High-speed internet service may be poised for a price hike

U.S. broadband service, already slower and more expensive than in many other countries, could get even pricier.

That's because major internet providers such as AT&T and Verizon want the Federal Communications Commission to scrap a key provision that some say helps keep broadband costs low for small businesses and consumers. Under the rule, large telecom companies must allow smaller rivals to piggy-back on their networks at rates set by the government. Those smaller rivals then sell internet service to consumers and businesses. 

Now, a trade group that represents ISPs has made a formal request to the FCC to waive the rule. Some industry participants say that could result in higher prices for consumers.

"Without the threat of upstart rivals, incumbent players will invest less in their networks and charge more to consumers," according to Dane Jasper,  CEO of Sonic, an ISP which benefits from the rule, told Wired. 

Since then, various organizations have filed public comments about the proposal, which was filed in May by the trade group USTelecom. The FCC isn't expected to take action until 2019 at the earliest. A spokesperson for FCC Chairman Ajit Pai, who pushed for the agency earlier this year to scrap net neutrality rules, couldn't immediately be reached.

USTelecom says that the regulation, part of the Telecommunications Act of 1996, is out of date and harms consumers. It denies that waiving the requirement will drive up prices, noting that only 11 percent of households access the internet through piggy-backed networks, down from 93 percent in 2003. (Cable companies are exempt from the rule.)

A market analysis cited by USTelecom estimates that telecom companies would spend as much as $1.8 billion and create more than 2,000 jobs if they didn't have to share their lines.

Not surprisingly, critics see things differently.

"It really is a monumental undertaking to rebuild an infrastructure like a telephone system," said William P. Zarakas, a principal with the economics consulting firm The Brattle Group, who is advising smaller networks, in an interview. The regulation was created "so that these competitors could start to get access to the network and to customers and gradually .. they would start to build their own customers."

Newer entrants in the ISP business provide "much-needed competition" in the market, according to the non-profit Electronic Frontier Foundation. It said it's concerned that big ISPs could charge "huge amounts for access to copper lines or simply cut off new competition altogether," crimping broadband access for some Americans. 

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    Jonathan Berr is an award-winning journalist and podcaster based in New Jersey whose main focus is on business and economic issues.