Market Forces Drive Operators To Invest In Their Networks, Offer Higher Speed Service, And Reduce Prices (Per Mbps Basis)
For Immediate Release
Contact: Ted Hearn
PITTSBURGH, March 21, 2019 – A senior Shentel executive, representing the ACA – America’s Communications Association, told the Federal Trade Commission (FTC) at a March 20 public hearing on “Competition and Consumer Protection in the 21st Century” that in rural broadband markets served by smaller cable operators, broadband competition exists, operators are investing in network upgrades and expansions, and prices are declining.
“Broadband in America is a ‘good news’ story,” explained Tom Whitaker, Shentel’s Senior Vice President, Fiber Operations. “Over the past decade, smaller cable operators have invested well over $10 billion in their broadband networks. As a result, most offer broadband service at speeds exceeding 100 Mbps and at prices that have declined substantially over the past five years on a per megabit basis. And, the even better news is that these trends will continue,” Whitaker said.
Shentel, short for Shenandoah Telecommunications Company, is located in Edinburg, Va., provides a broad range of diversified communications services through its high speed, state-of-the-art network to customers in the Mid-Atlantic U.S.
In a key recommendation, Whitaker urged government to further accelerate broadband builds by continuing to remove public and private barriers that hinder deployment and, in the remaining unserved areas, awarding subsidies efficiently. Whitaker’s FTC slide deck is here.
Smaller cable operators serve about 8 million broadband subscribers and pass about 17 million housing units. Shentel serves about 75,000 broadband subscribers in rural areas of Virginia, West Virginia, and Pennsylvania.
Even though smaller operators face more challenging economics to serve broadband customers in rural areas, they continue to invest and upgrade their networks. Shentel has invested more than $125 million over the past five years and will invest another $25 million this year. Other members of the ACA are making similar investments.
In his remarks, Whitaker said part of the reason smaller operators are driven to invest in upgrading and expanding their networks is that, just like the more urban broadband providers, they face existing or potential competitors that offer broadband Internet access service. They also know that if they do not invest, the government may decide to support entry by other providers.
Whitaker explained, “Shentel faces competition from multiple providers, from incumbent local carriers to electric cooperatives to fixed wireless and satellite providers to the national mobile providers. Every provider poses a threat. And, even if these competitors compete only in a limited segment of the market – for instance, targeting value customers – they still discipline Shentel’s pricing and drive us to offer a better product and provide better service.”
In addition to not having market power over their customers, smaller operators cannot extract monopoly rents in the upstream interconnection and traffic exchange market. Smaller operators have fewer broadband customers and networks with limited reach.
Accordingly, most must purchase transit service to reach Internet Exchange Points, and all must pay for peering. As a result, smaller operators have no ability to leverage, or exact additional rents from, edge providers which offer content, services, and applications. In fact, smaller operators face real challenges in seeking to improve services for their customers by attracting edge providers and content distribution networks to collocate in their facilities.
Going forward, government should recognize that private investment is the primary driver of broadband’s future, and it should refrain from adopting policies that would undermine these investments, for example, by enabling overbuilding of smaller operators networks.
Government also should ensure that smaller operators can access poles, ducts, and conduit and public and private rights-of-way on a reasonable and timely basis. Finally, before initiating new funding to reach unserved locations, government should first account for all current efforts to drive broadband deployments, including through existing support programs and tax provisions. Then, any new funding should be awarded efficiently by using reverse auctions.
Shentel and ACA Connects look forward to the FTC ’s report on the current state of broadband in the U.S. The FTC staff’s 2007 Broadband Connectivity Competition Policy report demonstrated a good understanding of the industry and markets and offered sound policy prescriptions.
About ACA — America’s Communications Association – Based in Pittsburgh, ACA Connects is a trade organization representing more than 700 smaller and medium-sized, independent companies that provide broadband, phone and video services to nearly 8 million customers primarily located in rural and smaller suburban markets across America. Through active participation in the regulatory and legislative process in Washington, D.C., ACA Connects’ members work together to advance the interests of their customers and ensure the future competitiveness and viability of their business. For more information, visit: https://acaconnects.org