What a difference one more competitor can make!

Using U.S. county data (n=3,140) from the National Broadband Map and relating the percent coverage by 2 or more vs. 3 or more wireline providers with the percent of a  population with access to high speed broadband (25 mbps), it was found that:

Table: Column headings are percent access to high speed broadband.  Row headings are percent coverage by the number of providers (2 or more vs. 3 or more)

At the low end:

12% of counties had 2 or more providers serving less than 10% of the population.  That percent jumps to 59% with 3 or more providers. 

In the middle:

66.6% of counties had 2 or more providers serving at least 50% of the population.  The percent drops to 19.8% with 3 or more providers.

At the upper end:

18.7% of counties had 2 or more providers serving at least 90% of the population.  (78.5% of these counties provided high speed broadband to more than 90% of its residence.)  

Just 3.6% of counties had 3 or more providers serving at least 90% of the population.  (98.2% of these counties provided high speed broadband to more than 90% of its residence.)

Slightly more than 20% of counties have 10% or less of its population with access to high speed broadband.  Among these counties,

Ø  38% have 10% or less coverage by 2 or more providers.

Ø  88% have 10% or less coverage by 3 or more providers.

Slightly more than 20% of counties have more than 90% of its population with access to high speed broadband.  Among these counties,

Ø  69.1% have more than 90% coverage by 2 or more providers.

Ø  16.5% have more than 90% coverage by 3 or more providers.

Putting a dent in poverty...might broadband help?

A simple regression using 2013 U.S. county data on the poverty rate and the percent of the population with access to broadband speeds > 25 mbps, reveals that for every one percent increase in high speed broadband penetration, the poverty rate falls by .015 percent.

What might be more revealing though is a look at the descriptive statistics.  Nearly equal is the percent (20%) of counties that have less than 10% and more than 90% high speed broadband access.  When ranked by poverty rates, at the top and bottom of the 3,040 counties, there is a digital divide as measured by access to high speed broadband.

Extending [a] Lifeline!

The FCC Commissioner's plan to extend Lifeline recognizes that times and technology have changed since 1985 when the program was introduced to subsidize landline phone service for low-income households.
Under the proposal, the $1.7 billion program that currently provides a $9.25/month subsidy for wireline and wireless (since 2008) service would be extended to include broadband.  The inclusion  of broadband acknowledges its importance to economic well-being.

http://www.nytimes.com/2015/05/28/business/fcc-chief-seeks-broadband-plan-to-aid-the-poor.html?_r=0

Time to change the rules

In a proposed rulemaking, the FCC is considering a change to the 22 year-old effective competition rule that requires cable operators to prove that there is effective competition in their communities before they can be exempt from local regulation of basic rates.  Under the proposed rule change, there would be the presumption that effective competition exists in all markets.  This would mean that a municipality would have to demonstrate otherwise to gain the authority to regulate rates.  The reason for the change is that the FCC has approved more than 10K effective competition requests, and has not denied any in recent years.

At the time of the initial ruling, in 1993, less than 2% of MVPD customers could choose between two or more cable providers.  Little has changed in that regard.  Gentlemen’s Agreements by the cable operators have continued to limit head-to-head competition among them.  But, beginning in 1999 and accelerating through the early part of the new millennium, DBS providers, specifically DirecTV and Dish, expanded their footprints and today cover all but a very small portion of the U.S.  Moreover, telecom companies, largely Verizon and AT&T, began offering video delivery services in major metropolitan markets in direct competition with the incumbent cable operator. So, today, in most markets, there are two (DBS only) to four (2 DBS, cable, and telco) competitors.  The mere counting of competitors in a market, however, does not suggest that competition is robust.  It merely points that in the vast majority of U.S. communities (34,000+), the current effective competition standard is met.*   “Effective” competition will have to come from new sources, not from interpreting outdated rules. 

*Effective competition is considered to exist if either the municipality or another multichannel video programming distributor (MVPD) offered an alternative service to at least 50 percent of the households in the franchise area and more than 15 percent of those households took service from a company other than the largest one.   Moreover, small cable operators are exempt from rate regulation in franchise areas where they serve fewer than 50,000 subscribers (serve less than 1% of U.S. subscribers, and do not exceed annual revenue of $250 million).

Full steam ahead...with Media M/A

It appears that the media industry set the re-start button on merger activity after last month's derailment of the Comcast-TWC merger.  Reports suggest that Charter is close to announcing a deal to acquire Time Warner Cable and Bright House Networks.  While regulators will have to review the merits of the deal, including assessing the impact on subscribers and competitors, it is highly likely the deal will be approved.  Why?  Many [not all] of the reasons are similar to why the AT&T-DirecTV merger will go through.  Here are they are:
1) A stronger #2 to Comcast.  As a share of the U.S. broadband market, a combined Charter (6%) /TWC (14%) /Bright House (3%) would have 23%, just two percentage points behind Comcast.
(Source: The Leichtman Research Group.  Percentages were of the top providers accounting for 94% of the total market.)
2) Greater scale -- geographical clustering for network efficiencies and stronger negotiating heft to balance the power of content owners.
3) In spite of expanded coverage, there is very limited market overlap.  Where there may be overlap (a few communities in southern California), regulators may require some concessions or divestitures. 4) FCC Chairman, Tom Wheeler, indicated that he is not opposed to industry mergers in spite of the Comcast-TWC decision.