Executive Summary

• Recent pricing and investment data show that broadband providers face significant competition, in part due to convergence of mobile and fixed-home services.
• Despite the lowering costs and increasing speeds, many federal regulations and policies still present barriers to deployment and improvements of broadband networks, particularly an onerous environmental review process and lack of spectrum access.
• Congress has an opportunity to lower regulatory barriers to entry and promote transactions that better allocate resources among firms by streamlining local and federal permitting processes, encouraging allocation of spectrum to private uses, and embracing an antitrust policy that is less hostile to mergers in telecommunications markets.

Introduction

In the fifth installment of USTelecom’s Broadband Pricing Index, prices for high-speed broadband internet services continued to decline as broadband speeds increased. These decreases in cost and increases in service stem from world-leading investment in broadband infrastructure by the private sector. But they also highlight a growing trend: Broadband markets continue to converge.

Traditionally, consumers purchased a home internet service through their local telecommunications or cable company, and a mobile telephone plan that included some data-usage limits from a mobile telephone company. But as technology continues to improve, traditional fixed-home internet companies have begun to offer mobile plans and mobile networks have begun to offer home service using 5G networks. For consumers, this allows a single, bundled transaction that provides service wherever the individual happens to be.

Some federal and state regulations, however, could hinder further competition. For example, high regulatory costs for permitting and zoning add risk to capital investments, and limited access to radio spectrum (both licensed and unlicensed) can limit the functionality of devices as consumers connect to Wi-Fi or 5G networks. The market allows for firms to bypass these concerns through targeted transactions and acquisitions, but historically such transactions have been met with skepticism and conditions that can distort the market.

To foster continued private investment in U.S. networks, the new Congress should focus on three key priorities. First, it should look to reform the permitting processes for both federal and local reviews to add certainty and limit delays. Second, it should work with the White House to free up additional spectrum for private use. Third, it should promote a merger policy at the Federal Communications Commission (FCC) and the Department of Justice (DOJ) that focuses on harm to competition rather than harm to individual competitors; and it should refrain from trying to impose a command-and-control approach to broadband markets. By focusing on these priorities, the Trump Administration and the 119th Congress can create a pro-investment regulatory regime that spurs further competition.

Competition in Broadband Markets

Broadband markets have arguably never been more competitive. According to the FCC’s Section 706 Report, when including satellite offerings, every American has access to at least 25/3 Mbps broadband service, and almost 94 percent of Americans have service at speeds of 100/20 Mbps. For mobile networks, 92 percent of Americans have access to 5G services of at least 35/3 Mbps. And despite being the latest Section 706 report, the data used in the report is from 2023, meaning these numbers significantly undersell the progress being made.

Indeed, industry data on broadband pricing paint a clear picture. The price of the most popular services went down by almost 53 percent last year, and down more than 9 percent when adjusted for inflation. Since 2015, that price has dropped 41 percent, almost 60 percent when adjusted for inflation. And since 2017, the price for gigabit internet offerings, generally the highest tier available to consumers, has dropped more than 21 percent, 43 percent when adjusted for inflation. Similarly, download speeds and upload speeds have increased by 113 percent and 88 percent, respectively, since 2015. These significant decreases in cost and increases in quality stem from heavy investment by broadband providers. In 2023 alone, broadband companies invested nearly $95 billion in U.S. communications infrastructure, and more than $2 trillion since 1996.

Broadband providers have made these investments to improve their networks because the market is competitive. If a broadband provider does not provide the expected quality of service at a competitive price, consumers generally have other options from which they can receive service.

At the core of this competition is convergence and the use of different technologies to provide similar functionality. Internet service has historically been viewed in different buckets. In one bucket is fixed home broadband, generally provided by the local telephone company or a local cable franchise. In another bucket is mobile telephone networks with data capabilities. At the outset, these services were functionally very different, as data on phone networks was relatively limited and home connections had to be hardwired into a computer to work.

But today, the distinctions matter less. Fixed home services face competitive pressures from mobile networks, both in the form of fixed home 5G service, and consumers simply choosing to only have mobile broadband service – which functionally provides similar quality to some of the lower tiers of fixed home broadband. Mobile networks also face increasing competition from traditional fixed networks, especially cable companies offering mobile packages to consumers that leverage existing mobile networks and their own Wi-Fi networks to offload traffic at a lower price to consumers. All the while, low-Earth orbital satellite broadband is now available almost everywhere, and the quality of this service will only increase as more operators enter the market.

This progress occurred despite regulations from the Biden Administration that disincentivized investment. Most notably, the Biden FCC reclassified broadband as a Title II service so it could regulate it like a telephone utility, and also passed broad digital discrimination rules that could result in almost any investment decision leading to liability. With the 6th Circuit definitively ruling against the FCC’s net neutrality rule and the digital discrimination rules also facing judicial scrutiny, however, the time is ripe for Congress to promote an agenda that creates a pro-investment regulatory environment.

Federal Regulators Can Promote More Competition

With a new Congress and FCC, policymakers should embrace a regime that allows broadband providers to improve their networks and better compete for consumers. First, Congress should reform permitting processes to decrease regulatory costs and remove uncertainty and risk from deployment decisions. Second, Congress should work with the FCC and the administration to make more spectrum available for private use, as well as restore the FCC’s auction authority. Third, the FCC should take a less hostile approach to transactions that allows broadband providers to acquire assets that supplement their networks so they can provide the best service quality possible at the lowest cost.

With regard to permitting, providers deploying broadband infrastructure currently must acquire local construction and zoning permits, as well as wade through federal reviews related to environmental protection and historic preservation. The FCC made great strides during the first Trump Administration on this front under the leadership of now-Chairman Brendan Carr, but there is much more work to be done, and it will likely need congressional action. Most important, Congress should codify the changes made by the FCC in 2018 that streamlined environmental and historic preservation review, as well as coordinate and streamline the permitting process so broadband providers can receive approval in bulk rather than getting individual approvals for every pole installed or antenna attached. State and local permitting reform presents more issues, but Congress could also look to pass legislation establishing uniform timelines or costs for obtaining permits.

The other key aspect of competition in broadband is spectrum access. Spectrum refers to the radio frequencies at which modern networks transmit data, and today every type of broadband service incorporates radios in one form or another. While providers disagree on the specific services to which new radio spectrum bands should be allocated, the real problem is that federal users currently occupy the most valuable spectrum bands and lack an incentive to operate more efficiently or take on additional interference risk by allowing private operations nearby (geographically or in terms of frequency bands). Forcing federal agencies to take on additional risk is probably a non-starter without at least some buy-in from the White House and the Department of Defense, so Congress should work with the administration to convey the important national interest in making additional spectrum available for private use – perhaps ultimately forcing the agencies’ hand if they drag their feet – if the engineering supports reallocation.

Finally, the FCC and the DOJ should reverse course on the Biden Administration’s anti-merger antitrust policy. If the federal government, or high regulatory costs to deploy new infrastructure, does not allow for new available spectrum, providers’ best course to improve their networks and incorporate needed assets may be to acquire them from another provider. By improving a network, a broadband provider puts competitive pressures on its rivals to do the same. While some transactions can be anticompetitive, and the agencies should thoroughly review all transactions, regulators should see transactions as a vehicle to impose regulations that would be better passed through notice-and-comment rulemaking.