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The Cable Monopoly
Dec 21st, 2010 at 5:29pm
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http://yalelawandpolicy.org/29/the-looming-cable-monopoly

The Looming Cable Monopoly
Thu, 12/16/2010 - 11:34am — YLPR Tech Editor
Author:
Susan P. Crawford
Date:
12/2010
Volume:
29
On March 9, 2010, the city of Alexandria, Virginia received a letter from Verizon.[1] The letter, signed by Verizon’s Virginia president, Robert Woltz, said that Verizon would not be installing FiOS services in Alexandria. The mayor of Alexandria, William Euille, was disheartened: The city council had already awarded Verizon a contract to install fiber service and had spent hundreds of thousands of dollars negotiating a cable franchise agreement with the company.[2] Verizon, for its part, declared that it was suspending FiOS franchise expansion around the country.[3]
Just one week later, the Federal Communications Commission (FCC) rolled out its National Broadband Plan.[4] The Plan, which was based on the assumption that “broadband is a foundation for economic growth, job creation, global competitiveness and a better way of life,”[5] and was said by the FCC to be “lay[ing] out a bold roadmap to America’s future,”[6] made a host of detailed recommendations. These recommendations focused largely on making more spectrum available for wireless broadband use, and reforming the nation’s Universal Service Fund.
The Plan did not discuss net neutrality or competition policy. There were likely good reasons for these omissions. The Commission wanted to be seen as setting forth a vision for the country’s broadband future and was trying to keep any discussion of the newly-contentious subject of net neutrality on a separate, dedicated track. Also, the Commission was not, as of March 2010, eager to address the market structure of high-speed Internet access services.
To the extent that there is humor buried in the details of telecommunications policy, the coincident timing of the Verizon announcement that it was backing away from further FiOS installations and the release of the FCC National Broadband Plan was genuinely funny. The Plan itself contained the punchline:
Analysts project that within a few years, approximately 90% of the population is likely to have access to broadband networks capable of peak download speeds in excess of 50 Mbps as cable systems upgrade to DOCSIS 3.0.[7] About 15% of the population is likely to be able to choose between two robust high-speed service services [sic]—cable with DOCSIS 3.0 and upgraded services from telephone companies offering fiber-to-the-premises (FTTP).[8]

These upgrades represent a significant improvement to the U.S. broadband infrastructure, and consumers who value high download and upload speeds will benefit by having a service choice they did not have before the upgrade. The upgrades may, however, change competitive dynamics. Prior to cable’s DOCSIS 3.0 upgrade, more than 80% of the population could choose from two reasonably similar products ([Digital Subscriber Line (DSL)] and cable). Once the current round of upgrades is complete, consumers interested in only today’s typical peak speeds can, in principle, have the same choices available as they do today. Around 15% of the population will be able to choose from two providers for very high peak speeds (providers with FTTP and DOCSIS 3.0 infrastructure). However, providers offering fiber-to-the-node and then DSL from the node to the premises (FTTN), while potentially much faster than traditional DSL, may not be able to match the peak speeds offered by FTTP and DOCSIS 3.0. Thus, in areas that include 75% of the population, consumers will likely have only one service provider (cable companies with DOCSIS 3.0-enabled infrastructure) that can offer very high peak download speeds . . . .[9]
Here is a translation of this section: Where Verizon FiOS service exists, there will be competition with cable Internet access service providers for high-speed Internet access at speeds that are necessary to carry out real-time video conferencing or watch high-definition video. Where FiOS is not installed, there will not be any competition, and consumers will have just one provider to choose from: their local cable monopoly. Most Americans—perhaps as many as 85% of us—will fall into this latter category. As of March 2010, with Verizon’s announcement that it would not be expanding service to their town, the citizens of the City of Alexandria had just joined this group.[10]
I. WHAT JUST HAPPENED
Not so long ago, copper phone line DSL Internet access connections were roughly comparable to cable modem Internet access connections in terms of their speed and cost. Where there was both a DSL and a cable modem provider in a given locality, the Commission had felt confident that competition would keep prices down and speeds up. This rough parity, on which the complete deregulation of high-speed Internet access from 2002-2007 was based, no longer exists.[11]
It is much more expensive to upgrade existing copper phone line connections to fiber (FiOS) than it is to upgrade cable electronics to DOCSIS 3.0. Copper connections have to be replaced with fiber, and the streets have to be dug up to allow this; cable electronics can be swapped out and upgraded with far greater ease. DSL connections are too slow to be substitutable for DOCSIS 3.0. The economics of cable are far more favorable than those of telephony when it comes to upgrading infrastructure to enable modern-day speeds. The predictable mechanics of natural monopolies were not left
  
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