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Could someone please explain the background to someone not from the US? Why is competition so scarce in this field in the US? Is it just the cost of infrastruct

Could someone please explain the background to someone not from the US? Why is competition so scarce in this field in the US? Is it just the cost of infrastructure over large distances, or is something else at play here?

cptskippy 7y ago
It's that and incumbents get laws made to preserve their monopolies or make it more expensive for competition to start up.
- jessaustin 7y ago
  So true! There is a giant federal agency, FCC, the primary purpose of which is to preserve telco monopoly. Few people realize this is FCC's purpose. As usual, it's informative to pay more attention to results than to marketing. Even supposed "reforms" (why would an agency functioning in accordance with its stated goals need reform?) like the 1996 law have primarily led to increased revenue for monopoly telcos.
  - rectang 7y ago
    Whenever you hear "deregulation", think "choosing winners". The form of "deregulation" we get from Ajit Pai's FCC selectively advantages the incumbent oligopoly of telcos, leaving in place the most grotesque market-distorting regulations and removing controls on vertical integration which allow for the expansion of telco power into other industries. Market failure can take myriad forms. The ISP situation in the US is a particularly maddening variant.
    - jessaustin 7y ago
      The "deregulation" of 1996 had many examples of this. ILECs were allowed into long-distance phone service, which they used their monopoly LEC rents to dominate. UNE-P tricked CLEC/ISP investors into thinking they'd be allowed to compete, but since none of the requirements it imposed on ILECs were enforced, those investors ended up selling their equipment and customer bases to ATT/VZN for pennies on the dollar. The Daughters Bell were allowed to reconsolidate from only the most profitable territories, while money-losers like Hawaii and rural New England (e.g. Fairpoint) were unloaded to fools who weren't capable of serving them well. In every case, the monopolist won.
  - cptskippy 7y ago
    Faliciously Purporting that Federal Regulatory Agencies are intended to be something because that's how they currently function doesn't lend you any credibility. Instead it makes untrustworthy and manipulative. It's completely possible to corrupt an agency and for the FCC to behave the way you described through political interference but that is not their intended purpose.
    - jessaustin 7y ago
      That's a nice portmanteau of "fallaciously" and "maliciously"; thanks for that. You seem to have concerns about "credibility". My suggestion would be not to worry too much about that. Paying attention to what is said, what is believed, and what is intended is asking to be fooled. Instead, pay attention to what is done. The USA polity has functioned in substantially the same fashion (even if at inexorably increasing scale) for about 150 years. One might imagine that voters can't always predict the consequences of their actions, but legislators certainly can. In 1934 a majority of legislators had concluded that telecommunications should be provided by a single monopolist, despite the fact that there had been a thriving market in previous decades. So, they wrote a law that enshrined that preference. In later years typically Panglossian economists would be inspired by FCC policy to misread Mill's discussion of "natural" monopolies. We're still dealing with this. Leaving politicians aside, perhaps this is too harsh a judgment of FCC personnel? To an extent, yes, because some of them are janitors or IT helpdesk folks. However, most people at FCC have at least an inkling of how things really work. At the minimum, they know where the third rails are. They know that asking "why can't more of the spectrum be unlicensed like the wifi band?" is a career-limiting speculation. They know that every Chairman Wheeler will be soon followed by a Chairman Pai.
    - josh2600 7y ago
      You should read the Kingsbury Accord and the history of the FCC. The origin of the FCC is fascinating.
      - cptskippy 7y ago
        I assume you're referring to the Kingsbury Commitment? I'm familiar with it and the creation of the FCC a decade or so later to take over responsibilities of the FRC and ICC but I've not read anything that delves into the politics surrounding it all or how closely they're related. Do you have any recommendations?
close04 7y ago
Big ISPs (and any big company really) can afford to lobby (legal bribery) to get laws exclusively in their favor. This basically guarantees that the bar for any new player is ridiculously high if it's even possible to pass, and that customers have no real choice.
- rectang 7y ago
  It all comes down to how easy the Roberts Court has made it for corporate entities to buy favorable treatment, giving corporations every possible advantage and loosening all restraints.
reallydontask 7y ago
> Is it just the cost of infrastructure over large distances In the US there are over 50 metro areas with more than 1 million inhabitants, over 100 with 500k. Granted that they will be more sparsely populated than european metro areas but I'm just not too sure that the large distances are an issue here at all.
clinta 7y ago
Permits are required for burying conduit, and are limited. Sometimes the city owns the poles that run along streets, sometimes the incumbent telco provider does, and space on those poles is limited. Sometimes local governments will promise monopoly access to a provider in exchange for free services to the city and school districts.
IfOnlyYouKnew 7y ago
In addition to the cynical everyone-is-corrupt answers you've been getting, I'll add: ISPs, like mail delivery or electricity, are classical examples of "natural monopolies" where the fixed price of installing infrastructure is high, while the marginal cost of each additional customer is low. Such environments are tricky to manage: You want some market forces, because otherwise there's one lazy government-owned provider with bad service at high prices because they have no pressure to be better. At the other end of the spectrum, you have a private company with bad services at high prices that makes a ton of profit because competitors cannot afford the initial investment. To balance these competing forces is tricky, and some countries manage better than others.
- bjelkeman-again 7y ago
  I really like how it is done in Sweden where the city provides the fibre but doesn’t run any service over it. We can choose from 5-10 ISPs. Much like the road.
  - seanalltogether 7y ago
    It's definitely the best way to do it. We have similar setups here in the UK. Let the government deal with all the right-of-way, property rights complications regarding the infrastructure, let private companies provide the customer service on top of it.
  - thekyle 7y ago
    If all the ISPs are using the same infrastructure how do they compete on internet speed?
    - wonderwonder 7y ago
      I wonder if they don't and instead compete on customer service? No idea if that's how it works, but that would be a great change of pace.
    - anderspitman 7y ago
      The same way trucking companies compete on speed.

cptskippy 7y ago

It's that and incumbents get laws made to preserve their monopolies or make it more expensive for competition to start up.

jessaustin 7y ago
So true! There is a giant federal agency, FCC, the primary purpose of which is to preserve telco monopoly. Few people realize this is FCC's purpose. As usual, it's informative to pay more attention to results than to marketing. Even supposed "reforms" (why would an agency functioning in accordance with its stated goals need reform?) like the 1996 law have primarily led to increased revenue for monopoly telcos.
- rectang 7y ago
  Whenever you hear "deregulation", think "choosing winners". The form of "deregulation" we get from Ajit Pai's FCC selectively advantages the incumbent oligopoly of telcos, leaving in place the most grotesque market-distorting regulations and removing controls on vertical integration which allow for the expansion of telco power into other industries. Market failure can take myriad forms. The ISP situation in the US is a particularly maddening variant.
  - jessaustin 7y ago
    The "deregulation" of 1996 had many examples of this. ILECs were allowed into long-distance phone service, which they used their monopoly LEC rents to dominate. UNE-P tricked CLEC/ISP investors into thinking they'd be allowed to compete, but since none of the requirements it imposed on ILECs were enforced, those investors ended up selling their equipment and customer bases to ATT/VZN for pennies on the dollar. The Daughters Bell were allowed to reconsolidate from only the most profitable territories, while money-losers like Hawaii and rural New England (e.g. Fairpoint) were unloaded to fools who weren't capable of serving them well. In every case, the monopolist won.
- cptskippy 7y ago
  Faliciously Purporting that Federal Regulatory Agencies are intended to be something because that's how they currently function doesn't lend you any credibility. Instead it makes untrustworthy and manipulative. It's completely possible to corrupt an agency and for the FCC to behave the way you described through political interference but that is not their intended purpose.
  - jessaustin 7y ago
    That's a nice portmanteau of "fallaciously" and "maliciously"; thanks for that. You seem to have concerns about "credibility". My suggestion would be not to worry too much about that. Paying attention to what is said, what is believed, and what is intended is asking to be fooled. Instead, pay attention to what is done. The USA polity has functioned in substantially the same fashion (even if at inexorably increasing scale) for about 150 years. One might imagine that voters can't always predict the consequences of their actions, but legislators certainly can. In 1934 a majority of legislators had concluded that telecommunications should be provided by a single monopolist, despite the fact that there had been a thriving market in previous decades. So, they wrote a law that enshrined that preference. In later years typically Panglossian economists would be inspired by FCC policy to misread Mill's discussion of "natural" monopolies. We're still dealing with this. Leaving politicians aside, perhaps this is too harsh a judgment of FCC personnel? To an extent, yes, because some of them are janitors or IT helpdesk folks. However, most people at FCC have at least an inkling of how things really work. At the minimum, they know where the third rails are. They know that asking "why can't more of the spectrum be unlicensed like the wifi band?" is a career-limiting speculation. They know that every Chairman Wheeler will be soon followed by a Chairman Pai.
  - josh2600 7y ago
    You should read the Kingsbury Accord and the history of the FCC. The origin of the FCC is fascinating.
    - cptskippy 7y ago
      I assume you're referring to the Kingsbury Commitment? I'm familiar with it and the creation of the FCC a decade or so later to take over responsibilities of the FRC and ICC but I've not read anything that delves into the politics surrounding it all or how closely they're related. Do you have any recommendations?

close04 7y ago

Big ISPs (and any big company really) can afford to lobby (legal bribery) to get laws exclusively in their favor. This basically guarantees that the bar for any new player is ridiculously high if it's even possible to pass, and that customers have no real choice.

rectang 7y ago
It all comes down to how easy the Roberts Court has made it for corporate entities to buy favorable treatment, giving corporations every possible advantage and loosening all restraints.

reallydontask 7y ago

> Is it just the cost of infrastructure over large distances In the US there are over 50 metro areas with more than 1 million inhabitants, over 100 with 500k. Granted that they will be more sparsely populated than european metro areas but I'm just not too sure that the large distances are an issue here at all.

clinta 7y ago

Permits are required for burying conduit, and are limited. Sometimes the city owns the poles that run along streets, sometimes the incumbent telco provider does, and space on those poles is limited. Sometimes local governments will promise monopoly access to a provider in exchange for free services to the city and school districts.

IfOnlyYouKnew 7y ago

In addition to the cynical everyone-is-corrupt answers you've been getting, I'll add: ISPs, like mail delivery or electricity, are classical examples of "natural monopolies" where the fixed price of installing infrastructure is high, while the marginal cost of each additional customer is low. Such environments are tricky to manage: You want some market forces, because otherwise there's one lazy government-owned provider with bad service at high prices because they have no pressure to be better. At the other end of the spectrum, you have a private company with bad services at high prices that makes a ton of profit because competitors cannot afford the initial investment. To balance these competing forces is tricky, and some countries manage better than others.

bjelkeman-again 7y ago
I really like how it is done in Sweden where the city provides the fibre but doesn’t run any service over it. We can choose from 5-10 ISPs. Much like the road.
- seanalltogether 7y ago
  It's definitely the best way to do it. We have similar setups here in the UK. Let the government deal with all the right-of-way, property rights complications regarding the infrastructure, let private companies provide the customer service on top of it.
- thekyle 7y ago
  If all the ISPs are using the same infrastructure how do they compete on internet speed?
  - wonderwonder 7y ago
    I wonder if they don't and instead compete on customer service? No idea if that's how it works, but that would be a great change of pace.
  - anderspitman 7y ago
    The same way trucking companies compete on speed.