New definition of broadband means that 63% of U.S. households would have only one choice for a broadband Internet provider
The Federal Communications Commission (FCC) made a formal announcement this week confirming what all of us already knew to be true: that piddling download speeds of 4 mega-bit-per-second (Mbps) shouldn’t count as broadband. (I mean, come on: it’s not even enough to stream a single episode of Peaky Blinders on Netflix.)
As of yesterday, the FCC now defines broadband as download speeds of 25 Mbps or faster.
That may seem like a bureaucratic hiccup — the FCC simply catching up with the times — but it’s actually really big deal.
The FCC’s redefinition fundamentally rewrites the rules on what the broadband market looks like, which dramatically changes the competitive landscape for companies offering broadband Internet service. And that, in turn, is the single most important factor in whether the Department of Justice approves Comcast’s $45.2 billion dollar bid to takeover Time Warner Cable.
Here’s how that works.
Until yesterday, Comcast was able to use the official federal definition of broadband (4 Mbps of faster) to plausibly and legally claim to compete head-to-head with basically every single Internet service provider out there, including glacial dial-up connections and old-school DSL lines. As a result, Comcast was able to claim — again, plausibly and legally — that even if it is allowed to buy Time Warner Cable, it will control only about 35.5% of the fixed (i.e. not wireless) broadband market in this country. That’s a big chunk, but it’s nowhere near monopolistic, right?
But now that math has changed. If you use the FCC’s new definition of broadband, which excludes all the dial-up and most DSL and other super-slow ISPs that used to count as “broadband,” then roughly 12 million US households that previously qualified as having “access to broadband” no longer qualify. While the industry numbers vary a bit, that means that a combined Comcast-TWC could control more than 60% of the total fixed broadband sector. (Some estimates put it at 70% or higher.)
To put that another way, if the merger is allowed to go through, then a whopping 63% of U.S. households would have only one choice for a broadband Internet provider, according to a memo from the FCC in December. For the majority of those households, their “one choice” would be Comcast-TWC.
Suddenly, that’s beginning to look pretty darn monopolistic.
For the last 24-hours, both Comcast and Time Warner Cable have frantically downplayed the importance of the FCC’s redefinition. On an earnings call Thursday, Rob Marcus, the CEO of Time Warner Cable, called the FCC’s redefinition “somewhat arbitrary” and said it wouldn’t affect the merger at all. “I don’t anticipate that that has any practical implications for life going forward or for the DoJ’s analysis of the deal,” he said.
He and representatives from Comcast stuck with the script they’ve been pitching for the better part of a year. Since Comcast and Time Warner Cable serve different geographic areas, U.S. cable customers will have the exact same choices before and after the merger. If your only choice for broadband today is Time Warner Cable, then your only choice for broadband after the merger will be Comcast-TWC, they say.
The Department of Justice is expected to decide in the next six months whether the Comcast-Time Warner Cable merger is allowed to go through.