Even our readers can’t agree on whether net neutrality is a good or a bad thing, so we thought we’d stoke the fire with a nice side-by-side comparison of sample broadband options for consumers in two “free markets,” the US and the UK. Art Brodsky of the Huffington Post (oops, we probably already lost half of you) writes that a British man he met while traveling showed him a spreadsheet he’d put together that compared 59 different broadband providers, so he’d know which one to do business with.
This fairytale-like story of consumer choice prompted Brodsky to look for comparison charts of services. What he found—a mag’s list of 25 common UK broadband companies versus what we presume to be his own local set of offerings—can’t be used for true side-by-side measurement, but it’s still a striking illustration of the stunted state of “innovation” and competition in the US market.
Click the links for more details on pricing and plan details, if you dare.
| US Broadband Companies (offerings available in Montgomery County, Maryland, from HuffingtonPost.com) |
25 UK Broadband Companies (most of which are available nationwide; from Which? magazine, August 2007) |
| Verizon Comcast |
AOL Be BT Bulldog Demon Eclipse Freedom2Surf Global Karoo Internet Madasafish MetroNet Nildram Orange (formerly Wanadoo) Pipex PlusNet Sky Supanet TalkTalk Tesco Telecoms Tiscali Toucan UK Online Utility Warehouse Virgin Media (cable/DSL) Waitrose Zen Internet |
“Our Internet Policy Is A Disgrace: Here’s The Proof” [HuffingtonPost via Yahoo! News]
(Photo: Getty)
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Baltimore, Maryland. Baltimore County… Pikesville. Let me know when anything other than Comcast is available.
@mac-phisto: “i think some of us are assuming that the reason there is no competition relates to cost of implementation. that’s just not true in most cases. the franchise system that exists in most of the united states prevents open competition.”
Apparently some of us are assuming that any franchise agreement gives an exclusive monopoly. Usually, that’s not the case. I’ve copied this from a different thread, because it was well written, it’s late, and I’m too lazy to type it all again:
BY JUSTAGUY2 AT 09/08/07 03:49 PM
“In the vast, vast majority of the US, if you want to start your own cable company, you certainly can. All you need to do is show the municipality that you have the financial backing required so that you don’t go broke halfway through your buildout, leaving torn-up streets in your wake, agree to pay the franchise fees (about 5% of revenue) agree to provide free service to schools and municipal buildings, and agree to provide some public access channels, and you’re all set. Problem is, the economics suck. RCN tried it, focusing on very high-income areas (the most attractive markets), and went bankrupt. Cable’s a great business if you can get 50% of the households in your footprint as customers. It’s a terrible business if you can only get 25%.
Market forces keep alternative cable operators away, not cable monopolies.”
@calacak: “Furthermore, net neutrality also has to do not limiting the applications that run over the network. It shouldn’t matter if it’s web surfing, email, VoIP or file sharing, they all get the same treatment. What Comcast is doing to Bitorrent seeds right now is an example of what net neutrality would prevent.”
Yeah, right. So you think the RIAA and MPAA lobbies aren’t powerful enough to get it written in that “suspected pirate activity may be blocked”? PUH-LEEEEEEZE.
It’s a bad idea in the first place, but once the special interest groups are done with it it’s going to be a major shafting for consumers.
They have more options, yes. but it seems like a good number are not unlimited, and all the speeds suck. well, not out of this world anyway. i have at&t DSL at 6 Mbps down and 768 up, for $35 monthlym no contract. thats excellent if you ask me, just for the simple fact of not having to deal with the Devil which is Comcast.
Verizon needs to step up their game and start bringing Fios to more parts of the country. im in chicago, and only a little sliver of us can get it.
@dbeahn: but that’s a bullshit argument. the assumption that the franchised cable co. owns the lines is fallacious. they own the right to use & maintain the lines for the duration of the franchise agreement. should they fail to meet the terms of the contract, they will lose their franchise – & the lines. the lines are reverted to the franchising authority who then seeks a new company.
you (& justaguy2) seem to think that it’s just as easy as laying new lines…uhh, no. here’s the fun part: you can have a franchise as soon as you connect every house in the franchise area with your lines – we’ve determined this already. sure, no problem. oh wait, there is a problem – you don’t have a right to lay the lines until the PUC authorizes you to do so. ok, how does that happen? easy – you just need to get a franchise. but i can’t have a franchise until i lay the lines! exactly. so how do i do that? easy, just get the PUC to award you a franchise. ok, can i have a franchise? no, you have to lay the lines first.
comprende?
@mac-phisto: Wow, you really have no idea how any of this works. But I applaud your efforts to make it up as you go, ignoring facts that are inconvenient to your world view.
What happens is that they issue a franchise agreement that specifies you will run X miles of line per year, and in specific areas. Then you go to work building your network. As an example,look at AT&T and the U-verse disaster. AT&T refused to sign franchise agreements locally, and municipalities had a huge issue with that (lost revenue). Yes, that’s right – even tho those cities HAD cable francise agreements already, they were expecting AT&T to sign one as well since AT&T was running coax for the “last mile”.
@Sudonum:
I’m curious — what city is it? I lived in BR for many years, but I know BR and NO have a lot more than 125,000 people.
In any case, that is very cool.
@dbeahn: that’s very convenient how you dismiss someone’s argument without addressing the central point in it. the problem is your argument does not explain why virtually all of this country’s cable operators operate without any effective competition as defined by 47 U.S.C. § 543. there’s only two possible explanations: they don’t want to compete or they are not allowed to compete.
there’s 24 franchises in connecticut & only 2 of them overlap (comcast/groton & thames valley communications in the groton, stonington, ledyard area). perhaps you can explain why a lack of competition exists better than i. it certainly is not b/c of cost. there are at least 6 highly profitable franchise districts where a new company could easily meet the 50% requirement laid forth by the telecom act (danbury/bethel/ridgefield being one such area – 93 sq. miles, 125,000 people, 44,000 households with median home price well above $400,000).
yet no competition exists. hmm. tough nut to crack.
u-verse is a horrible example of whatever you’re trying to portray & comically, does a pretty good job of backing up exactly what i said. at&t wasn’t sued by ct towns – it was sued by the state ag after the PUC refused to give them a cable operator license (stating that they didn’t need one). blumenthal sued & won & now the PUC refuses to give them a license (at least until the appeal goes thru…let’s see what their excuse is once the appeal denied). this has been going on for a year & something tells me the state regulators will do a pretty good job of stretching it out for a few more.
@dbeahn: i see where i misspoke – connecting “every house”. the point wasn’t that a competing operator needs to hook everyone up (again). it was that the PUC upholds localized monopolies by refusing to grant franchises to new operators until they meet requirements that can only be met by a franchised operator.
@mac-phisto: That’s between you and your city council. If your councilmen and women think it’s OK to screw you like that, then I’d recommend electing new ones.
Seriously, local governments are usually quite happy to sign new franchises, since it means money in their pockets without raising taxes. The franchise agreements aren’t some written in stone set of rules and laws – they’re negotiated in each area. If your city council (or county board or whoever handles it in your area) wants to set a 10 block build per year for a new operator, they can. If they REALLY want competition in badly (and there are likely financial incentives in place to keep competition out – again, if your city council is “on the take” and want the extra revenue from having a single operator, that’s a local problem) they’ll make the terms favorable.
The problem is very simple – it’s EXPENSIVE to lay new cable, buy new equipment, hire people to run the place, etc etc etc. And when you’re talking about cable, you’re talking a LOT of money, and you aren’t going to even begin to see a return for a decade.
Add to that the fact that you’ll have to cut prices to the bone to even have a chance to lure away your competitor’s customers (and your competitor has already paid off the debt from building their network, so they can cut their prices even lower than you can afford to).
All of this adds up to 2 very simple words that have been said numerous times in the past in this and other threads: “Market Forces”.
The problem isn’t that “they aren’t allowed”, the problem is “It just isn’t worth it”.
Here’s a perfect example I’m aware of: Shrevesport, LA. – the franchise agreement there is expired. Anyone can come in and build a cable network anytime they want to. It’s been that way for years. No one does. Why? Market Forces.
U-verse was sued because they stated they didn’t NEED a franchise. They went to local areas, said “We’ll agree to this and if you don’t like it, too damn bad.”. Then they went ahead and did it anyway, without the agreements. There may have been isolated areas that “refused”, but that’s 100% that local area’s right to refuse them. These are you local elected officials saying “no”. There was news story after news story of AT&T going to local governments, offering craptastic terms they KNEW would get turned down, and then building out anyway. Here’s an example: [www.multichannel.com]
The most damning part?: “In December, city officials offered to negotiate for temporary authority for AT&T to operate in the community, where it will compete with Time Warner Cable. But AT&T stressed that it would not apply for a cable franchise unless a court ordered it to do so.”
THEY DIDN’T EVEN TRY! They said “Uh, no. We don’t care what you think, unless there’s a court order, piss off.”.
More examples of how AT&T never applied for a franchise agreement *anywhere* (because if they had, even once, they wouldn’t have been able to pretend in court that their service isn’t cable and isn’t subject to franchise agreements):
[www.dslreports.com]
[arstechnica.com]
All of these articles say the same thing – AT&T didn’t want to do a LOT of the things almost all franchise agreements require: they wouldn’t notify the city of construction plans. They don’t want to build out the entire community, just the areas they can make the most money, they don’t want to get the impact studies done. Lots of things.
If you can provide even ONE link to a news story saying that AT&T applied for and was denied a franchise agreement, I’d like to see it.
@mac-phisto:
The thing is, people have tried to launch competitive cable offerings – they went bankrupt. RCN is the best example – they deployed competitive networks in very attractive markets (rich East Coast suburbs), and crashed and burned. They’re back in business, having basically defaulted on all the debt they undertook to build out the networks.
Cable deployment costs, ballpark, $1k for each home you pass, just for the network (no headend equipment, no set top boxes, just the physical outside plant), and that’ll last _about 10-12 years before it needs to be replaced. If you get 50% penetration (as the incumbents have), that’s $2k per customer in equipment costs. If you get 25% penetration or less (which is what a new entrant would be looking at, at best), it’s $4k/customer in network costs, plus, if they take all three services, about $800-1000 in equipment costs (set top boxes, voice switches, cable modems, etc). The average cable customer who takes all three services generates about $40-50 in cash flow per month (after paying the programmers, the staff, etc.), or $500-600/year. To get that $5k it’ll cost you per customer to start up, you’ll need to pay about $400-450/year in interest, leaving you with, at most, $200 in cash flow per year. Over 10 years, you pull in $2k. Then, you have to rebuild the network, only you’ve only gotten back about 40% ($2k out of $5k) of what you put into the network, so you’re $3k/subscriber in the hole.
As I said, being a second cable operator in a given market is a lousy business, unless you go bankrupt and essentially get your equipment for free.
@acambras:
Lafayette. [www.lus.org]
@dbeahn: town selectmen & board of selectmen don’t negotiate cable contracts in connecticut. the department of public utility control is the franchising authority for the entire state. cable franchises span multiple towns. you can access franchise info here:
[www.dpuc.state.ct.us]
now, whether or not the dpuc is crooked…i think that goes w/o saying.
i stand by my original argument that new cable operators are not allowed by nature of the law. at&t is taking advantage of their current status as the state’s primary telco to disseminate their technology, but a cable operator would not be granted the rights needed to build an infrastructure without a franchise & the dpuc would not grant those rights without proof that the required infrastructure exists.
it is only b/c at&t is already regulated as a public utility that they have the ability to build infrastructure needed to comply with franchise requirements before obtaining the franchise.
the “market force” causing this government-mandated localized monopoly.
@mac-phisto: “i stand by my original argument that new cable operators are not allowed by nature of the law.”
Except that you’ve provided no evidence to support your argument. Quite the contrary, if you read some of the agreements listed on the link you sent, I bet none of them promise exclusivity. I checked 4 at random, including Comcast Norwich, and they don’t say anything about exclusivity.
Since the link you provided proves you were 100% wrong about your first point (that AT&T applied for and was denied a franchise in CT.) and also directly contradicts your statement “new cable operators are not allowed by nature of the law.”, can you post a link to the section of law that says this? Either State of Federal would be fine.
Or, you could just admit that you don’t know anything about any of this, and take this as a learning opportunity.
“it is only b/c at&t is already regulated as a public utility that they have the ability to build infrastructure needed to comply with franchise requirements before obtaining the franchise.”
Um, no. By law, they do NOT have the right to build a cable system just because they’re a telco company. No more than you’d allow a water company to suddenly start running electrical lines without permission. What AT&T did was (and is) illegal, and that fact is being time and again decided in courts across the country. I have the “ability” to shoot someone with a gun. That doesn’t mean if I do I won’t be arrested, charged, tried and likely convicted. Just because you have the “ability” doesn’t mean you can go do whatever it is. File this under “duh”.
While we’re going over things you have made false statements about, intentionally or not, a random sampling (Cox Enfield, Comcast Norwich, and Cablevision of CT.) reveals there isn’t a “you have to have all houses hooked up before you have a franchise granted” clause. That’s just one more thing you made up because, I’m guessing here, if it DID work that way, your conspiracy theory might at least make SOME sense. All of those agreements have some clauses in common, but there are others that are unique to each one, which pretty much proves that the agreements are negotiated individually, and therefore there is no bar to a company applying to build a new system.
As far as the corruption in the government of CT – that’s a problem that it is the responsibility of the voters in your State to fix. It is not, however, a reflection of the laws of your State.
@mac-phisto:
This is just wrong, I don’t know why this is hard.
There’s no catch-22. To begin your buildout, you need a franchise. To get that franchise, you need to (a) make commitments as to speed of buildout, public access offerings, etc., and (b) show financial viability. Get those two, and you can get a franchise, and THEN start to build.
@JustAGuy2: i’m not sure where your figures come from, but we’ll assume they’re pretty accurate. i could see where a startup might have trouble. but what about an existing operator in a border franchise? the ridgefield, danbury, bethel franchise i spoke of here is currently awarded to comcast & is bordered by cablevision to the south & charter (cox) to the north & east. either could easily meet the subscriber requirements for minimal deployment cost (both already have head-ends in place in connecticut). they are both large companies, so we can assume that they will be amortizing the capital development instead of taking loans out (which eliminates the interest cost). the entire deployment by comcast is 760 miles, 48000 households passed, 36000 subscribers (75% penetration). that works out to ~60 possible (~48 actual) customers/mile of cable run. conversely, charter (western) has 2700 miles, 90000 households & 70000 subscribers (78% penetration). their market has only ~34 possible (~25 actual) customers/mile of cable. by running the extra 760 miles, their # of potential customers/mile of cable rises to 40.
by running lines to just the homes in the danbury & bethel part of the franchise area (which complies with the “effective competition” clause of the telecom act), the numbers are even higher. i can’t break them down b/c i don’t have access to exact data on cable miles/town, but i can tell you that danbury & bethel have a higher concentration of houses/sq mile (600 households/sq. mile vs. ~253/sq. mile of total land area). ridgefield comprises 37% of the total franchise area, so one could assume that by eliminating ridgefield, 80% of the households could be reached by running 20-30% less cable. 38000 households @ 1K = $38 million investment cost. 25% (9500 households) of that would generate $4.75-5.7 million/year = $47.5-57 million over 10 years for a net profit of $9.5-19 million (using your numbers).
seems like a pretty good investment to me. so if it’s not a monopoly, what market force exactly would be causing charter not to invest in a border franchise? collusion?
@dbeahn: i can’t find evidence that at&t applied for an application. but the dpuc originally determined that they didn’t need a franchise (05-06-12), so it stands to reason that they wouldn’t apply for one.
at&t does have a right to lay “cable” (fiber optic) in connecticut, which is what they have been doing & they can continue to build as much as they want. u-verse travels over their existing dsl setup – it just requires a beef up to handle the greater throughput. they just can’t court subscribers until whether or not they need a franchise agreement is resolved. i don’t know what you shooting people has to do with the argument, but please don’t. that’s not an effective way to resolve anything.
the law doesn’t inherently state that cable operators are granted a monopoly, but the renewal reviews repeatedly refer to the state granting a “near-monopoly”. obviously how near a cable franchise approaches the definition of monopoly is up for debate. the fact that competition does not exist in 22 of the 24 franchises in the state speaks for itself.
furthermore, i cannot find a single application by a company that does not currently have a franchise (except the transfers caused by acquisitions). interesting. is the cable business really that unprofitable? if so, why are comcast, cablevision & cox so damned rich?
As far as the corruption in the government of CT – that’s a problem that it is the responsibility of the voters in your State to fix. It is not, however, a reflection of the laws of your State.
thanks for the chuckle.
@Sudonum:
Cool — I always liked Lafayette. Great people, great music, great food. And they often did things before BR or NO got around to doing them (like curbside recycling, IIRC).
@mac-phisto: See [www.dpuc.state.ct.us]
It was resolved. CT. isn’t one of the places AT&T proceeded without an agreement, but they also never applied for a franchise in CT. They proceeded based on the decision that came about as a result of Verison etc. In other places where it was determined they needed a franchise agreement, they proceeded anyway. The “shooting” comparison is an example of taking an argument based on logic to an extreme situation to see if it still holds up. I don’t remember what the principal is called, but it’s an old one. So I took the statement you made about “Because AT&T has the ability to do it, they can ignore the law” to the extreme, and even though your statement didn’t hold up as it was, I thought maybe you’d see the error if I brought it to the “shooting people” side of the street.
“furthermore, i cannot find a single application by a company that does not currently have a franchise (except the transfers caused by acquisitions). interesting. is the cable business really that unprofitable? if so, why are comcast, cablevision & cox so damned rich?”
This is the statement that makes me throw my hands up and decide you just can’t be taught anything. I have explained it a few times, and Justaguy2 has explained it at least twice. With actual estimated numbers. I’ll say it one last time:
YES YES YES YES!!!!! Being a second company coming into an established market is NOT profitable. JustAGuy2 gave you the real example of RCN – trying to “break into” an established market drives companies into bankruptcy. Comcast, Cox et al are rich because they DON’T EVER GO INTO A MARKET AS A SECONDARY CABLE COMPANY – they know there isn’t any money in it.
In other words, it ISN’T “interesting”, it’s OBVIOUS.
@mac-phisto:
Cable companies aren’t actually that damned rich. Their share returns are pretty uninspiring, actually.
Also, you can’t just say “it eliminates the interest cost.” They still need to raise capital to do those buildouts – if they fund it from internal cash flow, that means that there’s debt they’re unable to pay down, so they’re effectively paying higher interest anyway.
Even if your numbers are right, a $19MM profit over 10 years from a $38MM investment is a lousy business. Generally, a company’s cost of capital is in the range of 10%. For that cost of capital, the company would need to generate $3.8MM/year on that $38MM investment (or $38MM over 10 years) to make an investment vaguely worthwhile. A $19MM return over 10 years on a $38MM investment is value-destroying.
@dbeahn: you’re right. i can’t be taught anything. despite your repeated attempts to beat the concept of market forces into my thick skull, i am still perplexed at the idea that a market anomaly (localized non-competitive cable franchising) can be “easily explained” by lack of interest. especially when real-world examples of cable competition exist. i’m just supposed to take the idea that cable cos. don’t want more customers at your word. the market for CATV exists. a demand for competition exists. market forces dictate that competition would exist. yet it doesn’t.
@JustAGuy2: Cable companies aren’t actually that damned rich. Their share returns are pretty uninspiring, actually.
share returns =/= corporate wealth. all 3 companies hold places on the fortune 500. that makes them pretty damned rich:
84. comcast
380. cablevision
409. charter
but i also assumed a stagnant 25% of available market share. the investment cost gives them growth opportunity to ~$200 million & increases their available households by 40%. personally, if i had a choice between comcast & charter, i’d choose a bullet, but comcast’s declining market share in the region* points to an opportunity for investment.
*i noticed after i posted the hypo that the numbers i lifted were from a 2003 report of franchise companies. most of the numbers are close enough that the equation will be roughly the same. what was striking is that market penetration for comcast dropped to 69% in 4 years (2003-2007), a decline of 2000 households. that decline is most likely attributed to at&t’s bundled service (echostar, dsl & telephone), but charter can easily compete with this service at their current price point with short-term sign-on incentives.
@dbeahn: you know, i’m wondering at what point i became the dumbass student being taught by the dumbass teacher. i read back thru the posts & i can’t find wherever it was that i stated that at&t applied for & was denied a franchise. i think i just stated that it was denied franchise rights (which is evident in 05-06-12 decision that we both referenced).
i also don’t remember stating that “because at&t has the ability to do it, they can ignore the law”. i believe i stated that they used their existing license as a telco to run cable that they were legally allowed to run.
finally, competition exists in some markets – primarily from cable overbuilders, which tells me that collusion exists in the marketplace. the fact that cable overbuilders haven’t reached connecticut – a wealthy, highly-populated state – tells me that regulatory authority perpetuates the status quo.
you & justaguy2 use the example of RCN to prove that competition is not profitable. here’s a link to WOW! – the 12th largest cable provider in the country & a cable overbuilder. evidently, competition is profitable for them.
@mac-phisto: Dood, that “decision” you referenced wasn’t even a decision. It was a request to establish a new docket, and it had nothing to DO with AT&T. Zero, zilch nada.
If you go read the decision (referenced in the docket request you mentioned) you’ll find that a decision was made that said IPTV didn’t require a franchise.
NO WHERE does it ever say AT&T applied for a franchise, nor does it say AT&T was denied a franchise. You referenced that earlier in this thread, saying that AT&T had been denied a franchise because they didn’t need one.
In answer to your first question, it seems you showed up here a dumbass, and despite 2 people trying to explain very, very basic economic theory to you, you remain a dumbass. If the cable industry was so profitable, we’d be seeing competition like in the wireless industry. We don’t. The capital investment up front is too high and the ROI too low.
I’m not even sure what your point is with the WOW link. Are they in areas as a secondary cable provider? Because if they are, it certainly proves you’re wrong about “the law prohibiting”. Which does make you look like a dumbass, since this whole discussion started when you asserted that the law would keep WOW from doing what you’re now using them as an example of.
@dbeahn: you aren’t very familiar with the regulatory process are you? docket #05-06-12 is entitled, “DPUC Investigation of the Terms and Conditions under Which Video Products May Be Offered by Connecticut’s Incumbent Local Exchange Companies”. here’s a key paragraph to understand what this is about:
“The Department commenced this proceeding pursuant to Conn. Gen. Stat. §§ 4-176 and 16-11 to investigate the terms and conditions under which proposed video products may be offered by two incumbent local exchange companies (this means IPTV), namely SBC (now known as at&t…OMFG, it does have to do with at&t!) and Verizon. (this next part’s important so pay attention!) The declaratory ruling statute was invoked as a procedural matter normally used to determine issues of law as herein presented such as whether the rules and regulations related to the provision of CATV services are applicable to the Telco and Verizon offerings. It is a well-established rule of statutory construction that an agency must be given the opportunity to decide a question of its own jurisdiction, particularly where the issue of the agency’s authority or jurisdiction over a matter may be aided by its expertise and interpretation of its governing statutes.”
here’s what i said: “PUC refused to give them a cable operator license (stating that they didn’t need one)”. now let’s go thru the painful process of connecting the dots: 05-06-12 was a statutory ruling by the dpuc that the video programming offered by at&t (f/k/a sbc) & verizon did not fall under the scope of the dpuc catv division. hence, they stated that at&t didn’t need a cable operator license to commence IPTV service.
i’m sure i could have worded it better, i didn’t realize you…err…it was that obtuse.
wow does not market in my area, but since you seem completely steadfast in the ridiculous idea that monopolies are naturally occurring economic forces, i felt the need to try a different method for persuasion. it is a cable overbuilder in the midwest, disproving the theory that competitive cable is not profitable. btw, in case it wasn’t crystal clear, an “overbuilder” builds over existing cable franchise areas. imagine that!
basic economic theory doesn’t explain this. & even if it did, you certainly did a horrible job of explaining how that happens. justaguy2 has at least provided some figures & informational analysis. your argument is simply market forces, market forces, market forces, MARKET FORCES!!!!11! laced with insults. it’s really not an effective argument at all.
@mac-phisto:
Just an an FYI, WOW acquired the bulk of their assets from bankrupt providers, so again, they’re not bearing the full cost of buildout.
@vonskippy:
Look at the PDF.
@mac-phisto: You’re right. Your conspiracy theory, in spite of having zero facts, evidence or even sound reasoning to support it, is much more likely to be the REAL reason.