[ NNSquad ] Re: Competition

["Benson Schliesser" <bensons@queuefull.net>]

Lauren-

For once, I agree with everything you said in your note. The
monopolistic foothold of legacy carriers (RBOCs) in the access market
is a difficult problem in the US. But I'd like to point out that it's
not the only problem.

I assume that everybody here wants their Net connectivity and
bandwidth to cost less. Naturally, as consumers we want the cheapest
price for the most product we can get. This is why we (the collective
we, not necessarily you or me of course...) buy Chinese goods from
Walmart despite the fact that it puts smaller shops out of business,
the longer-term effect of trade deficit on our economy, etc. In a
similar situation, consumer-oriented ISPs and the carriers that serve
them have experienced downward pressure on their prices.

If you look at prices in the carrier-wholesale market for bandwidth
you'll see that they've been falling for quite some time. Even if they
stabilize at today's rates (as some suggest) they're now at the point
where a service provider has to operate at significant scale to make
any money. And even then it doesn't have a very attractive return on
investment. So there aren't any significant new entrants to the
market. And existing players are increasingly merging and/or looking
for ways to provide "value-added" services. From an economist's point
of view, the market is in a consolidation phase. And ultimately it's
our fault for wanting lower prices.

So... Are network services in the US a natural monopoly? If so, then
isn't the access issue moot? I'm earnestly interested in hearing
thoughts on this, because it seems like this illustrates the future of
the network business and is at the root of the network neutrality
issue.

-Benson


On 2/29/08, Lauren Weinstein <lauren@vortex.com> wrote:
> Just as a point of interest, there are readers of this list in some
>  parts of the world who are laughing themselves silly at some of the
>  arguments we see here.
>
>  Why?  Because they realize that if there was broad competition in
>  the Internet access industry in the U.S., especially if wholesale and
>  retail components were *effectively* decoupled so that the range of
>  options were available here that are available in various other
>  countries, many of these other problems would vanish, or at least be
>  significantly reduced.  U.S. Internet users by and large don't have
>  a clue about how incredibly limited and primitive their choices are
>  here.  They simply don't know that there's better possible.
>
>  The essential problem with letting ISPs make these decisions in
>  our largely unregulated environment is that most Internet users have
>  few options (some have none!) when it comes to alternatives to ISP
>  policies with which they don't agree.
>
>  Voting with your feet is impossible if effective competition is
>  so limited that your feet are cut off.
>
>  --Lauren--
>  NNSquad Moderator
>