How much of a broadband monopoly is there?

One of the issues that comes up  in the Net Neutrality discussion is people’s perception that there is a monopoly or duopoly on broadband providers.  Ok, for folks outside the U.S. this is going to be a very U.S.-centric discussion because I know so little about how it works elsewhere.  Just be forewarned.  But is there a monopoly/duopoly, and if so how did we get here?

In Urban and Suburban U.S. just about everyone has access to two wired broadband offerings.  One from the old telephone companies and one from a cable TV company.  Why only two?  Because government granted a monopoly to one company from each category to operate within their jurisdiction.  The creation of the telephone system predates me of course, but I lived through the evolution of Cable from pretty early on.  A city, town, or county would open up a competition to give a charter to one cable company which would be the exclusive cable company allowed in that jurisdiction.  The cable companies would then bid, offering things like community access channels, to get the charter.  Thus when broadband came around there were two types of companies with already built out networks, Phone and Cable.

ADSL let the phone companies offer broadband over existing “last mile” copper cables into homes.  Cable companies responded with a number of efforts, with DOCSIS being the most notable, giving them the same capability to leverage their existing plant.  Over time various parts of this infrastructure have been updated or replaced, but this is mostly an incremental effort.  With so much existing plant in place, no new player could (with limited exception) create an alternate wired broadband offering.  And so most of the U.S. lives with a wired broadband duopoly.

It doesn’t really matter that many small cable companies have been swallowed up into a few giants, you had ONE before and you have ONE now.  You may have liked the little local guy better than you like Comcast, but it’s not like you had a choice before.  Years ago when I lived with a little local cable company I was thrilled that a bigger company bought them.  The little local cable company was not investing in digital TV or broadband.  The big company came in and immediately started doing an upgrade to their latest service capabilities.  I lost on customer service, but won out big time on capabilities I desperately desired.  This was in fact my first broadband service.

But having a wired broadband duopoly is not the same thing as having an actual duopoly, because we also now have wireless and (finally decent) satellite broadband offerings.  I live out in the sticks with no cable service.  I live at the maximum distance for a DSL line, with a maximum 1.5 Mb/s available and frequent issues cutting that in half.  Neighbors north or east of me don’t even have the DSL option.  Yet we do have a wealth of broadband options, they all just have one or another tradeoff.  We have at least two fourth generation satellite broadband options (Hughesnet Gen4 and Excede) and a fixed WiMax wireless offering from a local ISP (which is actually the preferred option for most of us).  Then there is Verizon’s HomeFusion LTE offering, the most serious modern option I’ve seen from a wireless company.  It uses an antenna mounted outside your house connected to a router inside.

Sprint, which long ago pioneered Fixed Wireless, is in the process of getting back into this business as well.  It currently offers the Netgear LTE Gateway 6100D.  This won’t work for me because I need an external antenna to get sufficient signal strength in the house, but it would work for many of my neighbors.  Or in my barn (which has an office and a lounge for people, in case you were wondering what horses would do with Internet access) which doesn’t have a bluff interfering with wireless signals.  In addition Sprint is working with DISH to build out a Fixed Wireless network in Corpus Christi Texas.  This is the real replacement for its old Broadband Direct service, and if successful could see Sprint and DISH blanket the country with a Fixed Wireless offering.

Neither AT&T nor T-Mobile have specific home wireless offerings that I know of, though of course you could (as with Verizon and Sprint) use their mobile hotspot offerings to cover an apartment.  For a while I used a Cradlepoint router with an AT&T 4G USB Modem to bring broadband into our barn.

Jumping back to the satellite options, I currently use Hughesnet Gen4 as a backup connection to our local WiMax ISP.  The performance of Gen4 is on par with the ISP, with better peak data transfer rates, though very long latencies impact some applications.  I use a load balancing router (with a couple of latency-sensitive things locked to the WiMax connection) and just about can never tell if my traffic is going over WiMax or Gen4.  Satellite used to be a poor connection of last resort, but the latest generation elevates its standing.  Peak throughput is better than Verizon’s HomeFusion, at least until Verizon moves to LTE Advanced.  But Verizon is half the price and doesn’t have satellite’s latency problem (bouncing a signal off a geosynchronous satellite takes time).  Tradeoffs, tradeoffs.

The problem with all of the wireless technologies, except for my local WiMax ISP, is that they are metered connections.  Essentially you pay by the gigabyte.  But as we’ve seen with the T-Mobile initiated price wars, higher capacities at lower prices are becoming the norm from the mobile carriers.  How long this trend continues depends on efforts to free up additional spectrum and to make more effective use of existing spectrum.  Hughesnet is rumored to be considering a (probably very expensive) unlimited plan, which would be a very interesting option for many more people when latency isn’t an issue.

So how much of a monopoly on broadband is there really?  Not much of one.  Here in my rural area my neighbors and I have 8 choices, although not every choice is available to every home.  In a typical suburban neighborhood anywhere in the U.S. you have as many as 10 choices when you throw in the 2 wired providers, 4 nationwide mobile providers, 2 satellite providers, and 1 or more fixed wireless or regional mobile providers.  Urban dwellers probably can’t do satellite, but are more likely to have additional wireless options.

All of us would probably like 1GB to the home with no capacity limits, 20ms latency, and low low prices.  Ok, we aren’t there and may never get there (especially the low low price part).  But it’s a fallacy to claim that broadband is a monopoly or duopoly.

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12 Responses to How much of a broadband monopoly is there?

  1. A great PBS video on the state of broadband in the U.S. and comparison to the model in the UK and forward-thinking countries in the EU (e.g. Netherlands). I’m all for deregulation and fair competition based on price/performance vs. geographic zone.

    • MarcelDevG says:

      Funny to see my country (the Netherlands) in a pbs documentary. Even funnier, that I can watch it over the internet with my 150/15Mb unmetered cable connection (soon to be upgraded 200Mb 🙂 for about 49 euro/month, including digital tv.
      But, it’s a relative: the Netherlands is about as large as your state Washington. And in Amsterdam, out biggest city, live about 1 million people. Out country is one of the most dense build countries in the world. And if you live in a rural part, there is no cable or (a)dsl. And no wimax. And mobile internet (3g/4g) is expensive and metered.
      My cable company is about to be aquired by Liberty Global, after the former owners, Cinven and Warburg Pincus brought it to the stock market.
      Funny isn’t it?

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  3. We live in South Korea. For about $30 USD per month we get 50mbps download and 5mbps up. As the tech magazines and websites, etc. like to point out South Korea is arguably the most ‘wired’ country on the planet. Here’s the kicker. The place is wired like a fraternity for cable television. When we had our internet connection installed, the guy drilled a hole in the frame of one of our windows, threw the wire across the roof of our building, threw the wire off the top of our four floor apartment building to the street, then connected the wire to the giant spider web of splitters on the telephone pole. There are probably twenty connections from various building in our neighborhood that are connected in the same fashion to the same telephone pole. The wires run through and around trees. It’s a giant do-it-yourself job. The wires are just everywhere.

    This installation method just wouldn’t be tolerated in most of the suburban US. Our entire problem is the last mile. To do it right, every single street in America needs to get ripped up to install fiber. Until that happens we’re stuck with the current system. As you stated in the post, satellite is on the horizon, but it’s still expensive.

    • halberenson says:

      This is why wireless, not satellite so much, has so much appeal.

    • Brian says:

      I have Verizon FIOS (fiber for the last mile) in the suburbs of Dallas. The little hub that my neighbors and I use is buried in my lawn. When they came to “rip things up”, it was pretty unobtrusive; they used one of those horizontal drills and pulled the cable through the lawns and under driveways, etc. From start to finish on our street was about a week.

      I didn’t connect to that hub for about a year or two. When I ordered Fios, an installer phoned me up for a time and I asked how long it was going to take to bring the fiber to the wall of my house. He said “it’s already there”. Someone had come during the day and done it without leaving much of a mark on my lawn at all. Other than a few little “dig-safe” flags and some spray-painted grass, you couldn’t tell they’d been working.

  4. Eolirin says:

    I’m sorry, most of those ‘options’ are vastly inferior to wired internet, and would never be seriously considered in a location where halfway decent wired service was available. Those aren’t tradeoffs, they’re drawbacks. Less speed for higher prices or significant latency and poor quality of service for close to the same price.

    That’s not how you define alternatives. Almost no one with even moderate internet needs is going to drop comcast or fios service for 4g or satellite. So for those areas that aren’t forced to rely on second best measures, they don’t even enter into it. It’s very much monopolistic for the majority of users in any way that’d matter to their actual usage; the other options need to be as good or better, or they aren’t options, and nothing, right now at least, is as good or better than cable or fiber, even on price.

    My area has developed actual competition between two proper broadband companies (adsl is a second best option too) so I know what that looks like; I get really good service at much lower prices than the average for the country; you can get over 100mbits down and 30 up, for 70 dollars a month around here. The reason why things suck as bad as they do most places in this country is because it’s not like this everywhere else. Speed rose dramatically and prices fell a bunch the second there was a second legitimate option. There’s tremendous slack in the system, and the local isps had plenty of ability to expand infrastructure when it meant losing customers.

    Rural areas like it sounds like you’re in will have very different dynamics than the rest of the country; your population density is awful to the point that you’re not going to be a good market to spend a lot on no matter what. But your area is not even remotely representative of general internet service. And net neutrality affects more than just your little bubble. It’s hardly just about video servicing either; how do you feel about Google Fiber being able to slow down OneDrive uploads and downloads while leaving Google Drive to run at full speed unless MS pays them a significant rent? That becomes perfectly legal under any set up that lets Verizon slow down Netflix traffic while leaving Redbox Instant Video alone (which is what would happen if they’re allowed to slow down Netflix at all. It’s hard to pay rent to yourself). And they could do this despite being awash in bandwidth.

    • halberenson says:

      See my response to Shirley.

      Inferior vs. Superior doesn’t count in a monopoly discussion. You have options. Some are better than others, either in absolute terms or in your particular scenario. Try taking your Comcast or FIOS connection with you when you leave the house. You can’t? Well that’s damn inferior to a Verizon or AT&T LTE option.

      I have a condo near Seattle that is serviced by both Comcast and FIOS. It was also one of the first areas that Clearwire went after with WiMax. So I’ve had some of the best options in the country. It doesn’t change my argument at all. It STRENGTHENS it. With the exception of satellite, an urban or suburban area is going to have more options than a rural area. WiMAX came to urban and suburban areas first. LTE came to urban and suburban areas first. LTE Advanced will come to urban and suburban areas first. FIOS. Google Fiber. Most people have LOTS of options.

      Now honestly your Google Fiber and Verizon examples brings up two points. The first is that if Google did that then Comcast, Verizon, and others would run great big ads saying “Come to use, we won’t slow you down”. Second, Verizon paid for the (**#($# network. They are carrying the cost of it no matter what traffic is on it. If they carry traffic from RedBox Instant Video then they are getting paid for what it cost them to build and operate that network out of the Redbox revenue. If they carry traffic from Netflix, and receive no money from Netflix, then they are not getting paid back for their investment in the network. Netflix is getting a free ride. How is that fair? And if the situation is as you describe it, that they have excess network capacity, then this discrepancy won’t last. They will find a way to sell that spare capacity to Netflix at a price that Netflix can afford to pay and still be competitive with Redbox.

  5. You underestimate how much of a monopoly there is. Some factors you missed:

    1. All of the options other than cable are usually pretty slow. DSL in the US mostly tops out at 6Mbps and most people can’t even get that. LTE is in the 10Mbps neighborhood. I doubt the satellite options are any faster. Applications that will need more bandwidth are on the way; YouTube has demonstrated 4K streaming and Netflix is working on it, and the estimated bit rate is around 15Mbps. (And even at that bit rate the video quality is going to be badly compromised.) And that’s for just ONE stream; families and shared households will need even more.

    2. Not only are most of the wireless options metered, but the price per bit is very high. Consider what it will cost to get 100GB/month from an LTE provider; you’re probably looking at $1000/month or more. And 100GB will only cover a reasonably heavy user of current services, not next-generation services. I don’t expect that price to come down quickly; wireless bandwidth is just too expensive to provide.

    3. Some of the options you discuss are dependent on being able to put up outdoor antennas. Lots of people can’t do that; either they are renters, or they live in places with property covenants that restrict or prohibit outdoor antennas. Satellite service can also be impossible to get because of a lack of a clear view of the southern sky, which can happen in urban and suburban neighborhoods.

    So the question is not how many providers can offer “broadband” but how many can deliver the real deal, which I figure starts at 25Mbps and allows 100GB/month or more? (I’d really like to see at least 50Mbps and 200GB, and those numbers will only increase over time.) For most people the answer is one. A few fortunate people – ones who live in areas where FIOS or Google Fiber is available or there is an alternate cable company – have two choices. Hate to burst your bubble, but that’s a monopoly in my book.

    • halberenson says:

      That people offer a variety of services rather than all adhering to some standard that happens to meet your needs does not play into the definition of monopoly. Tesla doesn’t have a monopoly on electric cars just because it is the only electric car manufacturer who offers a pure electric with a 265 mile range. The Nissan LEAF may offer less than 100 miles in range and have all kinds of other deficiencies relative to Tesla, but it is still an electric car competitor. Now I can tell you that it would be impossible for me to make use of a LEAF because round-trip from my house to downtown Denver, the airport, and many other important destinations exceeds its range (in fact, the airport is at the hairy edge of its one-way range) and so the Tesla is the only option if I want a pure electric. That still doesn’t make Tesla a monopoly. More broadly, just because only one company has the product that precisely matches your requirements doesn’t make them a monopoly.

      Now ignoring the definitional problem with monopoly, we have to look at both an expanding range of scenarios, the impact these competitors have on one another, and where various players may be heading in the future.

      On the scenario front my friends are reporting that as their kids leave college many are opting NOT to get wired broadband. Now why? They are the iPhone/iPad generation, don’t currently care about large screen TVs, and see no reason to pay for one Internet connection when they are mobile and another when they are at home. I think this scenario actually broadens out nicely in that the Family Share plans that mobile carriers are offering means you can add home broadband access to your shared mobile data for a modest incremental fee (Verizon wants $20/month to do it with HomeFusion). So for some significant part of the population it may be cheaper to go with a single mobile data plan and use it for home broadband than to have both a mobile plan and a wired home broadband connection. Despite the higher cost of mobile date. Wired broadband business are, or will, feel the pressure from an inability to capture or keep these customers. Particularly as some of the other things I am going to mention come true.

      Next, as wireless carriers go after this market their price is going down and performance is going up. 30GB with Verizon Home Fusion is currently $120 ($4/GB). Unfortunately their overage charge is $10/GB so currently 100GB would come to $820. But very few people are going to exceed the 30GB/month plan today. And since Verizon has shown they can hit the $4/GB price point I doubt it will be long before they offer a plan tier for 50, and eventually 100, at $4/GB or significantly less. Maybe more important is performance. LTE Advanced pushes speeds as high as 100Mb/s for mobile applications and 1Gb/s for fixed wireless. The point here isn’t that these technologies can “beat” wired broadband in most scenarios. It is that they offer alternatives that put price and service pressure on the wired broadband providers and thus represent real competition for them.

      The Sprint/DISH fixed wireless offering I mentioned is another important data point. DISH realizes that the biggest threat to its satellite TV business is that of you have to go to the local cable company (or a cable competitor like FIOS) for broadband then you are likely to go for some kind of broadband, cable, and perhaps telephone bundle. So they’ve been looking for a way to get into the broadband business. They’ve tried investing in two or three satellite based solutions in the past, but haven’t exactly picked the winners. Now they are working with Sprit on terrestrial wireless. The key takeaway here is that for their strategy to work they will need to be able to offer fixed wireless broadband to their customers that is competitive with the wired broadband from the local cable or phone company.

      Another thing you miss is that if there is sufficient demand for 50Mb/s and 200GB cap broadband offerings that more than one provider will emerge to service that need. Just because someone gets there first doesn’t make them a monopoly. Actually, it may bankrupt them if they get there too much before demand develops!

      Finally, my point about Net Neutrality is that in a strict net neutrality environment in which “peering” fails (which is what has happened with Netflix) and telecoms are not allowed to directly charge senders for the excess traffic, a major (and perhaps the only) option the telecoms will have is to meter wired broadband connections in the same way as wireless carriers do. If that happens then the differences between wired and wireless disappear at an even faster rate.

  6. halberenson says:

    The movement of 4G technology into the residential broadband market was apparently a hot topic at MWC

  7. Pravin says:

    In my country (India) broadband which are provided through wire works great. There is not every time you will get stuffed but the speed and usefulness of these broadband is quite impressive. There are a number of companies who are providing broadband service such as 3G, 4G etc through wire connection and their service is pretty faster than wireless companies service, Yes one thing, security matters every time. It is better to use a renowned and recognized service providers service every time.

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