One of the issues that people have with the way things are done today in the Internet Service business is the lack of competition. I want to address the causes of that and the implications that this has had.
Today, people are worried about the possible conflict between Content Owners and Internet Service Providers. I want to tilt this on its head as a discussion point for thought. From there, I will get to a bit of my history lesson. What do you think would happen if Netflix was going to deny service to all its customers on Comcast until Comcast changes its performance. Who would get the heat for turning this back on? My argument would be that its Comcast and take a look at what happens when Cable/Satellite company drops a major Television Channel.
But the driver that could keep everybody playing fairly is competition. The problem is that there is not a lot of competition and there is not likely to be a lot more in the future. If you recall Dial-Up Internet, you would buy Internet Service from a company that was often not your Phone Company. This separated what was termed your Access Service Provider (ASP) with your Internet Service Provider (ISP). The ISP was the company that actually provided you with your IP Address.
When the Telcos became involved in Internet Service, they decided to take over the ISP business. The way they did this is that they bundled the pricing as DSL came out. You bought your DSL line and you could get the ISP service with it for a very low price. So instead of shopping to someone like Earthlink or AOL, you would have your ASP and ISP be the same company. In fact this is so common today, that we rarely think about it the other way. But as an example, Earthlink still exists and you can have them as an ISP pretty broadly where your ASP would be your local Telco. The Telcos (and Cablecos) priced ISP service to such a commodity that it is the low value part of the business.
Their are two results here. First, nobody is starting a new company as a standalone ISP especially in residential service. There are companies that are standalone ISPs but they have existed for some time. This means that there is no new ISP competition evolving. Second, nobody wants to build new networks. In fact recently two smaller carriers have either spun off or sold their network assets. Networks are hard to build and maintain. They are capital intensive and take a long time to get an ROI.
Finally, let’s recall the Competitive Local Exchange Carrier aka the CLEC. This was the last time we tried to legislate competition into existence. This was not a success (like the Titanic was not a success). So let’s be careful before we assume we can regulate competition into existence
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