Please ensure Javascript is enabled for purposes of website accessibility

The FCC Just Gave You Faster Internet -- No Thanks to the Cable Industry

By Daniel B. Kline - Jan 31, 2015 at 10:52AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The companies that provide broadband service think it's good enough.

FCC Chairman Tom Wheeler has raised the standard for what Internet service providers are able to call broadband Internet access.

The move had been rumored for weeks with Ars Technica reporting that Wheeler had proposed changing the standard in a draft of the annual Broadband Progress Report that he shared with commissioners in early January. That draft called for updating the definition of broadband, increasing it from 4Mbps downstream and 1Mbps upstream to 25Mbps down and 3Mbps up.

Despite the rumors, it is somewhat shocking that the FCC actually approved the change, which was announced as part of its final 2015 Broadband Progress Report, The Verge reported.

This likely shocked the cable lobby, which has been vehemently opposed to the change.

What the cable industry wanted
Not surprisingly, the cable lobby, through the National Cable & Telecommunications Association, had been against changing the standard and filed a brief with the FCC earlier this month opposing the increase. The NCTA represents companies that cover 90% of cable television households in the nation, including Comcast (CMCSA 1.52%), Time Warner Cable (NYSE: TWC) , and Cablevision (NYSE: CVC).

Essentially, the NCTA argued the FCC should not set a 25/3 standard as the definition for broadband, because consumers would not know the difference: "It is beyond question that consumers would consider a 24 Mbps service (or, in many cases, a 15 Mbps or 10 Mbps service) to be a substitute for a 25 Mbps service for all current and anticipated needs, even if the Commission chooses to apply the "broadband" label only to the latter," the brief said.

That is just a fancy way to say, "Why raise the bar when we get away with calling what we already offer 'broadband' and few people complain?"

What the FCC says
The FCC is mandated by Congress to determine whether broadband "is being deployed to all Americans in a reasonable and timely fashion." The agency is also charged with defining what qualifies as broadband, or "advanced telecommunications capability," as it is called in various official documents. The FCC last updated that definition in 2010, raising it from 200Kbps to the current 4/1 standard.

According to the 1996 Telecommunications Act, advanced telecommunications capability must "enable users to originate and receive high-quality voice, data, graphics, and video telecommunications using any technology."

FCC Commissioner Mignon Clyburn explained the decision to make the change in comments first reported by The Verge.

"We are never satisfied with the status quo. We want better. We continue to push the limit, and that is notable when it comes to technology," Clyburn said. "As consumers adopt and demand more from their platforms and devices, the need for broadband will increase, requiring robust networks to be in place in order to keep up. What is crystal clear to me is that the broadband speeds of yesteryear are woefully inadequate today and beyond."

Her comments match statements made by Wheeler in the past.

FCC Chairman Tom Wheeler spoke at the 2015 Consumer Electronics Show. Source: Screenshot

What the NCTA says
While the FCC is mandating the default speeds for broadband to be faster, the NCTA finds the very notion absurd. The association asserted in its FCC brief that no party has argued there is a need for 3Mbps upload speed and that the only entities supporting faster download speeds -- Netflix (NFLX 2.72%) and Public Knowledge -- "both offer examples of applications that go well beyond the 'current' and 'regular' uses that ordinarily inform the Commission's inquiry under Section 706 [the section where these rules are housed]."

NCTA elaborated as follows:

Netflix, for instance, bases its call for a 25 Mbps download threshold on what it believes consumers need for streaming 4K and ultra-HD video content -- despite the fact that only a tiny fraction of consumers use their broadband connections in this manner, and notwithstanding the consensus among others in the industry that 25 Mbps is significantly more bandwidth than is needed for 4K streaming. Meanwhile, Public Knowledge asserts in conclusory fashion that an "average" U.S. household constantly streams at least three high-definition movies simultaneously while also running various "online backup services.

The association makes a compelling argument, but it might not pass the smell test, as simply streaming one movie in HD results in stops for buffering on my home "broadband" Internet. While this does not speak for everyone, this story, Internet in America: An On Again, Off Again Relationship, from NPR's All Tech Considered, included comments from listeners all over the country and shows my experience is not unique.

I'm guessing most people have encountered similar problems, making it hard to believe that the current standard is fully adequate. 

What happens next
The immediate impact of the ruling is that the percentage of homes without available broadband in the U.S. increases to about 20%. That number includes 4 million of AT&T’s (T 1.27%) 16 million broadband subscribers and 2.6 million of Verizon’s (VZ 0.83%) 9.2 million DSL subscribers, according to The Verge

ISPs are not required to offer broadband service, but this ruling likely kills the market for DSL in a locale where it competes with offerings which will equal the new standard.

The ISPs may squawk, but none had threatened legal action when the standard was just a rumor, and none are likely to pursue it now. Instead, the new standard will force the ISPs to improve their offerings in competitive markets or risk being left behind.

This is good news for consumers and good news for content providers -- many of whom are also ISPs. In reality, this decision may actually force the Internet providers to improve service in a way that ultimately helps some of their own streaming content services.

Daniel Kline has no position in any stocks mentioned. He remembers dial-up Internet. The Motley Fool recommends Netflix and Verizon Communications. 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Verizon Communications Inc. Stock Quote
Verizon Communications Inc.
$45.15 (0.83%) $0.37
AT&T Inc. Stock Quote
AT&T Inc.
$18.27 (1.27%) $0.23
Netflix, Inc. Stock Quote
Netflix, Inc.
$249.30 (2.72%) $6.60
Comcast Corporation Stock Quote
Comcast Corporation
$40.00 (1.52%) $0.60

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/13/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.