U.S. Cable Broadband Monopolies Close In On 70% Broadband Market Share

from the Do-not-pass-go,-do-not-collect-$200 dept

The U.S. telecom industry's monopolization problem shows no sign of slowing down.

According to the latest data from Leichtman Research, the cable industry is nearing a 70% market share over fixed line broadband. That's thanks to many reasons, not least of which being that most U.S. phone companies have effectively given up on seriously upgrading their aging DSL lines, driving a greater portion of Americans to the only companies actually offering modern broadband speeds: Charter (Spectrum) and Comcast. Phone companies collectively lost another 150,000 subscribers last quarter, while cable providers added about 1,400,000 users in just three months.

For the cable industry, this is all a wonderful thing. Less competition from phone companies, combined with a Trump FCC that couldn't care less about the sector's competition problems, means they can get away with charging higher rates than ever for a service that comes (not coincidentally) with some of the worst customer service ratings of any industry in America (seriously stop and think about that for a moment).

With COVID-19 making it clear that broadband is an essential utility, users are flocking to cable connections if they want to remain tethered to their jobs, education, and friends. Charter (Spectrum), as a result, saw 850,000 new customers in one quarter alone, a quarterly record for any broadband provider, at any point in U.S. history:

"With the continued impact of the coronavirus pandemic, there were more quarterly net broadband additions in 2Q 2020 than in any quarter in eight years,” said Bruce Leichtman, president and principal analyst for Leichtman Research Group, Inc. “In the first half of 2020, there were over 2.4 million net broadband additions. This is the most net adds in the first half of any year since 2008."

That's great news for cable giants, but not so great for consumers, smaller competitors, or the health of the internet.

Less competition overall means not only higher flat-rate prices, but more annoying fees, usage caps, and overage surcharges. It also means less incentive than ever to behave on subjects like net neutrality or privacy, improve customer service, or expand service into lower ROI areas (despite billions in tax breaks, subsidies, and regulatory favors). What exactly exists to curtail these companies' worst impulses or motivate them to do better? They face no competition, and U.S. regulators and lawmakers are potentially the most captured they've been at any point in the last 50 years.

There's a small glimmer of hope that low-orbit satellite ventures (from the likes of Space X and Amazon) and fifth-generation wireless (5G) could help shake things up, but the former lacks the capacity to seriously disrupt denser markets, and the latter still is far from being a direct competitor to fixed-line broadband due to high prices and nickel-and-dime connection restrictions. Meanwhile one of the more disruptive aspects of U.S. telecom, community-owned or public/private partnerships, have been under steady assault by the Trump FCC.

U.S. monopolization is not a bug, it's a feature. There is no panacea here, and nothing changes without both a dramatic shake up in American leadership, and major reform to rein in AT&T, Comcast, and Verizon's political influence over both state and federal lawmakers and regulators.

Filed Under: broadband, cable, competition, market share, monopolies
Companies: charter, charter spectrum, comcast

Debunking The Debunking Of The Market Share Myth

from the depends-on-what-you're-doing dept

Since so much of the economics we focus on around here look at the value of complementary goods to boost other markets, it caught my eye to see a former Forrester technology analyst, Carl Howe, claiming that using loss leaders to help grow another business has officially been debunked, and then using that claim to explain why Apple has been so successful lately. According to Howe, it's because the company focuses on profit first, rather than trying to build marketshare through the use of loss leaders. That struck me as odd, because a huge part of Apple's recent success has been its recognition of the importance of complementary goods and its ability to use music as a loss leader for its other products. This also comes just as we were pointing out how much of Google's success is also based on its recognition of the importance of complementary goods in building its own dominant position.

Howe points out one example from the report, supposedly showing that while Microsoft and Sony beat each other up fighting for marketshare in the gaming console space, Nintendo won by focusing on how it could profit from the Wii. That's somewhat misleading, and helps show why Howe is wrong in claiming that the focus on marketshare isn't important. In fact, half the problem that Sony has faced with the PS3 was that it was too focused on profit rather than marketshare initially. That is, it priced the PS3 way too high, trying to cover more of its costs, making it quite difficult for most people to afford it. The Wii's success had less to do with a focus on profit and much more to do with a focus on growing the overall market by expanding it into a new realm, attracting a different type of game console buyer.

It's that last point that's the key. An effective use of complementary goods isn't to take marketshare in a stagnant market (which is what the study Howe points to shows), but in using it to expand a market into new areas. That's what Apple has done. It's what Google has done and it's what Nintendo has done. That doesn't damn the use of loss leaders or complementary goods. Far from it. It shows how you absolutely should be using them to help expand primary markets for other goods allowing you to not only gain marketshare, but also profits. Howe acts as if the fight for marketshare and for profits are mutually exclusive. It certainly is true that focusing on marketshare exclusively doesn't make sense, but giving up some profits to focus on growing a market and taking marketshare in that new realm isn't just perfectly reasonable, it's the story behind many of the greatest business successes of all time.

Filed Under: competition, market share