[ NNSquad ] Re: Competition

[Lauren Weinstein <lauren@vortex.com>]

I believe that there are various ways to look at this.  From the standpoint
of the average Internet user, their window on the Net is whichever
entity bills them.  

This chart from Public Knowledge is instructive:
http://www.publicknowledge.org/pdf/uk-isp-20070905.html

It lists almost 30 firms, and far more service packages, offering
Internet access to the same location in the U.K. -- a clear result
of the effective unbundling of wholesale and retail in the access
marketplace.  How many of these guys will stay in business long?
Hard to predict, but does any location in the U.S. even come close
to having access to such a range of choices?

Of course, all these firms haven't run their own wires.  There's
satellite and DSL and Cable, but unlike in the U.S. where the
dominant powers gamed Congress and the FCC to minimize wholesale
access and competitive risk, other countries have embraced it.

Even if we take the view that access services are a natural
monopoly, that leaves us with the question of who should be running
the ball game.  Bob Frankston asserts that communities should own
their own Internet infrastructure as utilities -- he'd cut most ISPs
as they exist today out of the game entirely (my interpretation of
his position).

Frankly, there's much to admire in that scenario if we take the long
view, but I'm unconvinced that it's broadly realistic in the short
term for most areas, so I tend to concentrate on incremental
(though very much non-trivial) improvements to the current status quo.  

But where we are right now, with extremely limited Internet access
choices for most U.S. Internet users, combined with ISPs who are
treating their networks like individual, technological fiefdoms,
is likely not viable indefinitely.  

When Internet access for most consumers was mostly a perk, a toy, a
novelty, this didn't matter so much.  But transparent and neutral
Internet access is rapidly becoming a *necessity* of modern life.  

As some ISPs continue to push the envelope in terms of inspecting,
manipulating, controlling, inserting, and blocking data, they are
increasingly raising the risk of major consumer, legislative, and
regulatory pushback. 

Internet users won't accept being played as fools indefinitely.

--Lauren--
NNSquad Moderator

 - - -

> 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
> >