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That's generally how telecom works. You can always try to compete against the big guys, at least for a while, but in the long run they will own you one way or a

That's generally how telecom works. You can always try to compete against the big guys, at least for a while, but in the long run they will own you one way or another. It's not an accident that the two biggest wireless companies are also the two biggest wireline telecom companies (and both former parts of Ma Bell). Why? To build a telecom, you need billions in capital. To raise that much capital, you need shareholders with deep pockets. If you do very well with those investments and threaten the big telecoms, they'll just buy you out. Those investors with deep pockets will be happy to sell for a profit.

chii 9y ago
What if the investors are the people that are going to be using the service? Like a co-op?
- exelius 9y ago
  Eventually, the scale advantages when it comes to things like network upgrades will plow you under. Let's compare Comcast (30 million subscribers) with a local cable operator (and let's say it's a co-op with 50,000 subscribers): If Comcast wants to upgrade from DOCSIS3 to DOCSIS3.1, they have to come up with an upgrade / migration plan for probably 3 or 4 different configurations of their CMTS platform. Let's say this costs $10 million per platform, so $40 million overall. Spread across 30 million customers, that works out to about $1.25 per customer. If the local co-op wants to upgrade from DOCSIS3 to DOCSIS3.1, they have to come up with one migration plan for their single CMTS platform (this includes things like lab equipment, etc because you absolutely have to test and tweak this stuff). But the local co-op probably doesn't have a bunch of on-staff CMTS integration experts, so they have to hire an integrator at probably 1.5x the cost Comcast would pay. $15 million across 50,000 subscribers is $300 per subscriber. Tell a co-op board that they have a choice: a one-time $300 fee across all the customers to cover the upgrade, raise prices by $10/mo, or accept a buyout offer from Comcast who will perform the upgrade for free. And this is just for one component of the system. Costs are simply higher across the board, and that has to get passed along to customers. Scale matters in telecom. A lot. A lot of the investment is in non-variable costs, or at least costs that scale logarithmically to number of customers rather than linearly. Comcast/AT&T/Verizon can afford to undercut any smaller competitors because their scale enables a cost structure with much lower overhead maintenance costs.

chii 9y ago

What if the investors are the people that are going to be using the service? Like a co-op?

exelius 9y ago
Eventually, the scale advantages when it comes to things like network upgrades will plow you under. Let's compare Comcast (30 million subscribers) with a local cable operator (and let's say it's a co-op with 50,000 subscribers): If Comcast wants to upgrade from DOCSIS3 to DOCSIS3.1, they have to come up with an upgrade / migration plan for probably 3 or 4 different configurations of their CMTS platform. Let's say this costs $10 million per platform, so $40 million overall. Spread across 30 million customers, that works out to about $1.25 per customer. If the local co-op wants to upgrade from DOCSIS3 to DOCSIS3.1, they have to come up with one migration plan for their single CMTS platform (this includes things like lab equipment, etc because you absolutely have to test and tweak this stuff). But the local co-op probably doesn't have a bunch of on-staff CMTS integration experts, so they have to hire an integrator at probably 1.5x the cost Comcast would pay. $15 million across 50,000 subscribers is $300 per subscriber. Tell a co-op board that they have a choice: a one-time $300 fee across all the customers to cover the upgrade, raise prices by $10/mo, or accept a buyout offer from Comcast who will perform the upgrade for free. And this is just for one component of the system. Costs are simply higher across the board, and that has to get passed along to customers. Scale matters in telecom. A lot. A lot of the investment is in non-variable costs, or at least costs that scale logarithmically to number of customers rather than linearly. Comcast/AT&T/Verizon can afford to undercut any smaller competitors because their scale enables a cost structure with much lower overhead maintenance costs.