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Why is European broadband faster and cheaper? Blame the government (engadget.com)
207 points by d0ne on June 29, 2011 | hide | past | web | favorite | 139 comments

In the "Need to Know" version of this story they talked with a BT representative about how things had worked out for BT after they were forced into local loop unbundling.

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.

After looking at the options available that were linked in the article, I'm unsure that I agree that everyone wins. Specifically, consumers looking for the higher end of the spectrum.

At least, the only higher-end provider linked in the article, Demon [1], 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?

[1]: http://www.demon.net/broadband

BT Infinity (40Mbps down, 10 up) is £18 a month with a 40GB cap and £25.60 for unlimited.

Thank you, as much I tried to resist believing it...the grass certainly is greener on the other side.

I have symmetric 100 Mbps uncapped service in San Francisco for $33/month if I pay by the year or $45/month if I don't through Webpass. It works beautifully.

Ouch. My parents pay $45/month for 2Mbps. But they live in a rural mountain town where there's only one provider (plus satellite, which is even more expensive with interminable latency).

> Demon [1], seems to offer abysmally low bandwidth caps on almost every plan

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.

It isnt truly a case of everyone wins, consumers still need to pay ridiculous reconnection fees (these are typically £100 - £300, despite the fact there was an active line before you moved in)

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.

On the subject of connection fees:

"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.

yes of course, if you get your broadband from bt :)

Yep, i actually get charged a fee on top of my line rental because i dont make phone calls on it. I despise that i have to pay BT line rental then pay broadband from my other provider. I'd like to see 1 fee from my ISP of choice including line rental, just to make things simplier even if its the same price.

Paying both the incumbent operator and the ISP was the situation in France about ten years ago, at the very begining of DSL lines for the general public. It has been for ages that most people here only pay directly the ISP. Either the line is still owned by the incombent operator and the ISP lease it from him, or the line is bought by the ISP when necessary.

In addition to the problems raised by other commenters, there is a huge problem for ISPs that rent space in BT's switching centres:

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.

If they were truly interested in promoting competition, they would make it easier for new companies to offer broadband rather than forcing them to go through an incumbent.

The incumbent is split into separate organisations, which are effectively not allowed to communicate behind closed doors. BT Openreach provides access to the local loop, whereas BT Retail sells broadband to consumers. The setup is designed so that other ISPs have exactly the same interface to BT Openreach as BT Retail.

BT offered this arrangement to avoid being broken up - look up the "General Conditions of Entitlement" for more detail.

The most interesting part in that is that in the UK, both Verizon and AT&T were strong and public proponents of local loop unbundling. When asked about it for the US, they say it is terrible and will hurt consumers.

Because in the US, they own the loops, in the UK they'd get access to them.

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.

> 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

Most of the phone companies were Ma Bell, which had a government-sanctioned natural monopoly from 1936 to its breakup in 1984.

> 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?

Why government regulation? To prevent price gouging, favoritism to particular customers, killing off rivals. Prior to the Carterphone Decision you could not attach any third party equipment to the phone lines, including phones and modems. There was a huge battle for MCI to attach their long distance phone lines to the AT&T system. Common carrier status was invented to allow people to use their phones as they wish. When I was a child coast to coast phone calss were several dollars a minute. Now unlimited long distance is the price of a single call of the past.

(I realize that I answered the question "Why is regulation necessary?", but it goes along with the sanction.)

The concept of common carrier status had been around for a very long time when it was first used to apply to telecommunication services. These days, phone companies and many kinds of physical transport services are common carriers, while ISPs have only the benefits of common carrier status, and none of the limitations.

In order to try and regulate it, the federal sanction put Bell under purview of the FCC, so the FCC could handle Bell directly instead of having to go through the Justice Department every time.

While it ultimately failed, there was a method to the madness.

> If it was natural, why was a government sanction necessary?

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.

> Govt likes monopolies and companies like to have govt keep out competition, which is what the govt did for AT&T.

A natural monopoly means that competitors are kept out naturally. No government intervention would be needed.

At least here in Finland the lines were put in by a government owned company. Which was then privatized and later sold to Sweden. That private company now truly owns the lines, and the government is scratching it's head because it has passed a law that broadband connection is a "universal right", and it realized that it needs the lines for crises time communications.

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

Depends. When Ireland privatized it's state owned teleco, it included all the wires going all over the country.

Yes, but because the original investment was from the public purse, there's still a strong argument that, even if not legally, the public might have a right to some sense of entitlement.

All the citizens of Ireland voted to privatize the people owned telco and all its infrastructure?

No, the government did it. Member of the public were encouraged to buy shares and invest in share trading. IIRC many lost money.

That's because everyone justifiably hates BT, rather than it made sense.

That's mostly because in the US they're incumbents, whereas in the UK they're challengers.

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.

(As someone who had Internet access in the UK (dialup) for quite a while before moving back to the US, I can tell you that I was surprised at how well it worked and how CHEAP it was. I had Demon and I was amazed at how clueful they were; especially compared to US ISPs.)

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).

Well it produced the same result in Sweden. And I am sure that “everyone” hates the incumbents in the US too, so the result would possibly be similar.

Likewise in France (see FreeTelecom, pretty much the poster child for line sharing and local loop unbundling)

The report which is referenced by Endgaget says about fiber penetration in Sweden:

  "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.”
And I think this is probably one of the key factors to high fiber penetration.

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.

It's not a silver bullet, though. In Denmark, electrical utilities (semi-private) spend obscene amounts of money digging down fiber, but when fiber arrived at my in laws, it took all of a minute comparing their offer with what they could get over DSL before ticking the "no thanks" box. (The price was at best comparable, and then there was the several hundred dollar connection fee).

So this is basically more evidence that government regulation does work (when it's not captured - oil and nuke reg agencies are horribly corrupt).

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.

For those who think this is going to be an anti-government regulation, libertarian orthodoxy type article, here's the tl;dr:

"government regulators who have forced more competition"

Well this is how it happend in Romania:

----------------- 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.

----------------- Today

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.

Awesome story. I like the idea of a city or neighborhood LAN with an internet gateway.

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).

Well, back then we didn't see it as a business. Of course there were also people who knew what they were doing, but if I remember well, my network started with three teenagers wanting to play Quake and Need for Speed. Then more and more people joined... hundreds of them.

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.

---------- EDIT: 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.

The interesting thing in the report is that they blame Romania for introducing "noise" in their statistics, so they did not include it. In one place they actually blame the ad-hoc networks for this, probably thinking that most of the country still has the pseudo-ISPs that were usual back in 2003.

He's right, My dad, who lives in Romania, has a 100mbps internet connection bundled with a 5GB 3G plan for about $13/mo.

I am paying $60 for a 50/8 pipe, and consider myself happy, compared to other US residents.

... after creating monopolies in the first place

The logic there is astounding. The government broke up AT&T into a bunch of little companies. These companies then merged their way back into a handful of large corporations and are still trying to merge even more. Did the government force them to join up together? Of course not. The government is actively discouraging a lot of these mergers, i.e. the government is forcing there to be a more competitive marketplace.

The government broke up AT&T into a bunch of little companies

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.

> After establishing it as a federal monopoly in 1934. (And in TFA, we're talking even worse entities.)

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.

At the top of this thread, ojbyrne says we need to have government regulation in order to create competition.

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?

Regulation did not create AT&T's monopoly. AT&T did that, the government later sanctioned it in order to try and better regulate the monopolistic company (it failed).

The original AT&T was made into a national monopoly by U.S. government regulation: http://en.wikipedia.org/wiki/American_Telephone_%26_Telegrap...

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.

There are two differences (though I don't think they're very important):

* 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)

That doesn't really explain the difference though. The one Dutch telephone company used to be state owned. Now we have multiple competing telephone/tv/internet companies.

The government doesn't have to create these monopolies. Utility (i.e. telecom) companies naturally tend towards a monopoly because of the absurdly high cost of rolling out duplicate infrastructure. Usually the first mover is able to fend off any real competition by lowering its prices below that which its competitors can afford, given that they still have an infrastructure to build.

And even if the first mover does not end up alone on the market, after some time the market tends to undergo significant consolidation (once most of the organic growth has been achieved). And you end up with a natural monopoly anyway.

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)

Correct me if I'm wrong, but the baby bell split was a vertical split. In other words, it left 7 regional monopolies, rather than 7 companies covering the same regions, competing for the same customers.

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.

>... after creating monopolies in the first place

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.

Are you trying to say that unregulated monopolies like US Steel, Standard Oil, the railroads, AT&T, American Tobacco didnt have the best interests of the public in mind? After all Carnegie gave us lots of libraries and without Rockefeller we would not have had the Rockettes.

I can't comment on the other three, but Standard Oil was fantastically good for the United States and the world. I'd really recommend the biography "Titan" by Ron Chernow about John Rockefeller's life.

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.)

If American Tobacco had the best interests of the public in mind, do you think they'd still exist in any form?

Being philanthropic is not mutually exclusive with owning an amoral or even unethical business.

I'm pretty sure he was being sarcastic.

One man's robber baron is another man's philanthropist.

Did you ever use Windows Millennium Edition?

Properly speaking, the concept "monopoly" properly pertains only to situations where the government enforces the monopoly. This is the original meaning of the word (before it was altered in the 19th and 20th centuries).

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.

Properly speaking, the concept "monopoly" properly pertains only to situations where the government enforces the monopoly. This is the original meaning of the word (before it was altered in the 19th and 20th centuries).

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[1]

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).

[1] http://en.wikipedia.org/wiki/Monopoly#Historical_monopolies

I'd love to see where you got that idea


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."

Your definitions do not address the point of the comment to which you're replying.

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.

> This is the original meaning of the word (before it was altered in the 19th and 20th centuries).

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).

You lost me with that post there, Max. The opposite of "there is an absolute right to have choice" is not "you must not do anything to promote choice".

Besides, rights are not contextually absolute, as exercising them may conflict with the rights of others.

This is a very interesting article, especially 'dummifying' the complexities of US telecom markets. I used to always wonder why US was so behind in terms of broadband deployment and the answers that we given to me were always around 'density'. However, there are densely populated areas in US that can create better broadband experience.

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.

> On the other hand, European telecom companies are allowed to charge extra for higher bandwidth usage.

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.


Masklinn, If my first point was not correct, then why is there so much lobbying effort and dollars being spent on the 'net neutrality' issue?

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.

> Masklinn, If my first point was not correct, then why is there so much lobbying effort and dollars being spent on the 'net neutrality' issue?

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.

You do realize the telecoms want tiered pricing because it would allow them to gouge captive customers even more?

That is exactly whats being done in the countries referenced in the article.

I can't verify that, but I'm referring to the tiered pricing structure in the US (or how the US companies want to introduce it). Given what they want to charge for the various tiers, it's opportunistic gouging.

Free markets need government regulation in order to create competitive environments where the customer is served best. (The "blame the government" in the title refers to blaming the US government for not creating those conditions, and crediting the European governments for doing so.)

I think it's a clever, ironic use of blaming the government- in the U.S., big government is always seen as an impediment and to be dreaded, but the problem is not for meddling bureaucrats, but hands-off ones who allow corporations free rein.

You mean the governments that constrain through force the market so that only a few monopolistic entities are present?

The problem is caused by bad government, but the solution is good government, as exemplified by the BT story. A completely free market would lead to a monopoly in broadband anyways. The irony here is that the government is not doing anything to solve the problem.

Government getting the hell out of the way of people voluntarily interacting the marketplace is the best situation.

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.

Easements and the monopoly they sanction are the reasons that everyone in an area can get service at all. If they had to write a private contract that would cover the absurdly high cost of laying cable, it would make a cell phone contract look like a love note. It would have to be a covenant imposed on every tenant of the building for many years. It would be just like regulation, only written by people with an immediate incentive to do it as abusively as possible.

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.

If no one enforces laws that prevent underhanded tactics in business, how is that a healthy market? And don't say that consumers would naturally avoid companies that collude together to raise prices or put lead in paint.

Specifically in this scenario, how could the British government remaining uninvolved with the BT situation have led to a better market?

You don't need government to do anything to end up with monopolies, especially in activities with very high cost-of-entry such as utilities or telecommunications.

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.

Monopolies only exist in two situations:

1. They supply the market demand perfectly. 2. Government forces them into that position directly or indirectly.

There are no exceptions.

Ah, a libertardian. I should have known.

I love the down-votes - this site is becoming more like reddit every day.

I love the response too. Thanks. Rather mature and dignified.

Where can I find out more about the "last mile" wireless links near the end of the video?

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?

There is a direct correlation between competition and lower prices in this market. The US has little to no decent competition in many markets. Therefore ISPs rip people off.

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.

Wow - 200Mbps fiber for about £25 a month - that's pretty good!


Lithuania here - 25 pounds/month gives me unrestricted 100 Mbps, next month they're tripling all speeds for no additional costs. The one-step-cheaper option is 90% of the cost for only 10% of the speed, so I opted for this one instead.

Romania: 100mbps fiber + 5GB 3G bundle, about $13/mo


On one hand, more government regulation brings things like Sarbanes-Oxley. On the other hand, you get faster, cheaper Internet access, and arguably more jobs from that.

This is why I cannot bring myself to identify with a political party.

This is why I really don't like it when people treat "government regulation" like it's something that you have "more of" or "less of". Government regulation created the slow, expensive Internet access in the US, government regulation helped create faster, cheaper internet access in the UK and Europe. Government regulation isn't an atomic entity that either exists or doesn't, or there's "more" or "less". There's good regulation and bad regulation, and sometimes the best regulation is none at all but that's not always the case.

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.)

There's good regulation and bad regulation, and sometimes the best regulation is none at all but that's not always the case.

That's the key point there. Unless of course you're against regulation or government on principle.

Both of those sound like good things.

Sarbanes-Oxley seems to be a pretty solid example of a regulation whose costs exceed its benefits by quite a bit.

Want to put a dollar figure on the Enron/Worldcom implosions?

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".

First, you assume without proof that Sarbanes-Oxley will actually prevent the next Enron. Goals aren't results. I do not accept this as unarguably obvious. The rule of thumb is that it is easier to undetectably game complex systems than simple ones.

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.

Sarbox only applies to public companies, no? I wasn't papering over the costs, I assumed we both knew they exist. Public companies can typically afford a little accounting overhead, I don't think anyone's being dissuaded from starting a business because if they go public and become megamillionaires, there will be marginally more sarbox-related accounting work than there would've been anyways.

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.

>Goals aren't results.

To liberals they are. Go read Thomas Sowell's Vision of the Anointed.

I'm mentioning this from a point of complete ignorance but why can't this sort of proposal be used for cable operators as well (both for broadband and television)? Getting to choose from several competitors on who gets my tv and broadband service would I expect create better plans than the current "pay for 100 channels but only use 3" that most if not all US consumers currently get.

DSL uses the phone lines to the central, of which there is (at least) one per household, so you just need to hook into a different router at the central. This is easy. For cable you have one cable running down the street, and access is binary, either you have everything or you don't. It's not practical to force the cable owner to "open up", like you can force the phone line owner.

Digital is changing this, very quickly.

I agree. The only choice we have now is cable vs netflix.

Currently, in my area, there are at least four different choices: FiOS, Comcast, DirecTV, DISH Network. At yet all four offer similar programming packages (big blocks of channels). This seems to be evidence against your hypothesis.

When Black was named Telecommunications Adjudicator in 2004, he fought on two fronts to break the BT logjam. First, he used his own experience as a former employee of the telecom giant to push for change from the inside. When that wasn't enough, he used the bully pulpit provided by his government post to embarrass BT in public. He publicized the company's failure to meet goals. Reporters loved the story of the government regulator holding the giant firm's feet to the fire.

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.

Government regulation is the cause of slow US broadband. The laws are set up to prevent competition. If these laws were removed speeds would increase dramatically for those that desired them.

It is somewhat weird reading about DSL in 21 sentury. Atleast i hope ISDN is dead. Down here, in Lithuania, 50% of population (or maybe even more) has the ability to use 300 mbps fiber for only 30 eur/month. No data caps, no shaping.

This does not seem like much of an explanation. CLECs have existed in the US for over a decade now. In Chicago many of us have about a dozen options. None of them are very competitive with EU providers when it comes to price. A few are probably comparable when it comes to speed.

I have noticed that even when there is competition most people will stick with Comcast or AT&T and bitch about it.


This article surprises me. I'm Dutch and I always thought that in the US, everybody had super awesome broadband for nearly no money.

Not sure why, though.

It's worth highlighting that although broadband over-the-phone is competitive in the UK, the cable internet service (which was built with US money) is a virtual monopoly and there's no sign of its network being unbundled.

It is also the least expensive way to build out infrastructure (US cable).

France is one of the most regulated countries and the price for internet access is still the cheapest in Western Europe. So, no, I wouldn't blame the government for your prices.

1. Foreign call centers. My parents are now too scared to move because they (foolishly) assume everyone uses them. Talktalk and BT do, low quality lines to South Africa and India. 2. I practically live on the dividing line between two exchanges. The one I'm not on is really advanced, lots of choice, but not the one I am on.

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.

Or more specifically, blame the government we get because of the way we finance and run political campaigns.

Global report (excludes Africa). US is dirt cheap compared to internet pricing here...

The only reason we don't have most metropolitan areas with gigabit fiber to the door is almost entirely teleco/cable easements.

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.

That clearly isn't the answer, as the article spends many paragraphs explaining.

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.

The article argues that good situations resulted from government action. The reality is that while these situations are viewed as good, they are not neccessarily the best. Only when individuals are able to voluntarily interact in the market do the best services and products meet the best prices and innovation is at its highest. One of the main factors that does not permit government from being able to exist in a market in a positive way in comparison is due to a complete lack of price model interaction. Government (by its very nature) does not depend on consumer response (price model). It thus has no way of allocating resources as efficiently as it would were it to exist without tax dollars (confiscated property, not gained through competition or voluntary interaction). As such, it cannot gauge weather or not the things it is doing are the best or the most effective to meet the demand.

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.

Ah yes! -2! Let's outpace reddit down the website memory hole!

I mean really people, this is basic economics.

An issue that appears to be overlooked is that the US is much less densely populated and has a much higher overall population and land area to cover. I favor the way many European countries are able to handle things like this (and healthcare, and transportation, etc) but the US is hardly similar to any of those countries. We're operating at a completely different scale here. Not to mention political and cultural differences and issues of states' rights versus the federal government's rights.

> An issue that appears to be overlooked

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.

The potency of the population density argument is seriously diminished by the fact that rural municipal broadband initiatives frequently provide much higher performance than available commercial offerings.

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.

What do you think is the population density of Sweden, Norway, or Finland? There is still very decent broadband to be had up here at 70 degrees northern latitude.

Here's why: population density is much higher in Europe. The price per mile to put cables into the ground has a lower bound that cannot be breached. The same length of cable will connect far more customers in high-population areas than it will in rural Wyoming. It is not valid to compare Europe with the USA in this regard because they truly are apples and oranges geographically.

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.
If this is really the case, then:

* 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
That's really the point. There are areas of high population density in the US, but the broadband options, even in those areas are sometimes lacking (especially when the ISPs oversell their bandwidth in high-population areas rather than upgrading to deal with the additional load).

The article actually mentions that point:

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 don't buy that. One reason is that the article fails to account for the taxes that are put on phone bills that subsidize rural telecommunications. Another is that the regulations that force American telcos to support low-density projects have direct effects (someone subsidizes folks in Wyoming, and that invariably ends up being people living elsewhere) as well as indirect ones (regulating a business changes its culture for the worse. Risk takers get pushed out.)

The Federal USF Surcharge is what, US$1 per residential line per month? That's the only nationwide subsidy program I know of. Even if it's more - $5/month? $20/month? - that's nowhere near enough to account for the disparity in network performance in the Northeast seaboard states compared to, say Sweden.

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.

It blows my mind that anyone in a startup community, which is all about creating value and making good investments, would suggest that the government tax him (!) and invest in broadband infrastructure instead of that person investing in it himself.

I've read your sentence perhaps 10 times and I can't figure out what it means in relation to the article. Are you saying telecom incumbents are startups? Does the "him" refer to telecom incumbents? Are you suggesting that the government is taxing startups that are trying to invest in telecoms? Or that the government is investing in telecoms (which is very much not what the article is about)?

I actually did read the article. I wrote that comment before there were any comments, in anticipation of comments in support of subsidized broadband. It was a risky venture, for sure. Heh

I'm sorry, did you not read the article?

> 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.

Monopolies and duopolies are not free markets.

In order to create value, monopolies need to be checked.

We have checks on monopolies here in the US. The only problem is that often the people checking on the monopolies are the same people who run the monopolies.

It blows my mind that anyone in the startup community would automatically assume taxes = bad. Startups benefit immensely from tax funded services.

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.

Also, having an environment where taxes are the norm gives people incentives to pursue new endeavors that lead to tax write-offs!

Without a doubt, just like rampant window breaking incents people to build houses with less windows. Is that a good thing?

Bob, no one was talking about fire dept or highways... where did that come from?

Rampant window breaking incentivizes people towards inventing new and more innovative ways to create shatterproof windows. Still a win!

Read the article. No tax money was spent.

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