4 ms·

Maybe the reason the market is uncompetitive is because of the price caps? Fighting monopolies with regulation constraining their prices seems like a risky solu

Maybe the reason the market is uncompetitive is because of the price caps? Fighting monopolies with regulation constraining their prices seems like a risky solution. Isn't there some action that would open up the market to more competitors? Even if another company had to lay their own cables, that happens and isn't impossible.

xenadu02 10y ago
Are you serious? I'm not being flippant here, but your question doesn't seem to be an honest one. Laying cables is really expensive. It takes a lot of capital and the return on investment is long-term. Two things that aren't very popular among Wall Street or VCs. Even assuming you undertook such a venture, Comcast/ATT/Verizon have really _really_ deep pockets. They can undercut any price you care to offer. The idea that "regulation" is causing high prices is farcical on its face. There aren't enough schools and libraries to make any difference to the bottom line. The market is uncompetitive because broadband is a natural monopoly. Just like roads, water, sewer, and electricity. The capital costs are so high there is usually no business justification for having more than 1-2 providers in a given area. There are a few exceptions but they prove the rule. A "free market" in broadband would look much like the "free market" in electricity: Either the government or a regulated utility granted monopoly power by the government should run the fiber. Any ISP that wants to compete can hook up at the local CO. The equipment on both ends of that fiber can even be owned by the ISP so if new technology allows faster speeds nothing blocks the upgrade (the favorite excuse for pro-corporatist shills). The big three have fought anything that smells like a free market tooth and nail, outright purchasing legislation at the state level to squash municipal attempts to do anything like this. The funny thing is the big ISPs rely on government-granted taking of private property in the form of right-of-way to run their cables... something for which property owners receive no compensation. So much for "using our lines" as the ATT CEO likes to claim.
- defined 10y ago
  Well said.
- WalterBright 10y ago
  If it's a natural monopoly, why are there all these laws only allowing one provider? BTW, before the law enshrined AT&T as a "natural" monopoly, there were lots of phone companies who seemed to have no trouble at all running wires everywhere.
  - rhino369 10y ago
    There aren't laws allowing only one provider. In fact those are banned by the FCC (though a few grandfathered Exclusive franchises may exist). On the other hand a lot of America only got telephone access after the att monopoly was formed in 1913. Most of the rest of the world only has one hardware network run by a well regulated monopoly.
  - guelo 10y ago
    If you're referring to the Kingsbury Commitment[1] that was an agreement with the government after AT&T was already a monopoly. After Alexander Graham Bell's patent expired there was a brief period where competition sprouted but then AT&T started consolidating and buying up the smaller competitors. By 1913 AT&T was already in a dominant monopoly position. [1] https://en.wikipedia.org/wiki/Kingsbury_Commitment https://en.wikipedia.org/wiki/Kingsbury_Commitment
    - WalterBright 10y ago
      It was not already a monopoly. Your link says there were other long distance companies, just that AT&T's was more extensive. Note that scores of companies were running railroads everywhere, it doesn't make sense that running a telephone wire was infeasibly expensive.
      - overcooked 10y ago
        A couple things: 1) While AT&T was not the only provider left standing, it was the largest and had scale advantages against its competitors. The Kingsbury Commitment was designed to halt AT&T's expansion and ensure that those competitors were able to compete. However, it failed: AT&T was able to continue to improve its dominant position by selling subscribers in certain areas while purchasing competitors in more strategically advantageous areas. 2) One of the reasons for "natural" monopoly regulation is that we do not want telephone wires, railroads, and pipelines running everywhere. Building a utility requires gaining access to rights of way. Society subsidizes all private utilities by creating rights of way and infringing upon the rights of property owners along the route. 3) The scores of companies running railroads everywhere were subsidized even further. At least in the West, the federal government gave land along the route to the railroad companies for construction. [1] In some ways, building a railroad was more about land speculation than private construction of transportation infrastructure. [1] https://en.wikipedia.org/wiki/Pacific_Railroad_Acts https://en.wikipedia.org/wiki/Pacific_Railroad_Acts
- csydas 10y ago
  I'm glad you wrote this as it is far more coherent than I was writing in my head while walking to the metro station. To give an example of the type of competition an Isp upstart would face, just look at what happened with google fiber. That was a legal battle every step of the way for them and the incumbents defended against google's deep pockets. You have to have a heck of a defense to fend of a Google invasion. Yes, local government regulations played a role in this, but they blocked federal attempts to unravel the mess of regulations that allowed entire cities to be Comcast cities or time warner cities, and people argued it was a good thing to stop this. Look at the few cities that can and do offer municipal broadband - competition thrives and consumers have good choices, and the big three have to play ball to get customers; rolling out new lines, better speeds and prices, no caps. Tacoma, WA has municipal broadband and it's great; you have lots of options, including Comcast and century link if you desire. And it's this way because of the municipal, not in spite of it.
- genericpseudo 10y ago
  As a data point here (in your strong favor), consider UK broadband pricing and the effect of local-loop unbundling.
shmerl 10y ago
> Isn't there some action that would open up the market to more competitors? Sure there is. It's called local loop unbundling[1] (applied to Internet, rather than legacy telephone networks). Europe successfuly used it to boost ISP competition. In US though it didn't go further than copper DSL lines, and we still have this messed up monopolized market. 1. https://en.wikipedia.org/wiki/Local-loop_unbundling https://en.wikipedia.org/wiki/Local-loop_unbundling
- UnoriginalGuy 10y ago
  Absolutely. ISPs should remain privately owned and operated. But the so called "last mile" should be a shared utility like a road. Government should build it, maintain it, and support it. But once that last mile hits the exchanges then different competing private ISPs should pay a licence fee from the exchange onto the final mile to people's homes. The last mile is the most expensive element in internat deployments, and also the one most encumbered by regulation (e.g. digging up roads, putting cable on existing poles, installing cable with other utilities, etc). But most importantly other businesses depend on the reliable fast internet to make money. It is a utility. Entire new industries will crop up from superior internet (like video streaming services did from the last leap forward, and streaming music the leap before that). The US's entire ability to make money is being curtailed by low quality internet. Google had the right idea, just not deep enough pockets and a long enough attention span to see it through. This is a billion dollar project per state.
- rhino369 10y ago
  The issue in America is that cable is hard to local loop unbundle. Unlike dsl, each cable user shares a circuit with dozens, if not hundreds of users. I don't think it's technically feasible.
  - shmerl 10y ago
    Coax should be gradually all replaced with fiber optics.
    - astrodust 10y ago
defined 10y ago
> Even if another company had to lay their own cables, that happens and isn't impossible. But highly improbable, because it's very expensive to lay cable and hard to recoup the investment. There are countless articles on the Internet as to why this is so. One from 2014 has this poignant sentence: > There is a ray of hope, though. Just this month, FCC chair Tom Wheeler indicated that the agency might be willing to step in and help do away with all the state-level laws blocking municipal broadband projects. Not bloody likely. https://consumerist.com/2014/05/10/why-starting-a-competitor-to-comcast-is-basically-impossible/ https://consumerist.com/2014/05/10/why-starting-a-competitor...
- WalterBright 10y ago
  The high cost is due to regulations, laws, permits, and lawsuits. Actually laying cable is not that expensive.
  - rhino369 10y ago
    Those things are certainly a big chunk. But burrying a wire is expensive.
  - dsharlet 10y ago
    Maybe not all, but many of those regulations and permits are there for a reason. The vast majority of the population cares way, way more about not having construction in their yard than they do about enabling a competitive market for ISPs. If you try to dig up all the sidewalks and driveways on any given block block, most of the residents will raise holy hell with their local elected representatives and try to shut you down any way they can. Much of this regulation is in fact the will of the people, and I'm not sure it's wrong. It is a significant disruption to people's property, and it's silly to lay redundant network infrastructure. It's a bad solution to a stupid problem that only exists because of ideological intransigence.
    - WalterBright 10y ago
      In my neighborhood, and for miles around it, the internet cable is stapled to the telephone poles. Every few years they pull it off and staple another one on that can handle more bandwidth. A while back a competitor appeared and tried to run another wire, but it got so mired in permits, regulations, and lawsuits that it gave up. It wasn't the cost of laying the cable.

xenadu02 10y ago

Are you serious? I'm not being flippant here, but your question doesn't seem to be an honest one. Laying cables is really expensive. It takes a lot of capital and the return on investment is long-term. Two things that aren't very popular among Wall Street or VCs. Even assuming you undertook such a venture, Comcast/ATT/Verizon have really _really_ deep pockets. They can undercut any price you care to offer. The idea that "regulation" is causing high prices is farcical on its face. There aren't enough schools and libraries to make any difference to the bottom line. The market is uncompetitive because broadband is a natural monopoly. Just like roads, water, sewer, and electricity. The capital costs are so high there is usually no business justification for having more than 1-2 providers in a given area. There are a few exceptions but they prove the rule. A "free market" in broadband would look much like the "free market" in electricity: Either the government or a regulated utility granted monopoly power by the government should run the fiber. Any ISP that wants to compete can hook up at the local CO. The equipment on both ends of that fiber can even be owned by the ISP so if new technology allows faster speeds nothing blocks the upgrade (the favorite excuse for pro-corporatist shills). The big three have fought anything that smells like a free market tooth and nail, outright purchasing legislation at the state level to squash municipal attempts to do anything like this. The funny thing is the big ISPs rely on government-granted taking of private property in the form of right-of-way to run their cables... something for which property owners receive no compensation. So much for "using our lines" as the ATT CEO likes to claim.

defined 10y ago
Well said.
WalterBright 10y ago
If it's a natural monopoly, why are there all these laws only allowing one provider? BTW, before the law enshrined AT&T as a "natural" monopoly, there were lots of phone companies who seemed to have no trouble at all running wires everywhere.
- rhino369 10y ago
  There aren't laws allowing only one provider. In fact those are banned by the FCC (though a few grandfathered Exclusive franchises may exist). On the other hand a lot of America only got telephone access after the att monopoly was formed in 1913. Most of the rest of the world only has one hardware network run by a well regulated monopoly.
- guelo 10y ago
  If you're referring to the Kingsbury Commitment[1] that was an agreement with the government after AT&T was already a monopoly. After Alexander Graham Bell's patent expired there was a brief period where competition sprouted but then AT&T started consolidating and buying up the smaller competitors. By 1913 AT&T was already in a dominant monopoly position. [1] https://en.wikipedia.org/wiki/Kingsbury_Commitment https://en.wikipedia.org/wiki/Kingsbury_Commitment
  - WalterBright 10y ago
    It was not already a monopoly. Your link says there were other long distance companies, just that AT&T's was more extensive. Note that scores of companies were running railroads everywhere, it doesn't make sense that running a telephone wire was infeasibly expensive.
    - overcooked 10y ago
      A couple things: 1) While AT&T was not the only provider left standing, it was the largest and had scale advantages against its competitors. The Kingsbury Commitment was designed to halt AT&T's expansion and ensure that those competitors were able to compete. However, it failed: AT&T was able to continue to improve its dominant position by selling subscribers in certain areas while purchasing competitors in more strategically advantageous areas. 2) One of the reasons for "natural" monopoly regulation is that we do not want telephone wires, railroads, and pipelines running everywhere. Building a utility requires gaining access to rights of way. Society subsidizes all private utilities by creating rights of way and infringing upon the rights of property owners along the route. 3) The scores of companies running railroads everywhere were subsidized even further. At least in the West, the federal government gave land along the route to the railroad companies for construction. [1] In some ways, building a railroad was more about land speculation than private construction of transportation infrastructure. [1] https://en.wikipedia.org/wiki/Pacific_Railroad_Acts https://en.wikipedia.org/wiki/Pacific_Railroad_Acts
csydas 10y ago
I'm glad you wrote this as it is far more coherent than I was writing in my head while walking to the metro station. To give an example of the type of competition an Isp upstart would face, just look at what happened with google fiber. That was a legal battle every step of the way for them and the incumbents defended against google's deep pockets. You have to have a heck of a defense to fend of a Google invasion. Yes, local government regulations played a role in this, but they blocked federal attempts to unravel the mess of regulations that allowed entire cities to be Comcast cities or time warner cities, and people argued it was a good thing to stop this. Look at the few cities that can and do offer municipal broadband - competition thrives and consumers have good choices, and the big three have to play ball to get customers; rolling out new lines, better speeds and prices, no caps. Tacoma, WA has municipal broadband and it's great; you have lots of options, including Comcast and century link if you desire. And it's this way because of the municipal, not in spite of it.
genericpseudo 10y ago
As a data point here (in your strong favor), consider UK broadband pricing and the effect of local-loop unbundling.

shmerl 10y ago

> Isn't there some action that would open up the market to more competitors? Sure there is. It's called local loop unbundling[1] (applied to Internet, rather than legacy telephone networks). Europe successfuly used it to boost ISP competition. In US though it didn't go further than copper DSL lines, and we still have this messed up monopolized market. 1. https://en.wikipedia.org/wiki/Local-loop_unbundling https://en.wikipedia.org/wiki/Local-loop_unbundling

UnoriginalGuy 10y ago
Absolutely. ISPs should remain privately owned and operated. But the so called "last mile" should be a shared utility like a road. Government should build it, maintain it, and support it. But once that last mile hits the exchanges then different competing private ISPs should pay a licence fee from the exchange onto the final mile to people's homes. The last mile is the most expensive element in internat deployments, and also the one most encumbered by regulation (e.g. digging up roads, putting cable on existing poles, installing cable with other utilities, etc). But most importantly other businesses depend on the reliable fast internet to make money. It is a utility. Entire new industries will crop up from superior internet (like video streaming services did from the last leap forward, and streaming music the leap before that). The US's entire ability to make money is being curtailed by low quality internet. Google had the right idea, just not deep enough pockets and a long enough attention span to see it through. This is a billion dollar project per state.
rhino369 10y ago
The issue in America is that cable is hard to local loop unbundle. Unlike dsl, each cable user shares a circuit with dozens, if not hundreds of users. I don't think it's technically feasible.
- shmerl 10y ago
  Coax should be gradually all replaced with fiber optics.
  - astrodust 10y ago

defined 10y ago

> Even if another company had to lay their own cables, that happens and isn't impossible. But highly improbable, because it's very expensive to lay cable and hard to recoup the investment. There are countless articles on the Internet as to why this is so. One from 2014 has this poignant sentence: > There is a ray of hope, though. Just this month, FCC chair Tom Wheeler indicated that the agency might be willing to step in and help do away with all the state-level laws blocking municipal broadband projects. Not bloody likely. https://consumerist.com/2014/05/10/why-starting-a-competitor-to-comcast-is-basically-impossible/ https://consumerist.com/2014/05/10/why-starting-a-competitor...

WalterBright 10y ago
The high cost is due to regulations, laws, permits, and lawsuits. Actually laying cable is not that expensive.
- rhino369 10y ago
  Those things are certainly a big chunk. But burrying a wire is expensive.
- dsharlet 10y ago
  Maybe not all, but many of those regulations and permits are there for a reason. The vast majority of the population cares way, way more about not having construction in their yard than they do about enabling a competitive market for ISPs. If you try to dig up all the sidewalks and driveways on any given block block, most of the residents will raise holy hell with their local elected representatives and try to shut you down any way they can. Much of this regulation is in fact the will of the people, and I'm not sure it's wrong. It is a significant disruption to people's property, and it's silly to lay redundant network infrastructure. It's a bad solution to a stupid problem that only exists because of ideological intransigence.
  - WalterBright 10y ago
    In my neighborhood, and for miles around it, the internet cable is stapled to the telephone poles. Every few years they pull it off and staple another one on that can handle more bandwidth. A while back a competitor appeared and tried to run another wire, but it got so mired in permits, regulations, and lawsuits that it gave up. It wasn't the cost of laying the cable.