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Broadband Blindness: How North American Providers Set Us Up for Failure

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Broadband Blindness.flv[/flv]

Toast Sacramento produced this 28-minute documentary which succinctly tells the story of North American broadband, and how commercial providers have set us up for long-term failure, especially in rural and suburban areas.  Whether you live in the United States or Canada, phone and cable companies dominate the telecommunications landscape.  Unlike other modern-day necessities, broadband is almost entirely in the hands of an unregulated free market that fails millions.  Where competition exists, customers can get reasonably fast service, but it costs more than it should.  Where competition is hard to find: slow speeds, spotty access, and out-of-sight prices predominate.

The documentary explores:

  • the neglect of suburban and rural DSL from large phone companies like AT&T;
  • how phony, industry-influenced broadband availability maps convince public officials there isn’t a big broadband problem;
  • why the country’s broadband demands may be too great for providers to handle without major new investments, leading to usage limits and slowdowns to delay needed upgrades;
  • and how the latest broadband technologies being installed overseas fall victim to Wall Street temper tantrums back home.

Currently there are 11 comments on this Article:

  1. cyberdoyle says:

    This is exactly what is happening in the UK too.
    That is why the farmers are doing it themselves in our rural area. Wish us luck! If we can do it so can any other rural area, its the only way we are going to get a fit for purpose connection.

  2. John says:

    Does no one here understand how capitalism works? Look at cars or computers or air conditioners or washing machines or microwaves or any other piece of technology, ever.
    The most cutting edge technology will be very expensive and only the rich can afford it. The rich will fund the establishment of the new technology, so that successful technologies will eventually come down in cost and spread to the masses. What this documentary is calling for is wealth redistribution, and it won’t fly in the United States.

    • Actually, I think your model works in a marketplace with economy of scale and robust competition. We don’t have that in broadband because it is a de facto utility, constrained by capital construction costs, limited spectrum, and a financial system that considers competition anathema. In decades past, the government would declare the duopoly most of us endure anti-trust and would break it up. Phone company and cable company networks would be forced open to wholesale resale pricing, allowing multiple providers to sell over these networks (traditional DSL and cable) that have already fully recovered their initial investment.

      I admit to being completely confounded by how this equates to “wealth redistribution.”

      I see this documentary as heavily influenced by the same arguments that allowed rural electrification and universal telephone service. The free market cannot serve where no profit motive exists. Without an alternative, these rural communities are unsustainable. Considering agriculture is a major industry in these regions, and this country is among the top producers of these products, sacrificing that standing for a laboratory definition of capitalism seems ill-advised.

      • John says:

        You demonstrated in your last paragraph that you recognize the wealth redistribution: from cities to rural areas (or from wealthy city residents to poor ones, as implied in the video). I bet we will simply disagree on whether rural areas “deserve” service that is subsidized by people who live in cities.

        Your first paragraph simply recognizes the effects of the fact that the telecommunication industry in the United States is NOT a free market. It is HEAVILY regulated. In fact, there is an entire federal bureaucracy (FCC) that exists just to regulate it. In addition, telecom companies will get all kinds of sweetheart deals with municipalities in order to lock out competitors. If you want a practical solution that won’t be subject to political manipulation, then advocate for common carrier status of publicly-constructed networks and deregulated service providers.

        • Thanks for the quick reply John. While you may have been right about the regulatory situation if this was the 1980s, Congress has radically deregulated the telecommunications industry, particularly with the 1996 Telecom Act. Additionally, successive FCC chairmen under Pres. George W. Bush specifically adopted a hands-off position for the FCC with respect to broadband, and FCC Chairman Julius Genachowski has not directly re-asserted that authority.

          Some examples:

          1) Telecom franchise agreements that prohibit competitors were declared null and void years ago. Many states now have cursory statewide franchising rules that would allow any new entrant to compete, but few have shown interest. Large cable operators do not compete against one-another. Telco competition is very uneven (aggressive Verizon FiOS on one hand, Frontier/Windstream/et al., on the other). Third party overbuilders are rarer than snow in Orlando.

          2) The FCC specifically exempted large telecom companies from being forced to resell access on their networks. It was a fatal mistake because Comcast and AT&T can keep would-be competitors out. A voluntary agreement with Earthlink and Time Warner delivers Earthlink service over TW at prices usually the same or higher than TW charges itself.

          I am much closer in agreement with you on common carrier status, but that should be imposed on all networks once their construction/investment costs have been recouped. I don’t want to see Verizon nationalized, and they deserve to be paid back for their investments, but once they are made whole, a fair wholesale price for third party access should be established that would allow any ISP to resell service over their network.

          Unfortunately, the Republican Party these days treats common carrier status like it came right out of the mouth of Mao Tse-tung, and it will be hard fight to score victory here. Corporate money talks loudly in both political parties, but considering how corporate-friendly the Republicans have gotten (in lock step usually), it’s really shifted the balance of power to their favor, not ours.

          • John says:

            So the story is thus: the government created the conditions for favored corporations to become entrenched in their regions, and scaling back those conditions has proved insufficient to reverse the damage done. I don’t see how that makes a good case to trust in government solutions, but I guess I just don’t have enough faith in politicians and bureaucrats.

            • I recall in the late 1970s everyone was clamoring to get cable television into their respective communities. A number of the cable companies around at the time argued that the only way they could attract investor dollars and safely spend the capital to build the systems was to win an exclusive franchise to serve each community. Many got them, along with tax abatements, favorable zoning treatment, regulated prices for pole attachment fees, and other breaks in return for agreeing to wire their respective territories.

              As systems were being built in the early 1980s, the industry was engaged in a merger and buyout frenzy, with increasingly powerful companies lobbying Congress for deregulation, which they said would stimulate investment into buildouts and fuel innovation. (They actually spent more time buying and merging with each other and using the hands-off policy to drive enormous rate increases from their de facto monopoly status.)

              By 1992, the abuses made possible from their favorable regulatory treatment got to the point that Congress overrode President George H.W. Bush’s veto and passed a new Cable Competition Act, which the industry obsessed about getting rid of (and finally did in 1996.)

              My problem with blaming the government for all of this is that it ignores the corporate influence and money that drove the whole agenda. Government doesn’t write regulatory policy in a vacuum. Large campaign contributions, high powered lobbyists, and their friends in the public policy groups argued for all of these things, and eventually won them.

              It’s why we’re so wary of today’s dollar-a-holler campaigns by the wireless industry and big phone and cable companies decrying regulatory oversight and policies that expose their cozy duopoly to competition.

              Until a level playing field is established in Washington that puts consumer interests on an equal footing with corporate agendas, a regulatory oversight regime that provides checks and balances on industries that endure little competition is wiser in my view than a completely deregulated free-for-all which returns us to the robber baron era.

              • John says:

                The only regulatory oversight regime that will get established is the one crafted by and favorable to the subjects of regulation. You just painted a picture of that fact.

                Even though I loathe rent-seeking, I can’t blame the big greedy corporations for working within the system to enhance their position as much as I can blame politicians for failing to serve the broader interests of their constituents.

                Perhaps this movement should turn it’s focus toward ending corruption instead of adding regulation. Term limits and limits on the power of government will help.

                • Scott says:

                  The corporations are the politicians constituants, it’s all about lobbying money and how much they get in order to buy their next election or secure their cushy job when they rejoin the private sector working for one of the companies they favored with legislation.

                  If you’ve ever run a business, even in small towns you’ll see that first hand like I have where getting things done like re-zoning often takes several thousand dollars donated to the right politician in your town.

                  In any case, it’s rediculous for you to blame the government for this, while they can make mistakes, the dialup and early broadband market was working great before deregulation. Once the big players like AT&T and the Cable Co’s got their lobbyists going competition was pushed off their PoT lines and cable networks making cities than had more providers than you have fingers on your hand suddenly reduced to just a one or two DSL providers and one cable company for most.

                  You also need a balance of government run infrastructure, investment, and partnerships with private industry. The whole ‘privatization’ hype that caused many cites to sell off power plants and other utilities to the private sector often in sweetheard deals claiming they’d be better run was often a wash or ended up which reduced service and higher prices in my experience. I think government has every right and need to maintain critical infrastructure, including fiber networks just as they would the roads and electrical lines in a city. Then regulate and resell that access to private business in order to promote competition and a level playing field that benefits local consumers and the community as a whole.

                  Political reform would be great, number one would be taking away Corporations status as ‘persons’ and blocking political contributions.. as long as $$$ = votes and power nothing is going to improve.

                  Anyways, that’s not the point of this blog.

    • Scott says:

      You’re talking about commodity items will decent competition, however even those if you start talking about computer components aren’t above abuse such as price fixing by so called competitors.

      Broadband is not a competitive industry, the players have consistly tried to carve out and trade their way into exclusive territories so they wouldn’t have to compete with each other in order to maximize their profits by gouging consumers as much as 100-1000% on items such as reselling bandwidth per Gig.

      In a market like this with the huge requirements for spending on infrastructure, there is no incentive for any of them to compete, just like tax payer funded infratstructure like roads there will be a point where the government steps in if we keep going down this path.

      • Fred Pilot says:

        I concur with Scott. Telecom infrastructure is a natural monopoly like roads and highways. And as Phillip points out, this natural monopoly is prone to severe market failure consequences when there is insufficient profit motive. That’s why alternative business models are needed such as cooperatives where earning a profit for investors — in this case the customers themselves — isn’t the goal but rather providing needed telecommunications services. I’m interviewed on this point in the documentary.

        Fred Pilot
        Camino Fiber Network Cooperative, Inc.

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