The Technology Liberation Front - Latest Comments in Competition In Broadband Is Thriving

Re: Competition In Broadband Is Thriving

Matthew Hussey — Mon, 28 Aug 2006 14:19:30 -0000

I've heard these arguments from both sides time and time again on this issue of broadband competition as well as the larger net neutrality debate and must inject a few points that have been glossed over or missed.

Duopoly?
First, what exists (in the market as a whole) is a technology duopoly not a provider duopoly. Cable modems and DSL are the primary technologies for residential broadband access but, in many markets, there are more than just two providers offering these services.

A liberal analogy could be made to the two most relevant computer platforms; the PC and Mac. Here are only two platforms but there is competition in the companies that provide them (more so in the PC market than Mac). No one says there is a duopoly with computer platforms and demands that regulation be in place so UNIX can have the chance to take a sizeable market share from the PC and Mac. Granted this may be a little oversimplified but lots of markets see significant competition more than just incumbent cable and telephony. Just as computers have sellers of clone PCs so does broadband access.

In that, there are numerous CLECs and other resellers of DSL ( due to unbundled access from the ILECs as defined in the Telecom Act of '96) as well as some for cable. For example, you have EarthLink (nationwide presence), Covad (presence in 44 states), RCN, and hundreds of regional companies that provide broadband access. Granted it is dependent upon your area but certainly more and more markets are continually being introduced to competition as technologies improve, demand (hint, hint) increases, networks expand, etc. It just takes more time for competition to reach certain markets.

Supply & Demand!
Another issue is that there has been a lot of focus on the supply side in these arguments but not much discussion on the demand side, which also must be addressed. Right now, there isn't the ubiquitous demand present to warrant ubiquitous supply and the perfect competition that is holistically desired.

A Census Bureau study (from October 2005) reported that almost 40% of households with no Internet Access didn't have it because they "don't need it" or are "not interested" in it. Another 23% didn't have it because they have no computer or their computer was inadequate. Only 23% stated that the "costs are too high" as the reason for no Internet access.

Other Access!
Lastly, I grant that satellite may be but wireless and BPL are not lesser technologies, quite to the contrary, they are very promising broadband access technologies that have already (in limited cases) and will provide more sizable competition to incumbent cable and DSL as they are deployed. BUT you have to give it some time to let the technologies, the demand, and the markets mature.

Instead of looking to hastily regulate, the government needs to work with industry to educate consumers in order to increase demand for broadband, foster innovation through partnerships, and closely monitor how the market evolves and then utilize existing means to police anti-competitive practices or isolated market failures.

Re: Competition In Broadband Is Thriving

hhaney — Mon, 28 Aug 2006 12:00:40 -0000

My point is that once a network provider has a point-of-presence -- even if it's in an adjacent zip code -- the declining marginal cost of adding additional users provides a powerful incentive to expand the network, particularly in the absence of regulatory uncertainty. Because the network is expanding rapidly, the locations of these points-of-presence is more important than the number of households served when these statistics were gathered.

The other technologies are admittedly not identical substitutes, but they don't have to be identical. These offerings are continually improving and are sufficient to constitute a strategic threat that will discipline the behavior of competitors.

I agree the FCC has painted a somewhat idyllic picture. The U.S. is way behind other countries in broadband deployment. But it would be a mistake to insist upon a commoditized, perfectly competitive marketplace with lots of small suppliers as a prerequisite for deregulation. A marketplace like that won't attract any investors. Aside from competition that is actually on the ground, I and others maintain that the threat of competitive entry also acts to discipline competitive behavior and provides a justification for not re-regulating DSL. Investment will beget more competition, net neutrality mandates will beget more regulation.

Re: Competition In Broadband Is Thriving

Luis Villa — Sat, 26 Aug 2006 10:25:28 -0000

Mike: using the FCC's logic, you can probably claim that 60% of all Americans have access to rolls royces- I mean, hey, if there is one in your zip code somewhere, you've got access!

Re: Competition In Broadband Is Thriving

eric — Fri, 25 Aug 2006 22:22:37 -0000

I live in duopolyland. Our choice: Cable internet from Mediacom or DSL from the phone company or go suck an egg. Regular prices for basic service are virtually the same for either. If you bundle, you get discounts, again similar. (The phone company is offering TV deals too, via satelite receiver)

DSL can be had for an introductory $32/month plus sales tax, until the introductory period ends. This sounds good relative to what was available a few years ago. But relative to the ads we see on Yahoo for SBC service as low as $15, it feels like a lack of competition. Which is exactly what it is.

The whole of this metro area, the largest metro area in Iowa, has two and only two realistic choices, which are hardly different from one another, in service or price. If they can fool everyone into thinking this is competition, then shame on us. I think Masnick is closer to the truth here.

Re: Competition In Broadband Is Thriving

mmasnick — Fri, 25 Aug 2006 16:49:12 -0000

Ah, this again. It amuses me that this is the same argument that's been trotted out before here and has been shown to be wrong.

First, the FCC's numbers have already been discredited. You use their wording, but you don't note how problematic it is: "at least some presence." That means, if a provider serves one house in a zip code it's counted as fully covered. That's not real.

Second, the claims of these "new technologies" like satellite and wireless. You're comparing apples to oranges. None of these technologies delivers true, unlimited broadband. Satellite is extremely limited. So far, almost every wide area wireless network (such as EVDO) is greatly limited. Even though they sell it as "unlimited" they kick people off if they use more than 10 gigs a month (which is not very much).

So, yes, hopefully it will change over time, but it's fair to say that for a large part of the country right now, they effectively face a duopoly situation. Claiming that lesser technologies are equal substitutes or that some future technology is an effective substitute is bogus.

Repetition doesn't make it right.