Do Broadband Providers Actually Do Any Real Innovation?

The kind of “innovation” your Internet service provider (ISP) is fighting so passionately to protect won’t lead to faster or better service, says Ryan Singel at Wired. To ISPs, innovation means finding ways to generate more profit without making further investments in infrastructure. Yeah, it’s a deliberately provocative statement, but take a look at the list he provides for what ISPs have done to innovate in recent years versus what other companies have done.

First, think of all the Internet-related services and applications that other companies have provided: search engines, social networks, web-based email and productivity applications, online video like YouTube and Hulu, online encyclopedias, and crowdsourced product and business review websites.

Now compare that to what the ISP industry has provided: intercepting mistyped URLs in order to serve ads, forcing installation software on customers that interferes with online access, and selling access to customer online behavior to advertisers.

Singel writes,

The dirty secret of ISPs is that even as broadband usage on their networks continues to increase 30 to 40 percent a year, their annual costs for shipping data onto and off the net’s main pipes continues to fall.

The problem isn’t the cost of shipping data.

The problem is that the large ISPs answer to Wall Street and instead of planning and investing for abundance, they prefer to spend their time thinking of ways to extract more money from customers without having to invest significantly in future-proof infrastructure.

“You Don’t Want ISPs to Innovate” [Wired]

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  1. asten77 says:

    Cable/Satellite, Internet, and Cell Phones are perhaps the only examples I can think of where the cost of technology somehow goes up every year instead of down like every other mainstream piece of technology in history.

    Is this really a surprise to anyone?

    • Torchwood says:

      With the cable and satellite providers, the ever increasing costs is due to the program providers charging more for their content AND requiring that their programming be carried on certain tiers of programming to ensure to advertisers that they channel has a potential to reach a certain number of eyeballs. The most expensive “basic” channels, on a per-subscriber basis, is E$PN and the Regional $ports Networks.

  2. Darrone says:

    Excellent point, and well stated. If only this country had some technological direction and a governing body that could do more than make recommendations.

    • Kevin says:

      Put the government in charge of technology? We’d still be in the dark ages!

    • dragonfire81 says:

      I am confused. Libertarians say more government is bad and less oversight is good. I can see both sides of this argument.

      Looking at how the USPS is run, I’m not sure how comfortable I feel putting the government in charge of certain things.

      On the other hand a lot of people say “[country] in Europe/Asia has way better technology/systems/infrastructure/products than we do because they regulated the crap out of it.”

      Which approach is better?

      • Tedicles says:

        Lack of gov’t oversight will always lead to more and bigger innovations. What you see in Europe is not so much due to regulations, but more that the government spent a lot of money on the infrastructure to allow more and better access (ie getting rid of copper phone lines).

        Also imagine the gov’t not really being so ‘cool’ with all this freedom, as in China.

        The nine most terrifying words in the English language are, ‘I’m from the government and I’m here to help.’
        – Ronald Reagan

    • AI says:

      If you let the government control the internet, you’ll get exactly what Australia has. It’s up to you if you want that. I’d rather have apathetic un-innovative ISPs, personally.

      • Darrone says:

        There is a difference between control and regulation. Right now its completely open, Comcast can turn off whatever websites they want, install caps, and redirect their oppositions websites to their own. They can, and have, carved up the country to minimize competition, allowing each company to gouge customers in their area.

        It’s the new republican mindset to hear government and regulation and say “What is this, RUSSIA! They are going to clamp down on the internet and only show government approved youtube clips!” It’s ridiculous.

  3. brianisthegreatest says:

    What about fiber to the home or docsis 3.0? =/

    • Darrone says:

      Fiber to the Premises is utilization, not innovation. And Docsis 3.0 was developed mostly by Intel, Netgreat, Texas instruments, and not by ISPs.

    • Marlin says:

      Fiber to home was supposed to be done a long time ago. But there was not ENOUGH profit for it. Many analysts thought Verizon was crazy to do it. Now the bean counters have taken over and they are not expanding anymore as Comcast/Cox/TW/etc… have fought back enough to lower prices and/or get local politicians make the fees to high to install.

      DOCSIS has been put out mostly in places where there is competition. And even then some places still have a large number of modem that can’t use it.

    • PSUSkier says:

      Those technologies unfortunately don’t mean squat when you put caps on them or throttle the traffic that moves through those large pipes.

    • Brontide says:

      With what market penetration now, several years after the technology went commercial? Verizon was only deploys FiOS to “select” ( aka wealthy ) neighborhoods and now appears to have stopped completely by us.

      My Cable speeds have stayed steady at ~10/1 for 5 or 6 years, but the price keeps going up.

      • jason in boston says:

        They only went to the ‘burbs because it is easy to hang the fiber. There are plenty of places in Waltham that are not “wealthy” but they string fiber to their houses. They will never come to Boston or the People’s Republic because fiber doesn’t bent through underground pipes very well.

        It isn’t that they are going to the “rich communities”, they go to communities where the cost of putting the fiber is cheap. Paying the union guys isn’t cheap.

        • Wrathernaut says:

          What century’s fiber are you talking about?

          I’ve got gigabit fiber sitting under my desk that I can wrap around my little finger. It also gets kicked by my extended feet on a daily basis with no ill effects.

          Yes, this is fiber optic cable and not CAT-5.

          • jason in boston says:

            The fiber they pull through under the secondary lines of powerlines. Those lines have a bend radius of about a foot. The ones that terminate in a house are much smaller and therefore have a bend radius in the 5 to 10cm range.

            When I worked a summer at National Grid, I would stop and ask the Verizon guys when they would be able to bring FIOS to where I lives, and that was the reason. I moved to a FIOS friendly town, and was happy for those 2 years.

        • Hooray4Zoidberg says:

          Wasn’t part of the problem that the city said if you wire any of Boston you have to wire it all or none? I was under the impression they wanted to just wire up the wealthy areas like the back bay and beacon hill but the city was going to force them to also do Roxbury and the like to which they just said “nah”.

          Really sucks that Comcast runs virtually un-opposed in my neighborhood with no end in sight. If I could even just get decent internet through another means I’d cancel them, but the only other option is DSL and that doesn’t really cut it for me perfomance wise. In my opinion it’s a different product and therefore not truly competition to cable.

    • evnmorlo says:

      FIOS has now stopped laying fiber. Comcast rolled out docsis 3…along with a 250GB cap so you only can only use it 10 hours per month.

      • meltingcube says:

        You download 25GB per hour? This is the exact reason why caps are needed for some. I work from home 10-12 hours a day, and even download movies as well as use Netflix, and I still don’t use more than 40GB per month.

        • FredKlein says:

          I work from home 10-12 hours a day, and even download movies as well as use Netflix, and I still don’t use more than 40GB per month.

          What’s a good size for a DL’d movie? 1 gig? I know popular sizes for Bittorrented movies are ~700MB (1 CD) and ~1.4GB (2 CDs). So, 30 movies (one per day, not completely unreasonable) is 30GB. Are you sure you only use 10GB for all your other internet use?

        • JJ! says:

          Why does it matter if he downloads 25 GB a day if he does it at night while you’re asleep, and most others are asleep?

          Caps are -not- effective for regulating access or for network management because they don’t take into account the most important piece: how many users are trying to access that shared bandwidth.

        • kujospam says:

          I can go online a buy a video game for 20 dollars, and it’s 7 gbs. I normally buy 4 a month. My average usage a month is probably closer to 200 gb a month. Online TV, Movies, Phone, Video gaming, Digtial Video game buying for Ps3, PSP, Wii, Xbox 360, and the computer. It’s not uncommon for hulu or net flix to be streaming constantly, or some news program, while also someone on my house playing a game or two online at the same time. While still others are listening to internet music. The two biggest things are gaming, and Video, half is 480p and the other half is 720p. I mean hell, I just downloaded a demo of a game and it was 7 gbs. LOL This doesn’t even include work usage. Sorry, there should not be caps on data unless they advertise it to you that way up front I pay for high speed service and unlimited, if they can’t offer that to you, then yell at them not at me. I get my service, and my 25 Mbps connection. I gladly fork over my 60 a month for the fast speed, if I had to pay more money I would. Not sure how much more though.

  4. FreshPorcupineSalad says:

    Isn’t Comcast going to start offering that 250Mb/s service?

    • Mecharine says:

      Thats not really innovation, thats just activating pre-existing capabilities.

      • Marlin says:

        That and what good does it do when you are capped and/or throttle it?

        • Oranges w/ Cheese says:

          Hit your bandwidth cap in 10 seconds! WOOT!

        • jason in boston says:

          Business accounts aren’t throttled or capped. I average 1 – 2 TB a month. And only pay $10 more a month. And…have someone near Boston that I can call 24/7. I hate Comcast in most every way (compressed HD), but their business class internet isn’t bad.

          With that said, when I had FIOS for 2 years, it was the best. Hardly compressed HD. I could only tell when I used my projector.

        • Mobius says:

          I had 250 megabit service through Comcast. We used it for a month before they called us saying we were using too much bandwidth. This was before they would tell you the cap but the cap they applied was the same as their normal service. They really don’t have a firm grasp on what they are doing. We canceled the service and have their regular cablemodem service now. Comcastic!

  5. danmac says:

    I think a lot of this has to do with the relative lack of ISP competition in the United States…many Americans have to settle between only 2 or 3 ISPs where they live, which really doesn’t give much incentive for competition. Contrast that with places like England, where there are many ISPs competing to provide different services, capped or uncapped data limits, a plethora of DL speeds, etc., at many different price points.

    http://www.ispreview.co.uk/cgi-bin/listman/exec/land-line.shtml

    A casual search shows that at least 133 ISPs are fighting for your business in England…the number may be greater for all I know.

    • cristiana says:

      You are being generous with your statement that many people have a choice of providers, in some places there is only one choice of internet provider.

      • YouDidWhatNow? says:

        Indeed. I can now choose from a grand-total of one providers. Aside from satellite, which I had before, and which I wouldn’t inflict upon my worst enemy.

        The US is retarded in a lot of ways – one obvious way being the artificial monopolies granted to service providers of various types – such as ISPs.

    • dolemite says:

      Lol I WISH I had 3 ISPs to choose from. I live smack dab in the ‘better part of town’ in a small city with close to 100k people in it. My choices for the past 6 years I’ve lived there? Comcast only.

    • meltingcube says:

      My choice is either Brighthouse or ATT (dsl). With the amount of time I spend on the internet I wouldn’t be able to live with dsl speeds, thus that only leaves me with brighthouse which constantly has issues. They did however, get a bit better after reporting them to the FCC.

  6. Applekid ┬──┬ ノ( ゜-゜ノ) says:

    I just got “innovated” last weekend where their crummy modem can’t hold a connection for more than 5 minutes before ATM failure.

    Tech support? “Oh, sir, please to be restarting your computer.” Pathetic.

    SAVE ME FIOS!

    • ktetch says:

      I had a similar issue. Syetem working just fine. Then the modem’s connection drops. I can access the modem fine, even use a spare one – there is just no nothing on the line. I call AT&T, and spend 45 minutes of the woman ‘checking things’ and ‘reset modem’, ‘restart PC’, etc.

      The decision? Well, the dispatcher didn’t want to send anyone out, she thought the modem should be replaced first. just didn’t want to do her damned job, and I think I let the CSR I was speaking to have it. I also let her supervisor have it too. I mean, when I can diagnose the problems with just my home equipment better than they can with their server-side access with diagnostics, that’s BAD.

  7. Supes says:

    Isn’t all “innovation” driven by “finding ways to generate more profit”? Is disingenuous to say that ISPs alone seek to maximize profit without improving the product they deliver. All companies seek to maximize profit, and in different industries this means different things.

    When companies are able to increase profit without increasing costs, this is inevitably what they do (as ISPs are doing here). This is in no way unique to any industry, but rather a common trend among ALL industries.

    That being said, I agree the lack of competition is the reason for the lack of innovation. If there was a similar lack of innovation in the computer industry, for example, laptops would still be where they were 10 years ago and costing more.

    • failurate says:

      I have heard tales that in the distant past, there was a time when a person would be passionate about something, would improve and invent things for his passion, and the money would follow as people who shared his passion partook in his improvements and inventions.

      Now that everything is controlled by the gigantic oligarchy of corporations, innovation and change will be handed out at a slow slow slow pace, just fast enough to prevent a revolution.

  8. [MG]LooseCannon says:

    We need to start treating the data network infrastructure in the US the same way we treat the power grid. Wait. No. Bad example. Sorry.

  9. kathygnome says:

    The problem with innovation and ISPs is that the large broadband providers all have as their main revenue stream a business that will likely decline due to evolution of internet services. The conflict of interest leads them to actively try to suppress the possibilities of broadband in order to protect their legacy multichannel video and phone services.

  10. Akuma Matata says:

    Well, maybe if each carrier had actual competitors (look at where Verizon has started to compete with the incumbent cable co’s), you would see actual innovation and improvements. As long as there the type of competition we see is between 20mb cable and 3mb DSL, we’re not going to see any advancements.

    • PunditGuy says:

      “Actual” competitors is the key. I’ve bitched before about the fact that Qwest has nothing that is price-competitive with Comcast in Minneapolis. Paying 90% of the price for 1/10th the speed makes absolutely no sense. Comcast apparently agrees, and has no problem raising rates on services that cost it less to provide each year.

    • maztec says:

      They had them briefly in the 1990s. That helped create the modern communication revolution. Unfortunately, nearly all of the regulations that enabled that were rolled back in the early 2000s.

  11. Joe Gamer says:

    Ryan hit it right on the nose, the ISP’s answer to wall street and since there’s only three or four of them it’s very easy to collaborate and keep rates artificially high, This could also be applied to the wireless industry where rates just happen to be nearly identical.

  12. DeVore says:

    The linked article from Wired makes several good points, albeit with loaded phrases. Yes, I want faster, private, cheaper internet service.

    But another point that the article makes is inescapable. It is currently not in the economic interest of the ISPs or their shareholders to provide these innovations. I’m also skeptical that further government regulation will change/improve any of their practices.

    Are the economic interests of the ISPs and technological innovation for the customers mutually exclusive? And if so, what can be done to rectify that situation?

    • PunditGuy says:

      Municipal fiber. One infrastructure with multiple competitors providing service over the fiber.

      • DeVore says:

        You make a valid point. But I don’t see many city leaders pushing this agenda when there are so many other pressing issues on the table like banning pit bulls and skateboarding.

  13. EBounding says:

    My broadband connection is much faster and reliable than it was 9 years ago. But I live in an area that actually has some competition.

    • kujospam says:

      Same here, I have timewarner, WOW, AT&T, and Cox Cable competition where I live, and I see ok prices. The only thing they are really competiting on though is internet speed, everything else is sky high.

  14. vastrightwing says:

    ISPs are not innovators. They are a commodity . That is all I want. I want a wire/fibre/wireless tcp/ip connection to my NAT router. That is all. I don’t care about any innovation. Make it faster by purchasing faster switches and a fatter pipe. Don’t mess with my packets. Don’t block anything, don’t inject anything into my packets. Don’t shape my packets. Again, do not innovate. Oh, feel free to lower your costs and more money as long as you don’t innovate my pipe into not working as well as worked before.

    If you also want to compete and add movies and content, fine. Just don’t force me to pay for that junk unless I want it as an extra.

    • AnthonyC says:

      Also, feel free to offer speed tiers. I have no problem with people who want to get slower internet.
      But if I pay for a certain speed, don’t then reduce that because of the particular data I choose to send and receive, and don’t set a data cap lower than what using my purchased speed for one billing cycle would seem to entitle me to.

  15. MustWarnOthers says:

    I guess this is that famed “Free Market’ working its magic, huh?

    The oligarchy that is the large ISP’s gobble up any possible small local competition, lobby the federal and local government to keep other big players out of their territory, beg for the subsidies (giant taxpayer handouts) from the Government so they can “expand their network and increase coverage area”, and then squeeze every last drop of profit out of all that.

    This country is a complete and utter joke, and to think you have any say, or that your vote counts is the most bullshit rhetoric being sung.

    • PencilSharp says:

      Despite having “libertarian” leanings for some time now, I always laugh when I hear talk of the “free market.” A few major banking corporations hold the entire economy by the short and curlies, and Your Good Government (TM) is happily helping them along.
      And now Your Good President (TM) will soon have the Intarwebs under his heavy thumb…
      Still, your view of the country as a whole has something of an expiration date. Quick quiz: what happened the last time an overbearing government cheesed off enough people? Hint: think back about 234 years…

      • AI says:

        You’re going to rise up and use your Smith & Wesson against the government’s M1 Abrams and F/A-18 Hornets? I’ll be sure to get a front row seat for that one.

        • TehLlama says:

          A bunch of uneducated religious extremists were able to wipe out a larger force of Mi-8’s, T62’s, and such with limited foreign support. Considering that the majority of the military would rather see the political class collapse under its own hubris, it’s not implausible.

          Hope you don’t get a front row seat.

        • FredKlein says:

          You’re going to rise up and use your Smith & Wesson against the government’s M1 Abrams and F/A-18 Hornets? I’ll be sure to get a front row seat for that one.

          A S&W might not do anything to a tank or a jet. But the tank crew and the pilot have to come out of their vehicles sometime…

    • voogru says:

      Look at how the government stamps down community broadband projects or projects from competitors, the incumbent telcos can only do that with the help of the government. In a sense the government protects the telcos from competition, because if I have 10 billion dollars and want to run fiber throughout a city, who’s going to file an injunction against me?

      The incumbents.

    • jtheletter says:

      I can’t tell if you’re deriding the free market concept or just being sarcastic before pointing out how the market as it exists currently isn’t “free” in the economic definition.

      You’ve listed a number of reasons why broadband access isn’t a “free market” thus this is not a failure of free market forces since they are not in place.

      • kujospam says:

        It has been proven that free market can only exist in a computer program, or in a small nitched tribe of people. Adam Smith said that free market beyond a small tribe of people is impossible.

  16. MustWarnOthers says:

    The only say you actually have is the cliche “Vote with your wallet”, which in the ISP industry, is massively convenient since in many areas you either pay what they want or you go without it.

  17. smartmuffin says:

    I’m willing to bet that the average American currently gets more bandwidth per dollar spent than they did five, or ten years ago. What about the ubiqity of wireless internet/networking in the home, which was virtually unheard of and hardly utilized at all 5+ years ago?

    As far as “answer to Wall Street” I assume he means “answer to their shareholders,” which, you know, is a GOOD thing. It’s not evil to want to make as much profit as possible.

    • evnmorlo says:

      If you focus exclusively on maximizing profits you inevitably end up a thief, since thievery is all profit.

    • PunditGuy says:

      Wireless home networking isn’t an innovation of the ISPs, and it’s possible because of the 802.11 standards (b, g, n) for interoperability. Wireless G devices were basically brand new about 5 years ago, which may have had a bearing on their popularity.

      As for “more bandwidth per dollar,” yeah — in theory, but not in the way that we’d prefer. In 2005, I could get 5-6Mbps for roughly $55 a month. Now I get 10-12Mbps for $55 a month. Double the value, right? Yeah, except that those speeds are completely theoretical, the experience isn’t twice as good, and I’d rather be getting 5-6Mbps for $30 instead. 5 years from now I might be getting 18-22Mbps for $55, but I doubt that there will be a perceivable difference in my Internet experience.

      • smartmuffin says:

        Maybe it’s not “twice as good” but I’d have to say it’s substantially better than it was in 2005, no? And I’ll wager to guess it will continue to get better and in 2015, it’ll be significantly better (per dollar spent) than it is now.

        Do keep in mind, people’s expectation of what the Internet is supposed to do have changed dramatically. How many people expected their Internet provider’s basic package to provide them with the means to conduct live streaming of HD-quality movies to their Xbox to play on their TV in 2005? Today, it damn well better. Am I the only one who remembers paying $30 a month for 56k? Internet has gone from “in a few seconds this low quality JPEG will load” to “in a few seconds you’ll be pre-buffered enough to watch an hour’s worth of HD video without having any more load times” for about the same price.

  18. scurvycapn says:

    I want a barebones ISP that gives me nothing but access. I have my own email. I don’t need their portal with news stories, videos, etc. I already get the information I need from other sites. All I want from them in a line running to my house to give me the internet and a phone number to call if something goes wrong.

    • webweazel says:

      I’ve only been with a total of 2 ISPs in like 15 years, but that’s all I ever got. Email addresses if I wanted them, and a bare pipe to do what I wanted to do, and great customer service if I ever needed it. I’ve used other people’s ISPs and have not seen anything of the type you are talking about.
      Who the heck are you with….. AOheLL?

  19. SlappyFrog says:

    This isn’t news and any one who is surprised by this needs to pay attention.

  20. Rena says:

    ISP innovations? How about new ways to shape and drop packets, throttle bandwidth, censor the web, inject ads, sell your personal information, and charge increasingly high rates for increasingly low caps? Don’t tell me ISPs don’t innovate. The innovation never ends.

  21. Blious says:

    Sure but it takes awhile and when they do, they find more ways to nickle and dime consumers anyway possible to use it

    We can expect our speeds to increase and our caps to decrease substantially.

    I laugh at how all these companies jump up speeds yet then tell us they can’t afford us to use it.

  22. maztec says:

    Fact of life: Natural Monopolies do not innovate, unless they are forced to do so. Even if they have done something innovative, they do not pass it on to the consumer, unless forced to do so.

    Look at the history of the facsimile machine for a great example of how innovation is deterred by communication monopolies.

    Look at the AT&T Divestiture for even more information.

    There is no incentive to do better, when you can make money as-is.

  23. jeff_the_snake says:

    innovation is just their code word for maximizing profit by any unscrupulous means necessary.

  24. RagnarIV says:

    Soooo, exactly how many years of experience does “Ryan at Wired” have in the industry. My guess is 0. For a Cable ISP, the industry standard CMTS is the Cisco UBR10k. The chassis costs $1,000,000.00+ then factor in you need cards, and they cost $150,000 to $300,000 apiece. Don’t forget you’ll need 8 of them to connect your customers. So we’ve already broached the 3 million dollar mark. Oh yeah, let’s not forget the IP space you need to purchase, your uplink, which can cost anywhere from a 10,000$ a month up depending on your bandwidth utilization or, yeah if you buy a fiber optic network and peer with fellow tier 1 ISPs you’re looking at another multi-million dollar investment, which still costs you monthly in bandwidth usage and maintenance. We haven’t even touched on handing out CPE equipment, tech support, customer service, technician’s in the field, also the physical plant (the cabling that runs from the ISP to your house). So yeah I call this article bullsh*t.

    • RagnarIV says:

      Just in case people are wondering I work as NOC analyst for a medium sized ISP.

    • JJ! says:

      Man, it’s a shame that the investment you’re talking about never brings in profits. I mean, if there were profits to be found, big companies would move in and knock out the little guys such as your company.

      Such a shame they have it so hard, with all the choices people have.

  25. Levk says:

    old news very old news

  26. Torchwood says:

    I used to work for an ISP a few years ago. Back then, it was dial-up modems, and it was easy for an ISP to add more dial-up capacity or to contract with a supplier to add capacity.

    Then came DSL and Cable Broadband.

    Unlike dial-up modems, DSL requires that you have specialized equipment co-located in the telephone company’s switching office. The small ISP could not afford to co-locate the equipment in the switching office, and ended up contracting with a third party. That third party got charged a high rate to co-locate the equipment in the telephone switching office. The customer was unwilling to pay that high fees, especially when the telephone company’s own ISP service was so much cheaper.

    Goodbye mom and pop ISP. Hello ISP run by MBAs.

    What got worse was when I answered the phone as a tech and people wanted to get broadband. They were calling us because both cable broadband and DSL were too far. I had to give the same answer: technically not feasible. We also got a lot of cancellations not because of our technical support (they thought we were the best), but because we were unable to provide high-speed internet at a competitive price.

    We see innovation when we have good competition in the marketplace. When we have only one or two companies providing the service, there is no incentive to improve. There are such high barriers for new entrants in the Internet marketplace that it is almost impossible to introduce more competition into the marketplace.

    And, what makes it worse? The cable companies see the Internet as competition to their cable TV operations. Why should they allow users to download the shows off the Internet through their cable-provided Internet, and then have that user not subscribe to their cable service?