
One reason cable companies won’t willingly compete against each other - r0h1n
https://www.washingtonpost.com/news/the-switch/wp/2016/05/24/the-reason-cable-companies-wont-willingly-compete-against-each-other/?tid=sm_fb
======
Afforess
At this point, Cable companies are all members of a single large shadow
monopoly not unlike Standard Oil was in the early 20th century. The rational
the justice system used to break up Standard Oil is shockingly similar to the
situation we now face with cable:

 _Rates have been made low to let the Standard into markets, or they have been
made high to keep its competitors out of markets. Trifling differences in
distances are made an excuse for large differences in rates favorable to the
Standard Oil Co., while large differences in distances are ignored where they
are against the Standard. Sometimes connecting roads prorate on oil—that is,
make through rates which are lower than the combination of local rates;
sometimes they refuse to prorate; but in either case the result of their
policy is to favor the Standard Oil Co. Different methods are used in
different places and under different conditions, but the net result is that
from Maine to California the general arrangement of open rates on petroleum
oil is such as to give the Standard an unreasonable advantage over its
competitors "_ [1]

Cable companies regularly adjust prices based on the entrance of competitors
(Google Fiber), or when a cable company enters a new market, prices are
initially low to prevent competition and then slowly raised to a much higher
level. The excuses for vast differences in rates in metropolitan cities are
usually paper thin, but accepted by the media and government at face value.
Cable companies also operate secondary businesses with a conflicting interest
to their cable operations (Cable TV packages now directly competes with
Broadband Internet, also see: NBC/Comcast), not unlike Standard Oil's purchase
of many railways and control of shipping lanes. This arrangement vastly stacks
the deck in favor of cable companies, and further cable company "cooperation"
with state and national officials have created new restrictions on municipal
competition.

Cable companies are our 21st century Standard Oil.

[1]
[https://en.wikipedia.org/wiki/Standard_Oil#Monopoly_charges_...](https://en.wikipedia.org/wiki/Standard_Oil#Monopoly_charges_and_anti-
trust_legislation)

~~~
imgabe
It really is shockingly similar and a lot of the arguments against net
neutrality try to dismiss it as applying "laws made for railroads" to the
Internet.

Back when oil was getting to be useful, lots of people discovered it. Usually,
it was in a remote area. The only way to make money off it was to get it to a
refinery and then the market. Standard Oil bullied and bribed the railroads
into giving them preferential rates and charging high rates for competitors.
It's exactly like what cable companies would like to do by subverting net
neutrality, give preferential treatment to the traffic that profits them most.
It's just information instead of oil, which is even more insidious since it
can control the public discourse.

~~~
AnthonyMouse
The thing is, cable _is_ more like the railroad than it is like Standard Oil.
Petroleum isn't at all like a natural monopoly. It took a lot of corruption
and bribery for Standard Oil to keep competition at bay.

But nobody is really stepping forward to lay residential fiber. Google is the
exception and it's because they're one of the only companies with enough money
to survive a war of attrition with the incumbents, and even then it's only in
a handful of places.

It's prohibitively expensive to have twelve companies each run a different
strand of fiber to every house. And you only _need_ one. The key is to a) get
_one_ instead of _zero_ and then b) put competition on the other end of the
fiber. Have one company (or municipality) be the regulated monopoly that
provides only the physical layer, and then let all willing providers compete
to terminate the fiber and provide internet/TV/phone service.

Separating the natural monopoly (the physical layer) from over the top
services is the key to preventing monopoly abuse. The entity that does that
should do _only_ that.

~~~
colechristensen
There _are_ places where small companies are stepping up to place residential
fiber.

[http://fiber.usinternet.com/](http://fiber.usinternet.com/)

~~~
tomkinstinch
In Rochester, NY we are fortunate to have a local company competing with Time
Warner by offering gigabit fiber to the home[1]. The local company is hugely
popular, and based on their rate of expansion, very successful.

When my house was built in 1890 it did not have electricity, and all rooms
were illuminated by gas lights. As of last year, it has gigabit fiber.
Infrastructure _can_ change. It helps to have locals take action, and citizens
have to be vocal.

1\. [https://greenlightnetworks.com/](https://greenlightnetworks.com/)

------
Animats
There's a nice analysis in this week's Economist on cellular competition in
Europe. There's been a conclusion by some European antitrust regulators that
it takes at least four competing cellular carriers before prices come down.
Three isn't enough.

The US acts as if one unregulated carrier is enough in cable.

~~~
0xcde4c3db
I think we still have some cultural inertia such that things like high-speed
internet and cell service are seen as luxuries and not basic infrastructure
(plus some who believe that the poor ought to be excluded from using basic
infrastructure anyway). I'm also not convinced that Capitol Hill has fully
realized that Comcast isn't competing with rabbit ears anymore.

~~~
wtbob
> high-speed internet and cell service are seen as luxuries and not basic
> infrastructure

I would never want to live without high-speed mobile Internet (which can
provide the equivalent of cell service), but is it really a necessity to live?
I was a boy before cell phones even existed, and anyone outside academia and a
few tech companies had the Internet, and life was fine.

It's certainly extremely convenient, but I don't think it's a _necessity_.

> plus some who believe that the poor ought to be excluded from using basic
> infrastructure anyway

Do you have evidence for that statement?

~~~
Sreekar911
Even more previous generations' people would make the same argument: "Is
telephone really a necessity? We lived without telephones and we were fine,
our life was fine" and so on. Replace telephone with telegram or a car for
even earlier generations.

Now the problem with this argument is that we're not living in that
generation. We're living in the present generation, where a decent, if not
high speed internet is absolutely essential in order to progress. Can you
still live without internet in the present generation? Sure. But is there a
remote chance that such life would be comfortable and painless? Absolutely
not. Not even a chance.

------
riskable
Can someone explain to me what innovation cable companies provide that they
_deserve_ their anti-competitive monopolies? If we were to replace them all
with municipal broadband what would the short and long term consequences be?

I'd wager that the short term (~10 years) consequences would be vastly
superior service for every day citizens. In the long term, not certain but I
suspect it would be much of the same as long as the municipal provider had
ever-increasing speeds as one of their primary purposes/guiding principals.

I'm not a communist but I think evidence shows that municipal broadband
outperforms both telecom and cable operators in all terms of performance from
costs to speeds to reliability.

~~~
cortesoft
I think it is mostly because having multiple companies laying physical wires
is problematic. It is very capital intensive, and disruptive to infrastructure
(digging up lots of ground). In the end, it might not be better for customers;
for example, imagine 4 different cable companies spend all the capital to lay
4 sets of cables to every house in a town of 100,000. Since there are 4
choices of cable company to choose from, then you can imagine each company
will only get around 25% of the subscribers. The infrastructure costs to cover
running cable to 100% of the houses now has to be supported by only 25% of the
subscriber base.

In other words, the same number of subscribers now have to pay for 4x the
infrastructure costs.

~~~
dv_dt
This is why I think the makes the most sense for cities to own their own
broadband infrastructure (just like they often own their road & water/sewer
infrastructure). Maybe let out a contract for management of it comercially
that gets periodically reviewed - maybe even split the basic infrastructure
maintenance with companies competing to deliver data from common data centers
across the last mile wiring/fiber so multiple have a market to compete within.

~~~
kyebosh
This is, in general, close to what the Australian NBN model was aiming for;
the fibre capacity was to be "leased" wholesale to the commercial entities,
with the leases used for maintenance & upgrades. In theory it avoids special
interests & provides a baseline platform.

------
yk
The problem with burying cables is, that the first mover advantage can not be
overcome. The calculation of the first guy is, that he has some cost X for N
subscribers who will have to pay a monopoly rate M. The calculation of the
second guy is, he has to pay X to bury a cable to capture some fraction of the
subscribers fN who each pay a competitive subscription rate C much smaller
than M. (In fact close to the marginal cost of an additional subscriber, that
is basically 0). So the first guy expects to break even after X/(MN) and the
second guy at X/(CfN).

This suggests the interesting possibility, that it may be worthwhile for the
neighbors in a street to build their own cable and just give it to a
competitor of the cable provider.

------
en4bz
Cable companies don't compete because the market has reached a Nash
equilibrium. This is Game Theory 101. If one company lowers their prices or
increase their services then as soon as others start seeing attrition they
simply lower their prices in response until attrition stops. At the end of the
day no one gains any customers and they've all lowered their prices. No one
wins.

Similar things happen with turf wars. If I install services in one community
then the incumbent can simply lower prices to match mine very easily. At the
end of the day I've spent a bunch of money and may not gain any of my
competitors customers. Even if my competitor is still paying off
infrastructure in that region and may now be running at a lose the companies
are so large one community isn't going to make a difference.

Even if you offer faster services the majority of people don't care, they just
want to be able to watch Netflix as cheap as possible.

~~~
argonaut
Your first description isn't a Nash equilibrium because you're considering
second-order effects (you're considering the reaction of other players to your
changes), when Nash equilibrium only concerns itself with first-order effects
- you assume other players do not change and if under that assumption every
player is at the best action already, then you're in a Nash equilibrium.

I don't think cable companies are at a Nash equilibrium, but they may be at
other forms of equilibrium that I'm not familiar with. Also this game is
iterated so there are other (crucial) dynamics at play that I am not familiar
with.

~~~
en4bz
Good point. Subgame perfect Nash equilibrium [1] would be more accurate since
it applies to dynamic games.

[1]
[https://en.wikipedia.org/wiki/Subgame_perfect_equilibrium](https://en.wikipedia.org/wiki/Subgame_perfect_equilibrium)

------
ryao
This also takes a stab at explaining why cable companies do not compete with
one another:

[http://www.youtube.com/watch?v=0ilMx7k7mso](http://www.youtube.com/watch?v=0ilMx7k7mso)

~~~
cperciva
Not entirely accurate though. "In closed-door meetings where we've secretly
agreed to not have differing prices" is called price-fixing, which is 100%
illegal.

~~~
ryao
The video might have a few inaccuracies, but it is hilarious.

------
solotronics
It may be to little too late, but I am an engineer for Charter and we are
doing a few things that I think are worth noting. This is my own opinion and
not an official statement from the company.

\- bringing back all help desk type jobs that were offshored. All of our call
center jobs were in the US until recently and some idiot started outsourcing
some of them. We are bringing them back immediately. \- EPON fiber build outs
everywhere (we realize fiber is better than cable but there is existing cable
infrastructure and the protocol can support 1gig/s with the current DOCSIS 3.1
standard so for now we are both upgrading the cable system and building fiber
EPON) \- no data caps in any form \- getting rid of DVRs and having both live
video and on demand/saved video stream from servers over IP

I would place us as much more techie friendly than ATT but less so compared to
Google. Most of the problems with peoples cable service come from poor install
jobs, if you have a problem with lost packets or dropping video please be
persistent in getting a tech that is knowledgeable on how to troubleshoot line
issues.

p.s. use namebench to find the best DNS servers for your area and use those
instead of ours.

------
shmerl
_> What Charter really wants is the flexibility to buy up other cable
companies in the future, and it'll have a harder time selling those deals to
government regulators if Charter has been competing with the target firms the
whole time._

So, FCC wants them to enter a territory to increase competition, and Charter
says "we want to reduce competition down the road buying the competitor". FCC
should simply make it a requirement, that Charter should be forbidden from
buying competitors in that market. That's all, problem solved.

And Charter must be really stupid to claim they want to reduce competition
when talking about monopoly restricting conditions for the merger.

------
Gaelan
Headline is clickbait; could the HN title be changed to something like "cable
companies won't compete because they want to leave acquisition options open?"
About as long, and far more informative.

------
andrewclunn
So effective monopolies are unintended side effects of anti-monopoly laws?

~~~
wtbob
That's the real lesson here: if there were less regulation then companies
_would_ compete with one another — which would cost them profits, which is why
they lobby for more regulations.

~~~
setpatchaddress
Nonsense. See Afforess's comment above. Read the history of Standard Oil.

------
LordKano
Where I live, it's a legally mandated monopoly. Before Verizon FIOS came on
the scene, there was one cable provider here. Way back when, it was
CableVision, then Adelphia, then Comcast. We now have the choice of Comcast or
Verizon. I've been switching back and forth between them for years. As soon as
my promotional price ends and they start inching up my rate, I jump ship,
rinse and repeat.

I'd love to have a third player in the game to add more pressure to keep the
prices low.

------
gumby
An increasing number of people are getting their net connection via 4G-to-the-
terminal rather than a central pipe. Cable is probably on its way out.

------
luckydata
I think this article is the best proof we need to show that basic connectivity
infrastructure should be paid with tax dollars and licensed to operators by
the federal government since there's no incentive whatsoever to create a real
market around it.

~~~
ryao
Having the federal government own the infrastructure would simplify the
process of doing the more common forms of wiretaps.

~~~
SturgeonsLaw
They seem to be pretty handy at that anyway

------
dredmorbius
WashPo's clickbait head, bury-the-lede copy, is getting beyond annoying.

------
transfire
I fully expect the only competition will ultimately come from Google and
Facebook.

------
gruez
I like how detailed the caption for the (stock) header image is

    
    
      A coaxial cable is displayed for a photograph in front of a Time Warner Cable helmet in Manhattan Beach, California, U.S., on Monday, August 12, 2013.

~~~
imtringued
Blind people might want to know what those images are supposed to be showing
them.

------
niels_olson
> I can’t overbuild another cable company, because then I could never buy it,
> because you always block those

I'll buy that. For a dollar.

