Oregon Winds Up Giving Comcast A Huge Tax Break For Doing Nothing Differently

from the great-work-everybody dept

A well-intentioned effort in Oregon to drive more competition to the broadband market has instead netted Comcast a $15 million annual tax break for effectively doing nothing differently.

Back in 2014 the Oregon State Supreme Court issued a hugely-controversial ruling that allowed companies to be taxed based on "intangible" assets such as the value of their brands. Lobbied by Google, the state in 2015 signed a new law rolling back those assessments to try and incentivize competitors looking to deploy faster broadband networks. But in 2015, Google was quick to point out that the sloppily-worded bill actually exempted it from gleaning any tax breaks for deploying gigabit broadband:

"SB611 offers an exemption from the state's tax methodology to companies with the capacity to offer Internet service of "at least one gigabit." Google Fiber offers speeds "up to a gigabit" per second - that's 1,000 megabits per second, 25 times faster than the current broadband standard. So the law, as written, would make Google Fiber ineligible for the tax exemption."

In other words, a well-intentioned bill intended to incentivize deployment of next-generation broadband actually exempted the one company actually promising to do so.

Oddly, this was only the start of the problem. Google Fiber had spent several years promising Portland locals that gigabit fiber would be deployed to the city. This promise was at the heart of the entire state-level legislative tax adjustments in the first place. But by late 2016, Google Fiber had indicated that it was getting bored by the whole broadband disruption thing, and had decided to put its fiber expansion plans on hold. Needless to say Portland, one of several cities that had been strung along as potential launch markets, wasn't impressed.

But wait: it gets better. Comcast, which had already been planning to deploy gigabit broadband service via relatively inexpensive DOCSIS 3.1 upgrades, was quick to take full advantage of a law intended to bring more competition to bear on the incumbent giant. Its lawyers quickly got to work successfully arguing that its modest and already-planned cable-based upgrades qualified it for $15 million in annual tax breaks. But because Comcast's gigabit service costs $300 per month and came with a $1000 installation fee (plus usage caps), lawmakers were quick to argue that this massive Comcast gift wasn't what they had intended:

"Comcast argues it qualifies, too, by virtue of its obscure new service. Oregon cities are crying foul, but the staff of the Oregon Public Utility Commission says Comcast meets the letter of the broadly written law - even if hardly anyone signs up for a service critics say would cost subscribers $4,600 in the first year alone."

Since Comcast technically adhered to the letter of the law (even if the service it was deploying was already planned and priced uncompetitively), it was able to begin enjoying the huge tax break. So was Frontier Communications, a company under fire in other states for being almost as large of an anti-competitive shitshow as Comcast. And while Oregon lawmakers tried to reboot the whole mess and repeal the law last week, procedural missteps and Comcast's lobbying influence over state leaders made sure that wasn't successful:

"Count Comcast among the big winners in this year's legislative session in Salem.

Efforts to repeal a tax break worth millions of dollars a year to big internet companies faltered at the last minute Thursday during the Oregon Legislature's short session.

"I'm really disappointed we weren't able to get that one over the finish line," said Senate Majority Leader Ginny Burdick, D-Portland, who chairs the rules committee where House Bill 4027 died. She said the measure didn't clear the House early enough to avoid a potential Republican slowdown, and with the Legislature set to adjourn Saturday or Sunday she said the clock ran out on the bill.

Just so we're clear: a well-intentioned bill designed to improve competition in the state simply wound up giving Comcast $15 million annually in taxpayer funds for doing nothing differently. Funds that could have otherwise gone to local schools and other essential services. All, ironically, while Comcast faced heat in numerous communities for all manner of billing hijinks and anti-competitive behavior across the state. And this was a state where lawmakers really were trying to do the right thing. In countless other states, where those good intentions don't exist (like West Virginia), things are often even more ridiculous.

This state level corruption, dysfunction and absurdism, as they say, really is why we can't have nice things.

Filed Under: broadband, competition, gigabit fiber, oregon, tax breaks
Companies: comcast, google

Despite Gigabit Hype, Comcast Is Facing Less Broadband Competition Than Ever

from the ma-bell,-ill-communication dept

Despite the rise of heavily-hyped-but-highly-scattered gigabit deployments, the broadband industry is actually seeing less competition than ever before across huge swaths of the country. Once upon a time, broadband "competition" consisted of an equally matched telco going head to head with the incumbent cable provider (if you were lucky). These days, most phone companies lack the finances or competitive motivation to improve lagging DSL speeds across their footprints -- speeds that don't even meet the FCC's base definition of broadband (25 mbps).

That's resulting in a growing monopoly for the nation's cable broadband providers, who have quietly been absolutely butchering phone companies over the last several years. Just take a look at the latest data from Leichtman Research, which notes that while cable broadband providers collectively added 2.7 million net additional high-speed Internet subscribers last year, phone companies collectively shed roughly 600,000 broadband users.

That's the most net additions the cable sector has seen in any year since 2007. And the 122% 2016 net additions are a notable bump up from the 106% of net additions seen by cable providers in 2015, and 89% of net additions seen in 2014. It paints a rather clear picture of a broadband industry that, frankly, is even less competitive than public wisdom dictates (and most of us already knew it's one of the least competitive sectors in technology):

In countless markets, phone companies like AT&T and Verizon are simply giving up on unwanted DSL users, quite happily driving them to cable via the one-two punch of price hikes or apathy (their focus now is more expensive wireless, and gobbling up various media companies). Elsewhere, smaller telcos (Windstream, Centurylink, Frontier) have saddled themselves with so much debt by gobbling up AT&T and Verizon's aging copper customers, they're incapable (or unwilling) to invest in necessary broadband upgrades en masse.

Many of these companies quite simply don't even want to be in the residential broadband business, resulting in a palpable, active disdain by many of these phone companies for their own paying customers. The residential broadband industry simply isn't profitable enough, quickly enough for modern investors, so most of these companies have shifted their entire focus elsewhere. For smaller telcos like Windstream, it's gobbling up companies like Earthlink to expand a focus on enterprise customers. For AT&T and Verizon, it's gobbling up media empires in the quest to be millennial ad juggernauts.

All of this is wonderful news for companies like Charter and Comcast. This reduction in overall competition is eroding the resistance to the rise of completely unnecessary and arbitrary usage caps, meaning broadband (and competing streaming) services are getting more expensive than ever before. And remember, most of these companies have written and successfully lobbied for state bills preventing your town or city from doing much about it. As icing on the cable cake, new Ajit Pai-run FCC has made it clear that nibbling these companies' earlobes is going to pass for regulatory policy for the foreseeable future.

All of this tends to get overshadowed each time an ISP proudly announces the expansion of expensive gigabit broadband lines in highly-selective areas. But for the countless markets in the States, phone companies have effectively given up -- resigning consumers to at least a decade of higher prices and the cable industry's particular knack for atrocious customer service.

Filed Under: broadband, competition, gigabit fiber, monopoly
Companies: at&t, comcast, verizon

Vox Seems Kind Of Upset That We're Building Gigabit Networks With Bandwidth To Spare

from the you're-not-helping dept

If you want to see why broadband in the United States still stinks, your first stop should be to examine the state level protectionist laws used to stifle competition across countless markets. But despite the lobbyist stranglehold over state legislatures, we're still seeing some impressive progress when it comes to the deployment of gigabit fiber networks. Google Fiber continues to slowly but surely expand its footprint, and we're seeing the rise of numerous other piecemeal gigabit solutions, whether coming from the likes of Tucows or municipal broadband deployments in cities like Chattanooga, Tennessee.

To be clear, the "gigabit revolution" is certainly a bit overhyped. The vast majority still can't get this caliber of service, and the obsession with the mighty gigabit does tend to obscure a potentially more important conversation about broadband prices and the often glaring lack of real competitive options. But by and large most people can agree that gigabit fiber builds are a good thing in an era when most users can still only obtain DSL at circa 2002 speeds and prices, and two-thirds of homes lack access to speeds greater than 25 Mbps from more than one provider (aka a broken monopoly).

Well, unless you're Vox, which published a kind of strange article this week lamenting how "cities spent millions on fast gigabit networks" and "nobody is sure what they're good for." The central narrative of the article is apparently that gigabit fiber networks aren't any good because nobody has developed the "killer app" that can effectively use all that bandwidth at once:

But six years after the first super-fast connections went live, even proponents concede no “killer” gigabit application has emerged. Most of their potential, critics say, is simply ignored by users. And building gigabit networks nationwide would be a colossally expensive undertaking.

Vox appears to have missed the fact that gigabit broadband competition itself is the killer app. Google Fiber may only have a small footprint, but in markets where it's deployed, incumbent ISPs have been forced not only to dramatically improve their own networks, but also to offer these services at a significantly lower price point (usually around $70) without the usage caps that have been popping up in less competitive markets. Gigabit municipal broadband deployments often have the same impact, as we've seen in locations like Wilson, North Carolina, and Chattanooga, Tennessee.

It's true that most consumers don't take gigabit speeds when offered; usually because 25 to 50 Mbps remains the sweet spot and can often be had for significantly less. But ISPs consistently note that even advertising gigabit speeds causes consumers -- most of whom actually have no damn idea what speed they subscribe to -- to call in and see if it's time for an upgrade, driving overall adoption. Another study has found that prices of all service tiers tend to drop when gigabit connectivity is introduced into a market.

Yes, gigabit speeds aren't really necessary for most people, but that's missing the point. Especially when you're trying to build the networks and competitive landscape of tomorrow.

As such, Vox's claim that "nobody is sure" what gigabit networks are actually good for seems a bit short-sighted. Worse, perhaps, the article's core narrative is only fueled largely by a single analyst at the Information Technology & Innovation Foundation -- the same think tank that first proposed SOPA. Said think tanker manages to contradict himself in pretty short order, lamenting the lack of the "killer app," then immediately admitting gigabit network deployment could help the development of said apps in the future:

Of course, there’s another possibility: Maybe people just don’t have any use for so much bandwidth. That’s the view of Doug Brake, of Information Technology & Innovation Foundation, a think tank funded by foundation and government grants as well as donations from firms such as Google and IBM. "There are no apps today and no apps on the horizon,” he said, though he acknowledged that development of new applications would probably proceed more quickly with far broader gigabit coverage.

Vox notes that the ITIF takes money from "Google and IBM," but forgets to inform the reader they also take money from the same incumbent broadband ISPs threatened by the rise in gigabit competition. The ITIF is the same organization that recently tried to argue that Comcast's plan to charge users more money to protect their own privacy was "pro consumer," and that the failed Comcast merger would have been fantastic for consumers. As such, perhaps the ITIF is not the best cornerstone for your argument that gigabit networks are useless.

Meanwhile, this narrative that gigabit networks aren't important because we're not yet using their full potential runs deeply through the entire piece, the author trying to use Netflix as an example of why, apparently, we shouldn't aim high when building new broadband infrastructure:

Right now, one of the most bandwidth-hungry applications out there is Netflix. Netflix recommends users have at least 3 Mbps of bandwidth for standard-definition video — meaning that you could stream about 300 Netflix videos simultaneously on a 1 gigabit connection. If you want Netflix’s highest-quality streaming, called Ultra HD, that requires 25 Mbps. So a gigabit connection would allow you to stream 40 Ultra HD videos at a time.

But again, who builds technology for the future constrained solely by the needs of today? Are gigabit networks over-hyped? Yes. The fascination with extreme speeds tends to help some ISPs obfuscate the reality that the lion's share of their tiers are expensive (or capped). But Vox seems to have been sold on the idea that we don't really need these additional gigabit networks because the incremental improvements being deployed by cable and phone companies are "good enough."

But most of us realize that's not true: while cable companies are busy using relatively inexpensive DOCSIS 3.1 cable upgrades to deliver gigabit speeds Vox implies nobody wants, most phone companies are hanging up on unwanted DSL customers to focus on capped and metered wireless broadband that isn't truly a replacement for fixed-line service. The end result is going to be a stronger cable monopoly (and in many areas less competition) than ever before, and a market that might offer gigabit speeds eventually, but at exorbitant prices and with utterly unnecessary usage caps.

No, you don't need gigabit speeds today. But gigabit networks from the likes of Google Fiber and municipal broadband providers are delivering the kind of competition folks at incumbent ISPs (and by loyal proxy think tanks like the ITIF) are pretty clearly terrified of. And by helping them keep the bar set at ankle height, Vox is only perpetuating the kind of thinking that saddled us with the current broadband duopoly that so many of us "enjoy" in the first place.

Filed Under: broadband, competition, gigabit fiber