How Most Broadband Providers Have Focused On Decreasing Competition; Not Innovation

from the indeed dept

Mon, Jun 28th 2010 6:02pm — Mike Masnick

Ryan Single has an excellent piece at Wired that details how incredibly misleading telcos are being in claiming that the FCC's attempt to reclassify broadband access will lead to less "innovation." He highlights how far behind other countries the US has fallen, and how hard the telcos seem to work at not competing and not investing in innovation. Basically, Singel points out what many of us have pointed out all along. All of this posturing by telcos is about lowering their own costs (i.e., not investing) and squeezing more money out of customers, in an attempt to please Wall Street:

The dirty secret of ISPs is that even as broadband usage on their networks continues to increase 30 to 40 percent a year, their annual costs for shipping data onto and off the net's main pipes continues to fall.

The problem isn't the cost of shipping data.

The problem is that the large ISPs answer to Wall Street and instead of planning and investing for abundance, they prefer to spend their time thinking of ways to extract more money from customers without having to invest significantly in future-proof infrastructure.

He does note that Verizon may be the exception, but as we recently pointed out, with CEO Ivan Seidenberg on his way out, the company has shifted gears and is pulling back heavily on investing in new infrastructure. Seidenberg has long fought Wall Street, pointing out that putting down fiber was the best long-term bet, but the short-term thinkers on Wall Street didn't want to hear about high capital expenditure that would cost a lot initially, but not pay off until later. And, now, without Seidenberg leading the charge, Verizon is going back to not wiring up fiber.

Singel highlights how all of the "innovation" that seems to come out of the telcos isn't consumer focused at all. Nearly all of it is about limiting consumers with artificial rules and barriers to try to squeeze more money out of them:

In the last couple of years, ISPs "innovated" by changing how they handle users who type in a URL that doesn't exist. Under net protocols, the ISP's DNS servers are supposed to report an error code to your browser in those circumstances. Instead, ISPs are now serving up pages with ads, sometimes in ways that introduce huge security risks.

As a reaction, Google set up a fast, ad-free DNS service. And if you want to see what real innovation in DNS looks like, take a look at OpenDNS, which has built fraud protection, security measures and optional web content filtering into its robust DNS service.

ISPs have also long insisted on customers using "installation" software that did nothing but drive customers onto ISPs' web properties to get ad dollars; tried to sell -- for a monthly fee -- wireless home network capability you could set up easily with a $50 router (and then blame service problems on any home wireless networks you didn't buy from them); and even hijack address-bar searches that might otherwise, per the browser settings, use an actually useful search engine like Google.

ISPs also recently dipped their toes into another innovation: Selling access to everything their customers do online in order to build profiles on them and secretly insert targeted ads into other company's web pages.

From there, he covers just how much effort the telcos put into regulatory efforts to block competition in the face of overwhelming consumer demand:

It's literally not in telecom executives' best interest to invest in broadband and solid networks.

That's why you get companies like Time Warner trying to squeeze customers into limits on the amount of data they can use -- not because bandwidth is expensive -- but because building a real network is. It's far better, in their minds and for the stock price, to focus on bleeding as much from their current customers using self-serving policies instead of gaining loyalty by making networks that are generous, quick and reliable.

When towns get tired of begging for fast internet -- only to be told it doesn't make financial sense for telecoms, they sometimes decide to build their own fiber networks.

And then telecoms sue the cities -- as they did in the case of Monticello, Minneapolis, and run to state legislators to write laws outlawing citizens from organizing their own networks as Time Warner Cable did in the case of Wilson, North Caroline, which set up its own fiber network known as Greenlight.

All of this is a pretty accurate description of what's actually happening. The one point where I disagree with the article is Singel's assertion that what the FCC is doing in response to this makes sense. While I agree it's not nearly as big a deal as the telcos are making it out to be, I still think that supporters of the FCC's move are underestimating what will result, and what kind of loopholes the telcos will gleefully make sure are present. With the recent reports coming out, saying that the telcos are willing to "agree" to legislation on this topic, combined with the fact that they've hired up a ton of ex-high level government officials to help craft any rules, suggests that what comes out in the end will be a lot more "friendly" to the type of short-term Wall Street-driven "innovation" that the telcos want.

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Filed Under: broadband, lobbying, net neutrality, regulatory capture

41 Comments

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Anonymous Coward, 28 Jun 2010 @ 6:12pm

"their annual costs for shipping data onto and off the net's main pipes continues to fall." - misleading. while the direct costs of connectivity have dropped at the edge, the internal costs are still signficant and actually increasing. as networks are push to their limits, more nodes are required, more fiber, and more staff to maintain it. so only looking at the cost to connect to the outside world ignores much of the reality.

another myopic view of a subject.
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Bob, 28 Jun 2010 @ 6:30pm

Almost every industry?
Hasn't the process of merger and acquisition pretty much been business for the last 30 years or so.

Almost every industry is trading innovation for decreased competition that doesn't require risk from the company.

In most cases the risk is actually passed on to the American people, in some sort of reverse socialism. Ironically, they call municipal services socialism and block access to the market.

Beyond that, so many investors aren't trying to build value, but just inflate stock prices in the short term.
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Anonymous Coward, 28 Jun 2010 @ 6:57pm

The government needs to do one of two things. Either create a lot more unregulated broadcast spectra that can travel through much farther distances through walls and allow us to build our own wired infrastructure as well (ie: Cat 6 or whatever) from house to house so that we can create our own free wifinet and CAT6net and provide ourselves with free high speed interconnectivity or they need to provide us with free high speed interconnectivity on their own. The govt and the corporations can't have it both ways. They can't both not provide us with free high speed interconnectivity AND deny us the right to provide ourselves with such free high speed interconnectivity. This is unacceptable behavior on the part of our government for granting monopoly power as a method of gaining more campaign contributions from monopolists.

See WiFi P2P. But the current laws make the creation of a Wifi P2P network more difficult by limiting Wifi frequencies to frequencies that don't travel far and don't travel through walls very well. That needs to change.
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Anonymous Coward, 28 Jun 2010 @ 7:07pm

Re:
oh yeah, that would be good. you entire internet connection based on if the guy next door left his wireless on or not. excellent idea.
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Anonymous Coward, 28 Jun 2010 @ 7:11pm

Re:
and p2p networks do work. They're inefficient (ie: Gnutella and whatnot) but they work and can be used to communicate text across long distances pretty well. We can set up Public/private key systems as methods of identification. Not to mention, if the government provides more broadcast spectra to work with, we can easily transfer much more information from node to node than what is typically transferred via Gnutella and other online P2P networks being that these networks are limited by everyone's upload speed and wireless networks can provide much faster point to point connectivity (ie: 54 Mb/sec both ways though that's generally the max). and if Wifinet is supplemented with strategically stationed wired routers that transfers and routes info across wires from one router to another before completing the last mile wirelessly this can add tons of efficiency by preventing tons of frequency overlap. Not to mention even using WiFi directional antennas can prevent a lot of unnecessary frequency overlap. A wifi P2P network is possible, if Gnutella can run based on a bunch of P2P computers with very slow upload speeds (since that is the bottleneck) a wireless P2P network is possible.
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Anonymous Coward, 28 Jun 2010 @ 7:12pm

Re: Re:
It's silly to assume that there will be a single point of failure.
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Anonymous Coward, 28 Jun 2010 @ 7:15pm

Re: Re: Re:
Heck, pretty much everywhere you go these days there are wireless networks around, more than one often. We just need to get the right software on them, connect some sort of P2P software on them that has a common standard that can automatically interconnect with each other. Again, the network will be inefficient but it will work for things like text. For large file transfers it will certainly be a problem though.
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Anonymous Coward, 28 Jun 2010 @ 7:18pm

Re:
"misleading. while the direct costs of connectivity have dropped at the edge, the internal costs are still signficant and actually increasing."

If internal costs are high, that's your country's fault for being stupid and increasing the costs (or is lack of competition at fault?).

And everyone and his dog knows that the real cost is in shipping traffic to the rest of the world. You can update your internal network easy peasy. Now try going under the Atlantic to lay some more fiber..hard ain't it? Also costs a lot.

"as networks are push to their limits, more nodes are required, more fiber, and more staff to maintain it. "

Pushed to the limit? Last statistics I saw indicated that the "net" isn't anywhere near full capacity.

And more staff to maintain what? Someone to unclog the tubes when they get too full?
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Anonymous Coward, 28 Jun 2010 @ 7:27pm

Re:
"misleading."

There is no evidence of this and you cite no evidence to support your unsubstantiated contention. Most network admins say the opposite is true, costs are substantially dropping, and some evidence is the fact that many other countries offer faster and faster bandwidth at far cheaper prices yet they're not having any problems.

"so only looking at the cost to connect to the outside world ignores much of the reality."

TAM, nothing you say has any credibility. You make up what you say out of thin air.
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Anonymous Coward, 28 Jun 2010 @ 7:32pm

Re:
If costs were the limiting factor to faster bandwidth at cheaper prices then broadband providers wouldn't spend so much money, money that can go towards upgrading their systems, on lobbying the government to maintain their monopoly power. They spend this lobbying (and campaign contribution) money because they get something in return and what they get in return is at public expense. They lobby the government because they know that if the government opens things up to competition competitors will enter the market and offer a service that drives some customers away from them and hence drives prices down, they know that competitors will enter the market resulting in lower prices or else they have no reason to lobby for government sanctioned monopoly power. They lobby for monopoly because monopoly keeps out competitors, otherwise why lobby?
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Anonymous Coward, 28 Jun 2010 @ 7:40pm

Notice of course that TAM doesn't even attempt to refute the assertion that most broadband providers haven't been focusing on innovation.

Instead, he just resorts to the same non sequitor they themselves use (shocking, huh?): "Wahhhhh, it's expensive!!!!"
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Anonymous Coward, 28 Jun 2010 @ 7:41pm

Re: Re:
sigh.

say an isp (your isp) has 100 customers @ 2mbps on each network segement, connected to the central with a 100mbps line. the customers want a higher speed. so what do they do? to move those customers up to 5mpbs, they need to more than double your existing internal bandwidth (forget external). so they move from a 100mbps over copper, and have to run fiber to get a higher speed. that also means you replace the routers, likely change the type of dsl models they are using, and all of that equipment. they may have to entirely redo the racks to handle higher speed connections.

upping the speed isnt about just buying more connectivity. if it was, nobody would have an issue.
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Anonymous Coward, 28 Jun 2010 @ 7:44pm

Re:
there is nothing to refute. my isp has gone from 128k dsl to 25 meg dsl in 12 years. they have upgraded their network multiple times, and they continue to charge me a price in line with the product delivered. my isp (an effective monopoly) is moving forward quickly and effectively. shortly i will have an option of 4 feeds of hd tv or a move to 50 meg internet. so yeah, isps are not innovating, not moving forward at all.
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Anonymous Coward, 28 Jun 2010 @ 7:59pm

Re: Re:
Oh, how exciting, one example with no information of where it is, which company it is, what the price is, who the competition is, etc.
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Anonymous Coward, 28 Jun 2010 @ 8:02pm

Re: Re: Re:
So they need to make some investments. Big deal. The rest of the world does it. Also, since many of the fixed costs are already covered, providing more bandwidth won't nearly double costs. If the rest of the world can do it why can't we? You have failed to explain that part.

And don't give me the population density argument either, that's been refuted already being that we have population density statistics of various U.S. states and various countries and they disagree with you.

Also, why would they lobby so hard to keep others from building their own infrastructure? and then you haven't explained this.

"When towns get tired of begging for fast internet ... they sometimes decide to build their own fiber networks.

And then telecoms sue the cities -- as they did in the case of Monticello, Minneapolis, and run to state legislators to write laws outlawing citizens from organizing their own networks as Time Warner Cable did in the case of Wilson, North Caroline, which set up its own fiber network known as Greenlight. "

If the problem was really the costs then the telcom it all wouldn't constantly be lobbying to restrict competition. Others would be unable to provide a competing better service for a cheaper price. The reason why communities and others are willing to invest is exactly because they know they can create a better service for a better price and the reason why Cablecos resist is because they know it too and they don't want the competition. Otherwise there is no reason to resist.
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Anonymous Coward, 28 Jun 2010 @ 8:03pm

Re: Re: Re: Re:
telcos et al *
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Anonymous Coward, 28 Jun 2010 @ 8:09pm

Re:
The problem is that they get more return per lobbying dollar than they get per investment dollar, so as a self interested entity they would much rather spend their money lobbying. That need to change. We need to make the government decrease the return per lobbying dollar by ignoring these big corporations and opening things up to competition.
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Anonymous Coward, 28 Jun 2010 @ 8:29pm

Re: Re:
Sure, Korean ISPs are moving forward.
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Anonymous Coward, 28 Jun 2010 @ 8:31pm

it's only natural
it's only natural that they'd try to decrease competition. dollar for dollar, it's much more worthwhile to do that than to innovate.
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mozzis, 28 Jun 2010 @ 8:32pm

Slanted article
Worthless. Statements like "not because bandwidth is expensive... but because building a real network is." Where does he think bandworth comes from?
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Anonymous Coward, 28 Jun 2010 @ 8:34pm

Re: Almost every industry?
"In most cases the risk is actually passed on to the American people, in some sort of reverse socialism."

It's called plutocracism
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Anonymous Coward, 28 Jun 2010 @ 8:39pm

Re: Re: Re:
2 mbs? 5 mbs?

Just to be sure here, we are talking about Megabits per second right?

You people are being screwed hard over there. I have a 24mbps connection with unlimited traffic (upload/download) and that's about to become obsolete. There are already 200mbps fiber-optic connections available (although, they don't run at 200mbps from what I heard..more like 100-ish).

The minimum speeds we have around here are 12mbps.

And we are an insignificant country...Big bad USA is struggling with 5? WTF?
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Anonymous Coward, 28 Jun 2010 @ 9:15pm

Re: Re: Re: Re:
nah, he was just giving an example. The min I get is like 10+ and the MOST I (hardly ever) get is just under 30. But it is expensive. To be honest, the DL speed is OK but I would like the prices to drop a bit and I would like upload speeds to increase as well.
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Anonymous Coward, 28 Jun 2010 @ 9:16pm

Re: Slanted article
there are two types of bandwidth. internal bandwidth (connections within the isps own structure) and external bandwidth (peering), which is the connections to others on the internet. the actual connection to the internet (peering) is relatively cheap at this point (compared to where it was) but the costs of upgrading a network to provide very high speed connections to every customer is higher than it has been in a long time, because the jumps in connection speed are high, and the number of clients on these networks now is huge. so the costs of growing their internal structure and internal bandwidth is high. buying connectivity is much cheaper now than any time before, but it is also no longer the major challenge for an isp financially.
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Anonymous Coward, 28 Jun 2010 @ 10:27pm

Re: Re: Slanted article
So if the incumbent ISP's don't want to do it then it's time to either open up the existing infrastructure to competition or allow competitors to build their own competing infrastructure and organizing their own networks instead of suing everyone and running to have laws prohibiting competition.
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Jay (profile), 28 Jun 2010 @ 11:55pm

Well damn...

So how can Google's internet intervene in that? And how can we progress broadband to work a lot better without arbitrary limits?
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Anonymous Coward, 29 Jun 2010 @ 12:48am

Every community should lay their own fiber and say FU to telcos, cable, etc. They should also have Open Mesh Networks covering the community.
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Any Mouse, 29 Jun 2010 @ 2:51am

Re: Re: Re: Re: Re:
Then you're getting screwed. I'm in the US, and my basic plan is 12Mbs. For an additional $20/mth I can get 30Mbs. No usage cap, either. I just don't understand why other markets can't be competitive. Yeah, I know this still doesn't mesh with the rest of the world, but my cable co is staying just this side of competitive with the local market.
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Rekrul, 29 Jun 2010 @ 3:47am

In the last couple of years, ISPs "innovated" by changing how they handle users who type in a URL that doesn't exist. Under net protocols, the ISP's DNS servers are supposed to report an error code to your browser in those circumstances. Instead, ISPs are now serving up pages with ads, sometimes in ways that introduce huge security risks.

As a reaction, Google set up a fast, ad-free DNS service. And if you want to see what real innovation in DNS looks like, take a look at OpenDNS, which has built fraud protection, security measures and optional web content filtering into its robust DNS service.

OpenDNS does the exact same thing, replacing error pages with ad pages. Type any URL that doesn't exist and you'll get an OpenDNS search page with sponsored links. You can't turn the stupid thing off unless you pay!

The only reason I use it is because my ISP's DNS service is unreliable and seems to forget common URLs about every 5 minutes or so. Naturally, they blame it on my system. Funny that OpenDNS doesn't give me that problem.
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Vincent Clement, 29 Jun 2010 @ 4:23am

Re: Re: Re:
When I signed up with my ISP, high speed was 5mbps. Then they bumped it up to 10mbps. Then another bump up to 15mbps. At no time did I have to change my modem. The fiber was already in place. The costs are not as high as you want us to believe.
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abc gum, 29 Jun 2010 @ 5:12am

Re: Re: Re:
Does the inclusion of the expression "sigh" add anything to the post?
If so, what exactly?

Next time you make wild claims, you might want to support them with a few citations - other than from industry pundits.
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abc gum, 29 Jun 2010 @ 5:26am

Re: Re: Slanted article
"there are two types of bandwidth."

There are several ways in which the term bandwidth is used. The one to which you refer is a measurement of data rate or transfer. An ISP will have many connections, each one transfering data at different rates which vary over time. In this case, there is only one "type of bandwidth".

I think what you are referring to is the misguided attempt to charge twice for the same thing. The claim that big websites get a free ride has been debunked many times but some out there refuse to acknowledge the facts.
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Anonymous Coward, 29 Jun 2010 @ 7:21am

Re: Re: Re: Slanted article
"I think what you are referring to is the misguided attempt to charge twice for the same thing. The claim that big websites get a free ride has been debunked many times but some out there refuse to acknowledge the facts." - no, not anything i said and totally not relevant.

your internet connection is made up of two parts. the network internal to your isp, and the second part is their peered connection to the outside world (often referred to as internet connectivity or internet gateway). each jump and each step in the process is at a given speed, usually in a tree like configuration that brings the branches of the tree (individual end users) together to a branch (shared transit) back to the truck (the network center for the isp) that then turns around and connections all of them to the internet via a gateway or peered connection.

so 'bandwidth' can refer to the speed or connectivity of those peered connections, but it can also refer to the connectivity within your isp.

if an isp has a 100 meg line out to your area, and 100 people on at 10 meg each, it is likely that you will not get 10 meg most of the time, because it only requires 10% usage for the 100 meg line to be filled. in order to offer higher speed internet connections, not only does your isp have to increase your connection speed, but they have to make sure they have enough internal bandwidth to route your connections back to their central office so they can then gateway you to the internet. any single blockage in there (over subscribed connection) would lead to slower actual data flow, even if your connection is at a high rate of speed.

put another simple way: your computer connections to your dsl modem likely at 100meg, but your internet connection on average is probably 5 meg. your first jump (computer to modem) is very fast, but the next jump (modem to the dslam, the connection point for you modem in the phone companys connection box) is only 5 meg. so no matter how fast your single connection is to the modem, the next jump will be setting the actual pace.

so your isp could buy a ton more peering bandwidth, and your internet performance would not change unless they improve their internal network, which is incredibly expensive to do. peering bandwidth is getting cheaper, the rest is not.
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chris (profile), 29 Jun 2010 @ 7:51am

Re: Re:
oh yeah, that would be good. you entire internet connection based on if the guy next door left his wireless on or not. excellent idea.

mesh networking is a little more involved than that.
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chris (profile), 29 Jun 2010 @ 8:12am

Re: Re: Re: Re:
We just need to get the right software on them, connect some sort of P2P software on them that has a common standard that can automatically interconnect with each other.

it's called BATMAN:
http://www.open-mesh.org

Again, the network will be inefficient but it will work for things like text. For large file transfers it will certainly be a problem though.

the trouble isn't efficiency, it's distance. the FCC has very strict rules limiting the broadcast power for wifi devices. this means your mesh nodes have a broadcast radius of a hundred meters (give or take.) you would need dozens of nodes to cover a square mile of flat ground with no obstructions.

it goes back to innovation and competition: the established broadband market won't deliver what the public wants and the government won't open the market up to competition.
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The Devil's Coachman (profile), 29 Jun 2010 @ 2:28pm

I have Cablevision. They hate innovation, unless it raises prices.
Improving service is not on their agenda, and they could care less if your TV or data signal is working properly or not. I see daily evidence of bandwidth oversubscription by the frequent, yet random losses of signal quality resulting in pixelation, audio/video loss of sync, and screen blanking. They obviously have inadequate plant for the services they sell, but they round-robin the defects so everyone gets a little annoying taste of it, but nobody gets completely denied for long. The moment there's an alternative available, whether it be FIOS, satellite, or whatever technology brings, I'm out of there. I hate them, and the idiots in charge particularly.
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TtfnJohn (profile), 29 Jun 2010 @ 3:51pm

Re:
Really I do have to call total and complete bullshit on this one.

Being a tech at a telco that actually works on this stuff the article is right, the annual costs of providing high speed is dropping, in many places very quickly.

Build out is cheaper and easier than it was 3-5 years ago, the internal networks are by no means full, yes more nodes are needed but the fibre costs have dropped to far less than copper and take a few seconds to connect and, in fact, less staff is required for maintenance as most troubles, oh, say 95% of them, I can diagnose and repair remotely. Something I couldn't do even 3 years ago with as much speed and accuracy. (My guesses are still better than most of what the automated diagnostics suggest but that's another story!)

Myopia isn't the fault of the story but, in your case, the reader and commenter. Try getting some experience in the industry before you make a stupid remark like that.
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TtfnJohn (profile), 29 Jun 2010 @ 4:10pm

Re: Re: Re: Re: Slanted article
"put another simple way: your computer connections to your dsl modem likely at 100meg, but your internet connection on average is probably 5 meg. your first jump (computer to modem) is very fast, but the next jump (modem to the dslam, the connection point for you modem in the phone companys connection box) is only 5 meg. so no matter how fast your single connection is to the modem, the next jump will be setting the actual pace."

Put another way, what you say is there's no attempt at load balancing (dslams are intelligent, in case you didn't know) so the reality is that from modem to dslam will be 100meg regardless unless every port on the dslam is in use at exactly the same moment.

Further, the Internet and protocols running on it are bursty which means that even your connection from modem to dslam isn't "on" all the time nor is anyone elses. The internet is bursty by design and I don't see that changing.

Actually most dslams I've seen in the past 5 or 6 years are rated between and 1 and 10 gig back to the data centre in the nearest large central office and the simple bandwidth simply increases from there to what used to be called a class 1 office up to 500 gig, all on light.

your 100 meg or 5 meg is a mean taken over a few seconds not the total consumption of bandwidth on a constant basis.

You indicate the last mile remains a problem and you'd be right but that's something that telcos will overcome once they get enough of a regulator push on it. Mind you I'm not holding my breath on the that. More likely the current infrastructure will continue to be replaced as it is now in smaller centres as the old, some of it is ancient, infrastructure fails. Major metropolitan areas and concentrations in them are another story.

Incidentally telcos already have a ton of peering bandwidth and the bigger players don't need to buy more cause they're wholesaling it to the smaller players. Also, just so you know, your wired voice and cell voice calls are already routed across what you call peering bandwidth (backbone, actually) using VOIP across the, guess what?, Internet! And that's been going on for two decades now.
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Anonymous Coward, 29 Jun 2010 @ 4:45pm

Another reason the U.S. continues to slip into the abyss and why this country will never return to prosperity... the only place business and ethics no co-exist is in the dictionary - pity
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abc gum, 29 Jun 2010 @ 7:00pm

Re: Re: Re: Re: Slanted article
"so 'bandwidth' can refer to the speed or connectivity of those peered connections, but it can also refer to the connectivity within your isp."

No - this is still only one type of bandwidth.
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Anonymous Coward, 30 Jun 2010 @ 8:41am

And this will work for them until the United States has fallen SO far behind the rest of the world that somebody in Government finally grows a pair and hands down regulations that turn them into exactly what they are. Dumb pipes. The Telcos are digging their own graves.
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