What if there's not another paper because the margins are so low that neither of you would make a profit if you had to compete for customers (and your service was mutually exclusive)? And the government says that you have to drive by every house when delivering papers whether they subscribe or not?
Even if telecom/cable were fully deregulated, this is the situation you would face. A cable company may make $1 billion in revenue off of a city, but it probably costs them $900 million to serve the city. If someone else comes in and is able to radically undercut their costs at $600 million while simultaneously winning 50% of the market, both companies would still only make $500 million and lose money. The incumbent cable company probably has enough of a war chest to wait out the challenger's funding.
Infrastructure businesses are very expensive. There is no easy solution short of the government seizing the cable infrastructure, which would set such a dangerous precedent that it would probably destroy our economy.
> If someone else comes in and is able to radically undercut their costs at $600 million while simultaneously winning 50% of the market, both companies would still only make $500 million and lose money.
Emphasis added. This is not what "able to undercut" means to me. Furthermore, the situation described is great for consumers.
And yeah, it looks like Comcast has low-ish margins, for a monopoly:
> There is no easy solution short of the government seizing the cable infrastructure, which would set such a dangerous precedent that it would probably destroy our economy.
Sure, I mean, there's no way that the government could simply recognize the monopoly and regulate it as such.
What does that regulation look like to you? It's easy to say "regulation is the solution" but regulation can mean a lot of things. What's the easy regulatory solution?
Exactly like it did before the cable companies were allowed to kick out all their competition. In 1998, when I leased a DSL line I had a full page listing all the ISP options I had. Now that we're 'deregulated' and have a 'free market,' I have exactly zero choice in broadband ISPs.
DSL was a colossal failure of regulation. With the line-sharing rules, it was no longer financially viable for the telecoms to invest in infrastructure for common carrier services that they could no longer sell at a premium. Instead, they started investing in wireless. The telcos COULD have invested in FttN and FttH solutions, but wireless became a more attractive investment since it didn't carry the line sharing rules. Thus the telcos abandoned high-speed internet access and the cable companies (which were not under the same rules and could thus justify the investment) became the monopoly they are today.
What seems good for the consumer is not always good for the consumer. See how Verizon halted their national rollout of FiOS and instead plowed $130 billion into purchasing the 50% of Verizon Wireless they didn't already own if you want a very recent example of this.
> With the line-sharing rules, it was no longer financially viable for the telecoms to invest in infrastructure for common carrier services that they could no longer sell at a premium.
I completely agree, it's no surprise that a business that naturally tends toward a natural monopoly has a hard time with long term investments if the investors are chomping at the bit for immediate ROI. Hence the need to treat infrastructure as a local utility, regulate it as one, and fund the infrastructure improvements with bonds.
Government do and can regulate the mergers. They do it all the time and for last couple of big mergers with Comcast this has been on table but they seem to see Comcast with favorable eyes.
> Infrastructure businesses are very expensive. There is no easy solution short of the government seizing the cable infrastructure, which would set such a dangerous precedent that it would probably destroy our economy.
This is scaremongering, in the UK we have BT the almost national monopoly and Ofcom the regulator.
BT is required to grant competitors access to its infrastructure for cost price, which Ofcom sets. The UK has faster and cheaper broadband than the USA.
The American internet service provider market in no way sounds like capitalism but it does sound like protectionism. Just because you live is a country that is capitalist doesn't mean everything is.
and the reason you don't have the option to switch to another service provider is your state and local governments granting comcast, et al local monopolies.
Please direct criticism to the proper source: government interference.
> and the reason you don't have the option to switch to another service provider is your state and local governments granting comcast, et al local monopolies.
The real reason is the FCC doesn't require the infrastructure businesses to sell wholesale access to competitors. Once upon a time, Comcast et al would've leased you the line, but you would've had choice in your ISP service. A stroke of the pen eliminated all serious competition in the ISP game, and made it so Comcast owns the entertainment pipeline all the way from movie studio lot to your internet connection.
Odd that the studios aren't allowed to own movie theaters [1], but they're heading straight for the same end result by controlling your internet access.
No, the reason you don't have an option to switch to another service provider is that running a wireline provider is really expensive. Building one is even more expensive: you literally have to run cables to every household in a city thanks to the FCC's equal access laws (i.e. you can't ignore the poor parts of town when providing service). Each household probably has a fully-loaded cost of around $1000 (this includes switches, routers, a few thousand miles of cable, teams of guys in trucks to run the cable across the poles, etc), so for a small city of 500k households (~1 million people), you're looking at a ballpark of $500 million.
Even if the regulation allowed you to start your own cable company, what investor in their right mind would put up the money to do so? Trying to VC pitch a startup ISP would be the worst pitch ever. "Why am I going to give you a billion dollars for a 10% margin business that you're not even guaranteed to be successful in?"
In other words, the reason you don't have options for service providers is that it's expensive to be a provider; and the reason it's expensive to be a provider is...government regulations.
> and the reason it's expensive to be a provider is...government regulations.
If by government regulations you mean "the fact that running cable means acquiring access rights across large numbers of privately held properties, and government protection of property rights makes you have to negotiate with each of them for the right to access unless you can piggy back on someone else that already has an easement without exceeding the scope of the existing easement", then, sure, its about government regulations.
But its the kind of government regulations that even the people who complain about government regulations generally support (often, support most emphatically).
There needs to be some regulation to make that feasible, no doubt. But why does that function justify forcing cable companies to run cable to areas that aren't economically justifiable? Or to put it a slightly different way: while the public is entitled to make equal access a priority, it can't complain about providers not wanting to enter the market or not wanting to invest more private money in regulated service. You can't have your cake and eat it too.
You left out a key qualifier: "running cable to every household means acquiring access rights..." The post I responded to specifically mentioned the FCC regulations requiring equal access to all households as the driver of the high cost of being a provider. Without the equal access regulations, it would be a lot easier for smaller providers to compete. (And it would be even easier if state and local governments didn't give sweetheart deals to large providers.)
I think even without the government regulations you'd have a similar situation: it's expensive enough to serve even an affluent area that the market can't really support much more than 2 companies (which already exist in the form of Comcast/TimeWarner and FiOS/U-Verse in most wealthy areas). You'd probably also find that some middle-class suburbs would have no providers available at all.
Though I do agree that subscriber pricing is much better in areas where you see both a cable company and a telco video provider like FiOS or U-Verse.
> it's expensive enough to serve even an affluent area that the market can't really support much more than 2 companies
I would state this with a key qualifier: it's expensive to serve even an affluent area the way our society currently works. The way our society currently works is that local municipalities are strongly discouraged from doing local development sanely--where "sanely" means that when a new subdivision goes in, say, all the easements for running wired high-speed Internet go in as well.
The best way of doing this would be for the local developer to simply run the cables, and have them owned in common by the municipality, homeowner's association, or whatever entity owns the common areas in the development. That entity then leases access to the cables to all Internet providers on an equal basis.
The next-best way would be for the local developer to put in all the cable trenches, space for connection hubs, etc. in while the development is being constructed, right along with the water lines, gas lines, storm sewers, and other utilities, and with all the permits, easements, etc. already in place. Then an Internet provider just has to do a cable pull, which is only a small fraction of the cost of installing high-speed Internet in our actual society.
When municipalities actually try to do either of the above, however, they find themselves embroiled in lawsuits and negative publicity from the large Internet providers, who can't stand the idea that nobody really wants to buy their overpriced services, and if a way of routing around them became common, their business would be kaput.
I'm in favor of the FCC's equal-access laws. Otherwise people in places with poor infrastructure will have to pay even more to get service, which seems counter-productive for society.
That's fine, but you can not be in favor of these laws and then condemn their direct consequences with righteous indignation. If you've got the one, you've got the other. If you have onerous regulation in some market, you'll be limited to a few large players that can master that regulation.
If you lack the option because local government banned all other papers from the city (and courts approved this since it's "public interest") then it's really not right to lay this at capitalism's doorstep. Capitalism didn't do it, voters that elected politicians who approved it did.
There's plenty of alternatives for internet everywhere in the country. Saying "but they only have 1 broadband provider" isn't the same as having only one internet provider. The home I grew up in still doesn't have any broadband cable provider and can't get DSL. Yet somehow my non-tech savvy parents figured out how to navigate finding, competing and buying a high-speed internet provider after years of dial-up. They've had "always on" 24/7 internet in their house since about 1997-98 if I'm not mistaken.
What service do they use, exactly? I think most of us would be interested to hear about a high-bandwidth, low-latency option that isn't cable or DSL. The only things I can think of are satellite and cellular, both of which have huge hosts of problems for regular home use.
Oh your want high bandwidth and low latency? Just like Tesla doesn't have a dealership in my neighborhood, providers aren't available in their area that offers both of those things either.
They use to use pairbonded dial-up, then ISDN. Been on Satellite (high-band down, dial-up up then bi-directional) for the last 10 years or so. They've been thinking of switching to a 4g hotspot recently, which is similar bandwidth and half the latency (and similar cost for their uses).
It is if your customers don't have the option to switch to another paper.