Data Again Shows That U.S. Broadband Is Painfully Mediocre

from the do-not-pass-go,-do-not-collect-$200 dept

For literally twenty-five years we've thrown billions in subsidies, tax breaks, merger approvals, and regulatory favors at U.S. telecom giants in exchange for the promise of amazing, competitive, ultra-fast, widely-available broadband (and oodles of high paying jobs). And time and time again, studies show that what Americans got back in exchange was...something notably less than that.

The latest speedtest data from Ookla once again shows that when it comes to broadband speeds, the U.S. continues to be nothing to write home about. The country ranks fourteenth in both wired and wireless broadband download speeds, despite boundless subsidies, rampant "deregulation" (read: doing whatever Comcast and AT&T say to do), a nauseating amount of 5G hype, and lots of promises from industry about the illusory investment benefits of killing net neutrality rules and functioning government oversight.

When it comes to wired broadband, the United States has fallen out of the top ten nations despite the dropping cost of fiber deployments:

On the wireless side, we've never once been in the top ten list. And while we did jump four spots to fourteenth, that's still not great. In large part because U.S. deployments of 5G, despite a ridiculous level of hype, are consistently slower than most overseas deployments:

As always some caveats: speed tests alone aren't the most accurate representation of true network performance, because users are often running tests when there are problems, may not be subscribed to the fastest speed available in their area (often because it's too expensive), or may be testing dodgy WiFi from a bad router halfway across the house. But the problem is that the U.S. rates consistently mediocre to terrible on every meaningful metric that matters, whether it's speeds, coverage, quality of the actual connection, customer service, or, especially, price:

"If we want to talk about international rankings, it's worth noting that the U.S. ranked 21st out of the 26 countries tracked in both standalone fixed broadband price and in mobile broadband price in the FCC's 2020 Communications Marketplace Report, and that's not a departure—it's the norm,” (Dana) Floberg said."

And while geography certainly plays a role, that stopped being a valid excuse a decade or so ago. We've thrown countless billions in favors and tax breaks at these companies in exchange for networks that routinely fail to materialize. I've spent twenty years studying and writing about the U.S. telecom sector and can assure you that regional monopolization and corruption are the primary reason for our continued failures. Canada and the U.S., which both share pretty similar approaches to broadband policy (namely: kiss the ass of regional, ever-consolidating monopolies), see similar outcomes on that front:

Despite the data never supporting it, the narrative du jour in telecom policy is that if you deregulate the sector (read: make telecom regulators so weak they can't hold Comcast and AT&T accountable), miraculous things happen. Despite the data never supporting it, another popular narrative is that you can just throw billions in subsidies at this monopoly logjam to fix it. The reality is U.S. broadband stinks because of monopoly power and the corruption gravy train that protects it from accountability, something U.S. policymakers are rarely willing to acknowledge, much less actually do something about.

Filed Under: broadband, competition, fixed broadband, mobile, speeds, us

The Trump DOJ/FCC 'Fix' For The Crappy T-Mobile Merger Isn't Looking So Hot

from the regulatory-theater dept

Economists repeatedly warned that the biggest downside of the $26 billion Sprint T-Mobile merger was the fact that the deal would dramatically reduce overall competition in the U.S. wireless industry. Data from around the globe clearly shows that the elimination of one of just four major competitors sooner or later results in layoffs and higher prices due to less competition. It's not debatable. Given U.S. consumers already pay some of the highest prices for mobile data in the developed world, most objective experts recommended that the deal be blocked.

It wasn't. Instead, the Trump FCC rubber stamped the deal before even seeing impact studies. And the Trump DOJ not only ignored the recommendations of its staff, but former Trump DOJ "antitrust" boss Makan Delrahim personally helped guide the deal's approval process via personal phone and email accounts. Both agencies, the vocal chorus of telecom-linked industry allies, and many media outlets all behaved as if all of this was perfectly legitimate and not grotesquely corrupt.

At the heart of the DOJ's approval was a flimsy proposal that involved giving Dish Network some T-Mobile spectrum in the hopes that, over seven years, they'd be able to build out a replacement fourth carrier. As we noted at the time, there was very little chance this plan was ever going to work. In part because the remaining three wireless carriers (T-Mobile, Verizon, AT&T) have every incentive to fight against a major fourth wireless competitor emerging from this mess. But also because Dish has a long history of spectrum hoarding and empty promises in wireless (just ask T-Mobile circa 2019 or so).

And there have been several hints that we're already stumbling along this doomed trajectory. Including the 6,000 layoffs (so far) that the merging companies promised wouldn't happen if regulators approved the deal.

Last week, for example, Dish Network complained to the FCC that T-Mobile wasn't being particularly cooperative on a number of fronts, including their supposed spectrum and network sharing arrangements. To help build this "new" fourth wireless network, T-Mobile gave prepaid mobile brand Boost Mobile to Dish. But Dish is annoyed that the Sprint CDMA network, which is currently in use by many of these customers, is being shut down prematurely, making it harder for Dish to get an operational foothold:

"Dish's letter to the FCC addresses a range of concerns, but the largest issue relates to the shutdown of the CDMA network that had previously been used by Sprint and is still used by the majority of Dish's 9 million Boost Mobile subscribers...Dish had expected that T-Mobile would eventually look to shut down that network in three to five years, according to people familiar with Dish's thinking. But Sprint said late last year that it would look to shut it down far earlier, on Jan. 1, 2022.

But Dish's letter also generally complains about something else. Namely, that post-merger, T-Mobile is acting a lot more like AT&T and Verizon (which it used to mock), and a lot less like the consumer-centric company that disrupted the market in the first place:

"In the letter, Dish also accuses T-Mobile of flip-flopping on other spectrum issues. Where T-Mobile previously pushed for policies encouraging smaller competitors, Dish says T-Mobile is now adopting the same tactics as AT&T and Verizon.

"During its earlier life as the 'Un-Carrier,' T-Mobile championed policies that promoted competition, diverse spectrum ownership, and efficient spectrum use. How quickly things change," Dish says in its letter. "Now, T- Mobile opposes measures that would help new entrants and smaller providers compete."

This should surprise absolutely nobody, including Dish. When you reduce overall competition via consolidation, the remaining competitors will always take full advantage. People like to debate this stuff, but it's like debating whether water will be influenced by gravity. It (layoffs, higher prices, worse service) happened in numerous other countries (Germany, Canada, Ireland) that saw a 4-3 sector consolidation, and, as US regulators increasingly rubber stamp mindless merger mania in wireless, it's going to happen here. And absolutely nobody responsible for it will take ownership when rates skyrocket a few years from now.

Filed Under: ajit pai, competition, doj, fcc, makan delrahim, mergers, mobile
Companies: dish network, sprint, t-mobile

Merger Lawsuit Docs Reveal T-Mobile Eyed Merging With Comcast

from the Meet-the-new-boss dept

We've long noted that T-Mobile's brand reputation as a feisty consumer-friendly disruptor is only really skin deep. While the T-Mobile of 2012 or so certainly added some much needed competition to the wireless sector (killing ETFs, eliminating long-term contracts, and eroding international roaming costs), more recently the company has started to look a lot like the bigger competitors (AT&T, Verizon) it pretends to be superior to. From mocking groups like the EFF to opposing net neutrality, the company isn't all that different from the companies its brash CEO John Legere likes to make fun of.

Case in point: during the ongoing multi-state AG lawsuit attempting to stop the merger, documents were released showing that one of T-Mobile's master plans was to first buy Sprint then merge with Comcast. Yes that Comcast; one of the least liked companies on the planet, frequently mocked by Legere as a clear example of industry dysfunction. The presentation, assembled at the request of T-Mobile board member Thorsten Langheim in December 2015, highlights how T-Mobile owner Deutsche Telekom was eager to use T-Mobile to exploit the poorly regulated and marginally competitive US telecom market:

"The report, which is labeled as “confidential” throughout, suggests T-Mobile owner Deutsche Telecom had bet heavily on the US wireless market, where the company saw less regulation and higher average revenue per customer than in Europe. Analysts also predicted that, as the company reached the limits of its organic growth, it would have to rely on industry-wide consolidation to continue its growth after 2018. The report also cautions the company against pricing too aggressively in order to maintain those profits and the attendant merger potential. As the final slide puts it, “don’t trigger a price war in the US market (stable ARPUs base drives attractiveness & valuation.)”

We'd long noted that despite a lot of breathless press hype, T-Mobile's impact on American US wireless pricing (some of the highest in the developed world) was not all that. And with the 4-3 consolidation presented by T-Mobile's $26 billion merger with Sprint, most objective analysts say even higher prices are the likely result. T-Mobile, hipster Millennial pro-consumer branding schtick in tow, knows this very well. The docs show the company also knows that the DOJ's flimsy fix to have Dish step in and try to fix the problem the deal creates aren't realistic:

"The documents also cast doubt on one of the central claims of T-Mobile’s merger, which has sought to prop up Dish as a competitive wireless provider, backed by an MVNO deal with T-Mobile in advance of its own network buildout. But the document, which was prepared before the Dish deal was even considered, sees it as unlikely that any MVNO could provide meaningful competition to T-Mobile."

Yes, early T-Mobile (created ironically from the government's decision to block a merger with AT&T in 2011) was marginally disruptive. But modern T-Mobile is more of a stage play; designed to look disruptive without trying too hard to kill the captive cash cow. Like any corporation, T-Mobile's primary objective is to drive shareholder growth, something they feel is only actually possible via an endless series of merger and acquisitions resulting in fewer jobs, higher prices, and progressively worse service.

Normally that's where a functioning government would step in and protect the market, competitors, and consumers from antitrust violations. But in the Trump era, when corruption and regulatory capture are barely even hidden and even applauded, that's obviously not happening. As a result, a coalition of state AGs is the last line of defense between you and a significantly higher wireless bill courtesy of our mindless obsession with "growth for growth's sake."

Filed Under: cable, competition, merger, mobile
Companies: comcast, sprint, t-mobile

As Trial Begins, Evidence Shows Sprint, T-Mobile Know Merger Will Raise Prices

from the history-keeps-repeating-itself dept

With the DOJ (run by former Verizon lawyer William Barr) and the FCC (run by former Verizon lawyer Ajit Pai) eager to rubber stamp Sprint's $26 billion, competition-eroding merger with T-Mobile, a lawsuit from a bipartisan coalition of states is now all that stands in the way in the deal.

That lawsuit began Monday, with state AGs making it very clear that every meaningful economic metric indicates the deal will erode competition, raise rates, and result in thousands of layoffs as redundant employees are inevitably eliminated. While Sprint and T-Mobile (and the army of consultants, lobbyists, think tankers, and government officials paid to love them) insist the deal will be wonderful for America, financially independent economists paint a decidedly different picture. One in which ongoing consolidation in the space only drives up wireless data pricing for American consumers who already pay some of the highest prices in the world for what's routinely ranked as mediocre service (whether we're talking about speeds or overall video quality).

But underneath the deal's marketing veneer, industry giants know very well the reduction in competition will let them charge higher rates. You'll notice that AT&T and Verizon haven't lifted a finger to thwart the deal, suggesting they're perfectly fine with its impact (something that wouldn't be happening if they actually thought the end result would be a more competitive sector). And at the trial this week, AG lawyers highlighted that Sprint executive emails make it perfectly clear they know the deal will raise rates:

"Roger Sole, Sprint’s chief marketing officer, said in a text message in 2017 to Marcelo Claure, the carrier’s chief executive officer at the time, that the deal could mean an increase of $5 a month in average revenue per subscriber. Industry leaders AT&T and Verizon Communications would also benefit with fewer players in the market, he said.

“And they DO NOT pay anything for this,” Sole wrote to Claure. “The benefit of a consolidated market.”

The goal of the deal is less competition, providing a green light for even higher prices, which is effectively the same outcome we've seen from every major telecom union over the last 30 years. Three decades of data also makes it abundantly clear that pre-merger promises are worthless. But if the state AGs lose this case, the federal government is going to ignore that data -- and history -- and rubber stamp the deal anyway. You know, just because.

Filed Under: competition, consumer harms, merger, mobile, prices, wireless
Companies: at&t, sprint, t-mobile, verizon

Kenyan Government Risks Squandering The Long-Term Potential Of Mobile Transactions In The Hope Of A Little Extra Tax Revenue

from the laffer-curve-is-no-joke dept

Back in October last year, Techdirt wrote about some unfortunate developments taking place in the African digital world. Governments across the continent are bringing in levies and taxes on Internet use, making it more expensive and thus harder for ordinary people to access the Internet at a time when the digital ecosystem in Africa is starting to take off in a big way. In February of this year, we reported on some evidence that the social media tax in Uganda was indeed causing fewer people there to use the Internet, and for the total value of mobile transactions to drop. Quartz Africa has a post about a new report from Brookings on the steep rise in taxes on mobiles and data in Kenya, and the harms it is likely to cause. Here's how things have gone from bad to worse:

In June 2009, the Kenyan government, recognizing the importance of enhancing access to mobile telephony, exempted mobile handsets from the VAT. This move increased the affordability of the handsets and made possible the more than 200 percent increase in handset purchases and a 50 percent to 70 percent increase in penetration rates (Strusani and Solomon, 2011). In turn, the use of mobile phones and related services such as mobile money deepened, and Kenya's total mobile subscribers almost doubled from 17.4 million in June 2009 to 29.8 million by March 2013. Then, the VAT Act 2013 paved the way for the taxation of previously exempted goods such as mobile phones, computer hardware, and software. Now, mobile phone users in Kenya had to pay a 16 percent VAT [Value-Added Tax] on the purchase of a mobile handset in addition to the 10 percent excise tax on airtime, which had been introduced earlier in financial year (FY) 2002/03.Further, in FY 2013/14, the government introduced an excise tax on retail financial transactions at a rate of 10 percent. The Finance Act 2018 then increased the excise tax on money transfer services by banks from 10 percent to 20 percent, on telephone services (airtime) from 10 percent to 15 percent, and introduced a 15 percent excise tax on internet data services and fixed line telephone services.

The report notes the many benefits of promoting mobile payments -- things like serving as an economic driver, and encouraging savings and credit. Particularly important for developing countries is the how mobile-based services increase financial inclusion, providing access to banking for even the poorest sectors of society, which can help to reduce overall levels of poverty.

The authors of the study point out that the tendency of taxes to operate on a Laffer curve means that as rates increase, tax revenue from mobiles and data use may decline at some point, making such moves self-defeating. Moreover, if people start to turn back to cash to avoid increased costs of mobile payments, the benefits of digital transactions are lost, including the ability for governments to track and tax transactions more easily, leading to further revenue losses. The report concludes:

The tax policy and design of taxes on retail electronic transactions as well as bank transactions has the potential to reverse the gains that technology has pushed Kenya to the frontier of electronic payments and financial inclusion and back to cash preference and financial exclusion for low-income earners.

The same applies to other African nations that think taxing mobile services is an easy way to raise a little extra revenue. As this new report emphasizes, they may find that that they inflict considerable harm on their digital economies for very little financial benefit.

Follow me @glynmoody on Twitter, Diaspora, or Mastodon.

Filed Under: africa, kenya, mobile, tax

T-Mobile Tries To Save Its Unpopular Merger With A Few Concessions, But Nobody's Buying

from the ill-communication dept

Sprint and T-Mobile have been facing some increased scrutiny of their claim that merging and reducing the total number of major wireless competitors from four to three will be a wonderful thing for both consumers and the wireless market. New York and California regulators in particular have apparently been pushing back a little at the idea that more consolidation is what's needed in a largely consolidated and anti-competitive telecom sector:

You might recall that the companies' previous merger attempt was blocked in 2014 after regulators noted that removing one of just four major carriers would result in a proportionally-lower incentive to actually compete on price. That's really not debatable if you've paid attention to telecom and broadband industry history (it's a major reason why we all loathe Comcast). That's especially true in Canada, where consolidation to just three players has resulted in the highest mobile data prices in the developed world. AT&T's attempt to acquire T-Mobile in 2011 was blocked for the same reason, a move that many forget (some intentionally) resulted in T-mobile being more competitive than ever.

This week, T-Mobile attempted to salvage the deal by offering up a few concessions. In a letter to FCC boss Ajit Pai (pdf), T-Mobile CEO John Legere proclaimed that the agency should ignore critics of the deal, since they're "largely" employed by "big cable and big telco":

"Critics of our merger, largely employed by Big Telco and Big Cable, have principally argued that we are going to raise rates right after the merger closes. I want to reiterate, unequivocally, that New T-Mobile rates are NOT going to go up. Rather, our merger will ensure that American consumers will pay less and get more.

Of course that's nonsense. Every major consumer group (you know, the people paid very little to actually try and represent consumers) oppose the deal. And it's not just critics saying that greater consolidation in wireless will raise rates. It's history. You can, if the option is available to you, ask a Canadian how reducing the wireless sector's total carriers from four to three works out for both competition and the end user. This kind of rhetoric only exemplifies how T-Mobile's hip Millennial consumer advocate branding schtick only goes so far -- assuming T-Mobile's opposition to net neutrality and weird attacks on the EFF hadn't clued you into that fact already.

Legere goes on to promise Pai that the newly merged T-Mobile won't raise rates for a period of three years as a condition affixed to the deal:

"To remove any remaining doubt or concerns about New T-Mobile’s prices while we are combining our networks over the next three years, T-Mobile today is submitting to the Commission a commitment that I stand behind – a commitment that New T-Mobile will make available the same or better rate plans for our services as those offered today by T-Mobile or Sprint."

Right, but this is the same FCC that just had its authority over telecom operators completely gutted by a massive telecom industry lobbying campaign Legere supported. There's also zero indication coming from the Pai end that he'd have any interest in holding T-Mobile accountable were they to violate this agreement. Regulatory apathy is extremely common when it comes to actually enforcing merger conditions, and Pai worships at the altar of the (false) belief that mindlessly deregulating the broken telecom sector will somehow miraculously create more competition than ever.

Needless to say, critics of the deal aren't calmed much by a three year promise not to raise rates. The 4Competition Coalition, comprised of consumer groups and smaller mobile carriers (not a "big telco" or "big cableco" among them), was quick to issue a statement proclaiming that the promise meant less than nothing:

"Committing to not raise ‘rate plans’ for three years is an empty promise that does not provide any real price protection for consumers. In fact, T-Mobile’s announcement has confirmed exactly what their own data shows: The merger will eliminate wireless competition and increase prices for consumers. The company’s pledge is riddled with loopholes and ensures that any network improvements will allow them to justify higher monthly bills, effectively rendering the pledge meaningless."

Wall Street analysts, meanwhile, saw the Legere concessions as a sign of desperation. From a research note circulated by Wall Street firm New Street Research:

"The question for investors is whether this commitment is in indication that the deal is more likely or less likely to be approved. Count us in the less likely camp. We admit the clarified commitment could represent a concession that DOJ and/or FCC staff (or the White House) asked for in exchange for agreeing to support the deal. But we think that is unlikely for a number of reasons.

First, generally when it comes to mergers, the first side to offer concessions is likely to be the side that is losing."

John Legere is entertaining enough that many have been willing to overlook the historical evidence that these kinds of deals are almost always bad for employees and consumers. If they value the health of the telecom sector and their wallet, they really shouldn't.

Filed Under: ajit pai, competition, fcc, john legere, merger, mobile, rates
Companies: sprint, t-mobile