More People Realize The Obvious: Telco Regulatory Capture Is Why We Have Crappy, Expensive Broadband

from the wake-up dept

This is hardly a new thing, but it’s nice to see it getting more attention. There’s a new book, The Fine Print: How Big Companies Use ‘Plain English’ to Rob You Blind, by reporter David Cay Johnston that points out that regulatory capture and a lack of competition are why we have crappy, expensive internet (and mobile phone service). Among the points he raises, summarized over at Yahoo’s Daily Ticker, are the following:

  • Americans pay four times as much as the French for an Internet triple-play package—phone, cable TV and Internet—at an average of $160 per month versus $38 per month.
  • The French get global free calling and worldwide live television. Their Internet is also 10 times faster at downloading information and 20 times faster uploading it.
  • America has gone from #1 in Internet speed (when we invented it) to 29th in the world and falling.
  • Bulgaria is among the countries with faster Internet service.
  • Americans pay 38 times as much as the Japanese for Internet data.

Of course, we’ve seen most of this before, and we’ve heard all the excuses, about how we’re more spread out. But, in the long run, the facts remain: we’re piss poor at the internet, and that’s a pretty big problem when the internet has become so important to so many people’s lives and jobs. Johnston highlights the key problems:

“The telecos got the rules changed while we weren’t watching,” says Johnston in the accompanying interview. Basically, the phone and cable companies lobbied Washington to change laws and regulations to favor their businesses over their customers.

And remember the so-called “Information Superhighway”?

Over the course of the last 20 years, nearly $500 billion has been collected by the telecom companies to (allegedly) bring America into the 21st century with an “Information Superhighway,” says Johnston. That works out to $3,000 per household to have access to high-speed Internet.

But America did not get what it was promised and much of the country will never get fiber optic lines…

Indeed, this is nothing new. We’ve been writing about this for about a decade now. It’s also why we’re uncomfortable with net neutrality laws, even if we believe the concept of net neutrality is quite important. We’ve seen how the telcos are very, very, very good at working the system to their advantage.

The only real answer to our problems is to encourage more significant competition. The question that’s reasonable to ask is where that competition should be. It’s not at all clear that it needs to be at the infrastructure level — since that can be redundant. However, as Australia is now doing, you could invest heavily in a core fiber network that brings tremendous high speed access everywhere… and then let service providers compete at the service level, rather than the infrastructure level. Yet there appears to be little appetite for such things in the US these days. Rather, you have the big telcos and cable companies creating their own little controlled markets, with crappy service and inflated prices… while the rest of the world does much, much better. We’ve been able to get away with it in the short term, but over time, the lack of good broadband in the US is going to hurt us economically.

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Comments on “More People Realize The Obvious: Telco Regulatory Capture Is Why We Have Crappy, Expensive Broadband”

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R.H. (profile) says:

Re: Re: Re:

Please note that the American government won’t actually be ‘running’ healthcare. Unless you’re on Medicare or Medicaid you will probably NOT be recieving insurance from the government. The current health care law will simply require everyone to have a minimum level of health insurance, assist those who can’t afford to purchase it by way of tax breaks, and fine (by way of tax hikes) those who don’t purchase it. The public option, which would be the government run competing insurance company you seem to speak of, was removed from the bill before it passed.

R.H. (profile) says:

Re: Re:

As far as building/owning the infrastructure is concerned I’d still be fine with the federal government doing so. The way the law is worded now, a private company CAN give your information to government without a warrant and tend to do so to avoid friction. However, if the government actually owns the infrastructure then there would be no private company there to coerce and the 4th Amendment would still apply. I know that there have been issues with people or organizations within our government violating our rights but, at least this way there’s the chance of a legal argument protecting the data.

Anonymous Coward says:

Re: Re: Re:

I tend to agree, and I work in the business. The copper network of phone systems was created by the government, but it is general degraded. (Look at FairPoint after purchasing the NE copper plants from Verizon.) We need a new end point system, and that is going to be costly. Companies are simply going to use geographical monopolies to further delay this build out, and hamper future business growth. Look at Verizon no longer building out FiOS, and AT&T no longer building out U-Verse. Currently, the government is only offering tax incentives for the building of new end points, and it is obviously not working. I would like to see DSLAMs replaced with GPONs, but in order to get to that point, it’s going to take government involvement to push things forward in the US, like it did in South Korea.

Anonymous Coward says:

Actually, Telco regulatory capture has little to do with it, compared to the basic problems of the US:

Too many people living in the middle of nowhere, combined with a government system that demands that nobody is left behind.

People want to live 30 miles up a country road, on the side of a mountain, an expect the utilities to foot the bill and set them up proper. They expect the cell companies to fight for their business by each erecting a special tower just for their mountain… with 4G LTE please! (and yes, I said erecting… stop laughing butthead!).

So what happens? Tons of government money as subventions to set this stuff up. Problem? Almost every company around can apply for it, and they can always find a project that qualifies. So you end up with massive fibre backbones to the middle of nowhere. For years, Montana has the highest speed internet connections because they had been sopping up government money to run fiber all over the place. One of my friends moved a hosting company to the middle of a small farming community, because they had MULTIPLE high speed fiber connections into town, and effectively nobody to use them.

Basically, your dreams of suburbia are what kill you. You pay higher taxes for the roads you use, you pay more taxes for the gas you use, and you pay more taxes to support the incumbent phone and cable companies to wire up your distant, thin on the ground burb.

You did it to yourselves. Stop complaining.

(oh, and my just under $20 us a month phone plan here includes LTE that bursts over 50M… the price I pay for living in a high density area) 😉

Anonymous Coward says:

Re: Re: Re: Re:

many of those who are served live in areas of sparse population densities and yet, despite sparse population densities, they still get better service at cheaper prices than areas of the U.S. with equivalent and higher population densities. If your model is correct we would expect them to get bandwidth services like areas in the U.S. that aren’t heavily populated and we would expect them to generally have the same sort of difficulties that allegedly we have due to areas that are just as sparsely populated. Yet they don’t. Their sparsely populated areas don’t seem to have such a huge impact on their broadband provision services. Your theory fails.

Anonymous Coward says:

Re: Re: Re: Re:

yes, because they don’t have regulatory mandates that require bringing high speed internet to nowhere.

Well that is basically false. Phone service and electricity still are not in some areas of the US, let alone broadband. It’s the corporate mentality that less profitable areas are not worth building the infrastructure that is holding back development. The government itself tries to encourage companies to build out the system through programs like the American recovery and investment act, but the large stakeholders are simply taking the funds and doing limited deployments in those areas. Talk to some of the members of WISPA about how large companies are simply screwing the average American in rural areas.

Anonymous Coward says:

Re: Re: Re:

Because you are paying for the horrible service in the country side. You are paying for there to be massive excess capacity where it’s not needed (by mandate) and having not enough where it’s really needed, because they can’t afford to do it right.

It’s why AT&T claims 99% coverage for their wireless product, but you can’t get a reasonable speed connection for data.

Anonymous Coward says:

Re: Re: Re: Re:

“Because you are paying for the horrible service in the country side.”

No, the country side customers are overpaying for their horrible service. I am overpaying for my service. Other countries with lower population densities than various U.S. states offer better services at lower prices so if this were true then they should be suffering the same problems the U.S. suffers. But they aren’t. Your theory fails.

“You are paying for there to be massive excess capacity where it’s not needed (by mandate) “

What massive excess capacity where it’s not needed? We are paying way too much for far too little capacity.

and since when did I demand the government mandate excess capacity. I want the government to allow competitors to freely enter the market as they please without artificially blocking competition. If there is sufficient broadband demand in a particular area the free market will take care of it.

I don’t care if the government doesn’t mandate broadband in certain places, heck, I wouldn’t mind the government providing Internet services (even if at a nominal price) in places where no one else would provide in a free market.

“because they can’t afford to do it right.”

That’s a lie, of course they can. When the government artificially restricts competition it’s more profitable to abuse the monopoly which is why prices are high and service sucks. but such abuse should not be tolerated. The government needs to either freely allow competitors to enter the market or they need to regulate prices and services in the public interest. I prefer free competition but right now they do neither and that’s not acceptable.

“It’s why AT&T claims 99% coverage for their wireless product, but you can’t get a reasonable speed connection for data.”

The reason for that is because there isn’t enough competition.

John Fenderson (profile) says:

Re: Re: Re: Re:

You must live in a different city than I. I live in two cities, actually, and in both of them prices are about 4 times what they were a decade ago, and the service quality is mediocre at best. True, the speeds are higher now, but they’re nowhere near as fast as they should be even if priced reasonably.

The reason is obvious: monopoly.

Anonymous Coward says:

Re: Re: Re:2 Re:

10 years ago, I would bet a T1 would cost probably around 1K USD for loop and bandwidth, today it’s probably about 300 USD. Technically, he’s correct in some respects. But technology has changed greatly, and the building itself should be lit with a fiber deployment offering 100Mbs – 1Gbs for about the same price and this is where the US is failing it’s citizens.

bullshitdetector says:

Re: Re:

I call bullshit. 90% of the American population live in areas that could very easily be transformed into super high speed networks, the excuse that the country is so big is an old excuse that has been debunked many many times, and is now called out as bullshit when used as an excuse. As Google has proven it costs $300 for fibre to the house installations, having been given $3000 per household the telcos could easily have converted the country, the problem is that with high speed broadband the telcos would lose there money making racket via mobile call charges and text charges. This is only one of the many reasons they do not want a fibre network.

If anything America is going backwards in there broadband implementation and this proves that the core networking services must move to Europe or Elsewhere. Let American telcos have there slow internet, lets just not also give then the keys to the international network.

I would be interested to see where the money given by the government was used, if it was not just used for wage increases. Where did all of that money go.

Maybe the government should take the fibre network infrastructure under there control, making sure there is fibre to every house and then leasing it to telcos. This could be a nice money maker for the government as after the initial cost of implementation maintenance is much much lower than the copper network ever was.

But I would only allow this myself if there was a restriction to the government eventually selling the fibre network to some telco that would make a mess of it.

Anonymous Coward says:

“about how we’re more spread out. “

We’ve already refuted this lie. Different U.S. states have different population densities compared to other countries with faster broadband services at cheaper prices and we consistently have slower bandwidth at higher prices regardless. If population spread was a factor then we would expect states with greater population densities to have better broadband offerings than countries with lower population densities (or vice versa) but this is not the case.

pyrosf (profile) says:

The funny part is that “Micro” telco’s for planned communities are actually cheaper for the entire community.

I’ve setup a 300 unit Condo group just like this, and once its built its fairly easy to keep running. The best part is small computer network shops will take on the Tier 1 tech support and maintenance contracts.

The only real issue with the entire setup is getting the phone company to run the trunk line. Sadly they have regulatory capture stopping me from going directly to the major backbones.

Anonymous Coward says:

Re: Re:

“Sadly they have regulatory capture stopping me from going directly to the major backbones.”

No, the major backbone companies are not willing to cable to your door. They get their line service from the Telco’s because it’s cheaper for them to do it that way.

Remember, it they want to string fiber for you, they need to pay right of way to get it there. It’s not economical to do it, you wouldn’t want to pay the price.

Anonymous Coward says:

Re: Re: Re:

“they need to pay right of way to get it there.”

and that’s exactly why broadband is so expensive. There is nothing intrinsically expensive about it, what’s so expensive is the legal aspects of it. Certain companies underpay for exclusive ‘rights’ of way and for the privilege of abusing the government to deny competitors affordable rights of way.

Anonymous Coward says:

Re: Re: Re:

Our terrible broadband is overpriced for the same reason that copy protection lengths last way too long and keep getting retroactively extended and for the same reason that govt. established taxi cab monopolies have been imposed against us against the public interest causing inflated transportation costs. The reason is outright corruption and crony capitalism. It’s corporate campaign contributions and revolving door favors.

Chris Maresca (profile) says:

Er, some of the facts about France are just plain wrong...

My mom lives in France – rural France to be more vague.

It’s pretty much impossible to get regular (DSL or cable) internet, and even if she could, it’s about 70 euros/month without phone or TV. And her phone, with a special international rate, is about 40 euros/month. Satellite or cable TV is another 30 euros/month and international calls are hugely expensive (roughly double what I pay). Theres a reason Skype is widely used in Europe and it’s not because of the fantastic call quality. Oh, and these are not ‘special rural rates’, they are the same across France.

When she did finally get internet, it was via satellite and it costs 50 euros/month for 10mb down (and 500ms latency), plus the install cost was well over 1000 euros.

I was there for a month 1/2 last year trying to figure out how to reduce costs & make all this work better. No such luck, even 3G service is expensive & crappy and employees of various companies couldn’t give a shit less about delivering ANY service. And it’s not like I was some ugly American trying to get service – French is my native language…. It’s basically the result of zero competition coupled with the difficulty of firing non-performing employees. And don’t even try to cancel service, the only way is to call and the lines are always ‘too busy’, even at 3am (24h service supposedly…).

Quite frankly, I was SOOOOO happy that I live in the US and deal with US, customer centric companies. Even the absolute worst US companies (Comcast, I’m looking at you) are 100x better than the best French companies.

So, sorry, this story is a bunch of bunk. It’s easy to grab some stats provided by the phone company, but the reality on the ground is much, much different. Nightmare would be a generous description.

That Anonymous Coward (profile) says:

Re: Er, some of the facts about France are just plain wrong...

And let us not even touch on 6 strikes.

We pay them 500 billion, get crap, and now they decided to be judge, jury, and executioner to the copyright cartels in a system designed to not be fair.

Anonymous Coward says:

please enlighten me as to what in the USA doesn’t give a crappy service and inflated prices? i dont believe anyone can name anything. from fuel to pharma to entertainment, everything is very expensive in relation to the majority of the rest of the world and when there is the possibility of things changing to the benefit of customers, the industries concerned spend more on lobbying to get the changes stopped than they would have on bringing the changes in. stupid members of congress then do the rest after receiving their ‘encouragement’ and the service or whatever remains as shitty as it has always been. i suppose that’s progress for you!!

R.H. (profile) says:

Re: Re:

I’m willing to say that gasoline in the US is quite nicely priced compared to most of the world right now ^_^ Remember, most countries tax their gasoline at a very high rate, partially to encourage savings. Many countries with lower fuel prices are either net exporters of oil and use those funds to subsidize their gasoline costs. Honestly, the US is near the middle of that particular list. For example, as of today, 95 octane gasoline averages $10.18/US gallon in Turkey.

We suck pretty bad concerning our prices and service in many areas but fuel is NOT yet one of them.

Anonymous Coward says:

Internet has become a basic utility like electricity, trash service, sewage, water, roads and traffic control all controlled or regulated in some form by the government.
It’s time for the government to step up in the US and manage the entire infrastructure including internet. But our government fails us. All they are interested in is raising fees while everyone is hurting. Their solution for every job lost and fees lost to them is to raise the fees on those still working to the point of pain.

magusat999 (profile) says:

Thats just part of it...

High prices for crappy internet services is just a small part of the problem in America. In America, its high prices for crappy EVERYTHING. Run-down houses, electronic devices, furniture, software, hardware, fines, fees, cars, utilities – we are being shafted from every side. If you look at the price of almost anything in America, compared to the same item in most other countries you will find out how bad the problem is. It doesn’t matter if you live right next door to the factory – you pay more in America, and you get less.

What really makes it worse is that there are all kinds of fairly recent schemes to make sure that you don’t have money left over in the first place. Blue collar workers wages have went down from upper middle to almost welfare levels. You can’t get a simple job that used to require a high school education or some training – without an un-affordable BA degree (education being out of reach for most Americans too). Every time a job sector opens up that gives decent pay, here comes the Universities to capitalize and push out otherwise capable prospective employees. So how will people make the money to pay for all of these overpriced products / services??? If everyone is broke and has no disposable income – why are prices rising and inflating? Its almost feeling like some kind of scheme to break America down…

Mitch Featherston (profile) says:


The situation with American broadband is a complete debacle. We have almost no competition for the cable companies, and when competitors do show up they end up disappearing before an impact is made. I’ve personally used Charter and Comcast in metro Atlanta… both provide lightning fast internet access, but unless you “bundle” you get to pay a super premium, and of course, Comcast limits with a monthly cap.

George Leon says:


The real kicker & what frustrates the hell out of me is that in America we own the airwaves, the spectrum, that is used for radio & television broadcasts. It is supposed to be owned by all Americans & yet now we have a government that is reclaiming the spectrum that was once being used for television broadcasts that have largely gone to cable & satellite transmission, & they are selling what is owned by the people to the telecoms for next to nothing (relatively) to increase high speed bandwidth availability so these damn companies with crap customer service can charge even more money. The telecoms should not be allowed to buy spectrum, it should be leased in 4 year terms with citizens of each area voting to either allow them to continue using our airwaves or give them the boot. That way they are forced to keep things above board & competitive & ultimately will be accountable to their consumers.

Matt says:

Living in the country

I pay $100 per month for 1mbps and an absolute minimum of 125ms ping. The sad part is that’s my only option unless I want dial-up. Which I still have to pay for.

Recently, a small local business started putting up towers to broadcast long-range wifi (3-5ms ping, 8mbps, $80/month) to rural homes. Half the people in our county are almost literally throwing their money at them. Technically, it’s still slow compared to the rest of the world, but it’s many times better than the crap we’re literally forced to deal with (2-year contract with Sprint, we signed the contract assuming we’d get unlimited data, they changed it to 5gb caps 1 year in).

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