to its future. In a sense, many of the advocates have been yelling “fire” in the movie theater ever since 1999, when cable modem service was deemed to be an information service in the early days of broadband deployment. At that time, a number of consumer groups in effect said that the Internet as we know it would be lost.
Instead, the Internet has been transformed into a medium that is even better than the one we knew back then in terms of choice, innovation, competition, and openness. Yes, we’ve had a couple of fires - but as the Washington Post editorial noted they have been put out quickly. I think the existing set of principles and oversight that is in place will continue to work well.
So why I am I so positive about the future? Why do I believe we will continue to see more competition, more consumer choice, more openness and more innovation?
Because the facts show that the U.S. broadband marketplace is, indeed, delivering the results one expects from competition and has been for more than a decade.
Prices have declined. The average price of entry-level broadband for 5 major providers moved from $50 a month in 2001, to $33 in 2004, to $25 in 2007. Verizon’s own entry-level price in 2009 is $17.99 a month, with a 12 month contract.
Output has increased: According to Pew, seven out of 10 households still used dial-up modems in 2004. Today only 1 in 10 households use dial-up, while the U.S. broadband marketplace is perhaps the largest in the world, with nearly 70 million households connected, up from just 3.2 million in 2000. Furthermore, typical broadband speeds have more than doubled since 2004: DSL has moved from 1.5 mbps to 7; cable has moved from an average of 1.5 to 3 mbps to 8-16 mbps. Fiber didn’t exist in 2004. Today it’s available to more than 15 million households and delivers speeds of up to 50 mbps up and 20 mbps down.
Furthermore, Internet use is increasingly un-tethered, with portable connections evolving into mobile. In any given month more than 1 in 3 users now report they’ve used wireless to reach the Internet, up from almost no one in 2004. The U.S. now has 4 nationwide 3G wireless providers, some with plans for 4G wireless that will offer 5 to 12 mbps speeds. A 5th company, Clearwire, is gearing for a nationwide launch of a 4G service using WiMax technology. The U.S. has 70,000 WiFi hotspots, the most in the world. According to Nielsen, more than 40 million Americans use mobile devices to access the Internet, more than in any other country in the world.
This paper by Ev Ehrlich, former Undersecretary of Commerce for Economic Policy in the Clinton Administration, provides more background and facts regarding competition in the broadband market.
The dramatic innovation and investment in broadband, coupled with innovation in devices and applications, also means more choice than ever for consumers – not just in terms of networks but in all realms of the Internet ecosystem.
Cable, wireless, satellite, traditional wireline companies, and others compete against each other for consumers’ voice, data and video communication dollars. In addition to facilities-based providers of connections, device makers and application developers also compete for customer relationships. The advent of multiple broadband networks means network operators are no longer in the preeminent position with customers that they once were when they operated single-purpose networks for things like telephone and cable TV. So the field gets complex pretty quickly. Now consumers not only look for mobile service, they also think about what device they want, what applications they want to get access to, and what features (i.e., Bluetooth, SD memory chips and so on) they want in their mobile devices.
With regard to mobile markets, the trends towards more options and more features of all kinds is especially prominent. It used to be that many if not most of the applications and features on cell phones cost extra. Pricing was on a per minute basis in the early days for voice calls and you had to pay for incoming calls. In short, very little was bundled in with the phone for free and there were per minute charges or extra charges for many services or features available on phones.
Things have really changed in the market today. A partial list of services that are available on mobile phones free includes Basic Voice, Call Waiting, Call Forwarding, Caller ID, Caller ID Blocking, No Answer/Busy Transfer, 3-Way Calling, Content Filters, Talk hands-free, Voice Dialing, Speed and Spam Controls. A more extensive list is included in this press release from Verizon Wireless.
And this is just a partial list. For example, it used to be that in most cases you had to pay to upload all photos from your phone to “Pics Place” on Verizon’s servers before you could share them. Now, not only do some phones have Bluetooth, which allows them to connect directly to a PC to download photos, many have an SD memory chip that can be removed and can be inserted in a reader on a PC or a USB connected device and loaded right on to the PC. All of this is “free” too and that was not the case just a few years ago.
Or look at the various more “open” models that exist today in the mobile and video markets for Verizon products and services. On our FiOS TV platform, we offer a “Widget Bazaar,” including Facebook and Twitter widgets (soon to come: NFL stats, Kodak photo sharing, Home Shopping Network). We are currently developing new Widget apps with third-party preferred partners; inviting feedback and comment from developers. In the next few months Verizon will publish a Software Development Kit with API’s (application programming interfaces) based on a widely used open programming language called Lua. This will enable third-party developers to write programs for the FiOS TV system.
Or take our wireless network. Verizon Wireless is the first in the industry to open our wireless broadband platform to third-party development. In 2007, we announced the Open Development Program allowing third-party devices to connect to the current 3G network and the soon-to-be-deployed 4G / LTE broadband network. In 2008, we held an open development conference, developed an efficient review process and released specifications for mobile device manufacturers and certified two independent labs for testing 4G devices. This year, we held a Verizon Developer Community Conference in Silicon Valley for developers of mobile applications and announced a very efficient (14 day) review program for the approval of new applications. So far, nearly 50 devices have been certified for our 3G network including an inventory management device that lets suppliers know when materials get low, smart grid technology for utilities to read meters and manage energy usage and a wireless medical chart for health care professionals to access patient records.
The Chairman said in his speech that he has not prejudged this issue. I also have heard him say more than once that he is very committed to fact-based approaches. While I have a lot of respect for the accomplishments of Mr. Cerf in the Internet’s development, I do not believe his concerns are backed by strong evidence. I believe the proceeding the Chairman has initiated will provide the means of finally helping to bring clarity, understanding and a solid factual base to a debate that has too often lacked these characteristics.