You’ve heard the rumors. Providers brag about lightning fast speeds, and streaming in HD without a whisper of latency. But where is this miraculous Internet service of your dreams? One that will allow you to live a fantasy digital life in the wonder of the cloud. The lone Internet Service Provider (ISP) provider in your area seems to bog down at the first sign of traffic, and if tech support tells you to reboot your modem one more time, you’re going to scream. Why isn’t there more choice and competition among Internet providers in your area?
This isn’t an isolated issue. Most regions of the country are serviced by just a handful of big name broadband providers. Comcast, Cox and Time Warner Cable have massive footprints that loom over an inordinately large part of the map. When the FCC was considering approving a merger between Comcast and Time Warner Cable back in 2015, The Huffington Post warned that we would be facing “The United States of Comcast”. Today’s ISP map isn’t too far off that assessment, with four major ISPs eating up tremendous slices of the high-speed Internet market.
Statistics from the FCC indicate nearly 30 percent of Americans don’t have a choice when it comes to their Internet provider. Another large portion of the public, which estimates place at 37 percent, only have two options. To get a better handle on what Internet service across the United States looks like, visit the National Broadband Map, maintained by the FCC and the NTIA (National Telecommunications and Information Administration).
How did we end up here, with limited choice and virtually no competition in large swathes of the United States? To answer that, you’ll need to understand how the Internet reaches your home. It’s a complicated digital exchange through a labyrinth of networks and providers that you’ve likely never heard of. Follow me down the rabbit hole for a minute, my friend and I promise you’ll emerge a savvier Internet consumer.
How does the Internet get to your home?
Unlike the claims of some politicians, the Internet does not reach you through a series of tubes. It begins on the global level through a Tier 1 network– cable wires that cross continents and oceans, conveying digital pulses of light. Chances are, these do not belong to your local ISP. Much of this major infrastructure is owned by global companies like Verizon and AT&T who then lease usage of those Internet pipelines to Tier 2 providers.
Tier 2 providers are the major telecommunications companies across the nation that bring Internet from the global pipelines into metro and regional areas. Providers like Comcast, Time Warner Cable and Cox pay for transit on these uber fast global lines. Gizmodo gives a more detailed explanation of Tier 1 and Tier 2 providers for those who might be interested in tracing the convoluted digital handshakes that transmit data from one part of the world to another.
Much of the Internet delivered through Tier 2 providers is in fact broadband or DSL because that infrastructure already exists, humming below the ground and delivering your cable TV and phone service. Where your Internet bogs down and service slows is when data passes from these neighborhood hubs into your home. The telecommunications industry refers to this as “the last mile”. Much of this last bit of signal transmission is across ancient lines that have deteriorated over time and no longer support the speeds modern technology requires. Upgrading this piece of the infrastructure is the final challenge in ensuring high-speed Internet reaches every corner of the country, and it’s one of the big reasons there are isolated pockets of only one or two Internet service providers in large areas of the United States.
Upgrading that last mile of Internet infrastructure is a costly endeavor. While the utility poles are public property, the lines and wires are owned by specific companies that may have traded hands dozens of times over the years. If you are receiving DSL Internet, that technology comes into your home on ancient copper phone lines. These are likely the same lines installed nearly a hundred years ago when Alexander Graham Bell first invented the telephone. If you receive broadband internet, your home was likely wired to receive cable TV sometime between the 50’s and the 80’s. Because cable technology is more advanced, Internet via broadband delivers higher speeds.
Neither technology approaches the capabilities of fiber-optic, however. The difficulty becomes the cost. DSL and Cable Internet providers utilize existing lines, sometimes paying to lease them from the original companies that still own them. Fiber-optic providers have to start fresh, absorbing the cost of running new lines and connecting each household to the larger network. Once they’ve made this investment, they’ll have to lure away a significant amount of the high speed Internet customers in that area to turn a profit. Cable and DSL providers will often simply undercut the new kid on the block by promoting package deals and bundles that price the fledgling company right out of the market.
To further complicate the matter, there are some legislative actions that have encouraged the sparsity of providers. The 1984 Cable Communications Policy Act allowed cable service to be determined by each municipality. This resulted in a patchwork of regional providers that made cost-effective deals with certain cities, allowing them to control local pockets of service almost exclusively.
During the 90’s consolidation of these markets began in earnest. It was more cost effective for smaller companies to merge and create larger entities that could cover a larger area of service. The Wall Street Journal documented how, in a matter of two decades, 40 regional providers coalesced into just four telecommunications giants. At that juncture, the Internet was still a twinkle in Al Gore’s eye, but the cable wires that would deliver broadband all across the nation were already in the hands of Comcast, Time Warner Cable, Charter, and Cox.
A Natural Monopoly
It has been a perfect storm of expensive infrastructure, legislation, and growing media conglomerates that have resulted in what many industry experts refer to as a natural monopoly. Prohibitive costs and a consolidated network of providers effectively controls the market, making it virtually impossible to foster the healthy competition necessary to ensure better service and reduced costs for the average consumer. Many have argued that to bring cost-effective, high-speed Internet to more Americans, the government will have to intervene not only to incentivize innovation but also to help smaller companies make the necessary investments in infrastructure.
“The great danger to the consumer is the monopoly — whether private or governmental. His most effective protection is free competition at home and free trade throughout the world. The consumer is protected from being exploited by one seller by the existence of another seller from whom he can buy and who is eager to sell to him. Alternative sources of supply protect the consumer far more effectively than all the Ralph Naders of the world.” Milton Friedman, Nobel Prize winning economist
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