Trouble is, this business model severely discourages new development (witness the "No one wants gigabit" rationale). Why interrupt your twenty year plan just to extend its life a year or two into the future? This isn't a bad thing if your industry is basically a utility industry, where technological changes move at a glacial pace. God help you if you enter into the technology industry armed only with the economic and managerial tools of a utility juggernaut.
So we've got ourselves a conflict. On one side there are irritated customers wondering why their service is so poor and why their bills are so high. On the other there are communications utilities providers: while they have a legitimate business need to keep their networks profitable, they are paying the price for committing the gravest sin possible in the technology world: complacency.
I don't disagree with your comment, but your argument would seem to apply to the rest of the world, whereas in fact the US is in a fairly unique situation among developed countries.
Most of the current situation can be explained by the fact that broadband is currently the only unregulated public utility.
In NYC, I don't really pay much attention to electricity, gas, and water. ConEd kind of sucks, and I wish they were better, but really, they work well enough most of the time, and I'm not sure that I could name anybody else who would do it better.
The problem is that we sold off monopoly rights to broadband without attaching any strings of regulation, etc. Why should they bother to upgrade their infrastructure? Heck, we literally paid the cable companies billions of dollars of government money to do exactly that, and because we failed to enforce that with any real teeth, they just took the money and ran. Of course they're not going to listen when consumers say they "want gigabit". It would make no business sense to do otherwise, especially when 80% of your customers are unable to vote with their wallet and use a competing service[0].
There's a case to be made for either a free-market approach to broadband, or a more "socialized", regulated monopoly. Unfortunately, what we currently have is a hybrid of both, and it happens to hit upon the worst of both worlds.
[0] There's a South Park clip that does a great job of describing this relationship. I won't link to it here, because it's rather crude and possibly (?) a bit NSFW, but searching "south park cable" on Youtube should lead you to it if you want to laugh, sigh, and cry all at the same time.
This isn't a problem that is going to be solved by placing regulations on the industry. Your example of past subsidies provides an excellent argument for this: given the political clout these entities hold and have in the past used to stilt legislation in their favor, what leads us to believe we're going to do any better with new regulations?
At the end of the day, the market is demanding better internet service. While telecommunications providers are certain to wage war against the injection against honest competition into their sector, things are actually looking pretty good in my mind. The FCC sees market demand and is working to tear down anti-competitive legislative barriers [1]. Smaller efforts such as Google Fiber are doing the hard work of convincing the public that better service is within reach.
http://www.slate.com/blogs/future_tense/2014/02/20/fcc_s_pla...
There are also other problems with your post. For example, we didn't sell off monopoly rights. Its been illegal for municipalities to grant exclusive franchises since 1992. Also, franchises don't come without strings attached. Here in Phila, Comcast has to run cable to a bunch of poor neighborhoods and charge $13 per month for service. Distribution requirements and regulated rates exist in the cable world.
[1] At the end if the day, if Google bought TWC instead, Google's average profit margin would go down.
And don't forget: The telegraph industry! Neal Stephenson writes about it in "Mother Earth, Mother Board:" http://www.wired.com/wired/archive/4.12/ffglass_pr.html , which is fascinating and worth reading.
On one side there are irritated customers wondering why their service is so poor and why their bills are so high
One other "don't forget": a lot of people who pay attention are unhappy about franchise agreements and telco efforts to prohibit local utility fiber deployments by outlawing them at the state level (see https://news.ycombinator.com/item?id=7271044). Local municipalities that say, "Fuck it, we're going to roll our own" often find themselves forbidden because of successful lobbying at the state level.
In this new world, internet access is the new road. Good internet access will generate new services/goods and encourage consumption by consumers. This will inevitably lead to snowball effect of creating more wealth for the society.
US shouldn't be held hostage by a few people in an executive suite in Philadelphia who want to make a few bucks so they can own a few extra mansions and a private jet or 2. US is a greater country than that.
It's not that I want/need gigabit, it's that the only thing I can get in some locations is unusable. I'm looking at you, 1.5mb/768k DSL lines. It's barely enough for web surfing and useless for streaming video or doing things like gaming, video conferencing....
You mean to tell me that the NYT has been lying to me all these years?
I think that's why fiber adoption is slower than broadband adoption was. There's not much that you can do over a gigabit connection that you can't do over a 20Mbs connection for the average subscriber. Until some killer app that requires a gigabit connection to work starts to become popular, people just aren't going to demand it and adoption will continue to limp along.
In the current ecosystem, I see gigabit connections being useful for multi-user connections where a lot of video is being streamed. Or using cloud storage solutions like Dropbox or Google Drive.
In the future, I could see other use cases. For what we know about Google's self driving cars, the first time a road is driven on (manual driving) it gathers a ton of data about that road. When you park in the garage, it may have to upload gigabytes worth of data for Google to process to make available to other cars. Doing that over the current connections most people have would be painful. If you have a large pipe for uploading lots of data, this becomes a lot more feasible.
As for the rest, I would say that it's hard for us to imagine the might single killer app with a gigabit connection because so few have it. Once a certain level of market penetration has happened, whatever that may be, there's no telling what things will come along once bandwidth is no longer a concern.
Additionally, I don't think even streaming sites would generally require more than 50 mbps to watch comfortably. Not even talking about regular apps/static content.
The logical thing for most towns to do is to use their eminent domain powers to force the sale of easements and utility poles/tunnels to the municipality, and charge all utilities a flat rate based on pole capacity used. While two wires on a line of poles doesn't seem all that wasteful, two wires on two parallel lines of poles sounds pretty stupid. Digging up the street with two parallel trenches is even worse. As a consumer, I don't want a service provider in a position where it can keep its competitors from reaching by house via the best route possible. I want that access controlled by the cartel enforcer rather than any of the cartel members.
As a bonus, the town could allow residents or HOAs to hire qualified contractors to run and maintain their own cables to anywhere the poles/tunnels go. That way, if an ISP won't come to you, you can go to anything else you can reach.
starts by saying incumbents deny access even to city cabling and explaining the duopoly on most cities and ends by saying that allowing netflix to pass the fee to comcast subscribers is good because people will move companies and a free market is the answer.
is this april 1st or something? also extra moronic points for not understanding the first thing about isp to isp agreements and peer pricing.
He isn't saying that the "free market" will fix things by itself. He observes that there isn't a free market in providing internet access because the incumbents control things like telephone poles (to hang optical cable on) and municipalities are so addicted to the kickbacks they get from cable franchisees that they won't let anyone else in. The magic of the invisible hand only works if there is actual competition. Those supply and demand curve charts only describe reality if there aren't monopolists.
His claim is that if the FCC mandated right of way to anyone wanting to hook homes up then a company like Google would already be serving many more homes as incumbents wouldn't be able to block them as AT&T is doing in Austin.
This is true, but I'm not convinced that it is the right way to get proper competition here. Is the solution really to have 5 companies each run optical fiber down a street? Better would be for one company to run super-fast tubes, and then sell the bandwidth in bulk to ISPs. Maybe that is the business model that would emerge, but maybe not.
Say you have two ISP options at your home. Firm A forces Netflix to pay $1/month for access to enough bandwidth to stream movies in HD to your house, because they want you to use janky-streams.com, which they own. Firm B keeps their peering infrastructure up-to-date without charging Netflix. Where does this leave you as a consumer?
All else equal, you'll switch over to Firm B. Why? Because Netflix works there even without paying a ransom for their data. It costs Netflix more money to provide their service to you on Firm A. They could pass that cost along to you directly (increase Netflix bill $1/month) or reduce the stream quality and blame the ISP. The end result is that you're paying more or getting worse service because of the Net Neutrality violation.
However, Firm A understands this logic. They know that charging Netflix would push consumers to Firm B. Thus they decide to play nice and pass along the data you already pay them for.
This is the danger of oligopolies - even when they don't collude, their interests are in not competing 'too hard' to gain customers. If there are two firms, and each has roughly half of the customers, then the most money Firm A could get with no competition is 2x what they already have, so getting into a price war could easily result in lower total profits. For example, if they have a 50% profit margin, then lowering consumer prices by 25% (and thus cutting profits to only 25% margin) only breaks even if they are able to sign up every customer of their competition.
Free markets work best when there are many players and markets are easy to enter, as there is much more incentive to compete, which is not the structure of broadband markets.
Thats kind of how it was in telecom before they gave up on detailed long distance billing. You'd spend 4 cents/min on billing infrastructure which was OK when a LD call from CHC to NYC was $4/minute, not so great when Sams Club was selling LD cards for 5 cents/min.
Never forget that creating false scarcity of a non-scarce good takes a lot of time, effort, and money.
'Your margin is my opportunity' -Jeff Bezos
I guess that only holds true when there aren't artificial barriers to entry into a market.
If by net-neutrality you mean the system where a paying broadband customer can consume any content, irrespective of that content owner ability to pony up to cash to broadband provider, then yes, these two issues are related. More competition in consumer broadband market would keep providers in check.
In an ideal world (at least my ideal), broadband providers would strive to do everything they can to deliver content to me. In current world, it's well documented that Comcast is passively allowing interconnects to fill up, causing congestion, and forcing content providers to pay up for better interconnect.
When you multiply that amount by the number of homeowners in the country, that's a lot of potential influence. How could it be leveraged to improve broadband?
