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Why is the Internet slow and costly in the U.S.?

In Tokyo, Seoul, and Hong Kong, residents get bidirectional, gigabit Internet for less than U.S. $40 a month. On the other side of the globe, Parisians have a similar deal, though their upload speed is only 200 megabits per second (and much of the rest of France isn't so lucky).

Most of us in the U.S. would be happy with half that bandwidth — even as we accept paying twice as much as Internet subscribers in Asia and Europe. In Seattle, I pay Comcast nearly $67 per month for a 50Mbps (6.2 megabytes per second — MBps) connection.

So why is broadband such a bad deal in the U.S.? What gives?

The answer lies at the uneasy intersection of technology and politics, and the story begins in 1984, when Congress passed the Cable Communications Policy Act (more info
). At the time, of course, personal computers had only recently been introduced and the public Internet didn't yet exist. (The precursor to the Internet — ARPANET [more info] — was carrying messages between university and government researchers and had been doing so since 1969.)
In those days of dial-up connections, legislators probably had no inkling that most consumer broadband Internet service would eventually travel over cable-television lines. Their primary concern was bringing some order to the burgeoning cable-TV markets, ensuring both competitive pricing (via deregulation) and standards in programming. Government had some say in the matter because the private-sector companies' cables had to traverse public property. But there was a long debate over which government agencies would implement the act: federal, state, or local?

Congress cedes cable access to local control

The Cable Communications Policy Act of 1984 gave municipalities primary authority to grant and renew franchise licenses for local cable operations.

Generally, communities have given cable companies access to public property in exchange for agreements about such things as programming and access to residences and businesses in specified areas.

It also meant that cable service would vary widely from one community to another.

In some cases, cable companies were granted exclusive rights to a particular region. But even without exclusivity, the first company to reach an agreement with a community generally became the sole provider because of the high cost of laying new cables. Competitors faced the daunting task of quickly making their own agreement with a local government and then carving out enough subscribers to pay for the huge investment.

And then the cable companies got lucky. Use of the Internet exploded, and low-bandwidth messaging became high-bandwidth streaming entertainment. With customers demanding faster Internet connections, cable immediately had a clear advantage over dial-up, DSL, and other types of Internet connections — it offered both speed and broad coverage.

That gave cable companies a huge customer base they didn't have to acquire. Moreover, the cable companies weren't providing content; they earned their money from the connection to the Internet, not from selling streaming entertainment to customers. That meant that the cable companies had little incentive to improve service.

Municipalities try to cash in on broadband

Frustrated by the lack of competition and the quality of service provided by cable companies, some communities opted to use their own infrastructure to provide Internet service.

In 1999, after a storm wiped out much of its communications infrastructure, the small town of Bristol, Virginia, built its own fiber-optic network for internal city government communications. In 2003, the town expanded that network to provide Internet service to the entire community. The nonprofit Optinet company formed by the city now offers broadband services to other communities in southern Virginia.

In the years since Bristol launched Optinet, more than 130 communities
— mostly smaller towns not well served by cable companies — have followed suit, providing services over city-owned fiber or cable infrastructure. Some large cities, too, have shown interest in providing Internet service to their citizens.
Cable companies respond by going up the chain

Not all public services have succeeded. The island city of Alameda, California, for example, adapted its fiber-optic infrastructure to provide cable-TV and broadband Internet to local residents. The service proved popular but faced a full-scale marketing campaign by the only other significant local service provider, Comcast. Eventually, the city gave up the service, handing it over to … Comcast.

Concerned about the growing municipal-broadband movement, cable companies appealed to a higher authority. As reported in a Center for Public Integrity article
, the companies began an aggressive lobbying effort directed at state legislators. And they were surprisingly successful.
As noted in an Ars Technica story
, 20 states have passed laws that ban or limit the ability of municipalities to offer their own broadband services.
Why would states want to do this? Much of the reasoning seems implausible. For example, South Carolina State Senator Thomas Alexander stated that communities need to be protected from overspending on projects (as reported in a ComputerWorld story
).
There is likely another agenda. The pre-emptive laws pushed by cable companies have, in many cases, been drafted by the American Legislative Exchange Council (ALEC), a conservative advocacy group.

Noting that a growing number of cities are providing broadband services themselves, the organization's website argues that "ALEC disagrees with [the practice] due to the negative impacts it has on free markets and limited government. In addition, such projects could erode consumer choice by making markets less attractive to competition because of the government's expanded role as a service provider."

And why would markets be less attractive to competition if a city provides broadband? Opponents of public broadband would argue that cities can always deliver the service at a lower cost.

FCC takes a (small) stand on public broadband

In February 2015, as the Federal Communications Commission issued its ruling in favor of net neutrality, it also issued a less-noticed ruling that allows communities to build their own broadband networks. The ruling was in response to petitions by two cities — Wilson, North Carolina, and Chattanooga, Tennessee — that had already established municipal broadband but were barred by state law from expanding into neighboring communities.

The FCC's authority to trump state legislatures was found in a provision of the Telecommunications Act of 1996. Section 706 states that the commission should regularly determine "whether advanced telecommunications capability is being deployed to all Americans in a reasonable and timely fashion." If the commission finds barriers to broadband deployment, the law directs the commission to "accelerate deployment of such capability by removing barriers to infrastructure investment and by promoting competition in the telecommunications market."

At this time, the FCC ruling applies only to the two petitioning cities. But proponents of municipal broadband will undoubtedly use it to challenge pre-emptive laws in the 20 states that have them.

Not surprisingly, those opposed to municipal broadband are already fighting back. In May, the state of North Carolina filed suit in the U.S. Court of Appeals for the Fourth Circuit to overturn the FCC's ruling. "Despite recognition that the State of North Carolina creates and retains control over municipal governments, the FCC unlawfully inserted itself between the State and the State's political subdivisions," North Carolina Attorney General Roy Cooper wrote to the court (see Scribd. post
).
Local governments still face daunting costs

Even if the FCC's position is upheld and all U.S. communities are free to launch their own municipal broadband services, there are still significant hurdles. Just as the costs of installing cable still deter other private companies from competing against established providers for municipalities, the task of finding sufficient capital is even more daunting.

The city of Seattle has been trying for years to set up a municipal broadband service. A just-released study
commissioned by the city, however, determined that the city would have to invest $480 million to $665 million to achieve the service levels it needs to make the service viable. The report also found that the service would have to acquire 40 percent of the city's households and charge at least $75 per month — a rate higher than that charged by existing broadband providers for the same level of service.
"It presents too much risk to the city," stated Michael Mattmiller, the city's CTO, as reported in a govtech.com
post. Mattmiller said the city was going to explore other options, including possible partnerships with private-sector partners.
Ultimately, public broadband might require help through federal grants or subsidies. But the focus for those funds will be to provide or extend broadband service to underserviced communities — primarily rural areas.

Another way that cities and towns are expanding Internet access is via wide-area, public Wi-Fi. It doesn't provide the bandwidth and speed of broadband, but it's often free. Most of these services use a public/private partnership — a company provides the technology, and the city pays a fee.

The only solution is public action. For the U.S., faster and cheaper broadband Internet service will come only with broadening competition — in all forms: DSL, wireless, satellite, and so forth. If having a choice is important to you, I suggest actively supporting local, state, and federal laws that create a level playing field — and opposing those that don't.

If you're interested in more information and ongoing news, a good resource is Community Broadband Networks (site