March 01, 2005

"Why we need to keep the muni option open"

Opponents of municipal broadband networks "are monopolists who would rather regulate than compete," according to Harold Feld of the Media Access Project. Writing at, Feld argues that "even the threat of municipal entry can spur incumbents to provide better service," i.e. municipalities can promote competition where there might otherwise be none, and push for advanced services where services might otherwise be limited.

With merger mania going full tilt, competition is evaporating in most broadband markets. Even giants like AT&T and MCI have fled the local market and surrendered to the Baby Bell local monopolies. While consumers can hope for modest competition between the incumbent giant cable company and the incumbent giant phone company, most businesses only have one choice -- if they have any choice at all. Worse, the FCC has aggressively deregulated the surviving broadband giants. The FCC has gone to the Supreme Court to defend the right to eliminate the regulations requiring incumbents to open their networks to rivals and carry internet traffic without interference. Next month, in Brand X v. FCC (to be argued, interestingly enough, on the same day as the Grokster case), the FCC will argue that it is vital to our national broadband policy to let big cable and big telco have a free hand.

But we see what happens in an unregulated, uncompetitive broadband market. Fiber goes only to the wealthy neighborhoods. Prices stay high, while quality of service remains low. Speeds remain ridiculously low (the United States has the highest price for broadband in the developed world, measured on a dollars-per-bit basis). Worse, the rates remain asymetrical, with cable and telco DSL providers convinced that "consumers" have no need for high-speed uploads (so much for my iLife uploads; it would take hours to upload videos of my six-year old for his grandparents to watch).

In addition, innovation in network services comes to a stand-still in a market with a duopoly between cable and DSL. Cable and DSL companies will block any services that challenge the cable video monopoly and the telco voice monopoly. The high-profile complaint of Vonage that telephone companies have blocked VOIP service to Vonage customers makes it clear how the incumbents will leverage their networks to block competitors. If you subscribe to cable modem and want VOIP, you'll use the cable VOIP or none at all. If the local Baby Bell offers video and music through its fiber, you can bet that rival services won't get through your DSL line.

Posted by jonl at March 1, 2005 11:46 AM