Cable companies continue to dominate the U.S. broadband marketplace, and the gap between cable broadband and telephone company DSL continues to widen.

Leichtman Research Group reports the top seven cable companies together added 728,423 internet customers in the last three months, an increase of 35% over 2017. One of the biggest gainers was Comcast, which grew 363,000 subscribers during the third quarter. At the same time last year Comcast added 213,000 customers. Charter Spectrum grew by 308,000 customers in the third quarter, bolstered by speed upgrades in select areas and more aggressive promotions. At the same time in 2017, Spectrum added 285,000 customers.

Cable’s gains are phone company losses. AT&T, Frontier, CenturyLink, and Consolidated (formerly FairPoint) saw 159,974 customers disconnect service in the last three months. Phone company losses were buffered in part by government-funded rural broadband expansion campaigns, which typically introduce broadband service in rural areas for the first time. Where customers have a choice, they are increasingly choosing cable companies to supply internet service because speed and reliability are often better, especially compared to DSL service still prevalent in a lot of areas.

Sources: The Companies and Leichtman Research Group, Inc.

*LRG estimate
^CenturyLink only reported residential subscribers in 3Q 2018.  LRG estimate including non-residential subscribers
^^Consolidated includes a minor sale of a local exchange carrier
^^^Cincinnati Bell does not include the acquisition of Hawaiian Telecom
Company subscriber counts may not solely represent residential households. Top cable and telephone companies represent approximately 95% of all subscribers.

The Federal Communications Commission (FCC) has proposed a new policy allowing cable companies to deduct the fair market value of their obligations to serve the public interest from franchise fee payments to towns and cities.

The proposal, MB Docket No. 05-311 — Cable Franchise Fee Deduction, will turn cable franchise laws upside down in virtually every state, reducing local government revenue and threatening public, educational, and government (PEG) access channels, access to cable in schools and other educational institutions, and undermining local control over the placement of wireless cell equipment and other infrastructure that some cable operators propose to install.

Critics of the proposal claim it would continue a concerted effort to shift oversight and regulatory controls away from local communities and states to a federal government that currently has a policy of favoring the interests of telecommunications companies over the interests of community leaders and the public.

Concord, Calif. Mayor Edi Birsan warned the FCC that if it adopts its proposal, it would strip his city, along with others, of its ability to manage where cable companies place cellular equipment and at what price.

Birsan

“Local governments may lose their authority to manage a cable company’s deployment of non-cable facilities, such as ‘small cells,’ Birsan wrote in a letter to the FCC. “This preemption would threaten to extend to fees for use of the rights of way, meaning:

• Cable companies can use local rights of way for any purpose, regardless of the terms of the franchise, and avoid having to pay fair compensation to the local government for the use of publicly funded assets in the rights of way.
• Cable companies could potentially install “small wireless facilities” with little to no public input, without having to meet any aesthetic or equipment size requirements aimed to mitigate blight and preserve community character.
• Cable companies would gain a significant advantage against their competitors, including telecommunications providers even though the FCC has just adopted an order lowering their deployment standards, resulting in a race-to-the-bottom deployment strategy for both cable and telecommunications companies.”

Officials in King County, Wash., which includes the city of Seattle, were critical and suspicious of the FCC’s argument that the burdens of providing benefits to communities as defined in franchise agreements are slowing down the deployment of broadband services, a claim Tanya Hannah, chief information officer of the Department of Information Technology and Christina R. Jaramillo, manager of the Office of Cable Communications found had little merit and no evidence to back it.

Hannah

“It is not obvious that if a cable operator’s profit increases by one dollar that the operator will invest an additional dollar in broadband infrastructure deployment,” they wrote in a joint letter to the FCC. “Many cable companies are functional monopolies. Because the data transfer speed of fiber-line cable systems significantly exceeds the speed of wireless systems, cable broadband is the preferred broadband service if the prices for other broadband services are comparable.”

The two officials made it clear that since the FCC was proposing to impose these changes retroactively on town and cities around the country, the result would be detrimental to local government finances.

“If the FCC were to allow the value of the proposed franchise fee offset activities that were done in the past to be deducted from current or future franchise fee payments, the results to local  governments would be debilitating,” the officials wrote. “It could essentially end all monetary fee payments to King County by Comcast and WAVE Broadband for a number of years. This is not a feasible option. It is not realistic and it is not fair.”

The Alabama League of Municipalities told the FCC the issue was about basic state sovereignty, and Alabama does not want the federal government to run its affairs.

“Section 220 of the Alabama Constitution of 1901 provides that no person, firm, association, or corporation shall be authorized or permitted to use the streets, avenues, alleys, or public places of any city, town, or village for the construction or operation of any public utility or private enterprise without first obtaining the consent of the proper authorities of such city, town, or village,” the League wrote. “The Supreme Court of Alabama has labeled this grant of authority as ‘an essential and sovereign power in local authorities […] in the nature of a bill of rights [that] recognize certain fixed constitutional rights which shall not be invaded.'”

Under the FCC’s proposal, Alabama’s Constitution would be violated by allowing cable operators near carte-blanche access to public rights-of-way without fair compensation or permission, the League argued.

For a lot of communities, any reduction in franchise fee payments will lead to a corresponding decrease in funding for PEG television services.

“Our town’s ability to invest and support its public access television unit and the telecommunications curriculum in our schools is directly linked to the funding received from Charter Communications as part of the franchise fee (“cable tax”) agreement,” noted Robert J. Oliveira, chairperson of the Westport, Mass. Cable Advisory Board. “Any reduction in these funds would mandate a corresponding reduction in programming levels and information access to the community and curriculum support to our students.”

Public comments are due to the FCC by the end of today — Wednesday, Nov. 14. Consumers can share their opinions by visiting the docket on the FCC’s website, and then selecting + Express on the left hand side of the page, which will open an online comment form. Municipalities can file formal submissions using the + New Filing link.

Wheeler

Three developments — two in the courts and another at the ballot box — have encouraged former FCC Chairman Thomas Wheeler to believe net neutrality can be restored, but only if a new Democratic majority in the House of Representatives reignites public attention on the issue and a D.C. court finds the current FCC acted recklessly in repealing the rules.

Wheeler, a visiting fellow of Governance Studies at the Brookings Institute’s Center for Technology Innovation, argues the last chapter of net neutrality has yet to be written:

The FCC’s Authority to Govern Internet Traffic Upheld by U.S. Supreme Court

On November 5, the Supreme Court declined to review the decision of the D.C. Circuit Court that twice upheld the 2015 Open Internet Rule. The industry groups that had long opposed non-discriminatory access to broadband networks had previously stopped such regulation at the D.C. Circuit. When they attempted the same thing with regard to the 2015 decision of the Federal Communications Commission (FCC), a three-judge panel ruled the FCC’s favor. The industry then appealed the panel’s decision to the entire D.C. Circuit and lost again. The industry then appealed that loss to the Supreme Court. The Supreme Court voted 4-3 (with Chief Justice Roberts and Justice Kavanaugh abstaining) to deny a writ of certiorari for the appeal. As a result, the lower court’s decision upholding the 2015 Open Internet Rule stands.

In order to overcome earlier court rulings that found the FCC lacked the authority to regulate broadband services, Wheeler redefined broadband as a telecommunications service, subject to stronger regulatory authority under Title II of the Communications Act. Under “common carrier” provisions, internet service providers could not engage in traffic discrimination. The industry disagreed with Wheeler’s reclassification and sued. Because the Supreme Court refused to hear their appeal, the D.C. District Court ruling in favor of the FCC stands.

Trump’s FCC Becomes a Partner of Big Telecom

The Trump Administration appointed a Republican majority to the FCC that wiped away or repealed most of the accomplishments of the FCC under Chairman Wheeler, including net neutrality.

Pai

“In 2017, the Trump FCC repealed the Open Internet Rule at the request of the network companies. In the process, the FCC also ruled that the agency had only minimal authority over internet networks,” Wheeler wrote. “Except for toothless transparency requirements, the Commission would exercise no oversight over broadband internet access services. Not only did the agency created by Congress to oversee the nation’s networks walk away from that responsibility, but it also joined with the plaintiffs in asking the Supreme Court to overrule the D.C. Circuit’s 2015 decision. When the High Court denied that request, it breathed new life into the 2015 Open Internet Rule.”

Wheeler was gratified by the news that Democrats have retaken the House, noting that presumptive Speaker Nanci Pelosi, next chairman of the Energy & Commerce Committee Frank Pallone, and incoming chairman of the Telecommunications Subcommittee Mike Doyle are all vocal supporters of net neutrality. Reps. Pallone and Doyle even attempted to introduce a resolution to repeal the FCC’s decision on net neutrality, but Republicans refused to allow the issue to come up for a vote in the House.

Wheeler believes both congressmen will conduct more aggressive oversight hearings over the FCC, but until Republicans are voted out, net neutrality “is a long shot” according to Wheeler.

“Even if it was passed by the House, the Republican-controlled Senate would not likely support it. Even if they miraculously passed a bill, President Trump would no doubt veto it, having previously spoken out against net neutrality,” Wheeler said. “The only foreseeable legislative path would be with the support of the network companies, and that support would come at the price of watering down the proposal to render it virtually meaningless.”

Will a Court Find Trump’s FCC “Arbitrary and Capricious?”

On Feb. 1, the D.C. Circuit Court will hear arguments over a lawsuit challenging the FCC’s decision to repeal net neutrality. Wheeler says if the D.C. Circuit rules against the FCC and vacates the decision to repeal net neutrality, Wheeler’s 2015 Open Internet rules will be reinstated.

“In their zeal to gut oversight of their activities, the internet networks and their Trump FCC allies may have shot themselves in the foot,” Wheeler wrote. “There is a strong case that the Trump FCC acted in an arbitrary and capricious manner when it repealed the 2015 Open Internet Rule and walked away from any responsibility over the most important network of the 21st century. If the D.C. Circuit makes such a finding, net neutrality would once again be the law of the land. Although the Trump FCC would probably spitefully ignore its enforcement and even force adoption of a new rule to free the broadband companies, that action would simply bolster the Democrats in the House.”

From the producers of Dividing Lines:

Across the country, state legislatures have created barriers to community involvement in expanding internet access.

In Tennessee, lobbyists from AT&T, Charter, and Comcast spread huge campaign contributions around the state legislature. AT&T’s influence is felt in the governor’s own broadband expansion legislation, which was tailor-written to allow the phone company to collect huge taxpayer subsidies to expand inferior DSL into rural parts of Tennessee.

Meanwhile, some local communities seeking to build state-of-the-art fiber to the home networks capable of delivering 10 gigabit service found that doing so would be illegal under state law.

Think about that for a moment.

A multi-billion dollar telecom company is allowed to expand its slow speed DSL network with taxpayer-funded grants while your local community is forbidden to bring fiber optic service to your home even if your community votes to support such a project. Exactly who is the governor and state legislature working for when it comes to resolving Tennessee’s rural broadband nightmare?

In part two of this series, watch State Senator Janice Bowling describe how much influence AT&T has over the Tennessee state legislature. (5:31)

From the producers of Dividing Lines:

The online world is no longer a distinct world. It is an extension of our social, economic, and political lives. Internet access, however, is still a luxury good. Millions of Americans have been priced out of, or entirely excluded from, the reach of modern internet networks. Maria Smith, an affiliate of the Berkman Klein Center for Internet & Society and Harvard Law School, created Dividing Lines to highlight these stark divides, uncover the complex web of political and economic forces behind them, and challenge audiences to imagine a future in which quality internet access is as ubiquitous as electricity.

This is the first part of a series being deployed by organizations and community leaders across the country, from San Francisco to Nashville to Washington, D.C., in an effort to educate stakeholders and catalyze policymaking that elevates the interests of the people over the interests of a handful of corporations.

The fight for rural broadband in Tennessee pits a publicly owned electric utility against Comcast and AT&T and their allies in the state legislature. (5:25)