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One reason cable companies won’t willingly compete against each other

washingtonpost.com

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Re: One reason cable companies won’t willingly compete against each other

#31

Post by dv_dt »

cortesoft wrote: post #12
riskable wrote: post #3

Can someone explain to me what innovation cable companies provide that they deserve their anti-competitive monopolies? If we were to replace them all with municipal broadband what would the short and long term consequences be? I'd wager that the short term (~10 years) consequences would be vastly superior service for every day citizens. In the long term, not certain but I suspect it would be much of the same as long…

I think it is mostly because having multiple companies laying physical wires is problematic. It is very capital intensive, and disruptive to infrastructure (digging up lots of ground). In the end, it might not be better for customers; for example, imagine 4 different cable companies spend all the capital to lay 4 sets of cables to every house in a town of 100,000. Since there are 4 choices of cable company to choose…

This is why I think the makes the most sense for cities to own their own broadband infrastructure (just like they often own their road & water/sewer infrastructure). Maybe let out a contract for management of it comercially that gets periodically reviewed - maybe even split the basic infrastructure maintenance with companies competing to deliver data from common data centers across the last mile wiring/fiber so multiple have a market to compete within.

Re: One reason cable companies won’t willingly compete against each other

#32

Post by justin66 »

harryh wrote: post #21
noobermin wrote: post #14

Earlier quoted context omitted.

...and 200x slower than those in Korea.

Actually, my speeds are about the same as those in Korea as I live in NYC. Which makes sense because South Korea is almost entirely urban much like NYC. It's not really fair to make cross country comparisons between countries with vastly different geographies.

> It's not really fair to make cross country comparisons between countries with vastly different geographies.

It's fairer than you'd think. There were some articles in the last few years (summarized at Ars Technica, I think) about how the US is really, really average at delivering residential network bandwidth at a decent cost, compared against a wide variety of countries.

The thing that struck me about it was that the countries in the comparisons varied a lot politically (highly regulated vs. largely free market, etc.) and in terms of varying population density. I think the main conclusion I drew was that there isn't really one simple explanation for why we're pretty mediocre at this. We just have a crappy system.

Re: One reason cable companies won’t willingly compete against each other

#33

Post by nerdponx »

argonaut wrote: post #23
en4bz wrote: post #15

Cable companies don't compete because the market has reached a Nash equilibrium. This is Game Theory 101. If one company lowers their prices or increase their services then as soon as others start seeing attrition they simply lower their prices in response until attrition stops. At the end of the day no one gains any customers and they've all lowered their prices. No one wins. Similar things happen with turf wars. If…

Your first description isn't a Nash equilibrium because you're considering second-order effects (you're considering the reaction of other players to your changes), when Nash equilibrium only concerns itself with first-order effects - you assume other players do not change and if under that assumption every player is at the best action already, then you're in a Nash equilibrium. I don't think cable companies are at a…

It's not Nash equilibrium, but this is a standard result in industrial organization. Companies "collude" by threatening to start price wars. The threat of a price war is enough deterrent to prevent anyone from undercutting anyone else.

Re: One reason cable companies won’t willingly compete against each other

#34

Post by AnthonyMouse »

imgabe wrote: post #19
Afforess wrote: post #5

At this point, Cable companies are all members of a single large shadow monopoly not unlike Standard Oil was in the early 20th century. The rational the justice system used to break up Standard Oil is shockingly similar to the situation we now face with cable: Rates have been made low to let the Standard into markets, or they have been made high to keep its competitors out of markets. Trifling differences in distance…

It really is shockingly similar and a lot of the arguments against net neutrality try to dismiss it as applying "laws made for railroads" to the Internet. Back when oil was getting to be useful, lots of people discovered it. Usually, it was in a remote area. The only way to make money off it was to get it to a refinery and then the market. Standard Oil bullied and bribed the railroads into giving them preferential ra…

The thing is, cable is more like the railroad than it is like Standard Oil. Petroleum isn't at all like a natural monopoly. It took a lot of corruption and bribery for Standard Oil to keep competition at bay.

But nobody is really stepping forward to lay residential fiber. Google is the exception and it's because they're one of the only companies with enough money to survive a war of attrition with the incumbents, and even then it's only in a handful of places.

It's prohibitively expensive to have twelve companies each run a different strand of fiber to every house. And you only need one. The key is to a) get one instead of zero and then b) put competition on the other end of the fiber. Have one company (or municipality) be the regulated monopoly that provides only the physical layer, and then let all willing providers compete to terminate the fiber and provide internet/TV/phone service.

Separating the natural monopoly (the physical layer) from over the top services is the key to preventing monopoly abuse. The entity that does that should do only that.

Re: One reason cable companies won’t willingly compete against each other

#35

Post by ryao »

cperciva wrote: post #16
ryao wrote: post #10

This also takes a stab at explaining why cable companies do not compete with one another: http://www.youtube.com/watch?v=0ilMx7k7mso

Not entirely accurate though. "In closed-door meetings where we've secretly agreed to not have differing prices" is called price-fixing, which is 100% illegal.

The video might have a few inaccuracies, but it is hilarious.

Re: One reason cable companies won’t willingly compete against each other

#36

Post by colechristensen »

AnthonyMouse wrote: post #34
imgabe wrote: post #19

Earlier quoted context omitted.

It really is shockingly similar and a lot of the arguments against net neutrality try to dismiss it as applying "laws made for railroads" to the Internet. Back when oil was getting to be useful, lots of people discovered it. Usually, it was in a remote area. The only way to make money off it was to get it to a refinery and then the market. Standard Oil bullied and bribed the railroads into giving them preferential ra…

The thing is, cable is more like the railroad than it is like Standard Oil. Petroleum isn't at all like a natural monopoly. It took a lot of corruption and bribery for Standard Oil to keep competition at bay. But nobody is really stepping forward to lay residential fiber. Google is the exception and it's because they're one of the only companies with enough money to survive a war of attrition with the incumbents, and…

There _are_ places where small companies are stepping up to place residential fiber.

http://fiber.usinternet.com/

Re: One reason cable companies won’t willingly compete against each other

#37

Post by kyebosh »

riskable wrote: post #3

Can someone explain to me what innovation cable companies provide that they deserve their anti-competitive monopolies? If we were to replace them all with municipal broadband what would the short and long term consequences be? I'd wager that the short term (~10 years) consequences would be vastly superior service for every day citizens. In the long term, not certain but I suspect it would be much of the same as long…

Obviously the situation has it's differences, but the original form of the National Broadband Network[0] here in Australia was, in part, to help nip these kinds of problems in the bud. It was close to a nationwide glass utility, but still allowed for a competitive commercial market. There was a lot of excitement for both short-term technological gains & long-term economics. I'm still dirty it got so mangled.

[0] https://en.wikipedia.org/wiki/National_Broadband_Network

As an off-topic aide: was "I'm not a communist" tongue in cheek? Or would such an infrastructure project be actually seen as "communist" &/or undesirable just for it's oversight?

Edit: terminology, link

Re: One reason cable companies won’t willingly compete against each other

#38

Post by luckydata »

I think this article is the best proof we need to show that basic connectivity infrastructure should be paid with tax dollars and licensed to operators by the federal government since there's no incentive whatsoever to create a real market around it.

Re: One reason cable companies won’t willingly compete against each other

#40

Post by yk »

The problem with burying cables is, that the first mover advantage can not be overcome. The calculation of the first guy is, that he has some cost X for N subscribers who will have to pay a monopoly rate M. The calculation of the second guy is, he has to pay X to bury a cable to capture some fraction of the subscribers fN who each pay a competitive subscription rate C much smaller than M. (In fact close to the marginal cost of an additional subscriber, that is basically 0). So the first guy expects to break even after X/(MN) and the second guy at X/(CfN).

This suggests the interesting possibility, that it may be worthwhile for the neighbors in a street to build their own cable and just give it to a competitor of the cable provider.

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