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FCC Told Broadband Subsidies Should Reflect Streaming Impact

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Rural broadband advocates are telling the FCC that some of the money the commission is spending on subsidizing broadband in high-cost rural areas has to go to compensate for the unrecovered costs of massive amounts of video streaming entertainment, which means flexible subsidies rather than at flat rates, as is currently the practice.

That came in a USTelecom brief and an academic paper entitled, "Rural Broadband and the Unrecovered Cost of Streaming Video Entertainment,"* both presented in a meeting with FCC staffers by Andrew Erlich, partner in consulting firm Total Spectrum, and a number of representatives of rural ISPS, in response to the FCC's Connect America Fund plan for subsidies in high-cost areas.

The presentations assert that the rapid growth in streaming entertainment services has put increased demands on infrastructure and transport costs "without a corresponding increase in broadband provider revenue."

In fact, it argues, that flat and uniform pricing--and the similar subsidy model--may actually be increasing the number of high-volume users and thus exacerbating the problem given that data shows that lower income is associated with higher average broadband consumption.

And while big players like AT&T or Comcast can shoulder the costs of uniform pricing, for smaller players it is tougher, primarily due to the high volume of traffic generated by the streaming Big Five--identified as Netflix, Alphabet (Google), Disney+/Hulu, Amazon, and Xbox Live.

“Improving network capacity to accommodate streaming is a never-ending exercise...Providers must accommodate greater adoption of streaming across the customer base, in addition to supporting increases in video resolution," said one Indiana broadband provider, according to the paper.

*Paper authors are Roslyn Layton, Aalborg University, Center for Communication, Media and Internet Technologies, and Petrus Potgieter, University of South Africa and Institute for Technology and Network Economics.

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.