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Biden's bid to lower broadband prices

President Joe Biden says the cost of broadband is a problem in the U.S., but the potential solutions to addressing this issue, including the possibility of rate regulation, are neither easy nor popular within the industry.

Biden has called for investing $100 billion to bring "affordable, reliable, high-speed broadband" to all Americans as part of a sweeping $2 trillion infrastructure proposal. The plan aims to reduce the cost of broadband, arguing that "Americans pay too much for the internet — much more than people in many other countries." Further, it states that subsidies — the government's traditional mechanism for making broadband more affordable — are not a long-term solution.

The plan does not state what an alternative solution might be, and the White House did not respond to a request for comment by publication time. The plan only says Biden will work to "find a solution to reduce internet prices for all Americans, increase adoption in both rural and urban areas, hold providers accountable, and save taxpayer money." For many industry analysts and policy experts, the proposal's language raises the question of whether Biden will pursue broadband rate regulation — something the industry has long fought against as part of the related debate around net neutrality.

'Opening salvo'

In an interview, Doug Brake, director of broadband and spectrum policy at the nonpartisan public policy think tank Information Technology and Innovation Foundation, called the fact sheet an "opening salvo" from the Biden administration but said it remains to be seen where it will go.

"So much depends on how this thing unfolds and where the details end up landing, but … the likelihood of at least a push towards rate regulation is definitely higher after that fact sheet than before," he added.

Blair Levin, a former Federal Communications Commission chief of staff who now works as a policy adviser at New Street Research, explained during a recent call that at a high level, there are only so many ways for the government to reduce prices. One is to encourage competition, which is hard to do when there are still some areas of the country that have zero broadband options. The other is rate regulation.

"If we take off the table that we're not building fiber competition everywhere, then the only way to do what the president said is price regulation," said Levin, who helped oversee the development of the National Broadband Plan under former President Barack Obama.

Low odds

Levin believes the chances of price regulation being enacted, either by the Federal Communications Commission or Congress, "are close to zero."

Levin said there are too many obstacles and explained that it would take four to five years for the FCC to push price controls through.

"You have a couple election cycles in there. You have a lot of problems in terms of courts' overview of that. And then you have a lot of administrative law problems about how do you really do it, how you're going to determine speed, latency, data caps," Levin said.

In order to control broadband prices, the FCC would need to reclassify broadband service as a Title II telecommunications service — a move the agency is already expected to take under Biden to restore net neutrality protections.

Broadband was previously classified as a Title II service in 2015 during the Obama administration, but that order was overturned under Republican leadership in 2018. Title II not only gives the agency the regulatory authority to impose net neutrality rules, but it also technically enables the agency to regulate broadband rates. Under Obama, the FCC said it would forbear from controlling prices.

Looking ahead to Biden's FCC, Levin said, "I believe that Jessica Rosenworcel, who is both the interim chair and likely to be the permanent chair, would agree with what she did in 2015 … where upon adopting Title II, also forbear from price regulation."

The FCC on April 15 declined to comment on the issue.

Open seat

Notably, the five-seat commission currently has a vacant seat and thus a 2-2 partisan split. Biden would need to fill the third seat with a Democrat and get that person confirmed by the Senate before any move on net neutrality could be considered. The White House has not yet named a nominee for the role.

Brake said a decision on rate regulation could very much depend on who fills the open FCC seat and how much pressure the Biden administration puts on the independent agency over the issue. Alternatively, he noted that Congress could also act.

But Levin said he sees no political momentum on Capitol Hill behind rate regulation.

Ultimately, Levin sees the Biden administration pushing to ensure that low-cost broadband options are available in rural and low-income areas.

"At the end of the day, I think the primary purpose of the policy … is to make sure the entry-level price … is affordable to that large number of individuals that don't have [broadband] in their homes, even though it is available, because they can't afford it," he said.

Pricing problem

Some of the country's largest broadband providers already have voluntary programs in place to offer discounted broadband services to eligible homes.

Comcast Corp.'s Internet Essentials, for instance, offers 50 Mbps downstream speeds for $9.95 per month to households that are eligible for public assistance programs such as the National School Lunch Program, Housing Assistance and Medicaid, among others. Charter Communications Inc.'s Spectrum Internet Assist offers 30 Mbps downstream speeds for $14.99 per month, plus a $5 fee for in-home Wi-Fi.

In contrast, Verizon Communications Inc. relies on the FCC's Lifeline government subsidy program, which provides a discount on wireline and wireless services for certain Americans with low incomes. Approved Lifeline applicants can get Verizon Fios for $19.99 per month, not including any equipment charges. The price works out to a $20 discount per month, above the $9.25-per-month broadband subsidy Lifeline provides.

These $10-, $15- and $20-per-month plans are significantly below the average cost of fixed broadband in the U.S., which according to data from broadband comparison site, stood at $59.99 per month as of 2020.

Among G-20 and European Union member countries, the U.S. has the fourth-highest cost of broadband behind Saudi Arabia, Canada and South Africa, data shows. But when speed of service is taken into account, U.S. broadband compares well in terms of value. With the country's comparatively fast speeds, the price in the U.S. breaks down to only 20 cents per megabit, putting the U.S. in the bottom quartile of those countries in terms of cost.

Looking at cable in particular, NCTA — The Internet & Television Association says the cost of cable's broadband services declined by 98% when comparing the price per megabit in 2020 versus 20 years ago.

"Government does have a critical role to play in getting networks to areas that lack service and helping low-income families afford it. However, those targeted, shared goals are not served by suggesting wrongly that the entire network is ailing and that the solution is either to prioritize government-owned networks or micromanage private networks, including the unfounded assertion that the government should be managing prices," NCTA President and CEO Michael Powell said in a statement.

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