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Why There Are So Few ISP Start-Ups In the U.S.
An anonymous reader writes "Despite whispers of growing dissatisfaction among consumers, there are still very few ISP start-ups popping up in communities all over the U.S. There are two main reasons for this: up-front costs and legal obstacles. The first reason discourages anyone who doesn't have Google's investors or the local government financially supporting them from even getting a toe in the business. 'Financial analysts last year estimated that Google had to spend $84 million to build a fiber network that passed 149,000 homes in Kansas City, with the cost per home at $500 to $674.' The second reason will keep any new start-up defending itself in court against frivolous lawsuits incumbent ISP providers have been known to file to bleed the newcomers dry in legal fees. There are also ISP lobbyists working to pass laws that prevent local governments from either entering the ISP market themselves or partnering with private companies to provide ISP alternatives. Given these set-backs and growing dissatisfaction with the status quo, one has to wonder how long before the U.S. recognizes the internet as a utility and passes laws and regulations accordingly."
Where government creates regulations and laws to favor "connected" businesses and interests. That's how the established ISPs have come to have so much power.
."..one has to wonder how long before the U.S. recognizes the internet as a utility and passes laws and regulations accordingly."
Now the author of TFS thinks *more* laws & regulations from the *same* crooks that have intentionally worked long and hard to *create* this situation are suddenly going to help!?
If there's enough crap stirred up to occupy the news cycle for more than a day or two, they'll do what they always do. Put together some Bill with a great-sounding name and at a quick glance looks good, but there will be sub-clauses and sub-paragraphs buried deep in the weeds of the Bill that actually make things *worse*.
Hmm, on second thought, where did I put that property title to that bridge? I may have found a prospect!
Strat
Progressivism (aka US 'Liberalism'): Ideas so good they need a police/surveillance-state to enforce.
Address exhaustion means all new entrants are locked out anyway. To become a major US ISP you would need to control several /8s worth of IPv4 address space. There is no longer enough unallocated space to grant that to a new company. So the only way, regardless of other considerations, to become a big ISP is to buy an existing big ISP.
The same is true in Europe. You cannot build a new European ISP, because you would need a sizeable network allocation and they're all gone. As a new entrant you would receive roughly the address space needed to run your data centre, leaving nothing for customers. And that's it, forever. Could you buy what you need on the "open" market? Sure, buy from your competitors at a price they specify, that sounds like it would definitely work...
You could have said the same thing about telephone 100 years ago, too, and the same thing about electricity at around the same time.
It is increasingly the case where you are excluded from participating in some parts of modern society if you don't have a decent internet connection. For instance, you're not going to be doing any MOOC courses if you don't have an internet connection that's good enough for video. You're not going to be able to find things out as easier as other people if you don't have a decent internet connection, and you can find yourself denied of many opportunities. It's not all about looking at cat photos. The internet has become embedded enough in modern society that you are now often at a disadvantage if you live in the US and don't have it, so just like the telephone became a utility, internet should also become available on a similar basis.
Oolite: Elite-like game. For Mac, Linux and Windows
I often see to very different views on the concept of a free market. One is "free from intervention" and is producer-focused, which often leads to one or a few domninant players due to network effects and/or scale advantages. The second one can be interpreted as "optimal competition" and is consumer-focused, where regulations (antitrust, enforced standards, consumer protection etc) try to make sure that the consumer always has a choice and that a market can not stagnate into its stable state of one or a few dominant players. I think the telecom market in the US vs EU (and probably most of the world) is a good example. In most places, the government has mandated a single standard (for example GSM) and rules for roaming on a network. This has led to a big market of small service providers on a few networks (there is for example stiff competition on prepaid SIMs). What I have understood from the US, differing standards between the providers coupled with a subsidized payment plan for the phone effectively causes a lock-in situation for the consumer. I am definitely leaning in favour of the "optimal competition" interpretation of a free market (how can a market be free if the consumer does not have a choice?).
Strawman, the OP does not state that we have to have maniciple broadband in order to fix it, he said we need to treat it like a utility. We have utilities that are not owned by the government, namely phone and electric, which are better regulated to provide universal access. Without treating them like a utility we cannot do what even you suggest.
When you cant win, ad hominem.
All these idiot posts about how its the market that is constraining ISP development.
Never mind that it is a heavily regulated industry that is very hard to launch on a small scale despite logistically being very easy.
What drives the costs up are the pole fees. They're way too high.
Sell the poles to a co-op. And then let that co-op spread the cost of maintaining the poles around its members.
This should not be under the control of the cities. They just see it as a revenue making opportunity. And that attitude keeps the cost of using the poles high.
Sell it to a co-op. Then we can all use the poles/pipeline for anything.
You could have tiny mom and pop ISPs. That would be in everyone's interest except for the big telecoms.
I've decided to stop wasting my time responding to AC trolls/sockpuppets... so if you want a response from me... login.
Loser-Pay Legislation would take care of the second one. Been saying it for years.
Eventually, those folks who oppose it simply because it seems too "conservative" for their politics are going to get their minds right.
The United States is the only major Western Democracy that doesn't follow the "british rule," where the winning party in a lawsuit is generally allowed to recover the costs of bringing or defending a suit.
Cogito, igitur comedam pizza.
As long as politicians are involved and their little brown unmarked envelopes are passed from the actual players to them and industrials can contribute whatever they like to their campaigns , as long as money buys the politicians freely you think that politicians will actually do something ?
Wake up. Politicians in the USA are owned by industry and rich contributors. The interest of the People ? they couldnt care less.
In the USA , it's a governemnt of the people by the corporations for the corporations.
Oh stuff a sock in it.
The cost for the infrastructural build out of basic telephone service, which is what the incumbent telcos are required to provide, was paid for decades ago and with significant taxpayer subsidies. None of the incumbents are required to provide universal internet service at all, let alone reasonably useful universal internet service, so your complaint is bull crap. Also, Comcast/Time Warner/Charter etc are not required to provide any level of universal service.
"Remember, there never were pineapple-almond cookies here."
with dozens of satellites in orbit and then no ISP subscription needed, FREE internets for everybody with an internet capable device, smartphone, tablet, laptop, desktop, etc...
that would make ALL ISPs obsolete
Who pays for the launches, the satellites and the constant adjustments needed to keep them in proper orbits, the ground stations, and the staff needed to run everything? Those are hardly free.
We also have utilities owed by members. Rural phone and electric providers, who serve areas for profit companies cannot due to lack of profitability.
putting the 'B' in LGBTQ+
But companies often float bonds insured by the taxpayer, massively reducing upgrade costs. Besides profitability is no guarantee of service.
putting the 'B' in LGBTQ+
Except for banking. And filing some legal papers. Education. Weather reporting. Checking commodity reports, which is very important to farmers. Rapid shipping of design documents to job sites. Those are just a few I can think of.
putting the 'B' in LGBTQ+
There is no need to imagine what might happen, we've had regulated industries and we know how they work. An example you probably remember is long distance phone service. The government set the cost recovery rate at $0.40/minute USD1980 ($2 / minute in 2014 dollars).
If you want to ponder about similarly situated ISPs and their upgrade plans, imagine you are on the board. You have two choices:
a) Issue more stock to raise $80 million and risk your reputation attempting a difficult upgrade, the split get the government-mandated $10 million profit with the new stockholders.
b) do nothing and have the mandated $10 million profit all to yourself.
When your profit is set by law, the only rational course of action is to not rock the boat and spend your days on the golf course.
Courtesy of Nat Torkington of O'Reilly and BoingBoing, video interview with Susan Crawford about why the Internet should be treated like a utility. She’s the only policy person I see talking sense. There’s a multilarity coming, when a critical mass of everyday objects are connected to each other via the Internet and offline devices become as useful as an ox-drawn cart on railway tracks. At that point it’s too late to argue you need affordable predator-proof Internet, because you’re already over the (sensing, e-ink covered, Arduino-powered) barrel.
davecb@spamcop.net
This is a stupid comment.
They wont spend money because their profits are regulated? are you that stupid? Please explain the huge number of Windmills going up all over the place at $100,000 each. Plus all the backbone upgrades going in. Hell they recently upgraded the local COAL power plant to be a dual fuel Gas/Coal so they can run Natural gas but easily revert to coal if they need to.
Did you even do ANY googling before you made your horribly uninformed comment? Utilities are spending money on upgrades at a higher rate now than every before in history.
Do not look at laser with remaining good eye.
My small city of around 200K just had one big wireless player (who also happened to be the cable company) announce they are leaving the market (and selling the spectrum licenses to one of the big guys) and the other three I know of buy their bandwidth from.. well, that same cable company and/or the local telephone company. There's no other place to ultimately buy bandwidth: there are three companies that transport and transit: the big regional telephone company, the local cable company, and Facebook. Everybody else is buying and selling Internet from the big guys.
I can't talk about the health of the small wireless ISPs here, but if you sit down and do the math, they are likely just barely making a profit. This may be why the local cable company has exited the wireless ISP market. (I live in an area with a small urban center surrounded by miles of farms and ranches, the cable company's strategy was to use the wireless to extend their range to these rural subscribers and infill in the few areas their cable network didn't cover). And this small cable company had the first LTE network on in the state, so they had a hell of a head start.
That's pretty much the picture in most places: the little guys are very little and increasingly getting smaller, and the big guys are only getting bigger.
And compared to using the internet, every one of those alternatives is either more expensive, more time consuming, or both. As time goes on, the brick and mortar method will become 'depricated' as anyone still catering to that group will be less cost effective than their online-only counterparts. Obligatory car analogy: Once upon a time, people could get anywhere they needed to go via public transportation or by simply walking. Automobile travel enabled the 'big box retailers' model, and local businesses in small towns evaporated.
Same thing with cell phones: People once used a combination of pagers and pay phones. Now there's very few pay phones, so that model is no longer viable.
To become a small town ISP by providing longer range WiFi and deploying it in the 5GHZ or 24GHZ spectrums. Ubiquity makes very reliable equipment to make this happen and if the area is terrain-friendly, it certainly is possible. To build out a high speed, broadband wired infrastructure is nearly impossible with the government and regulatory issues alone. Ever notice how the large telecom corporations wine about free markets when bills are introduced that don't favor them but when the legal winds are in their favor, it is "fuck free markets, we want to own it!"
There were thousands of independent ISPs once, they extincted themselves because they lacked the vision to work together and instead died one by one. I had a ringside seat.
They went extinct because the cost of building the infrastructure to provide the broadband internet access that consumers now demanded. It fell on king telecom to build that out. Even with the number of ISPs that you pull out of the air, I doubt they could collectively come up with the 100s of millions necessary to make this happen. Government helped the big boys make it happen and also created regulatory nightmares to ensure that the telecom industry is an oligarchy.
There never was such a thing to begin with. It was a fiction created by plutocrats to give moral cover for avarice. "It's not me, it's just the market!"
Attempting to create a moral framework for greed is one of mankind's oldest hobbies.
You are welcome on my lawn.
US telco regulation does the opposite of what such regulation is supposed to do: promote competition, preserve consumer choice, reduce prices, and increase the quality of service. Monopolies granted by municipalities to cable operators, and the deregulation of the Baby Bells, do exactly the opposite-- they protect incumbents with entrenched positions and raise barriers to entry. It's a classic case of regulatory capture on multiple levels.
The idea of municipalities now wanting to run their own ISPs, because it's so clearly a job they should be and can be doing better than the private sector-- is now resulting in lobbying groups sponsoring legislation to make it illegal to do so in order to preserve the monopolies-- is surreal to the point of absurdity.
The simplest case is that they aren't required to upgrade. The slightly less simple case is that, like with phone service prior to 1984, regulators set upgrade targets based on information provided by the companies. In the first step, the second case is exactly like the first: a rational actor will blow smoke at regulators trying very hard to avoid significant upgrades (because further investment in upgrades by definition reduces their ROI in a defined-profit model).
When it becomes clear that some upgrade will be needed, the same calculations apply to the marginal cost of different upgrade options. The difference between a $10 million upgrade to the copper vs. a $80 million switch to fiber is $70 million, and far more risk. As above, the extra $70 million and extra risk is a bad thing for the company, so they should fight to only do the $10 million upgrade. In other words, choosing between a $10 million upgrade and a $80 million upgrade is exactly the same as choosing between no upgrade and a $70 million upgrade: a non-stupid company will spend as little as possible, and risk as little as possible, because either way the get the government-mandated profit. Look at the history of (minimal) AT&T service upgrades during the decades they were fully regulated.
Contrast this with removing the government mandated monopoly, in which case a $80 million upgrade will allow the ISP to offer service with 10 times the speed of their competition, resulting profits increasing by $180 million.
Further, consider these two sets of choices:
Compete.net has $80 million to spend on upgrades. They can either spend $80 million on fiber, or $65 million on fresh copper.
If they buy fresh copper, outages will be reduced, increasing profit by 2%. If they buy fiber, service will be WAY better, increasing profit by 50%. Acme should of course spend the money on fiber.
Regulated.net must spend $80 million on upgrades. They can either spend that $80 million buying fresh copper or spend it on fiber.If they buy fresh copper, profits are unaffected. If they buy fiber, profits are unaffected. If they buy $65M worth of copper from the CEO's bother-in-law for $80M, there's an extra $15M profit to the company run by the brother-in-law, to be shared with the family.
Regulated.net doesn't CARE that they've wasted millions of dollars by essentially giving it away to friends and relatives - their profit is the same either way. In Compete.net tried the same thing, shareholders would be in an uproar and their CEO would soon be sharing a jail cell with Bernie.
Being regulated doesn't mean being efficient or not being corrupt.
Look at the mexican telephone company.
Its a state monopoly... ever seen a mexican telephone bill?
Sorry, sport... its a zero cost operation. Its a tax/revenue scheme for local governments to get a little extra tax money through a service fee.
You see it in phone bills as well.
Ever tried to take your phone bill as low as you could go? Ever seen what portion of the bill that is left is taxes?
I set up a phone not long ago that was I shit you not 80 percent taxes. The phone company operated on 20 percent of what I was paying. 80 percent went to the government.
The government just needs to be taken out of these things. They want money? Remove the crap service taxes and have the stones to raise the actual taxes.
The point of all these little nickle and dime taxes is to hide the real tax rate. You have one big tax that is about as big as you can get away with... and then you have a thousand little taxes that eat away at the edges. And then you have taxes at different levels of the supply chain so that by the time someone goes to buy something they don't realize that half the price of whatever they're buying is just people up the supply chain passing the taxes down.
That's the game.
Its all predicated on the assumption that the people are stupid, unaware, incurious, gullible, and moronically trusting. Is that redundant? Only in the way that three exclamation marks are redundant and yet emphasize the point just that much more.
I've decided to stop wasting my time responding to AC trolls/sockpuppets... so if you want a response from me... login.
We've already paid for high speed internet using the existing infrastructure. The telcos and cable cos have to get the permission of various entities from state and federal agencies, sometimes they got huge tax breaks to improvements. New Jersey was supposed to have fiber to the home of everyone by 2010 if I recall. currently it's up to 300 billion that taxpayers have paid and hasn't been delivered. We want better internet speed start calling your congress critters and ask them where our money has gone.
Words and phrases change their meanings over time. You should probably get used to it or you might lose your mind.
Nobody NEEDS indoor plumbing; there is nothing happening in there that can't be accomplished elsewhere.
Il n'y a pas de Planet B.
You don't want to replace/upgrade everything ever 10-15 years. Fiber in short-run residential areas that don't require more than 100km ranges, has an expected lifetime of 50-100 years. They are currently replacing and upgrading copper infrastructure every 3-8 years and copper infrastructure is more expensive than fiber. Really, you can purchase 144 strand fiber cables with an embedded wire for finding in the ground, for about $0.2/meter, while a single COAX cable will run you around $2.5/meter. That's not including that a single strand of fiber can carry magnitudes more data than the COAX and requires less maintenance and more reliable.
Google fiber is using WDM to get 40gb/s over their fiber. Each of 32 customers sharing a strand of fiber gets their own 1.25gb/s lamda.