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A solution looking for a problem?

FCC NPRM – Empowering Broadband Consumers Through Transparency

In the last week of January 2022, the FCC adopted a NPRM whose purpose it is to “Proposes to require that ISPs display, at the point of sale, labels to disclose to consumers certain information about prices, introductory rates, data allowances, broadband speeds, and management practices, among other things.”

I wonder if this is a case of a solution looking for a problem!

Don’t get me wrong, I wholeheartedly subscribe to the saying credited to Louis Brandeis “Sunlight is said to be the best of disinfectants.” According to Dr. Alasdair Roberts Director, School of Public Policy, University of Massachusetts Amherst, Brandeis was supposed to be referring to James Bryce’s book, The American Commonwealth excerpted here:

“Sunlight kills many of those noxious germs which are hatched when politicians congregate… Selfishness, injustice, cruelty, tricks, and jobs of all sorts shun the light; to expose them is to defeat them.”

I am all for transparency and the benefits it might bestow on fellow citizens, but let’s see if there is a real problem or opacity that needs to be addressed.

Internet Service Providers (ISP) are among the most reviled businesses in America. ISPs, especially the cable providers have historically ranked among the lowest in customer satisfaction and Net Promoter Scores (NPS). According to NICE Satmetrix, the co-developer of Net Promoter®, Cable & Satellite TV Service and Internet Service were the only industries among 23 surveyed in 2021 with a negative NPS score, meaning these companies as a group have more detractors than promoters. Based on the experiences over the past couple of years for our small business, I most certainly am not a promoter for one of these companies!

Figure 1

According to the ASCI, ISPs rank only above ‘Public Administration / Government’ in terms of sector level customer satisfaction.

Figure 2

Poor customer satisfaction across industry players in and of itself is no reason to tighten the regulatory screws. ASCI survey of consumers shows call center experience, variety of service plans offered, and service interruptions are the attributes that drive poor customer satisfaction among ISP customers. “Ease of understanding bill” ranks 6th best out of 14 factors.

ISP Customer experience benchmark

Figure 3: ISP customer experience benchmarks 2021

This makes us think the FCC may be barking up the wrong tree! But wait there’s more…

Now, looking at how the pricing for broadband has trended over time, this is one of the unique industries that has continued to deliver significant consumer surplus over the years. According to the NCTA, the price per Mbps of cable broadband has declined a whopping 98% between 2000 and 2020.

Figure 4: Price per MBPS

With the U.S. wireless operators having spent nearly $120B to acquire spectrum between 2019 and 2021, they are on the hunt for new revenue streams and leveraging fixed wireless technology, Verizon and T-Mobile have launched home broadband offerings and are bringing the heat to wired alternatives. The wireless industry is uniquely competitive and according to the St. Louis Fed, the wireless price index has declined an unparalleled 36.5% since 2009. During the same time, the producer price index for all commodities rose by 43.4%!

Producer price index

Figure 5: Producer price index: Cellular phone and other wireless telecommunication services

And now that everyone has finally woken up to the insidious impact of inflation, let’s see what the data shows. According to the U.S. Bureau of Labor Statistics, since the onset of COVID-19. between Dec 2019 and Dec 2021, the CPI for all items has increased at a 4.2% annual rate. And wait for it, communication related prices have increased at less than half the rate, at 1.8% per year. All the data and analysis would suggest consumers are getting a great deal when it comes to home broadband and wireless, despite the junky customer service.

An administration and the FCC on its behalf that is keen to make the U.S. competitive with China in 5G would have better things to do.

Please share your thoughts on what the FCC could do to make the U.S. a leader in 5G in the comments below.

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