Saturday, May 24, 2014

Why the ISPs fight against community broadband

Scratch a conservative, and he will tell you over and over that in every respect, private enterprise will outperform government. There are a few exceptions like police, fire, and armed forces that a typical conservative will yield to. It is hard to find a conservative that can readily accept the reality that in the arena of internet access, publicly owned networks are not only outperforming private ISPs, they are teeming with happy customers.

ISPs are now the most hated companies in America. Comcast and Time-Warner, two of the biggest ISPs are the lowest ranked companies in the country in terms of customer satisfaction. They are the companies everyone loves to hate. I believe that they are where they are due to their government granted monopolies.

The telcos and the cable companies (we'll call them "incumbents") both get local monopolies from the communities they serve. They then have zero competition for phone and cable TV service in each city they serve. This arrangement is called a "franchise". In return for this, cities receive handsome sums of money that can be used for city expenditures, such as operating expenses or important projects.

The incumbents are well aware of a national trend that they helped to start. They are aware that when communities cannot get the service they want for internet access, that those same communities will try to build their own networks with public money to do it. They have known about it for a long time and have been working hard to prevent communities from building their own networks. We call those networks, "community broadband".

Community broadband has been implemented with varying levels of success. Lately, I've been watching the news to learn that places like Chattanooga, Tennessee have built and implemented a network to give their residents gigabit access to the internet. To put this in perspective, the average internet connection speed is about 9 megabits per second (mbs). Gigabit access is roughly 100 times faster than that.

As the internet has increased in speed, so have the capabilities of the applications that can run over the internet. I remember the early days of the web. The World Wide Web was once known as the World Wide Wait. But technology improved over time. I got my first cable connection at 1.5 mbs in 2001. Speeds doubled sometime later to 3mbs per second and then I thought that was fast. Now I have a 50 mbs connection and that still doesn't hold a candle to what can be had in Chattanooga. And I don't have any choices for that speed. Comcast is all I have since Centurylink conceded the territory to Comcast with their meek offering of 5mbs.

The incumbents have been fighting back to keep the internet from becoming a public utility. They seriously want to offer slower speeds at higher prices against the will of the people.

In my community we have Utopia, a public agency devoted to building and providing reasonably priced internet access to the residents they serve. Comcast and Centurylink, the local incumbents, both sued to keep that from happening, but they were too late and many residents in the Wassatch Front have had a taste of the higher speeds at lower prices. An example is Sumo Network's offering of 100mbs for $45 a month. Yeah, that's pretty incredible when you consider that at Comcast, you'd pay $200 a month for that kind of speed. The incumbents don't want us to have that kind of speed for cheap. I would have Utopia too, but the incumbents have been running interference, halting the rollout a block and a half from my home.

The incumbents are not just fighting off competition for their precious monopolies. They are fighting off higher property values. If gigabit access were provided in my neighborhood as a well regulated utility, I am certain that property values would go up. It's like connecting electricity to the home. A home without electricity or water wouldn't hold as much value as a home with utilities. The internet has become a utility, whether the incumbents like it or not.

The incumbents are fighting off economic development. We have seen an explosive growth in the capabilities of the applications we can use on a fast internet connection. Netflix is the big one, but there is YouTube, Pandora, massive multiplayer games, video conferencing, and so on. We are just beginning to see what can be done at gigabit speeds in the cities that have gigabit like Chattanooga, Kansas City and Provo. Those cities are seeing improving economies and are becoming attractions for businesses to create jobs. The incumbents need to be called out for fighting against jobs when they resist providing higher speeds at a reasonable price.

20 states, including the state of Utah, have passed model legislation designed to hobble or outlaw community broadband. Why? The incumbents have met the community broadband movement with deep pockets at the state level to curtail the trend. The incumbents want to keep their monopolies so that they can continue to finance the posh lifestyles of the C-class executives. Who wouldn't want a second home on the coast of Spain?

The incumbents are fighting against a more competitive America. By restraining speed and creating scarcity in the market through monopolies and abuse of political power, the incumbents are allowing the world to pass us by. America was #1 in internet access service and pricing in 2001. Now we're ranked 31st against the world. This country cannot remain competitive in world markets with slow internet access. We must keep up with the speeds if we want to remain competitive.

Comes now a raging debate over net neutrality. Netflix has had to sign expensive deals with Comcast and Verizon to ensure adequate access to their customers. Netflix would not have to do this with real competition in the market. The deals mean that Comcast and Verizon are holding out on upgrades until they can get paid more money. Netflix will pass those costs on to their customers. Comcast and Verizon will use the new money to build their own content to sell.

What is interesting about those deals is that the major ISPs in America are not keeping up with speeds at Level3 and Cogent, the biggest backbone providers on our network. Yet, worldwide, everyone else is adding more capacity. This is because the incumbents want to suck at the teat of government granted monopoly rather than actually compete with others. We're just not dealing with adults here.

So what is the solution? I have two suggestions:

  1. Reclassify anyone who owns the pipes as common carriers. Comcast owns a vast network in every city in which they operate. It's really expensive to build another one. It makes sense to classify them as common carriers and require that they resell service to competitors at wholesale so that customers get a choice in service providers.
  2. Use the Commerce Clause of the Constitution to pre-empt state laws that prohibit or restrict community broadband. Acknowledge that if cities can grant a franchise to the incumbents, then they can build their own networks with public funds when the incumbents fail miserably at their end of the bargain.

I believe that this two-pronged approach can restore balance in the market by offering the proper incentives for the carriers, the incumbents and the cities, to meet the needs of the people they serve. Once we have restored that balance in the market, we can move on to bigger and better things. We can remove the internet divide.
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