If there were actual competition in the ISP space anywhere in the US outside of the densest metro areas it wouldn't be possible for incumbents to exert their monopoly power like this. It's a drag on US economic activity, and one of the clearest examples of what institutionalized corruption looks like in America today.
Really? NYC seems to have some great internet options. I get reliable unlimited 50Mbps down/20Mbps up, and many parts of the city can now get Verizon's 300Mbps down/65Mbps up service, if you're willing to pay extra for it (I wouldn't because it wouldn't speed up most activities and for those it would, my ISP is rarely the bottleneck).
In my building in Union Square, I can get 30Mbps/5Mbps from TWC for a lot of money, or I can get 1.5Mbps/256Kbps DSL from verizon. I pay $50 for 15/2.
I've lived in NYC since 2007, moved several times, and never had FIOS - although the last place I lived in before this one got FIOS a couple of months after I had to move.
I've always wondered how one would disrupt the ISP market. Can you only enter this market with huge capital expenditures to build out a network? Are there ancillary networks/pipelines/bandwidth that could be utilized that are not explored?
It seems like Google is going down the road with using huge capital but are there other ways? Republic Wireless is the only other "similar" product to disrupt the telecom market.
You'd need an immense amount of capital for the network, but also for the legal guerrilla war. Laying fiber to the last mile? What about the risk to the current lines? You get a lawsuit and an injunction while you fight it in court and prepare your impact study that demonstrates that digging a ditch on one side of the road won't cut fiber on the other, and in the meantime who knows how long has passed, probably years.
You probably have to get the city on your side for eminent domain for purchase or at the very least easement rights on a tiny strip of land everywhere so that you can lay cable, and of course that's going to take time, and there's going to be a fair amount of "grassroots" opposition (no one ever comes to municipal/community meetings, you can sway it pretty easily), and so you make your case about how it's going to benefit and bring jobs and bring X to Y group and all the while you aren't actually delivering internet and you're not sure when you'll be able to. In the meantime the existing players can build out in the town you're trying to move into and make the speeds you were promising pointless anyway.
tl;dr: Local government is easily gummed up, you have to compete in many places at once to be a real threat.
Tacoma's click! network has been giving City of Tacoma residents high speed internet for around 10 years. Seattle's about to join with their own high speed internet offering.
I'm starting to think that ISPs should be government-regulated utilities just like electricity, water, sewer, etc. Isn't that how those industries were disrupted -- through regulation?
I see you're point with govt regulated utilities but some governments have de-regulated such as Texas with electricity. I'm thinking there might be a good hybrid solution.
It's called structural separation, and was the reason why we had so many $20/month ISPs back in the days of 28.8k modems.
The infrastructure business -- for electricity, water, information networks, and other similar services -- are high-capital cost very long term investments that typically require some degree of government intervention in terms of rights of use. There's no reasonable way to provide independent supply systems if your goal is 100% coverage, and the government must be allowed to dictate things like "this road can be dug up to install pipes" and "this edge must be allowed to hold wire poles" and so forth. If you want an efficient implementation, you have one big infrastructure system that all the suppliers share.
The trouble usually comes when an entity gets to both maintain the infrastructure and supply services on it. That's bad. Now they have an incentive to provide better service for their customers and worse to everyone else's. For example, if you allow an ILEC (telco owning local wire systems) to provide DSL service but require them to rent space in their local wiring centers to their competitors, you will discover that the competitors' service requests are answered more slowly, accidentally ignored more often, and generally deprioritized if not actually sabotaged.
The best thing a municipality, county, or state government can do to foster a robust network environment is to establish an infrastructure provider and regulate them as the monopoly that they are, forbidding them to provide the services on top of the infrastructure. Then you can get healthy competition in those services.
In some countries the government has split the ownership of the pipes and the providing of Internet service into separate concerns.
So one company charges ISPs for using the pipes and then ISPs pass that cost on to the consumer. This means the cost of entry is significantly lower for an ISP.
> Can you only enter this market with huge capital expenditures to build out a network?
It certainly feels that way. Though I believe there is some chance for bootstrapping, even starting out with an entire apartment signed on would still be difficult. Though it may be enough to spark investor interest.
> Republic Wireless is the only other "similar" product to disrupt the telecom market.
While what they're doing is neat, they're just using someone else's network (Clear) and essentially shuffling expenses around. It's not low-level physical disruption where we need it.
I think that's a good start. I'm willing to bet low-level disruption could be realized using the existing infrastructure. A one cost, low-monthly rate for ISP and VoIP such as Sonic.net?
I'm not aware of any rules that force cable providers to resell their infrastructure (like Google is doing willing with their fiber). I think, at least at one point, DSL providers had to allow competition using their lines. Sonic.net for a while (and still does to my knowledge) resold DSL and eventually started binding two DSL lines together to increase speeds. They had to pay a hefty amount of their revenue for that customer directly to Ma bell though. For whatever reason, AT&T is not forced to resell their UVerse(VDSL) system. Which maxes out at 24Mbps anyway and thus is already a disappointment for competition. So unfortunately, I'm not seeing any opportunities for disruption with existing infrastructure, at least in the states.
The problem with wireless is mainly physics: at the higher frequencies that could be used for high-throughput links, you have problems with water. Basically, the signal attenuates very quickly in water (by heating it, which is how a microwave oven works), and so things like plants, fog, rain, etc. all cause problems. Trying to deliver wireless service to homes is going to be expensive -- you're going to be setting up a lot of APs in strategic locations that have line-of-sight to your nearest base station.
It's not impossible, just hard. You also have to deal with airspace e.g. if someone decides to put up a new building right through one of your beams, you need to somehow get around that building, which could be hard. The only people I know of who are doing wireless broadband are doing it in very rural areas, where they can follow the electrical lines, which have nice, clear paths through the forests. Their biggest problem is regulations -- they cannot put up towers because of rules about visual appearance.
Ars Technica had a few good articles a couple of years back discussing how the wired telco/cable networks developed. Cable companies all started as co-op type entities that eventually gobbled up the smaller players.
IMO, ISPs and Telcos are natural monopolies that need to either be periodically broken up by the government, or be fully regulated like a public utility. The cost of monopoly should be external control of pricing and operating parameters.
I don't see why ISPs are natural monopolies. I live in Russia and ISPs in big cities are highly competitive.
When you serve high-rise apartment buildings, ethernet is a viable alternative to DSL. I don't see a technical reason why an independent ISP can't serve a few central districts of a city with fiber and ethernet as the last mile (in this case, the last few meters).
I imagine in USA it's ridiculously hard to lay your own cables between apartment blocks and host a few boxes in a common utility cellar; and maybe it's also legally impossible to serve a subset of a city or even a state.
But in Russia each apartment block has 2-3 ethernet ISPs offering Internet plus one DSL. These networks grew organically: they were profitable from the day one when they served one large building and they they added a few buildings a month; the industry wasn't regulated so they didn't have fixed regulation costs.
Now there are some stupid regulations and the costs of starting that kind of business went up, but there are still a lot of options to choose from.
So it seems that by promoting anti-market regulations dedicated to delivering predictable and quality service, you are now stuck with clumsy monopolies. So much for violating principles of capitalism.
Additional beauty: Even in smaller towns or remote districts where there is no competition, the de-facto monopolist still has to look up to the "industry best practices". Of course they may still offer comparatively worse service for the money, but on some level the knowledge of "how the things should be" forces them to develop better network than they could get away with.
You made the point yourself -- they smart small and grow with revenues over time. Eventually the market runs out of growth, so you see consolidation.
US cable companies started out as small cooperatives that served individual neighborhoods without good over the air signal and grew into behemoths. The old US Bell telephone system was formed after waves of consolidation of small telephone companies serving a city or town. The current US cellular market is the same story -- lots of little companies getting eaten up by bigger companies.
Post-Soviet Russia has only been around for a couple of decades. I'm sure that you will see consolidation as time goes on -- there are absolutely economies of scale to be had when operating networks.
But why don't new small players arise as small cooperatives that serve individual neighborhoods (under-served and over-demanding; I assume there are a lot of areas like that in the US)? And they they may slowly eat the behemoth from the inside.
Of course consolidation will happen, but we'll already have good intertubes by then. Also they might follow the cellular carriers path, where there are three to five large carriers covering any (inhabited) area with no further sign of consolidation.
(I assume if large cell companies try to merge antitrust won't let them - not counting under extreme economical or political curcumstances which are known to arise from time to time)
"why don't new small players arise as small cooperatives that serve individual neighborhoods"
I am just going to guess that it is a combination of (1) the expense of getting linked to the rest of the Internet, (2) the low density of knowledge i.e. most people who would be interested in a cooperative don't really know how bad American Internet service is, and (3) the difficulty one faces with laying cables. I could be wrong, of course; I only briefly looked at doing this sort of thing, and I was planning to use wifi (once I saw how expensive things would be, I dropped the plan).
1) Why should it be particularily expensive? Data centers do this and they are competitive.
2) It should be obvious that your internet connection sucks shouldn't it? If it isn't, maybe it's not an actual problem?
I think there should be one success story showing it can be done for a profit and then they will appear like mushrooms all over the country. You could crowdfund one I think.
> When you serve high-rise apartment buildings, ethernet is a viable alternative to DSL. I don't see a technical reason why an independent ISP can't serve a few central districts of a city with fiber and ethernet as the last mile (in this case, the last few meters).
That's what's happening in Australia with our national fibre network. Fibre runs to the bottom of apartment blocks, router in the basement and Ethernet to each individual apartment.
Theres a lot of hyperbole there. Is there any evidence that building 100 megabit pipes to non dense metro areas is actually profitable exercise for ISP's right now? There is tons of groaning about slow internet access on HN and especially Reddit, but I'm not sure the majority of Americans would even opt in to this service as they might not have a need for anything more than a basic cable modem connection at $20/month.
Ah yes, that would be why three national telcos sued my local electric utility when they started exploring the idea of doing a city-wide public access fiber network where any number of competing ISPs would provide transit and support but the physical cable plant would be owned by the municipality. So now ten-years later it's the same cable/telco duopoly as it is everywhere else in the US; speeds suck and are asymmetric, and we have these "bandwidth transfer caps", which wouldn't exist if the playing field were level.
It's not hyperbole, if anything I'm understating the damage that has been done to the public to feed entrenched private interests.
I've seen this a few times -- municipality wants to offer high speed internet, or even just a local fiber network without ip transit, and the telcos start suing.
It makes me curious what would happen if a private non-profit were formed to provide the the cable plant instead of the municipality. I know of a number of local DSL providers that provide ip transit over PPPoE and ATM DSL connections, so I can't help but think they would jump at the opportunity to offer services on such a network.
"It makes me curious what would happen if a private non-profit were formed to provide the the cable plant instead of the municipality."
There would still be lawsuits, this time about how a non-profit is anti-competitive because they don't have the expense of trying to make a profit, so they undercut anyone who does try to make a profit.
This is certainly a problem and you are correct that it is hampering economic growth. The New America Foundation, where this report originated, does some great work on promoting high speed broadband access at affordable prices. They also have an excellent YouTube channel where you can watch some presentations related to their efforts in this area.
To the GP post, most people will not recognize the need for faster access until you provide it to them. Imagine a town with only dirt road horse and buggies. Now imagine someone builds a highway on-ramp in the town. You can be certain that these individuals are now far more likely to purchase automobiles. [Shameless plug] This is a pet issue of mine, so to spare HN from being inundated with similar articles, I post them to: reddit.com/r/bandwidth.
>Is there any evidence that building 100 megabit pipes to non dense metro areas is actually profitable exercise for ISP's right now?
That's not at all what your parent is saying.
>I'm not sure the majority of Americans would even opt in to this service as they might not have a need for anything more than a basic cable modem connection at $20/month.
Lack of the option (due to few competitors) is the point, not whether or not it would be useful to a majority of Americans.
Additionally, "640K is more memory than anyone will ever need" - Bill Gates
Any pipe you build nowadays will be capable of 100 megabits, so the real issue is that nobody is rolling out any new hardware in most areas, even though we're paying rates that should be able to easily fund upgrades at least once per decade.
In prepaid and other live billing systems the cost to bill a data session is higher than the cost to bill a phone call. This is due to data sessions having longer hold times (months) compared to phone calls (3-5 minutes). Since a session has a cost to the charging and rating platforms (memory, CPU and therefore software licenses), the more people use data, the more expensive it is for the carrier.
As an aside, an SMS has the same cost structure as a phone call. They cost roughly the same on the signalling side, and roughly the same on the charging side.
How much data is used also adds cost to the charging system. The charging system will perform periodic writes to persist the money spent so far. While this write will typically be performed once per call, it is performed every X dollars or Y kb or Z min on the data side. If you don't, the carrier loses money when any machine in the network goes down, tearing down the session. With shorter periods between writes, they still "lose" a little money, it's just not several months worth of charges. This is more cost pressure (increasing writes per minute).
Historically, data was a minimal portion of a carrier's traffic. That meant that data would fit into the spare capacity of the voice and SMS charging system. Since data is now an appreciable portion of a carrier's traffic, they can't ignore it. Even worse, data usage is increasing faster than Moore's law (doubling every year instead of Moore at 18-24 months), which means that they can't buy newer hardware to solve the problem. They have to buy more hardware.
There are solutions. Getting to a cost/subscriber model instead of a cost/transaction one would be a great first start. The hard bit is convincing product managers and salespeople that their beloved architectures and protocols don't fit the new world.
It does to a degree. The established cities will most likely have installed Internet infrastructure a long time ago whereas developing cities may likely have only recently installed pipes so they are getting newer generation equipment.
Once you have invested in infrastructure (or anything else) the goal is to maximize profit from that so unless there is competition then there is no reason to continue to upgrade.
Established vs. developing cities is a false dichotomy.
The cities everywhere else in the world where you get 10 or 100 or 1Gb to the home are all established. None of them has only "recently installed pipes". They just upgrade things regularly, unlike the US.
And unlike New Zealand. We are in the midst of a big fibre rollout, but don't hold your breath for getting anything soon. Stuck at an unreliable 3mb connection. And strangely, despite living at multiple location, ringing to complain always gets a puzzled response and a reply along the lines of: just up the road from you is a really fast connection.
In my opinion, the best argument that there is no need for a data cap is to look at usenet providers. They provide some if the fastest connections I've ever seen, for dirt cheap prices, throwing in VPN and cloud storage type services, always unlimited in data, for around 20 to 30 bucks depending on what package you want.
And I'll bet they are plenty profitable. Plus, they don't get some of the niceties that the larger isp's are getting. For example I've heard NetFlix essentially pays all the transit fees right up to Comcasts doormat, so Comcast actually pays nothing other than the cost to shove the bits around it's own very large LAN. I'm sure Amazon and YouTube and google as well as any company of substantial bandwidth use has transit deals like this in place.
It seems to me the ISP's have it pretty easy when you factor all that in.
Personally, I'm pretty bummed that the company that was to bring country wide access via spectrum that was close to GPS got held up in legacy nonsense. I think they were called LightSquared. Honestly, if GPS manufacturers made crappy gear that leaked into a frequency they assumed no one would use, that is their problem, not LightSquared's. That's like building a shopping center and letting a portion of it overlap into an empty lot. A few years later the lot owner comes into town and says "WTF yo!" And somehow he is told "too bad, we were here first and it would hurt our sales".
Why can't we go back to the days of modems. It seems to be the only potentially accessible set of wires that any company can hook into without permission, regulation, permits, etc.
Most homes have at least 2 pair wiring, most modern homes have 4 pair. So minimum is 4 wires and maximum is 8. Even on a 2 wire half duplex Ethernet connection you should get pretty good speeds compared to DSL and especially 56k. Yes, lots of collisions but hopefully most opt for the 4 wire 2 pair connection.
Instead of a 56k modem we would have to create an Ethernet modem. What is the technical limitation that prevents this from happening? Being able to have "Ethernet Dialup" so to speak? If I have 4 pairs on one end I should be able to connect up to some telco and get access.
In thinking about this, that does mean the cost of having 4 data lines turned on. But I had a data line dropped into a colocation cabinet for 9.99 a month. For around 40.00 a month maximum a home should be able to be lit up. At just the prices Amazon advertises for S3 storage and that's transit and storage add another 10.00 a month and I have plenty of bandwidth. Though I would hope to actually pay wholesale pricing getting costs down even lower. It should be possible to profit 20.00 or so off each user. Throw in a one time fee for the Ethernet router and you should be making money. With potential for gigabit speeds.
The only thing I can think is how do you deal with the line length limitations of Ethernet runs inherent to that technology itself. I'm hoping there's something out there. They have been slowly pushing DSL to faster speeds, or is DSL++ or DSL2 or whatever it's called essentially what I'm talking about?
Maybe this all comes down to the 100 meter limit for Ethernet runs and how impossible it would be to put repeaters or hubs every 100 meters.
It just seems that the wire is there, why not use it? In 5 years when no one has a landline are we really going to have millions of telephone poles scattered around with wire on them that does nothing? Grated we use the poles for other things like power but it just seems strange that there will be all this copper just sitting around. I guess then it's time for the mass copper recycling project to get underway.
