The Hidden Cost of Internet Connection: Will the FCC Intervene?

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Social media. Man holding a mobile phone with photos on screen in one hand and using laptop computer with the other, whilst sat in bed. Uploading to blog. Images on phone photographers own.

As we head into campaign season, we can expect to hear many promises about job creation and economic growth. But as voters decide who to support, the FCC is facing several decisions that would impact how competitive the broadband market can be in the future -- which impacts everything from how much consumers pay to whether new innovative companies can indeed start up and create jobs.

This FCC has actively worked for better prices and Internet access for consumers and small businesses from its Open Internet order to preventing the proposed AT&T merger.

While many consumers complain about the cost of both their wired broadband and mobile broadband services, it's up to the FCC to support more competition so that companies naturally have more incentive to offer better rates and service.

Despite all the attention FCC Chairman Wheeler has given to promoting competition in recent years, most consumers across the country -- about 75 percent of all Americans -- have just one choice for wired high speed Internet access. When it comes to mobile phones, customers and businesses can choose some of the competitive prices and packages of smaller carriers, but Verizon and AT&T still dominate this market with almost three quarters of all wireless revenues.

What many don't realize is that one key reason for this lack of choice is that the big carriers still control some of the most crucial points of the Internet access pipeline that their competitors need. So even if a consumer or small business chooses a smaller service provider, part of the bill they pay is still going to the big carriers for these broadband pipes. Moreover, these broadband pipes (sometimes called special access in regulatory speak) are used in all kinds of services and businesses from swiping a credit card at a store to withdrawing cash at an ATM.

These building blocks of the Internet provide dedicated, guaranteed transmission of high volumes of critical data. Almost every American uses these high-capacity broadband lines each day usually without even knowing it. That is because these high-capacity lines connect our cell phones, workplaces, banks, factories, data centers, universities, and hospitals to enable communications among customers, employees, suppliers, government, and each one of us. Most consumers don't realize that the wireless networks they are using to send snapchats, watch streaming videos, or even make phone calls rely on broadband access lines controlled by the same big Internet access providers.

Unfortunately, in most locations there are few or no alternatives to purchasing broadband access from the big incumbent carriers. Accordingly, the old Bell companies are free to charge monopoly rents, including imposing these charges on small carriers attempting to compete with them.

The FCC is aware that the big companies providing these dedicated broadband pipes have a powerful position and little incentive to price fairly and invest in service upgrades. Previous studies submitted to the FCC have pointed to statistics that calculated special access cost the economy $12 billion annually. More recently, the FCC has estimated the size of this market at $40 billion. Now the FCC has collected data on what these companies are doing, how these hidden costs are passed on to consumers and businesses and how their control of high-capacity pipelines is impacting other businesses and the overall economy.

Chairman Wheeler has indicated that he wants to restore competitive pricing to this key broadband input. After investigating for nearly three years, it's now time for the FCC to stop a few dominant companies from using their market power to extract unjust and unreasonable rates from businesses that want to innovate.