In recent years, the Federal Communications Commission, which is supposed to be on the side of the United States public, has often looked out for business rather than the little guy. More recently, however, the federal agency, which is run by a former lobbyist for the cable industry, has made some moves which are decidedly pro-consumer.
The FCC has not actually done anything. It has just begun the process through a formal inquiry document, but the two companies, which both would be affected in the Internet service provider business by any changes to the definition of broadband wasted no time pushing back.
Though it's very early in the game, this issue could show whether FCC Chairman Tom Wheeler will serve the greater public good or give in to his former colleagues.
What is the FCC thinking about doing?
The current definition of broadband used by the FCC was adopted in 2010. Under it, a household is considered to have broadband access if if has "at least one of the following Internet access services ... [digital subscriber line (DSL)], cable modem, fiber optics, mobile broadband plan for a computer or a cell phone, satellite, or 'some other service.' " The 2010 standard, which was referenced in the inquiry, required download speeds of 4 Mbps and 1 Mbps when data is uploading in order for a service to be considered broadband.
The proposed new rules would increase those speeds, making 10 Mbps the new minimum download speed and require broader benchmarks, such as the ability to stream HD video to multiple users simultaneously, before the broadband term could be used.
None of this is easy to understand as it's buried in the inquiry, a 195-page document with enough citations and footnotes to make any college professor weary.
What are AT&T's and Verizon's objections?
Basically, both AT&T and Verizon say that the FCC is wrong to raise the standard because what's currently being offered is adequate for most American families. AT&T, in its written response, also charged that the FCC did not use proper math when it calculated how people use the Internet:
The Commission theorizes that "advanced" should be defined as 10 Mbps downstream by assuming a "high use" household of three people who are simultaneously attempting to watch a "super HD movie," make an "HD video call," save files to the cloud, and perform background functions such as syncing alerts. Assuming these four uses require 7.0, 1.5, 1.1, 0.4 Mbps respectively, the Commission simply adds these abstract bandwidth amounts together and concludes that the statutory definition should be 10 Mbps.
Broadband networks and applications today, however, are engineered in ways that efficiently allow concurrent uses, so that less overall bandwidth would typically be necessary.
Verizon actually used its statement to, in part, say some nice things about AT&T and its proposed merger with DirecTV, which the companies have said would bring increased broadband options to millions of Americans. Mostly, Verizon said the FCC does not need to do anything because competition was forcing Internet service providers to continually improve service anyway:
The broadband marketplace in the United States is thriving, as competition and consumer choices continue to expand. ... Consumers increasingly have a multitude of options for broadband service, particularly with the rapid deployment of 4G wireless broadband services that combine higher speeds and advanced capabilities with the significant benefit of mobility.
So AT&T and Verizon are arguing that Americans don't need faster service legally mandated because what they have is good enough, but they will get faster access anyway because competition forces companies to make these "unnecessary" improvements.
How fast are speeds now?
Though an index maintained by Netflix shows average speeds below the current 4 Mbps requirement, the company admits that its measurements show the "average is well below the peak performance due to many factors including the variety of encodes we use to deliver the TV shows and movies we carry as well as home Wi-Fi and the variety of devices our members use." A study from Akamai is more kind to the ISPs, showing that "34% of U.S. Internet users connected at speeds above 10 Mbps during [the fourth quarter of 2013], up 2.1% from [the previous] quarter and up 56% from the fourth quarter of 2012."
The numbers are improving, which backs up what AT&T and Verizon are saying, but increasing speeds for the remaining 56% of U.S. users is a huge capital expense. AT&T and Verizon will likely ultimately have to make that investment due to competition, but the speed at which it gets implemented -- especially in rural areas -- is a point of contention.
Still, the fact that these network improvements likely would have happened at some point anyway paves the way for a compromise where the FCC looks like it's doing something for the public, but the ISPs still get what they want.
Who will win?
The FCC has had a history of caving in to the demands of the businesses it supposedly regulates, but in this case, it may take a more public-friendly approach and split the proverbial baby.
It seems likely the federal commission won't ignore what AT&T and Verizon are saying because the two companies have a point. More people have access to broadband Internet and in most cases speeds have improved. The FCC is not likely to completely leave future improvements to the benevolence of businesses. It's more likely it will mandate tougher standards, but on an extended timetable made in consultation with the ISPs.
A quick change in standards would drop the number of American households where broadband is available, which is embarrassing for the FCC. That means that while there won't be a quick requirement for faster speeds, change is coming, and that will ultimately be good for American Internet users.
Daniel Kline has no position in any stocks mentioned. His family home in rural New Hampshire recently got slowish "high-speed" Internet access after many years of it not being available. The Motley Fool recommends Netflix. The Motley Fool owns shares of Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.