U.S. Markets close in 2 hrs 21 mins
  • S&P 500

    -39.75 (-0.95%)
  • Dow 30

    -122.77 (-0.36%)
  • Nasdaq

    -188.67 (-1.56%)
  • Russell 2000

    -18.80 (-0.95%)
  • Crude Oil

    +1.27 (+1.65%)
  • Gold

    +6.00 (+0.32%)
  • Silver

    +0.23 (+1.03%)

    -0.0001 (-0.0107%)
  • 10-Yr Bond

    -0.0290 (-0.79%)
  • Vix

    +0.82 (+4.39%)

    +0.0026 (+0.2162%)

    +0.2190 (+0.1671%)

    +54.77 (+0.24%)
  • CMC Crypto 200

    -8.34 (-1.55%)
  • FTSE 100

    +20.46 (+0.26%)
  • Nikkei 225

    -79.01 (-0.29%)

Cable Firms Fear Being Left in Dust in Biden Broadband Quest

(Bloomberg) -- The Biden administration’s multitrillion-dollar infrastructure proposal includes $100 billion to bring high-speed broadband to every American, an idea that might be expected to win applause from those who provide the service.

But cable companies such as Comcast Corp. and Charter Communications Inc. that connect about two-thirds of U.S. homes that have broadband service fear the plan’s specific call for “future-proof” technology could leave them facing subsidized competitors.

That’s because the traditional coaxial lines that cable companies still use to serve most of their subscribers don’t handle the upload speeds that consumer advocates say should be required to receive federal infrastructure aid. Many say subsidies should go only to systems that can download and upload traffic at speeds of at least 100 megabits per second.

Cable can download at that speed but averaged only 11 megabits per second for uploads in 2019, according to a January report by the U.S. Federal Communications Commission. Carriers using fiber lines averaged 193.

“Why do you want to spend the people’s money on an interim technology?” Tom Wheeler, a former Democratic FCC chairman, said in an interview. “We ought to be building it in a future-proof manner -- which means fiber.”

Technology Gaps

Cable systems that incorporate fiber can be part of the solution in coming years, and are to be preferred over technologies such as wireless broadband and satellite-based internet services, Wheeler said.

At issue are potentially billions of dollars earmarked for closing the technology gaps revealed by the pandemic, where remote work and schooling were hampered by patchy internet speeds and access. Proposals to require lofty minimum speeds have already sparked a lively debate in Congress where investing in broadband is otherwise one of the less controversial elements of President Joe Biden’s infrastructure plan.

The White House hasn’t defined the speed it wants. In announcing its “American Jobs Plan” on March 31 it called for bringing “affordable, reliable, high-speed broadband to every American.” It cited rural areas bereft of broadband, and urban areas where some shun broadband because of high prices. It flatly said: “Americans pay too much for the internet” and pledged to work for reduced prices.

Congress will ultimately decide whether to tie aid to the higher speeds. Four U.S. senators, including two Republicans, an independent and Democrat Joe Manchin, of West Virginia, earlier this year wrote to Biden administration officials in support of a 100/100 standard.

“There is no reason federal funding to rural areas should not support the type of speeds used by households in typical well-served urban and suburban areas,” the senators said in their March 4 letter.

The idea has drawn opposition from Republicans, though, including Ohio Representative Bill Johnson who said it could lead to subsidies in areas that already have broadband, while rural areas wait. “That sounds like the exact opposite of what needs to happen,” he said at a March 22 hearing.

The congressional focus on broadband continued on Thursday with a House hearing on unequal access to the technology.

‘Digital Divide’

“There is a digital divide between races and ethnicities,” Democratic Representative Frank Pallone of New Jersey, chairman of the Energy & Commerce Committee, said at the hearing before his panel. “While 80% of White households have broadband access, that is true of only 70% of Black households and 65% of Hispanic households.”

Representative Cathy McMorris Rodgers, a Washington Republican, criticized Democratic proposals that she characterized as creating “arbitrary speed thresholds that favor fiber-only projects with no restrictions to prevent overbuilding in areas where broadband already exists.”

Cable providers say it doesn’t make sense to demand very fast uploads, since most home broadband traffic consists of video downloads where their download speeds often exceed 100 megabits. Rather than subsidizing new ultra-fast networks in areas already served by cable systems, the government should focus on areas without broadband, they argue.

Federal money should go to places with “no broadband, or very little broadband, or really inadequate broadband,” Michael Powell, president of the trade group NCTA-The Internet & Television Association, said last month on the C-Span network program “The Communicators.” The group’s members include the biggest cable provider, Comcast, and No. 2 Charter.

The current broadband benchmark established by the FCC is 25/3 -- 25 megabits per second download, and 3 megabits per second for uploads. About 20 million Americans lack access to such service, according to the FCC.

If the 100/100 standard is adopted for determining what areas are eligible for subsidies, federal broadband-construction aid could flow to areas with fast downloads but that lack speedy uploads. Funds could subsidize competition where established cable providers such as Comcast and Charter operate. Under a bill proposed in March by Democrats and that could be the basis for eventual infrastructure legislation, that would happen only after money first flows to areas with no broadband or very poor service.

Shares in Comcast and Charter slipped in the days after Biden’s plan was announced but have since recovered that ground and more as each company reported earnings. Comcast said it signed up 461,000 new broadband subscribers in the first quarter, and Charter announced 355,000 new internet subscribers, surpassing analysts’ expectations.

Consumer Complaints

Neither company publicly discloses how many of its customers are served by fiber to their doorstep. About 16% of cable subscribers are connected with fiber optic lines, according to research by Cowen & Co.

Jon Peha, an engineering professor at Carnegie Mellon University in Pittsburgh, said complaints about upload speeds soared during the pandemic.

“Upstream is critical if you’re working or taking classes from home,” Peha said in an email. “We found that after the pandemic hit, downstream speed stayed about the same but upstream speed was significantly degraded, and consumer complaints about speed tripled.”

FCC Commissioner Brendan Carr, a Republican, said the proposed faster standard could have perverse results, with money flowing into already-well-wired cities.

“You’re going to seriously dump taxpayer money on top of that?” Carr said in an interview. “When we have many areas with zero connections, that seems like a mistake.”

The 100/100 mandate could spur cable providers to offer higher speeds, said Gigi Sohn, a former Democratic FCC aide who’s now a distinguished fellow at the Georgetown Law Institute for Technology Law & Policy.

“It incentivizes them to up their game,” Sohn said in an interview. “You’re seeing that with Charter, Comcast and Altice -- the three biggest cable operators.”

Cable’s Fiber

Comcast President David Watson told investors April 29 that symmetric service -- the same speeds up and down -- “is a focus” for the company. Charter in February said it would spend $5 billion on a new fiber optic network to serve mostly rural areas as part of an FCC subsidy program. Altice USA Inc. Chief Executive Officer Dexter Goei on April 28 told investors the company, with 4.4 million customers, has surpassed 1 million fiber-to-the-home connections and is building more.

“Customers are increasingly appreciating higher upload speeds,” Goei said.

The push for higher speeds is coming from a White House with cable critics in key policy roles. National Economic Council Deputy Director Bharat Ramamurti led a team for Democratic Senator Elizabeth Warren that criticized Comcast as a “market-dominant” company. Special assistant Tim Wu has long said cable prices are too high, and he helped New York assemble a lawsuit that accused Charter of ripping off customers with promises of faster internet speeds than the company knew it could deliver. Charter agreed to pay $174 million to settle the claims.

Even Vice President Kamala Harris, who Biden has asked to lead the broadband effort, oversaw cases against Comcast when she served as California’s attorney general.

“The administration might view the infrastructure bill as a once-in-a-lifetime opportunity to build competition in that market,” Paul Gallant, a Washington-based analyst with Cowen & Co., said in an interview. “Is this a paradigm shift?”

(Updates with congressional hearing testimony beginning in 12th paragraph.)

For more articles like this, please visit us at bloomberg.com

Subscribe now to stay ahead with the most trusted business news source.

©2021 Bloomberg L.P.