So last week I talked about some new technologies and the ramifications for the network. I concluded that this was not a big change that would create new carriers based solely around these technologies. The reason that this is important is that some change must happen if we are to have new carriers. If we don’t have new carriers then we won’t have increased competition. If we don’t have increased competition, then the prices that consumers pay for Internet Service and the Quality of that service will not change dramatically.
Well, there are some non-standard competitors. We have old fashioned ISPs like Earthlink and Sonic.net. We have CLECs like Integra. We have Mobile Virtual Network Operators like Tracfone. So, there are these companies that have models that use other people’s networks. Are they successful? Well, depends on how you look at it. None of these companies are large nor do they serve broad markets within the US. They don’t cause other companies to increase their investment in the network. So, from a consumer standpoint they do little to improve competitiveness. On the other hand, many of these companies have been doing business for a long time. Some of them like Sonic.net are trying to build small networks for themselves.
One of the challenges that this class of competitor will have is the current rules that they operate under are bad as networks change. They use a type of network that requires “Local Loop Unbundling”. This means that the telephone companies are required to rent their existing lines to these companies. The telephone companies are not required to rent out FTTH or FTTC networks. The cable companies are not required to rent out their networks at all. So as long as there is this limited requirement that can be satisfied with copper phone lines or T-1 lines, then these companies still have a business. The moment that bandwidth needs go beyond it they will struggle.
There is a fundamental competitive problem with this model however. If you are renting equipment from a telephone company, then there is little that you can do that the phone company can not do themselves. That means any actual technical advantage is mitigated. There are pricing and service capabilities that you can do, but as a bandwidth provider there is essentially nothing new for customers to buy.
There is another class of competitors called over-builders. Google Fiber and Wow! are examples of these. They build a 3rd network into places that already have telephone carriers and cable companies. These exist in some areas but they are few and far between. So far, like the other networks they have only a small impact on the competitive landscape. Google Fiber has the chance to be the largest impact, but it is not clear that Google is going to execute a national or even regional network. They have gone after what they have said are underserved cities. New cities have not been announced for some time and higher speeds from Cable and Fiber to the Home systems are being announced. Maybe that is enough for Google.
So, again what this leads me to is that we have to expect to regulate a duopoly. Perhaps municipal networks can put pressure on this, and I will post about that next week.
Have a great weekend!
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