1. Posted by: Luis Villa - 08/22/2006

   The competition in the telecom space, for the vast majority of users, is roughly equivalent to the entire transportation market being a vast range of bicycles (modem), a Volkswagen Bug (DSL), or a single model of BMW sedan (cable). Some lucky few also get to pick a Mercedes sedan as well. Insert calculator, single Dell 486, and single Apple P4 if you want to compare it to the PC market instead. We’d consider that situation appalling when compared to the current vibrancy of the car or PC market. It isn’t really competition in any meaningful sense of the word- it doesn’t drive feature differentiation, it doesn’t drive price competition, it doesn’t drive quality differentiation*. So… what exactly makes it like real vibrant competition again? I’m with you guys in spirit- real competition would be vastly preferable to regulation. But to pretend that there is actual competition right now, or that there are any trends** which point towards increased competition in the foreseeable future, is to live in a very potent reality distortion field, no?

   * which is why I think this blog’s dominant opinion on net neutrality is charmingly naive.

   ** save potentially WiMax

2. Posted by: enigma_foundry - 08/22/2006

   The question of broadband competition underlies the drive for net neutrality law, or public utility regulation of broadband.

   Not for me. Not for Tim Berners-Lee. The most pressing issue is the prospect of corporate censorship of internet content.

   
   “The neutral communications medium is essential to our society. It is the basis of a fair competitive market economy. It is the basis of democracy, by which a community should decide what to do. It is the basis of science, by which humankind should decide what is true. Let us protect the neutrality of the net.”
   - Tim Berners-Lee

   You criticize the statement Market forces really do not exist when it comes to broadband.

   This,for very many people is a true statement. I happen to be lucky living two blocks from my telephone switching station, so I can get DSL. My Sister, for example, in a fairly close-in suburb, can only get cable. So even if I grant you that I, having a choice of two options, reap the benefits of a ‘competitive market place’ you can not make the case that all of us have that benefit. That makes regulation necessary, both from a price control standpoint, and to prevent a single corporation from exercising control by censoring sites or protocols they don’t like.

   I have already posted examples of this, where a cable company stopped access to an internet site that gave the unions point of view in a labor dispute.

   Is that kind of corporate control really what we want?

3. Posted by: Tim - 08/22/2006

   Luis,

   I think you’re under-selling the extent of the competition here, in three respects. First, this year’s “VW Bug” broadband is roughly equivalent to the “BMW” broadband of 3-5 years ago. A top-of-the line cable modem circa 2002 gave you about 4 megabit, about the same speed as a typical DSL connection today. The low-end cable speeds and prices today are also roughly equivalent to the high-end cable prices. For example, Qwest’s top speed is “3-5 mbit” for $32/month. I’m currently paying $30/month for 6 mbit from Charter.

   Finally, I think you underestimate the pace at which the market is evolving. The broadband market is less than a decade old. In that time, we’ve seen rapid progress. Prices have been falling. Speeds have been increasing. And new technologies are being rolled out–WiMax, FIOS, and Sprint’s fixed wireless network.

   Obviously, we’d all like faster progress, lower prices, and more competition. But the fact that competition isn’t ideal doesn’t mean that it’s non-existent.

   Personally, I find the notion that neutrality regulations will work exactly the way Larry Lessig hopes it will to be charmingly naive.

4. Posted by: Luis Villa - 08/22/2006

   I think I’m with Enigma here: I’ve lived in two of the highest-density cities in the country, and my parents live in some of the wealthiest zip codes in the country, and despite that, I’m not seeing the speed increases you’re seeing- I’m stuck on ~2Mb, as are the ‘rents, and have been for several moves now. (My father can’t even get DSL.) Let me know where this capitalist paradise is you’re living so I can move there and get some of the fat bandwidth competition has brought you.

   As far as the Lessigian vision of net neutrality goes… I’m not a fan of regulation either. But this country has two major data networks. One of them (the cellular network) is reasonably competitive, lower capital, and unregulated, and yet getting content through it is incredibly complex and costly, and the network completely devoid of interesting new uses. The other one (the IP network, inc. phone and cable) is much less competitive, requires higher capital investment, and is heavily regulated, and yet getting content through it is cheap, and the network is teeming with interesting new uses. Again, I’m sympathetic to your argument here, but you have to really twist the facts on the ground to make them support your position in this particular case.

5. Posted by: Luis Villa - 08/22/2006

   (Tangentially, a friend of a friend of a friend tells me that his company, which delivers services to cell phones, has staff whose job it is purely to test the networks of the cell providers, to see what they do and don’t allow, and modify their software appropriately. Maddeningly inefficient and wasteful, and of course wildly inconsistent between providers. But hey, I’m sure competition will fix that right up.)

6. Posted by: Tim - 08/23/2006

   Luis, I’ve lived in three cities: the Twin Cities, Washington DC, and St. Louis. Here are some quick statistics for each.

   Twin Cities:

   Qwest is the DSL provider, and they’re advertising “Up to 5 Mbps download (typically 3-5 Mbps)/896 Kbps upload” for $31.99/mo. They’ve also got “Up to 1.5 Mbps download/896 Kbps upload” for $26.99/month.

   Comcast is the cable provider in the parts of the Twin Cities I’ve lived in. They’re offering a special web-only deal for “up to 4x faster than 1.5 Mbps DSL,” which by my calculation is about 6 mbit, for $29.99/month.

   In DC, the DSL provider is Verizon. They’re offering “Up to 3 Mbps/768 Kbps” DSL for $29.99/month, and I believe they’ve been offering deeply discounted introductory packages. According to my co-blogger Adam, they’ve also begun rolling out FIOS all over the DC metro area, including his neighborhood. They’re offering 5 Mbps up/2 Mbps down for $34.95/month and 15 Mbps for $44.95/month. There’s every reason to think that the cable companies in areas where FIOS is rolled out will respond by either investing in faster networks or slashing their prices to compete.

   Finally, here in St. Louis, I’m paying $29.99/month for a charter cable connection that gets real-world download speeds (I just ran a test) of approximately 3 mbps.

   Now, for comparison purposes, when I first got broadband back in 2000, I was paying $55/month to my ISP and $65/month to Qwest for “unbundled” 512 kbps DSL. (this is a bit of an unfair comparison because I was paying extra for a block of static IPs, and I was splitting the cost among 5 housemates. But it’s not that atypical. The cheaper alternatives still cost $80-100/month for a 512k connection.

   In 2002, I moved to a new apartment in the Twin Cities where I got AT&T (later Comcast) cable Internet. I paid an introductory rate of $45.95 for six months, followed by a standard rate of $60.95/month, for cable modem service that I think was 1 Mbps, although it might have been faster.

   When I moved to Alexandria, VA, in 2003, the price had dropped to $42.95/month, and I think the speed got bumped up to 2 Mbps, which seemed blazing fast at the time.

   So in the last 6 years, the price I pay for broadband has dropped from $110/month in 2000, to $42.95/month in 2003, to $29.99/month today. Meanwhile, the speed has gone up from 512k, to 2 Mbps, to 3 Mbps. Again, it would be swell if we could make things improve even faster than that, but it’s awfully hard to call that stagnation.

7. Posted by: Tim - 08/23/2006

   Also, it just isn’t true that the Internet has been “heavily regulated.” One segment of the Internet, the telcos’ “last mile” has been subject to government regulations. The rest of it–cable, business-class Internet connections, co-located server farms, wireless services, and the backbone itself–has been completely unregulated. If you turned off all the regulated segments of the Internet, the majority of the ‘net would continue to work just fine.

8. Posted by: Lewis Baumstark - 08/23/2006

   Tim, are those the real costs of broadband or are they the cost over and above the infrastructure cost? By “infrastructure cost” I mean having to pay for a phone line in the case of DSL or having to buy at least basic cable in the case of cable modem.

   My experience has been that unbundled alternatives, if you can even get them (e.g., you *must* maintain a phone line to have dsl), are higher than the rates you quote.

   For example, in my area, the real cost of 1.5 mbps dsl is $65/mo, after you add in the requirement of an active phone line (which is useless to me). The real cost of 3 mbps cable modem is $45 for internet-only service and about $90 for internet+expanded cable video.

9. Posted by: Tim Lee - 08/23/2006

   Lewis,

   I haven’t had a DSL line since 2002, so I’m not sure about the phone side of things. On the cable side, I’ve had no trouble getting broadband without paying for cable. The $29.99/month I’m paying is for “naked” broadband.

10. Posted by: Duncan Frissell - 08/23/2006

    In assessing competition, you have to keep in mind that DSL can be offered by dozens of suppliers beyond the local telco.

    Also, I currently use EVDO for my home broadband (circa 1 meg) because I’m far from the CO and use it for travelling.

11. Posted by: Jim Harper - 08/23/2006

    Thanks, all. I think this is a worthwhile discussion. The important thing is to move away from absolute, simplistic thinking like the quote from the Ars reporter. The issues are more subtle than that and we’ll do a better job if we keep that in mind.

12. Posted by: Luis Villa - 08/23/2006

    The issues are more subtle than that and we’ll do a better job if we keep that in mind.
    Absolutely. I think in general TLF does a good job of dealing with subtlety, which is why the typical position on net neutrality here drives me bonkers
    Tim: of course only the last mile is regulated, which is why I’m optimistic about WiMax. That said, the last mile is how the vast, vast majority of internet users get their content these days, and has been since the early 90s. If the oligopoly that controls the last mile decides to follow the strategic route of the cell providers , and charge per-service instead of per-bit (which they clearly want to do), it won’t matter that the core of the ‘net is unregulated, because most people won’t ever see that ‘net except perhaps while they are in college, if they live on campus.

13. Posted by: Tim - 08/24/2006

    If the oligopoly that controls the last mile decides to follow the strategic route of the cell providers , and charge per-service instead of per-bit (which they clearly want to do), it won’t matter that the core of the ‘net is unregulated, because most people won’t ever see that ‘net except perhaps while they are in college, if they live on campus.

    …or at work, or at their local starbucks, or their local library, or the house of their nerdy friend who’s shelled out for a T1, or their other nerdy friend who’s downloaded a tunneling program that hacks around the telcos’ content filters, or anyone who lives in a country with a different regulatory regime.

    I don’t think it’ll ever get to that point because I think the backlash would start a lot sooner. But even if it does get to that point, it’s not irreversible. People will say “Hey, why does my nerdy friend get all these cool services while I only get VerizonNet’s lame services?” And either one of the telcos will see the opportunity to steal market share from the other duopolist, or there will be irresistible pressure on Congress to enact regulations.

    The residential last mile in the United States is an important market, but it’s nowhere close to a majority of the Internet. In the (in my opinion highly implausible) worst-case scenario, the rest of the Internet will progress without most American households, but we can easily rejoin it once we get our neanderthal telecom companies straightened out.

14. Posted by: Jim Harper - 08/24/2006

    Thanks for bearing with us, Luis! Started to comment further, but it turned into an entire post.

    I see from your Web site that you’re at Columbia Law. If you haven’t already, take an Administrative Law class. Along with digesting and regurgitating the black letter, think about whether it actually works for organizing society justly and fairly.

15. Posted by: enigma_foundry - 08/24/2006

    Well, I live in Saint Louis, and although in theory you can get diferent ISP to provide broadband, in fact there is only one DSL provider: Southwestern Bell (now ATT)

    I had signed on with Earthlink, because USAA had a good bundled deal a while back. When I got my bill, it was from Earthlink allright, and consisted of two charges: a charge for DSL Telecom Svc & an internet account charge. The charge for the DSL service used to read DSL Service (SWB), but changed when AT&T bought SWB.

    When I tried to sign up for AT&T’s new cut rate service, they told me I was not eligible, because I “already had AT&T DSL” service, “through earthlink” So much for a competitive market!

16. Posted by: Luis Villa - 08/24/2006

    Tim: the T1 is going to be just as traffic-shaped as the home connection- it is, after all, coming from a telco. And many libraries, schools, and ‘open’ wireless networks are already non-neutral- almost all universities do substantial shaping and blocking of traffic, and I’d be shocked if Starbucks doesn’t.

    But even if I grant that all those will be neutral and open for innovation… yoiks. That’s just such a depressing vision for the network. Go read up on Metcalfe’s Law- a network that excludes everyone at home at the mercy of a telco would be much less valuable, and much harder to innovate in. Do you really want the telcos to be able to even threaten to veto the next Skype, or the next AIM, or whatever next innovation it is that is not dead-standard http-over-port-80 and needs network effects to take off? Switching from a default admit to a default deny policy (which is what the cell networks have and what the telcos undoubtedly want), even if it is for only 1/2 the network, would most certainly kill the fount of innovation we’ve seen the past 10 years.

17. Posted by: Tim - 08/24/2006

    I agree that it’s a depressing vision. I don’t think it’s very likely that things would get that bad, and if they did, I don’t think it would last that long, precisely because it’s so depressing. I think you under-estimate the power of public backlash, both to get companies to change their behavior and to get Congress and/or the FCC to act. The pro-NN folks have managed to whip up quite a frenzy based on entirely hypothetical fears of discrimination. The backlash is likely to be all the stronger when the real thing comes along.

18. Posted by: Jim Harper - 08/25/2006

    One of the assumptions driving our friend Luis, and many people - probably a majority out there - is that corporations are powerful. Except when they co-opt government power, they’re not.

    I have enough friends who have been product managers at large corporations, including telecoms, to know how desperate and helpless they feel at the thought of consumer revolt. I myself regularly write letters to CEOs of companies that cross me and they lavish me with gifts and praise when I do - not exactly the behavior of the powerful.

    It’s enough to bring me to understand that corporations are my obsequious handmaidens. They stock entire stores of food, hardware, and clothing in my neighborhood, then silently wait for the chance that I may wander in and buy something. When I don’t, they suffer in silence, grateful for the chance to have been considered by the almighty me.

    Because of lacking competition, telcos aren’t quite as prostrate as I’d like them, but I would pay extra for satellite if they were to get uppity, and I think there are enough people like me to keep them in line. Each of us has their marginal revenue by the short hairs.

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