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Comment by rayiner | Hacker News Reader

The "no viable alternative ISP's" thing really isn't true as often as people on this site make it out to be. DSL is almost always available if cable is available. And some cities don't raise stupid regulatory barriers and have some real competition. In my zip code in Chicago, we had Comcast, RCN, AT&T U-Verse (with FTTN). Heck, there's a ton of FIOS households in the shadow of Comcast Center in Philadelphia.

If you really just have one ISP in a substantially-sized city, go blame your municipal government because it's almost always their fault. I just have Comcast or 1.5 mbps DSL here in Wilmington, and it's 100% the government's fault. Verizon wanted to build FIOS here, but the city killed the deal with ridiculous demands: http://www.dslreports.com/shownews/Dont-Actually-Demand-Anyt....

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I don't think you can put all the blame on local governments. A huge part of the problem is structural. Having two ISPs isn't actually competition. Conscious parallelism and other signaling mechanisms allow them to collude implicitly without violating antitrust laws. If you have two alternatives but both of them behave identically (e.g. both charge Netflix for peering) then it isn't really much of a choice.

In order to have enough competition that the free market can behave as it does in capitalist philosophy you would need to have a dozen or more separate ISPs to choose from. But building that many competing networks is a waste of resources, and to recover their costs each ISP would then have to charge $500+/month because the cost of the network (which has significant costs that are per mile rather than per customer) would have to be amortized over far fewer customers.

The way you can get the desired level of competition without building duplicative infrastructure is local loop unbundling (with a prohibition on the entity providing the local loop competing for customers against the entities leasing it). But that isn't any less of a regulatory burden than network neutrality.

You don't need a dozen or more competitors to have a reasonable level of competition. You just need a few, targeting the right market segments. Cities are almost exclusively responsible for preventing those few competitors from arising.

Here is (I believe) the current franchise agreement between Wilmington, DE and Comcast: http://www.wilmingtonde.gov/docs/1320/3716Rev1.pdf.

Note Section 1(F), that it's a non-exclusive franchise. Then note 2(A)-(C). 2(C) states that Comcast must offer service in any part of the city with at least 40 residences per linear mile of cable plant, without cost-sharing with residents. It also extracts almost $2 million in grants, on top of the franchise fee, which is 5% of gross.

Basic cable here in Wilmington is $13.50/month (which is usually regulated by state law). This is usually a regulated rate set by state law. Serving the least dense linear mile at basic rates therefore offers a potential maximum revenue of $540/month. Out of that comes recouping your capital costs, marketing, bill collection, etc.

Wilmington is a city of ~70k people, and about 2/3 of the land area is in census districts that have a poverty rate in excess of 30%, and a good part of the downtown core is in districts that have a poverty rate of around 50%. These are not people buying $150/month cable packages.

Now, say you're an enterprising new VC-funded fiber internet company. You think: you know, there's a few areas in the western part of the city and downtown that have the right combination of income level and density to support premium internet service profitably. If the city let you build in just those areas, it'd be a huge boon to competition against Comcast, because it hits them among the subset of customers that actually justify their business in the city. This is true even though only a relatively small number of customers may have an alternative to Comcast. You don't get perfect competition this way, but it weeds out a lot of the obviously bad behavior.

Instead, the city says: if you want to operate here at all, you have to operate in all the marginally profitable or outright unprofitable areas. So the returns aren't there, the VC's throw their money elsewhere, and Comcast gets to keep their de-facto monopoly.

Out of curiosity, if I were to start connecting residences with fiber on my own, at which point would I start to hit regulatory burdens?

Depends entirely on the local law, but you probably hit the first major roadblock when you need to lay cable on a public right of way. Some creative ISP's have been using line-of-sight microwave technology to overcome that limitation: http://motherboard.vice.com/blog/two-brothers-built-their-ow....

(Not legal advice.)

> If the city let you build in just those areas, it'd be a huge boon to competition against Comcast, because it hits them among the subset of customers that actually justify their business in the city. This is true even though only a relatively small number of customers may have an alternative to Comcast. You don't get perfect competition this way, but it weeds out a lot of the obviously bad behavior.

In your scenario the newcomer could easily drive Comcast out by aggressively competing on price. Since they don't have to subsidize other parts of the city they could profitably charge lower prices than Comcast, and internet service is a fungible product with price sensitive customers, so Comcast would no longer be able to make enough in the affluent areas to carry on subsidizing the rest of the city. Comcast would be forced to walk away from the whole city and leave the newcomer as the new monopolist.

The alternative is that the newcomer doesn't compete aggressively. This is the status quo in areas where there is an incumbent cable company and an incumbent telco both offering similar service. They both know that they can each torpedo the margins of one another through aggressive competition, so neither makes any concessions to customers lest the other respond in kind and make the gesture a pure cost yielding no competitive advantage. Similarly, if one of them does something customer-hostile, the other takes it as an invitation to follow suit, because maintaining balance is more profitable than taking the other's customers thereby inviting them to take yours.

The whole problem is that last mile is a natural monopoly. Aggressive competition in that situation is ruinous -- it just drives all but one of the providers out of business because the point at which it ceases to be advantageous for a non-colluding provider to gain customers by undercutting the other's prices is well past the point where each provider can recover its roll out costs. One way or another you end up with either a monopoly or a cartel that behaves as a monopoly.

Cable companies own separate regions. It is monopoly by design. You have no choice.

The only reason you would signup for DSL/fixed wireless/dialup would be if you were not wired for cable.

I have both Comcast and DSL available here, but the fastest DSL is 5mbit. That barely counts as connected. So in my mind, Comcast has a complete monopoly here even though DSL is available.

Yeah, it's almost like saying "look you have an alternative to Comcast; you can use dialup!"

Yes DSL isn't as painful as dialup, it's 100x faster or whatever. But the 5mbit is the TOP speed (which we all know you never get) and the likely usable speed is anywhere from down in the dialup range up to perhaps a couple of megabit.

I live in New York City, the biggest market in America. My options are: TimeWarner (but only with a cable subscription) or Verizon (not FIOS, and only with a phone subscription). The lack of competition really is a problem.

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