FCC Chief: Cable Companies Are Wrong About Internet Competition

Tom Wheeler says Americans don't have real choices for Internet providers.

Most Americans lack any real choice in accessing high-speed Internet, the chairman of the Federal Communications Commission said Thursday.

Comcast and other cable giants have argued that the industry is already plenty competitive. Consumers in many areas can choose to access the Internet from a DSL provider or on their smartphones, the cable companies argue.

While FCC Chairman Tom Wheeler didn't mention Comcast by name, he said those other options don't deliver the speeds that consumers need today. To reliably stream high-definition video, as consumers expect, providers must deliver speeds of at least 25 megabits per second, Wheeler said. In most areas, that means the only option is the local cable company.

"At 25 Mbps, there is simply no competitive choice for most Americans," the FCC chief said. "Stop and let that sink in. Three-quarters of American homes have no competitive choice for the essential infrastructure for 21st century economics and democracy. Included in that is almost 20 percent who have no service at all."

The conclusion doesn't bode well for Comcast's bid to buy Time Warner Cable. The deal would unite the top two cable providers, creating a new behemoth controlling a large portion of the nation's high-speed Internet access. But Comcast frequently notes that its network doesn't overlap with Time Warner Cable, meaning the merger would not actually create fewer choices for any consumers.

Comcast didn't respond to a request to comment.

The speech could also have implications for the agency's net-neutrality regulations. Wheeler noted that, historically, the absence of competition has "forced the imposition of strict government regulation in telecommunications."

But he made it clear that he would prefer a competitive market with light regulation than heavy regulation of monopolies. One of the consequences of past monopoly regulation was the "thwarting of the kind of innovation that competition stimulates," Wheeler said.

Internet activists are urging the FCC to impose a tougher regulatory regime on Internet providers in order to enact strong net-neutrality rules. The FCC is currently rewriting the rules, which are intended to prevent providers from manipulating or blocking Internet traffic.

While Wheeler chided cable giants like Comcast for soaking up profits with little competition, he praised Google, which is delivering high-speed access in a handful of cities around the country through Google Fiber.

Wherever Google deploys its network, the incumbents have responded with their own faster options, Wheeler said.

"Clearly, the infrastructure companies are voting with their checkbooks to say that competition and investment not only can coexist, but also that they can drive each other to produce both profit and progress," he said.

But, Wheeler noted, even where there are choices, it's not easy to switch providers because of costs such as early-termination fees and equipment rental fees. He also alluded to a phone call that recently went viral in which a customer had to argue endlessly with a Comcast representative to disconnect his service. That difficulty in switching further suppresses competition, Wheeler said.

"My goal is not to criticize," the FCC chief said, "but to recognize that meaningful competition for high-speed wired broadband is lacking and Americans need more competitive choices for faster and better Internet connections, both to take advantage of today's new services, and to incentivize the development of tomorrow's innovations."

—This article was updated at 4:30 p.m.