In 2011, Comcast commenced its Internet Essentials program with great fanfare from then FCC Chairman Julius Genachowski. We looked at the program in detail and described Comcast’s decision to withhold the program for two years to use as a carrot in a bid to secure the NBC merger. In addition to acquiring NBC, Comcast received great public relations press.
The Roosevelt Institute’s Next New Deal Blog, recently ran an article by John Randall in which he examined the program in depth. He concludes that the program is an effective distraction from the real problem – lack of competition. In addition to placating policy makers to prevent meaningful changes, the program turns a hefty profit for Comcast and efficiently mines for new customers.
The program, touted as a way to reduce the digital divide, established onerous criteria to qualify for the $9.95 monthly service. Children in the household must qualify for the National School Lunch Program, there cannot be any unfinished business between the household and Comcast, participants must be new customers, and households must be located in an area served by Comcast.
I have had my own experience with the Internet Essentials program. My small family qualified and we now receive up to 3/1 Mbps from Comcast; prior to the program, we paid twice as much for 1 Mbps Wi-Fi. Randall is correct when he describes the program as a “customer acquisition program.” A common expression goes “The slowest speed you will accept is the fastest speed you’ve experienced.” So true. As more of my kids’ homework depends on a usable Internet connection, we will need to sacrifice somewhere else to keep our 3 Mbps and we will do it. Our choices are limited because competition is scarce, even though we live in a major metropolitan area. Comcast, you have us. Nicely played!
If Comcast really wanted to help close the digital divide, it would make Internet Essentials a permanent program and ease the restrictions. I qualify because my kids qualify but there are millions of other people, including single adults and seniors, who do not and they need the Internet just as much as I do.
As Randall points out, Comcast is still turning a profit – $18 million per year on Internet Essentials’ 150,000 subscriptions. While it may not be quite as profitable as roping those 150,000 into a higher rate when the program ends, more subscriptions and good faith business practices could pay off in the long term. Realistically, the Gonzalez Family knows Comcast will make no such changes. With no competition to fear, why should it?
Randall summarizes:
Comcast’s Internet Essentials program does more to benefit Comcast’s customer acquisition, public relations, and lobbying departments than to help people in America who need high-speed Internet access at a reasonable price. The reality is that the program is a cleverly designed customer acquisition program that benefits Comcast’s bottom line. The program is ineffective: the connections are not “high-speed,” the program assists very few people, and the the program does nothing for those who can’t get a connection at all where they live. More importantly, the program does nothing to address the fundamental reason for the lack of ubiquitous, affordable high-speed Internet access in this country – the lack of competition. It earns Comcast good press while distracting regulators and public officials into thinking that changes in policy aren’t needed and that digital divide problems will somehow work themselves out on their own as a result of corporate generosity. In the long run, Comcast Internet Essentials will do no more than contribute to the delay of much-needed regulation.
Lack of competition is important, but more choices may not solve much if they are also owned by companies from outside the community that are not accountable to it. Access to the Internet is not an ordinary market because all other markets depend on telecommunications services in the modern economy. Even if there are not many choices, having at least one choice that is rooted in the community and putting community needs first is the best solution.