It worked out great for BT. They make more money leasing out the lines and leasing out space in their switching centers for the third party ISP's equipment than they were making providing monopoly ISP services directly.
It truly is a case of everyone wins. BT makes more money. Third party companies can start ISPs and make money. Consumers get plans that fit their needs better and cost less.
At least, the only higher-end provider linked in the article, Demon , seems to offer abysmally low bandwidth caps on almost every plan, and generally low max download speeds (20Mb or less). How well are their bandwidth caps enforced? I ask because Comcast does not seem to enforce their bandwidth caps in San Francisco, at least for customers on their >$99/mo Home plans.
I realize that this is an extremely small sample size, how well does this trend describe other UK providers? Personally, given the option between any of the plans Demon has to offer, I'd still prefer my 50Mbps down/10 up Comcast line that has effectively no cap, for which I pay 100/mo. Is Demon the exception and not the rule when it comes to pricier third party providers in the UK?
They're very low on "Home and home office" plans, low on "Business" plans (200GB from 19 quids) and unlimited in the premier section (30 quids).
> and generally low max download speeds (20Mb or less)
It's ADSL, ADSL2+ caps out at 24Mb/s.
As well as being forced to pay line rental (£8-£15pm) for a bt phone line despite no intention of ever making any calls.
BT definitely won out of it, not sure anyone else did.
"If a connection charge applies most people find they don't need to pay this it costs £30 if you're just taking a BT line or free with any broadband package."
I'm pretty sure we didn't pay anything when we moved a while back.
BT wholesale will only allow approved parties to enter their premises. AFAIK only BT retail and Alcatel are on the list of approve maintainers.
So third-party ISPs are forced to pay extortionate fees to Alcatel who get to make more on-site vists (and charge more) if they make more mistakes.
BT offered this arrangement to avoid being broken up - look up the "General Conditions of Entitlement" for more detail.
I think a factor in making this easier in Europe is that all phone lines were put in by entirely government owned and operated enterprises, and it can't be argued that the public doesn't own them. In the US, if I'm not mistaken, most of the phone companies were and are at least somewhat private entities that invested private money in putting in the lines. Although often protected by exclusivity etc. this makes the "public owns it" argument much more murky.
Most of the phone companies were Ma Bell, which had a government-sanctioned natural monopoly from 1936 to its breakup in 1984.
If it was natural, why was a government sanction necessary?
(I realize that I answered the question "Why is regulation necessary?", but it goes along with the sanction.)
While it ultimately failed, there was a method to the madness.
Govt likes monopolies and companies like to have govt keep out competition, which is what the govt did for AT&T.
Interestingly enough, AT&T had been a govt monopoly well before 1936 and then lost that and regained it again in 1936.
AT&T loved being a monopoly.
A natural monopoly means that competitors are kept out naturally. No government intervention would be needed.
Depends. When Ireland privatized it's state owned teleco, it included all the wires going all over the country.
Because line sharing and (then) local loop unbundling makes new entries into the market significantly easier (as there isn't the cost to build a whole physical network upfront, and the network can be implemented over time instead) it drives competition in the sky and fees into the ground. It lets challengers challenge, but it's awful for incumbents as they can't just fleece their customers unchallenged.
But more to the point: the US telecoms are deathly afraid of competition. The same thing goes for the CableCo's. Wireless is killing their wireline business and broadband isn't making up the difference. That's why they are looking at network-neutrality killing services/deals they can monetize. That's not necessarily a bad thing, but when one company essentially OWNS the access loop, it's a recipe for high-prices and bad service to customers.
If our FCC wasn't chock full of industry players looking to land a cushy lobbying spot after their term is up, we'd see a lot more competition (and better options for everyone).
"Fiber and fiber-LAN networks have a slightly bigger share of the market
than cable, holding 14% and 13%, respectively. Sweden trails only
South Korea and Japan in household fiber penetration rates.”
"Municipal networks alone control 20 to 25% of the coverage.
Among the more than 150 local fiber/LAN networks in 2008, a majority
are owned by municipal authorities or municipally run companies.”
My local government owns the fiber, and I paid to connect to it from my house, so I own the last 40 meters. :) And now I can chose from seven companies offering IP services (four which offer services for homes, the others are company offerings only) and four which offer digital-TV services.
92% of apartments in our local community are connected to the fiber network and 37% of the individual houses are. The other houses are likely to use DSL.
If there's anything that all folks of political bent should agree on, it should be greater transparency where government and business (ie, moneyed interests) interact - otherwise you get the mess that is the US government "regulation" efforts.
"government regulators who have forced more competition"
2000 - 2002
There was NO regulation. We just threw UTP cables from building to building, and bought external connectivity from bulk sellers.
We didn't pay any taxes. We didn't have any signed agreements with "customers". We didn't have any permits from the city council either. There were no employees... heck, we weren't even registered as a business.
We just threw UTP cables through the city like it was in our own backyard. The only problem was after thunderstorms, when there was a shortage of switches to replace the burned ones :) Oh, and from time to time I had to call some customer's mom to ask her to reset the stuck switch hosted by her kid, because half the network couldn't connect to the internet.
Users paid about $10 for 100 mbps connectivity with other users (multiplayer games and movie/mp3 sharing) and 64 kbps internet access.
Basically we were just some highscool/college kids building a LAN, and every user paid a share of the costs. My network had about 200 subscribers and covered a 2x2 km area. Several networks like this one were scattered throughout the city. Every month a couple of new networks appeared, while others bit the dust (including my own).
2003 - 2004
(By this time me and my friends lost interest in being a "pseudo-ISP", so I can only speak from the POV of a customer)
Networks with 100-300 users began joining together forming networks of 1000+ subscribers. Companies were formed, real sys-admins were hired. Some backbones were now built with fiber optics.
Big companies noticed this and started to complain in the mass-media, calling such networks "illegal". Well, they were partly right (nobody gave a f#ck about building permits and taxes).
Now users paid $10 for 100 mbps connectivity with hundreds and even thousands of other people, and 256 kbps internet access. Big telcos were barely able to offer 128 kbps with a monthly traffic limit.
2005 - 2008
Big telcos stopped complaining and began building their networks. Then increased their networks speeds, removed the FUP, offered subscriber packages (phoneline + cable + internet access). For $10 you could get a landline and 5 mbps internet.
A lot of city "LANs" couldn't keep up with the big guys and crumbled. Others joined forces and became real ISPs (with tech support, tax payments, ...) and some even managed to obtain money from investment funds. They could still compete with the main ISPs because they offered much better tech support, and the 100 mbps LAN speed was still of huge interest, even if the internet access was limited to 1-10 mbps.
2009 - 2010
Small ISPs begin implementing Fiber to the Building. Hello Gigabit (well, 1000 mbps with others subscribers only... the internet connection is limited to 20-30 mbps).
Big telcos buy more and more small ISPs, but also continue to improve their infrastructure. Some drop the old cable (with its DOCSIS modems) and begin implementing Fiber to the Building too.
For $10 per month you can get 100 mbps internet access + 5GB of mobile 3G connection. My ISP started installing Fiber Optics to the home (GPON technology) for houses and continues installing Fiber to the Builing (and UTP from there to your apartment) for high buildings. They also began installing WiFi access points through the cities (free access for all subscribers).
IN THE END, I WOULD LIKE TO THANK THE ROMANIAN GOVERMENT FOR NOT INTERFERING.
And if the large companies will try to form monopolies, I'm sure new ISPs will appear. I don't care about regulations. Thank you.
This makes a lot of sense, especially when local online businesses want to serve their local community (like a local Groupon or live streaming of the neighborhood's Little League game from multiple cameras).
Internet access wasn't a priority (most users wanted it for IRC, and there were very few local websites/services anyway). As long as we could share movies and play games, everything was fine.
Today things changed. I think that most users want 100 mbps internet access instead of 10 mbps internet + 1000 mbps LAN. But I'm confident that, if the ISPs fail, people could build their own networks as long as the State doesn't interfere.
The problem with US seems to be that the Government is bullying (through all kinds of regulation) small ISPs in order to protect the big guys.
I have to admit that (in 2003 or so) it felt good when a big telco, with a budget of millions, could barely provide 128 kbps, while the small ISP which I joined was providing 512 kbps internet access + 100 mbps LAN.
Today I'm a subscriber of that big telco, because they managed to pull their stuff together and now provide a really good service (at least in my area).
But Gov regulation had noting to do with it. It was the competition: improve your service or die. Plain and simple.
I am paying $60 for a 50/8 pipe, and consider myself happy, compared to other US residents.
After establishing it as a federal monopoly in 1934. (And in TFA, we're talking British Telecom.)
Similarly, there are a lot of municipal agreements in the US where one company gets the exclusive right to handle local phone or cable service within a city or region. More companies or smaller companies doesn't mean any benefit for consumers when they still just end up choosing between "the phone company" and "the cable company" as designated by law.
In order to regulate it (putting it under jurisdiction of the FCC) as Bell was already a natural monopoly by this point, even after the Kingsbury Commitment.
Here you say that we needed regulation to make AT&T a de jure national monopoly so that we could further regulate AT&T.
So, regulation grants monopolies, then regulates those monopolies, then also regulates more competition into the monopoly market it had previously granted? This is good governance?
Likewise, in many European countries, telecoms were originally national monopolies. Both in Europe and in the United States those national monopolies were either broken up or subjected to more competition.
VMG is quite correct to point out that telecoms gained monopoly status due to government action.
* In Europe, it was generally an artificial monopoly through a state company, Ma Bell was a natural monopoly sanctioned by the federal government.
* Where Ma Bell was broken up following an antitrust case, most european monopolies were simply privatized along with new regulations (or deregulations depending on the market) forcing them to open up their market (instead of turtling)
You can even see that in very recent history: the US government broke up Bell in 7 in 1984, it's already merged back into 2 companies (AT&T and Verizon are composed of 3 baby bells each, the 7th is part of Qwest/CenturyLink)
That means that customers were still stuck with one choice for phone and internet access, but the choice merely varied based on where you went. The Baby Bells weren't competing with each other.
If you are really trying to advance the theory that "the market", left to itself, won't generate monopoly after monopoly, perhaps you could point us to actual examples of those golden times when the absence of regulation served consumers more than they served business oligarchy.
Tons of advances in efficiency, chemistry, operations, logistics. Oil prices fell dramatically, consistency and quality went up, supply went up through all of Standard's monopoly years. Breaking it up was far more about political factional conflict than it was about problems for consumers.
(Preemptively: Before anyone decides to jump on it, Rockefeller's rebate deal with the railroad wasn't above board. But Standard Oil was a huge net gain for the world. Absurdly so, actually.)
Being philanthropic is not mutually exclusive with owning an amoral or even unethical business.
Did you ever use Windows Millennium Edition?
There is no proper political right for a "consumer" to have a choice between multiple brands of a product. If there were such a right, it would be violated the moment they walked into a remote store that didn't happen to carry every single product currently sold on the market. Remember, rights are contextually absolute. Their purpose is to subjugate society to moral law. And the purpose of moral law is to make individual flourishing possible.
I'd love to see where you got that idea because it isn't true.
The first use of the word was by Aristotle, where he describes Thales of Miletus' (who was a private citizen) cornering of the market in olive presses as a monopoly
It's true that later there were some government sanctioned monopolies, but it is a mischaracterization to say that the word's meaning has ever changed. It was well understood then that there were monopolies that weren't sanctioned by the government (eg, the guild system in Europe).
weren't sanctioned by the government (eg, the guild system in Europe).
No, this proves my point exactly. See http://en.wikipedia.org/wiki/Guild. Here's the fourth sentence: "They often depended on grants of letters patent by a monarch or other authority to enforce the flow of trade to their self-employed members, and to retain ownership of tools and the supply of materials."
To restate, the point is that many markets tend to wind up as monopolies or cartels. This turns out to be bad for the people making up society, and they (we) will not put up with it, so we pass laws against it.
This is why we have and use the words "monopoly" and "cartel". And other terms like "price fixing", "bid rigging", "market failure", etc.
Considering the origins of the word (monopōlion, from monos "single" and pōlein "sell."), that does not feel correct.
While there were a number of de-jure monopolies (English and Dutch East India companies in the 17th century for instance) the origin of the word comes from a natural monopoly (of olive presses).
Besides, rights are not contextually absolute, as exercising them may conflict with the rights of others.
The challenge here is that the larger telecom companies (AT&T, Verizon) are required by law to sell their loops to other carriers, but there is a lot of CAPEX needed even with the fiber/copper look. It costs around $1000 per subscriber to bring a broadband TV service home even from the neighborhood (connecting from neighborhood to home and all the equipment in the home). This high CAPEX is a barrier for new entrants in this market.
Another reason why US is behind is that the US Federal Communications Commission (FCC) is not allowing the telecom companies in US to charge users based on their tiered internet usage. Therefore, price per mbps is flat no matter how much bandwidth you use. On the other hand, European telecom companies are allowed to charge extra for higher bandwidth usage.
Once these two barriers fall (cloud based home TV management and tiered pricing) there will be more competition in US.
These are getting rarer and rarer these days. And the countries which raced ahead dropped quotas early, or never had quotas in the first place (France for instance, second ADSL market in Europe, standard ADSL contracts are all unmetered and metered never represented any significant portion of the market).
Even Belgium, historically one of the worst countries in europe quotas-wise (supposedly due to the very low level of computer-based production, meaning ISPs can get no peering), is moving away from quotas.
> Once these two barriers fall (cloud based home TV management and tiered pricing) there will be more competition in US.
Also, just out of curiosity, want to know why the 'No' for the two barriers and if you identified something different that would change the landscape.
Net neutrality has nothing whatsoever to do with quotas.
> Also, just out of curiosity, want to know why the 'No' for the two barriers
The first one simply does not make sense, the second one is at best irrelevant and at worst counter-productive (countries using quotas are historically the worst ones in terms of penetration and improvements over time, they're solely a way for carriers to fuck with above-average customers)
> and if you identified something different that would change the landscape.
Bundled line sharing (mandated at acceptable prices by regulations), they let new isps start out as purely virtual and ramp up their operation by building their physical network over time (DSLAMs and local loop unbundling) instead of having to front these, and affordable local loop unbundling.
Those are what triggered internet access improvements in european countries with a former telco monopoly (just about all of them). As well as policy and explicit political drive for increased competition in the sector.
For example: cable easements. Get rid of them. Get rid of all easements. Without them, you would have a variety of options and methods of gaining access to a number of utilities (internet, power, etc) as well as new services that have not yet been created.
Real-world markets lack infinite competition and perfect transparency, so they pretty routinely fail to deliver optimal solutions. Many famously wealthy people got there by exploiting strategies to make markets fail.
Specifically in this scenario, how could the British government remaining uninvolved with the BT situation have led to a better market?
Ma Bell became a natural monopoly all on its own, and barring an extremely disruptive entry into the market (which is, again, extremely difficult in high-entry-cost markets since the rate of new entry is so low) it will consolidate over time as the current incumbents reach the limits of possible organic growth.
1. They supply the market demand perfectly.
2. Government forces them into that position directly or indirectly.
There are no exceptions.
I love the response too. Thanks. Rather mature and dignified.
I will be moving to an retirement area that has a summer population of a few hundred and a winter population of many thousands. There is no internet currently aside from cellular. I wanted to look into long link wifi, but only have found expensive point to point solutions that are multiple thousands of dollars.
I don't even know if it is possible. The closest town is only a few miles, but I doubt Comcast is going to let me share a few business class accounts to all those users.
I was going to try to keep it free to near free, a few bucks a month and cover the equipment costs on my end up to a few thousand dollars. If I can't hook into cable without violation of TOS, then I have to go right to the telco and lease a line, which I have no idea the costs of these days. I would need at least several hundred Mb/s I believe. Hopefully there is a datacenter or ISP nearby that would allow me to work with them to put something on the roof or on a neighbors property.
Suggestions on resources?
If you think Western Europe has cheap broadband try going to small countries in Eastern Europe like Croatia, Slovenia, Latvia or Estonia. I've never seen cheaper BW in Europe than in Latvia.
This is why I cannot bring myself to identify with a political party.
As a little-l libertarian, I observe that when markets have real competition, consumers and society benefit and even the providers globally benefit. When the free market is allowed to be monopolized, consumers and society loses. I believe that it is a valid use of regulation to force markets to remain non-monopolized, even if it is a "natural monopoly". Regulations to encourage this are good; regulations that enhance the monopoly rather than busting it are bad, and there's no way in which I am being a hypocrite about the goodness of regulation.
(The general metric of good regulation is "benefits exceed costs", and the general metric of bad regulation is of course the opposite. However, there is legitimate room to argue about some of the details, in particular costs and benefits to exactly whom. But even within those constraints, it's hard to crash your economy with regulations whose benefits routinely exist costs, and easy to crash with the other way around, so you really have to have a pretty freakin' sweet system before these arguments are really the biggest problems you are facing. We do not have a such a system.)
That's the key point there. Unless of course you're against regulation or government on principle.
How about if we threw a couple of those into the 2008 disaster, same time as Lehman collapsed? What's the cost there?
People are really, really bad at pricing catastrophic events.
Not to say that the bill couldn't be cleaned up, probably. But the conservative half of the aisle seems to be more interested in talkshow ideological invective than sucker's games like "fixing stuff".
Second, you've not mentioned the fact that Sarbanes-Oxley has real costs, not just in terms of direct compliance but also the business that they've simply shut out in advance because the businesses knew they couldn't afford compliance.
Finally, the really relevant metric is not merely "How can we as a society purchase assurance against another Enron at any cost?", but "How can we as a society purchase assurance against Enron in the most cost-effective manner?" I am deeply skeptical that SOX is the correct answer to this question, or even within spitting distance.
You've also implicitly bought into the political duality and assumed that if I'm not for it I must be in the "conservative half", even after I just said I'm libertarian quite nearby. I don't particularly care about whether it's "liberal" or "conservative" solutions, I care about working in the most cost-effective manner. SOX is almost certainly not it.
People are bad about accounting for disasters, people are really really bad at accounting for regulations. The twin specters of mistaking goals for results and counting only benefits without the costs loom over pretty much every discussion.
Libertarian is functionally equivalent to conservative in a post-january-2009 world. Sorry, it's not my fault, blame the tea party. The point still holds regarding the triumphant freshman class of 2010-2012 -- where are these guys on reforming sarbox? They're too busy ranting about socialism or death panels on Fox News and threatening to default the government.
Like I said, I'm all for reform that makes it cheaper, more effective or more efficient. Where are you actually disagreeing with me here?
EDIT: I actually do think it says something in favor of sarbox that nobody had an Enron style accounting disaster during the implosion. I mean, given that we saw every other form of financial bad behavior on display, why not that form too? Impossible to prove a negative, of course.
To liberals they are. Go read Thomas Sowell's Vision of the Anointed.
Digital is changing this, very quickly.
I wonder if there are similar tales in the U.S. of the brave little bureaucrat against the hulking titan of industry. Seems rather countercultural.
I have noticed that even when there is competition most people will stick with Comcast or AT&T and bitch about it.
Not sure why, though.
There are various ideas floating around, which I've never heard of since, such as iPlayer and Steam caches at every exchange. I wish they'd stop caring so much about speed (I get 5.5mb/s in speedtests, over 1.2 (directly, the line isn't) miles of copper) and move onto ping and caches.
The day you stop government from mandating one company per area or delimiting it to a small few monopolistic entities and allow a free market is the day we stop dealing with the hell that is becoming us.
The answer is quite simply LESS government, dammit.
The answer is "do things that encourage competition and investment". The US government fails at this, but it is neither a limitation of government per se or easily achieved by private enterprise alone.
There are mountains of writing on the basics of free markets and Austrian Economics, if you would like me to link you to some resources.
I mean really people, this is basic economics.
It wasn't overlooked in the article, you overlooked it in your reading:
> Meanwhile, the size of the U.S. may be a red herring. Most of the region between Boston and Washington is as densely populated as most of Europe and the UK. So is the California coast between San Francisco and San Diego. And so is the region of the Midwest centered on Chicago. Those areas are home to about a quarter of all Americans. In other words, we live in a big country, but a lot of it is relatively empty space.
> The argument that the U.S. is too spread out is nonsense, according to Herman Wagter, one of the Netherlands' most prominent evangelists for next-generation broadband. He thinks there's something else going on in Verizon's and AT&T's opposition to competition at home: They're afraid of it.
Blaming the government is reasonable. Before the FCC shut it down, I had a 6mbit up/160kbit down wireless cable modem from Sprint Broadband Direct in a rural area in 2000, connecting to a tower 30 miles away.
I assert that broadband would be faster and cheaper anywhere given true capitalism (that is, a system where people trade honestly, at a profit, with the only government involvement being the courts [no regulation to give corrupt businesses and activists the upper hand].)
> population density is much higher in Europe.
* Why do FIOS rollouts happen in the suburbs rather than in the densely packed cities? Wouldn't it be cheaper to roll out in the city since the suburbs are less dense than the cities that they cling to?
* Why don't we have excellent broadband on the US East coast where the population density is comparable to Europe?
> far more customers in high-population areas than it
> will in rural Wyoming
Meanwhile, the size of the U.S. may be a red herring. Most of the region between Boston and Washington is as densely populated as most of Europe and the UK. So is the California coast between San Francisco and San Diego. And so is the region of the Midwest centered on Chicago. Those areas are home to about a quarter of all Americans. In other words, we live in a big country, but a lot of it is relatively empty space.
I'm an American living in Sweden. I'm in a city and can get 200Mbit/s for US$80/month. Checking Comcast for Boston and I don't see any option above 105Mbit and that costs US$105/month. That's not a simple difference in subsidies.
In any case, Sweden is not a densely packed country. It's about 54 people/sq. mile and the US is 83 people/sq. mile. Massachusetts is 830 people/sq. mile.
Why doesn't Boston have better internet service than here? It can't be subsidies for universal access for a far-flung population since the surcharge isn't that high. It can't be population density since otherwise Boston or any other large US city would have better connectivity than here.
The point of the survey is to analyze those reason, and you drew your conclusion after only reading a summary of it.
The objections you raise come up every time there's a cross-national comparison of internet access. They are accounted for, and the US is still behind, and falling further behind.
> Not government spending. The UK's administration hasn't invested a penny in broadband infrastructure, and most of the network in the Netherlands has been built with private capital.
In order to create value, monopolies need to be checked.
As an example, you can complain all you want about specific laws and their enforcement,but nothing remotely resembling Silicon Valley could exist without the stable legal environment provided by the tax payer funded court system and law enforcement system. Not to mention the role tax payer funding played in the initial development of the Internet, the benefit US startups get from the interstate highway system, local fire departments, etc.
Bob, no one was talking about fire dept or highways... where did that come from?