The market conditions are set up for what is called a "natural monopoly". Its inefficient for new companies to build wires to an already wired up neighborhood.
Companies therefore become de-facto monopolies on a neighborhood-by-neighborhood basis. The exception are cities where a dense population of people can support additional carriers for sake of competition. But at a basic level, the economic conditions just make the ISP problem complicated.
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Frankly speaking, all options to deal with natural monopolies kinda suck. Socialism simply has the government take over for example, so the legal monopoly is at least owned by the people.
Capitalism can't solve the problem. Its more efficient for companies to wire up other neighborhoods. Why become a competitor when you can simply become a monopoly holder somewhere else?
An interesting blend of capitalism / socialism is to have the wires owned by the municipality, or perhaps a highly-regulated entity (such as a utility company). The law is then rewritten to state: "It is illegal to be both a physical-wire company AND an ISP at the same time", or something to that effect.
Physical wire companies are then forced to rent out their wires to different ISPs. For example, if Verizon owned the wires of an area, they'd be forced to reorganize and split-off the wire-owning portion into a "Verizon Local utility coporporation".
Then, "Verizon Local Utility Inc." (now an independent company) will sell the time on the wires to various ISPs, like Verizon or Comcast.
ISPs will still be responsible for interfacing with the population, as well as bandwidth, routers, and other such details on the data-center side. The local-utility company will be responsible for physical maintenance of the wires, with a strict regulation regime to ensure that they provide equal-opportunity access to large ISPs, as well as any startups who wish to enter the space.
Its certainly "more regulations" towards this problem. But I've never heard of a more complete solution than this kind of scheme. Its not necessarily "Socialism" either, because the US has a long-record of tightly regulating local Utility companies, due to similar economic issues (the concept of local power companies being a natural monopoly. The "deregulation" schemes that exist today to allow local residents to buy solar energy or nuclear energy, delivered by local wires under a tight regulation / utility regulation scheme)
So its American, its a familiar model to many municipalities, and it works in practice. As demonstrated by power-companies and phone companies of ages past... as well as a few European countries who have adopted this scheme.
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Under such a regime, "Net Neutrality" can become an ISP's defining trait. And we can let the market decide if its worth the cost. If people want a "Net Neutral ISP", they simply pay for the competitors who offer such a service. So the overall regulatory burden is lowered, IMO.
One of the problems with that approach is that a wholesale monopoly selling to various competitive retail ISPs will still end up capturing all the economic surplus.
So you end up having to regulate how much profit that wholesale monopoly is allowed to make.
Eventually, this is probably what needs to happen in the US to fix the market problems with ISPs. NN is a stop-gap measure to prevent a mono/duopoly from taking advantage of their position.
We should be pressing for NN right now and work towards the next steps of deregulation like the splitting of wire / ISP after this effort.
Local loop unbundling was required under law wrt dial-up and DSL until 2006, when DSL was reclassified from being a Title II to Title I, service, correct?
It was my understanding that Title I service providers, like cable companies, can use the lack of LLU requirements to charge exorbitant rates to competitors who want access to someone else's local loop, which secures the incumbent's effective monopoly in a neighborhood.
Would love to be corrected here if I'm wrong so I don't spread misinformation about this elsewhere.
> as well as a few European countries who have adopted this scheme.
Do you have examples of which countries that have implemented something similar? I recall reading about this in the past, and I would like to read more about it, but I can't think off the top of my head which countries I might have read about.
afaik it’s how power distribution works in australia? i think there are energy “retailers” and energy “wholesalers”, and you legally aren’t allowed to be both. wholesalers cover plants and wires, and retailers handle billing and connection.
thats not a glowing recommendation of he system though because our electrical network is all kinds of expensive :p (but that could be for other reasons; i’m no expert on it)
thats not a glowing recommendation of he system though because our electrical network is all kinds of expensive
Yes. The distribution monopolies are only allowed to make a fair rate of return on their operating and capital expenses, as determined by the independent regulator (this is to prevent them from raising their prices to the point that they capture all the economic surplus, as they otherwise would). Unfortunately this has incentivised over-investment in the distribution networks (the more they spend, the more profit they're allowed to make) - referred to as "gold-plating" - which ends up being passed on in the prices faced by consumers.
Specific to the ISP issue, this is how the NBN works in Australia too - the NBN provides the underlying network, but isn't a retail ISP itself.
I also happen to forget the name of these countries, basically every time I read about them. :-(
Ignorant American stereotype and all that jazz. If I were to guess, I think it was someone from Norway who told me about this. But I'm not 100% sure from memory.
We had a state owned company, telecom, which was then privatised by a National govt., and then as a response to local loop unbundling regulations from Labour, it split itself into two companies, telecom (now spark) for retail and chorus for infrastructure.
Companies therefore become de-facto monopolies on a neighborhood-by-neighborhood basis. The exception are cities where a dense population of people can support additional carriers for sake of competition. But at a basic level, the economic conditions just make the ISP problem complicated.
---------
Frankly speaking, all options to deal with natural monopolies kinda suck. Socialism simply has the government take over for example, so the legal monopoly is at least owned by the people.
Capitalism can't solve the problem. Its more efficient for companies to wire up other neighborhoods. Why become a competitor when you can simply become a monopoly holder somewhere else?
An interesting blend of capitalism / socialism is to have the wires owned by the municipality, or perhaps a highly-regulated entity (such as a utility company). The law is then rewritten to state: "It is illegal to be both a physical-wire company AND an ISP at the same time", or something to that effect.
Physical wire companies are then forced to rent out their wires to different ISPs. For example, if Verizon owned the wires of an area, they'd be forced to reorganize and split-off the wire-owning portion into a "Verizon Local utility coporporation".
Then, "Verizon Local Utility Inc." (now an independent company) will sell the time on the wires to various ISPs, like Verizon or Comcast.
ISPs will still be responsible for interfacing with the population, as well as bandwidth, routers, and other such details on the data-center side. The local-utility company will be responsible for physical maintenance of the wires, with a strict regulation regime to ensure that they provide equal-opportunity access to large ISPs, as well as any startups who wish to enter the space.
Its certainly "more regulations" towards this problem. But I've never heard of a more complete solution than this kind of scheme. Its not necessarily "Socialism" either, because the US has a long-record of tightly regulating local Utility companies, due to similar economic issues (the concept of local power companies being a natural monopoly. The "deregulation" schemes that exist today to allow local residents to buy solar energy or nuclear energy, delivered by local wires under a tight regulation / utility regulation scheme)
So its American, its a familiar model to many municipalities, and it works in practice. As demonstrated by power-companies and phone companies of ages past... as well as a few European countries who have adopted this scheme.
----------
Under such a regime, "Net Neutrality" can become an ISP's defining trait. And we can let the market decide if its worth the cost. If people want a "Net Neutral ISP", they simply pay for the competitors who offer such a service. So the overall regulatory burden is lowered, IMO.