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The FCC Thinks U.S. Internet Is Slow; AT&T and Verizon Disagree

By Daniel B. Kline - Jan 19, 2016 at 10:04AM

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Telephone company Internet providers led by the two big boys in the field have been outspoken about a new report.

Every year, the Federal Communications Commission issues its report on broadband deployment across the United States. Every year, its findings cause grumbling from the industry.

A preview fact sheet of the 2016 report was met with more disdain from ISPs, including Verizon (VZ 0.83%) and AT&T (T 1.27%), this year because in January, 2015, the FCC upped the standard for what speed of service counts as broadband. As part of its 2015 Broadband Progress Report, the federal agency raised the minimum download speeds required from 4 Mbps to 25 Mbps, and the minimum upload speed from 1 Mbps to 3 Mbps.

FCC Chairman Tom Wheeler Source: CES.

That was a setback for the Internet service providers because it effectively tripled the number of homes in the United States not served by broadband. As of January, last year, about 6.3% of households lacked broadband under the old standard, while another 13.1% fail to meet the new standard, The Verge reported.

As you might imagine, various trade organizations, and AT&T and Verizon most vocally, take issue with the FCC, saying that U.S. broadband deployment has fallen behind. That's exactly what the agency is saying in the new fact sheet that previews the 2016 report.

What does the FCC report say?
The FCC acknowledges that both public and private efforts are advancing broadband deployment; but it charges that the improvements are not happening fast enough. "While the nation continues to make progress in broadband deployment, advanced telecommunications capability is not being deployed in a reasonable and timely fashion to all Americans," said the fact sheet, which had the following findings:

  • Approximately 34 million Americans still lack access to fixed broadband at 25 Mbps for downloads, 3 Mbps for uploads
  • A persistent urban-rural digital divide has left 39% of the rural population without access to fixed broadband 
  • Only 4% living in urban areas lack access

If this was a report card, then the nation's ISPs would have scored some failing grades; but like a kid who brings home an F or two, the companies say it's not their fault -- it's the test that's wrong.

What are AT&T and Verizon saying
It's probably fair to say that no ISP is happy with what the FCC is reporting, but Verizon and AT&T -- the two major telephone company Internet providers -- have been particularly vocal. USTelecom, a trade group that represents telcos of all sizes, including AT&T and Verizon, took up the cause on behalf of their members.

The trade group poked fun at the FCC, saying in a statement that the report should "carry the headline 'our policies have failed' since it concludes that six years after adoption of the national broadband plan, the commission's actions haven't produced even so much as a 'reasonable' level of broadband deployment."

The group also went on to point out that broadband providers are investing more than $75 billion each year to add network capacity and increase speeds. It also charges that the FCC has ulterior motives. "Unfortunately, this annual process has become a cynical exercise, one that eschews dispassionate analysis, and is patently intended to reach a predetermined conclusion that will justify a continuing expansion of the agency's own regulatory reach," it wrote.

AT&T was more direct in its response, saying that it's not a case of ISPs failing the the test; it's a matter of the FCC changing how it grades. "It's bad enough the FCC keeps moving the goalposts on their definition of broadband, apparently so they can continue to justify intervening in obviously competitive markets," the company said in a statement.

Of course, AT&T also charged the agency, which is run by Chairman Tom Wheeler, a formal cable-industry lobbyist who many expected to be an industry puppet when he was appointed by President Barack Obama, just wants to gain more authority. "It's beginning to look like the FCC will define broadband whichever way maximizes its power under whichever section of the law they want to apply. This cannot be what Congress intended," AT&T wrote.

This is just an industry used to getting its way
The FCC has a Congressional mandate to produce this report, and AT&T, Verizon, and the various trade associations representing the ISPs are arguing with facts. At no point does either AT&T or USTelecom take issue with the numbers. The only real complaint they have is the characterization that the results produced so far are not good enough.

Neither statement referenced here explained why rural areas are underserved, even though the answer clearly lies in the fact that bringing broadband to less-populated areas is less profitable. The FCC found factually that certain parts of the country lack broadband service, and it delivered the conclusion that ISPs are not working fast enough to deploy it.

That's the job the agency was given by Congress, and the only real complaint the industry has is that the FCC is actually pointing out that service is not being offered to many rural Americans. People living in those areas would certainly seem to count under a mandate which says the FCC has to determine whether broadband is "being deployed in a reasonable and timely fashion to all Americans." 

All means everybody, and 39% of rural Americans not served is not even sort of close to everybody. AT&T and Verizon have made investments in their networks, as have the other ISPs; but they're not investing enough in rural markets, which the FCC is required by Congress to not only point out, but take steps to remedy.

If the broadband industry does not want the FCC asserting its power, then it should have worked harder to pass the test. That's a lesson every American school child, rural or urban, learns pretty early on.

Daniel Kline has no position in any stocks mentioned. He does not have broadband Internet service in his West Palm Beach condo, but  expects to soon. The Motley Fool recommends Verizon Communications. 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.

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