Recent Headlines
October 2, 2009
Tweet Be Sure to Read Part One: Astroturf Overload — Broadband for America = One Giant Industry Front Group for an important introduction to what this super-sized industry front group is all about. Members of Broadband for America Red: A company or group actively engaging in anti-consumer lobbying, opposes Net Neutrality, supports Internet Overcharging, belongs […]
October 2, 2009
Tweet Astroturf: One of the underhanded tactics increasingly being used by telecom companies is “Astroturf lobbying” – creating front groups that try to mimic true grassroots, but that are all about corporate money, not citizen power. Astroturf lobbying is hardly a new approach. Senator Lloyd Bentsen is credited with coining the term in the 1980s […]
September 27, 2009
Tweet Hong Kong remains bullish on broadband. Despite the economic downturn, City Telecom continues to invest millions in constructing one of Hong Kong’s largest fiber optic broadband networks, providing fiber to the home connections to residents. City Telecom’s HK Broadband service relies on an all-fiber optic network, and has been dubbed “the Verizon FiOS of […]
September 23, 2009
Tweet BendBroadband, a small provider serving central Oregon, breathlessly announced the imminent launch of new higher speed broadband service for its customers after completing an upgrade to DOCSIS 3. Along with the launch announcement came a new logo of a sprinting dog the company attaches its new tagline to: “We’re the local dog. We better […]
September 23, 2009
Tweet Stop the Cap! reader Rick has been educating me about some of the new-found aggression by Shaw Communications, one of western Canada’s largest telecommunications companies, in expanding its business reach across Canada. Woe to those who get in the way. Novus Entertainment is already familiar with this story. As Stop the Cap! reported previously, […]
September 22, 2009
Tweet The Canadian Radio-television Telecommunications Commission, the Canadian equivalent of the Federal Communications Commission in Washington, may be forced to consider American broadband policy before defining Net Neutrality and its role in Canadian broadband, according to an article published today in The Globe & Mail. [FCC Chairman Julius Genachowski's] proposal – to codify and enforce […]
September 21, 2009
Tweet In March 2000, two cable magnates sat down for the cable industry equivalent of My Dinner With Andre. Fine wine, beautiful table linens, an exquisite meal, and a Monopoly board with pieces swapped back and forth representing hundreds of thousands of Canadian consumers. Ted Rogers and Jim Shaw drew a line on the western […]
September 11, 2009
Tweet Just like FairPoint Communications, the Towering Inferno of phone companies haunting New England, Frontier Communications is making a whole lot of promises to state regulators and consumers, if they’ll only support the deal to transfer ownership of phone service from Verizon to them. This time, Frontier is issuing a self-serving press release touting their […]
September 7, 2009
Tweet I see it took all of five minutes for George Ou and his friends at Digital Society to be swayed by the tunnel vision myopia of last week’s latest effort to justify Internet Overcharging schemes. Until recently, I’ve always rationalized my distain for smaller usage caps by ignoring the fact that I’m being subsidized […]
September 1, 2009
Tweet In 2007, we took our first major trip away from western New York in 20 years and spent two weeks an hour away from Calgary, Alberta. After two weeks in Kananaskis Country, Banff, Calgary, and other spots all over southern Alberta, we came away with the Good, the Bad, and the Ugly: The Good […]
August 31, 2009
Tweet A federal appeals court in Washington has struck down, for a second time, a rulemaking by the Federal Communications Commission to limit the size of the nation’s largest cable operators to 30% of the nation’s pay television marketplace, calling the rule “arbitrary and capricious.” The 30% rule, designed to keep no single company from […]
August 27, 2009
Tweet Less than half of Americans surveyed by PC Magazine report they are very satisfied with the broadband speed delivered by their Internet service provider. PC Magazine released a comprehensive study this month on speed, provider satisfaction, and consumer opinions about the state of broadband in their community. The publisher sampled more than 17,000 participants, […]
Subscribe
This is exciting to have something like this published. Unfortunately, the video won’t play for me. Also, it’s harder to use a video for reference than an article. Can you direct us to a transcript?
There is no video attached to this article. All videos here are in the Flash format until we switch to HTML5, which means iPad owners will be able to see our videos as well.
Phillip, am I missing something then? You appear to be linking to a full article at
http://online.wsj.com/article/SB10001424127887324073504578109513660989132.html
but this is apparently a page with an auto-starting video segment. It does not work with FF, IE or GC on my PC. Depending on the browser, the video either never starts, or there is missing content.
Bah. So the article is subscriber-only, and it’s an ad or some web gadget that is timing out.
Here is a trick around the paywall. Google the exact title of the article you want to read and then click on that link. You will get a “free preview” of the original article in full.
Thank you, Phillip. It didn’t work earlier, but now I can read the article through the Google Cache!
Part of the reason broadband has good gross profit is because the video business does not, especially for smaller service providers. There is very little margin in video (if any for some — in fact some lose money on video), thanks to programming costs primarily. Broadband is seen as a way to even things out a bit.
ISPs want the Internet customers to help pay TV programming costs, even if they only use Internet. If the Obama administration is serious about promoting affordable broadband, they would break up this racket.
Gross profit is not the same as net profit. Gross profit is generally defined as gross revenue less cost of goods sold. For cable TV that would cable revenue less programming costs. It’s possible that Internet access doesn’t have an analogue to programming costs.
But so what? You still have to account for marketing, operating costs, taxes, overheads, etc. So the net profit is almost certainly much less than 90% but specifics are probably confidential.
In a perfect world, how much gross (or net) profit is enough? And who should determine that? You may not like it, but in a capitalist economy, the customer has very little say over how much profit is “enough”.
Pro-industry commenters always speculate that costs are high, pro-consumer commenters always speculate that costs are low. It’s opinion either way as long as the industry is allowed to hide it’s statistics. What is important to remember is that most clues point to costs being extraordinarily low, and which do not adequately explain existing prices.
The best arguments for the high prices are when the industry points out that they have agreements to pay so much for this and that, suggesting that these are costs to them; never mind that there are further arrangements that exempt them from these bills. The best example of that is the backbone peering arrangements. Other expenses basically amount to them writing big checks to other elements of their company, but treating this as money lost. But I don’t accept these arguments.
The bottom line is, it costs very little to provide Internet service, but the cost of it is high due to lying ISPs, lack of competition, and an industry that creates a false shortage to run prices up. The industry apparently trades megabytes as though they were a precious, consumable commodity, and they do so, astonishingly, according to a stock exchange model. I don’t have a problem with the market system. I do have a problem when businesses are running dirty tricks to eliminate competition.
So how much profit is enough? And who decides?
The current business model is likely “as much as we can get away with” and “we, the Internet Monopoly Industry”.
Assuming the decision is brought up to the market, I cannot define that myself. The market tends to pay as much for a thing as it is worth to them, or more if it it is indispensable. The industry appears to think we’re willing to pay more each year, and since our culture is increasingly dependent on Internet services, they may be poised to extort as much as any life-supporting utility.
However, the market’s perception of the value of their Internet service has been grossly warped by the industry’s deception. I don’t have a problem with a company that improves it’s perceived value through PR and advertisement, but I have no tolerance for one which runs a cartel. This is what Internet service in the USA and many other countries has become. Regrettably, the market system does not require vendors to be honest, but the industry has no entitlement to deceive it’s customers. The industry in question has simply managed to do so. Regulatory bodies are utterly circumvented or broken (which is nice language for “incompetent and in collusion”).
My hunch is that when customers find out that their Internet providers could charge two orders of magnitude less, and still make a hefty profit, then there will be pressures to make it so. And the decision should be up to them.
So what do you suggest be done about it?
Personally, I’d like to see last-mile providers (especially cable) be required to sell wholesale access to third party ISPs at cost-based rates. I would not preclude the facility providers from providing retail Internet access but they could do so only on the same terms as third-party ISPs.
But I doubt if the FCC has enough Congressional support to overcome the inevitable industry opposition to such a plan.
I do what I can afford to do. I shout about it, lol!
I agree that telcos should share the lines at-cost, since they’re still using the cables that public taxes paid for years ago. Unfortunately, our government has essentially agreed to gift this equipment to the telcos, and now they won’t share them. In the days when they were temporarily sharing them, the telcos resold their access at a sliver below RETAIL cost. This is what drove all the small ISPs out of business, and why those that linger on claim, semi-correctly, that bandwidth is “expensive”. I guess we’ll have to wait until someone comes up with an alternate means to distribute information. My money’s on tiny SIMM-sized cards containing an entangled molecule, lol.
I would love to turn back time and bring the mom-and-pop ISPs, like the ones I worked for, back to life, but how does the public arrange to bribe the FCC and congressmen more than the Internet monopolies do?
In a perfect free market model with a level playing field, competition will guide how much profit is enough. If there was more competition, the gouging would attract more players who would be happy as can be to walk home with only 75% gross profit, forcing the incumbents to match pricing and potentially trigger a price war and a new paradigm for margin expectations.
But guess what, we have a protected racket in place here.
1) Wall Street treats competition in broadband as anathema. Bankers won’t loan money to non-sure things these days, and broadband competition sure isn’t a sure thing for them. The drumbeat is for further consolidation, not increased competition among the banks and investment firms.
2) Wired broadband infrastructure has a natural and practical limit. It is highly unlikely anyone other than community providers or a deep pocket like Google will dive into the market with fiber infrastructure. And wireless is not going to be a practical solution for urban areas for years.
3) Congress has adopted a variety of corporate welfare and protectionist legislation on the state and federal level that discourages community broadband, does not compel incumbents to open wholesale access to their networks at competitive prices, and has broadband funding opportunities that favor incumbents over new entrants.
4) A friendly pro-corporate federal court system regularly kills pro-competition and pro-consumer legislative and regulatory initiatives because it violates corporate free speech, et al.
Canada has the right idea with a framework that can help solve this. They compel phone and cable companies to sell wholesale access to their competitors, allowing independent ISPs to offer better pricing and often superior customer service.
But Bell and the cable operators responded by trying to force those competitors to offer the same usage-capped, high priced plans they do.
I guess one could say, and I hate to admit it, but the market is faithfully holding Internet access at a price which the public is willing to pay.
An ignorant and outrageously manipulated public, though.
In the long run (hopefully not too much longer), I see this as another tech bubble. When word gets out, people will bring the pressure to bear on the monopolies, FCC, congress, et al, to slash prices. It would be nice to dream about a series of “60 Minutes” style segments, but remember who owns the TV networks such shows would be airing on…?