Despite Gigabit Hype, U.S. Broadband's Actually Getting Less Competitive Than Ever

from the beneath-the-hype dept

Wed, Mar 16th 2016 6:24am — Karl Bode

Despite government programs, national broadband plans, billions in subsidies and a lot of recent hype paid to gigabit services like Google Fiber, U.S. broadband is actually getting less competitive than ever before across a huge swath of the country. Companies like AT&T and Verizon have been backing away from unwanted DSL networks they simply don't want to upgrade. In some cases this involves selling these assets to smaller telcos (who take on so much debt they can't upgrade them either), but in many markets this involves actively trying to drive customers away via either rate hikes or outright neglect.

As an end result, the nation's biggest cable companies are enjoying a larger monopoly in many markets than ever before as they hoover up those fleeing customers. According to the latest postmortem of 2015 subscriber totals, the seventeen largest broadband providers acquired 3.1 million broadband subscribers last year. But if you look at the numbers more closely, you'll notice that nearly all of them were acquired by the cable industry:

In fact, cable added 97% of the 6.1 million subscribers added in the last two years. Phone companies, meanwhile, lost about 185,000 subscribers last year -- the first time in the history of broadband that they saw a net loss. Again, that's because many of these companies either no longer want to be in the fixed-line broadband business because they're focusing on wireless (AT&T, Verizon) or they're growing just for growth's sake (Frontier, CenturyLink), acquiring neglected AT&T and Verizon assets, but saddling themselves with so much debt in the process they can't afford necessary upgrades.

That's great news for cable. Less fixed-line competition means they can charge higher prices, yet have less incentive to improve what's arguably already the worst customer service in the history of industry. More importantly, the cable industry can begin experimenting with usage caps and metered billing without the pesky threat of a customer being able to leave. Of course, if you ask cable providers, they'll be quick to assert they face greater competition than ever before -- but the reality is in many markets they either face no real competition or a sagging telco trying to push 3 Mbps DSL as the pinnacle of innovation.

And indeed, recent FCC data suggests that two-thirds of homes currently only have the choice of one ISP (cable) that's capable of providing speeds that even meet the new standard FCC broadband definition of 25 Mbps. ISPs and loyal Congressional allies have been whining about this higher standard precisely because it only highlights the markets slow transition to cable broadband monopoly.

That's not to downplay the impact of efforts like Google Fiber, which are going a long way to spur competition in select markets. But Google Fiber is really only focusing on a dozen or so profitable markets, and in some ways our gigabit obsession has overshadowed the fact that the majority of towns and cities are facing a stronger cable broadband monopoly (and therefore higher prices for the kinds of speeds people actually use) than ever before. That's something Tucows/Ting executive Elliot Noss touched on briefly in an interesting bit over at Medium talking about the company's own piecemeal broadband improvement efforts.

It's understandable that any given week the media would prefer to talk about the feel-good aspects of the gigabit economy, but the reality is that, thanks to telco apathy, Congressional incompetence and cable consolidation, we've quietly built a bigger, bolder cable broadband monopoly. The solution? Either waiting for wireless to mature as a fixed-line alternative (which, given current LTE usage caps and prices, could be quite a wait), or eliminating the state-level barriers erected by local duopolists, designed to prevent grass root efforts to kick-start something vaguely resembling real broadband competition.

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Filed Under: broadband, cable, competition, dsl, fiber

13 Comments

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Anonymous Coward, 16 Mar 2016 @ 6:32am

Of course.
Corporatism seeks a monopoly.
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John Fenderson (profile), 16 Mar 2016 @ 7:15am

Re:
As Adam Smith spent a fair number of words explaining, only to be ignored by the people who shout his name the loudest, capitalism naturally tends toward monopoly. If we want something approximating a functioning free market, then careful and constant regulation is required.
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Mason Wheeler (profile), 16 Mar 2016 @ 7:23am

Re: Re:
It's funny how, if you were to go around today saying the things the Father of Capitalism actually advocated, modern "capitalists" would call you a dirty Commie.
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Ninja (profile), 16 Mar 2016 @ 8:07am

Re: Re:
Don't say that loud near a conservative group. It may cause a lot of mouth foaming and mindless rage.
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Anonymous Coward, 16 Mar 2016 @ 8:13am

net neutrality is a big smoke screen to allow big monopolies to get even bigger. why is a poor country like Romania deploying cheaper and faster internet? because they have many micro-ISPs that only have 50-3000 customers.
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John Fenderson (profile), 16 Mar 2016 @ 8:41am

Re: Re: Re:
Well, in all fairness to conservatives it depends on what kind. One of my closest friends is hard-right (politically opposite of me), but he understands what Adam Smith was talking about and agrees. Our points of disagreement tend to be around what is appropriate regulation, not whether there should be regulation.

But he's an old-school conservative. The sort that you can completely respect even if you don't agree. They are distressingly rare these days.
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Ninja (profile), 16 Mar 2016 @ 8:50am

After all, 640K ought to be enough for anybody. I mean, 3mbit.

Note: whether Gates said it or not is irrelevant to the joke.
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Ninja (profile), 16 Mar 2016 @ 8:51am

Re: Re: Re: Re:
Fair indeed. People nowadays have serious trouble in agreeing to disagree and move on towards some middle ground.
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Anonymous Coward, 16 Mar 2016 @ 9:02am

...The solution? Either waiting for wireless to mature as a fixed-line alternative...or eliminating the...barriers erected by local (governments)...

Slight alteration of Karl's quote here: in my state the 'barriers' are at the county and city level, not the state. The ugly reality is that there needs to be a philosophical change either by the providers or by the cities and counties. The issue is that cities and counties are balking at the concept of multiple infrastructures; that is, a half dozen (or more) fibers under the streets and sidewalks or a half dozen (or more) wireless towers on every street corner. Either the providers will have to compromise on sharing infrastructure or the cities will have to allow multiple fiber runs and towers, otherwise competition will not be possible.

And a related note: several new neighborhood developments got permission to NOT be wired for plain phone service, thus DSL will not be an option for them.
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JoeCool (profile), 16 Mar 2016 @ 10:14am

Re:
Oh, he said. He's just paid more to rewrite history than you'll be worth in three lifetimes.
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Anonymous Coward, 17 Mar 2016 @ 12:49am

i think its safe to say google underestimated the lazyness of the ISPs in general.
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Wendy Cockcroft, 23 Mar 2016 @ 8:49am

Re: Re: Re: Re:
I'm in that camp. Nick Hanauer and Eric Liu explain precisely how it works. tl;dr: it's like having a referee at a boxing match. No biting, no gouging, or hitting below the belt.

http://www.amazon.co.uk/The-Gardens-Democracy-Citizenship-Government/dp/1570618232
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Wendy Cockcroft, 23 Mar 2016 @ 8:50am

Re:
That's got nothing to do with net neutrality and everything to do with regulatory capture. Micro-ISPs can't afford to buy politicians so they have to compete. That is what neutrality looks like; no one gets precedence over anyone else.
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