> Most reports are that major ISPs are highly profitable. Undercapitalized local ISPs always seem to struggle, however -- as do companies like Google when they aren't serious.
What reports? Verizon’s wireline division reports a 5% operating profit margin in a good year. It’s been 15 years since Verizon started deploying FiOS, and it’s not clear they’ve even recovered the initial capital cost yet. Charter, the biggest pure cable company, reported massive annual losses in the years leading up to the merger with TWC.
The idea that wireline broadband isn’t “highly profitable” doesn’t pass the smell test. Everyone is trying to get out of wireline.
For the most part they’re really not. See my comment above—the article really blows the restrictions in many states out of proportion. That aside, nobody wants the government coming in and using tax dollars to drive them out of business,[1] even if the business is a low-margin one they’re looking to get out of.
[1] And that’s what will happen. Municipal broadband will kill any private competitor, because you can’t compete with a tax-subsidized alternative. If that happens, folks better pray that their municipal system doesn’t end up like say the DC Metro or New York Subway (initially good, but neglected in the long term and allowed to decay).
I was shocked by one of the comments saying that the only reason those neighborhoods have utilities like water and sewer now is that they didn’t used to be poor.
Let me turn that question around: how can a community like Cleveland afford to run a municipal broadband network, if the reason AT&T won’t expand service there is that people don’t have the money to pay?
Our approach to broadband in poor urban neighborhoods is completely screwed up. We blame the telecom provider for not building in areas it’s not profitable to service, or force them to do it to be allowed to service the city at all (and as a result, nobody gets service).
Broadband access in poor neighborhoods is a matter for the general welfare system and should be paid for with federal and state tax subsidies, just as we do for say schools in poor urban neighborhoods. Then, we can make a reasoned cost-benefit analysis about how to best use that tax money. (For example, maybe wireless is a more cost-effective way of providing a safety-net level of service than fiber.)
You might be interested in the story of Dennis Kucinich and Muny Light. Years later, it actually did turn out to be the right choice (and I’m no Kucinich fan). Maybe something similar could be done with wireless and the utility poles.
They did not. If you dig into reports about “subsidies” to Bell Atlantic (Verizon’s predecessor), you’ll see that the “cash” is actually “excess rates” resulting from telecom deregulation. There is no economic substance to the argument, it’s based on the idea that the rates and profits of Bell Atlantic should have been the same during the period when broadband demand was exploding as it was during the period when a phone line was just a phone line. (Then you call any difference between the two a “subsidy”).
What reports? Verizon’s wireline division reports a 5% operating profit margin in a good year. It’s been 15 years since Verizon started deploying FiOS, and it’s not clear they’ve even recovered the initial capital cost yet. Charter, the biggest pure cable company, reported massive annual losses in the years leading up to the merger with TWC.
The idea that wireline broadband isn’t “highly profitable” doesn’t pass the smell test. Everyone is trying to get out of wireline.