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The Internet Businesses Technology

Why American Internet Service Is Slow and Expensive 351

Posted by Unknown Lamer
from the collusion-laws-prove-useless dept.
An anonymous reader writes "Reporter David Cay Johnston was interviewed recently for his new book, which touches on why America's Internet access is slow, expensive, and retarding economic growth. The main reason? Regulatory capture. It seems the telecommunication companies have rewritten the regulatory rules in their favor. In regards to the fees that were meant to build a fast Internet, Johnston speculates those fees went to build out cellular networks. 'The companies essentially have a business model that is antithetical to economic growth,' he says. 'Profits go up if they can provide slow Internet at super high prices.'"
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Why American Internet Service Is Slow and Expensive

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  • Because... (Score:5, Insightful)

    by Fuzzy_Pumper (673365) on Tuesday September 25, 2012 @05:03PM (#41456519)
    Screwing over people for profit the the American way???
    • SOCIALIZE! (Score:5, Interesting)

      by mozumder (178398) on Tuesday September 25, 2012 @05:15PM (#41456631)

      Communications is a basic service provided by government. It's defined in the US constitution as well, as the Postal service.

      There's no reason for private internet providers to exist.

      Get rid of them, implement a government-designed system, like the roads. It would be far cheaper than building the highway system.

      The best part of government ISP is that it has to follow constitutional freedom-of-speech rights, whereas a private ISP can shut down any message critical of the company, since private organizations don't have to follow the constitution.

      • Re: SOCIALIZE! (Score:5, Insightful)

        by Anonymous Coward on Tuesday September 25, 2012 @05:25PM (#41456785)

        Given that the government tramples on constitutional rights all the time (i.e. 2nd Amendment), the FCC would find a way to restrict your "freedom-of-speech rights". Using your highway system example, driving is a privilege granted by the government to use their roads, not a right. Just as they have implemented laws and rules and restrictions on driving, they could easily do so on the internet. Fines could be implemented for cussing, anit-political rantings, etc. and it would just become another government cash cow. We would end up paying as much or more as we do now in registration fees and licensing, and likely have less freedoms on the internet.

        • Re: SOCIALIZE! (Score:5, Insightful)

          by Anonymous Coward on Tuesday September 25, 2012 @06:01PM (#41457311)

          That's another form of "capture", in this case by control freaks. We don't have a government that represents the people, at least not all of them. All too often government represents the interests of the rich and powerful, the loud and obnoxious, or those who want others to conform to their way of thinking--when what government should be doing is guaranteeing and preserving freedom (and yes, that includes freedom FROM monied interests in some cases, sorry libertarians).

          Government should not be in the business of controlling individual liberties without a damned good reason. The "driving is a privilege" BS is a prime example. That should never have been allowed to take root, has no basis in any kind of constitutional republic, and that it has taken root we're going to be forever eradicating it, just as we're going to be forever eradicating the "because it's on a computer/on the Internet then law enforcement should have it without a warrant" crap too. Both things, BTW, have been allowed to exist because some people are fearful of cars and some people are fearful of computers and control freaks use those to gain support for their positions.

          However, consider this: corporations are not exactly huge defenders of freedom and individual liberty. They are in fact quite the opposite and they prove it constantly. It is at least possible for people to take their government back and make it work for them. I would aruge it is their duty, as would some rather wise folks from a couple hundred years ago. It is not possible to make a corporation behave correctly in a civilized society absent a monetary interest or force of law. We need the force of law on OUR side, not theirs. In this case, it need not be government provided broadband. I don't want the government making my computers, shoes, jeans, etc. and broadband isn't something they should do either for just those reasons you specified. However, government can and should require certain behaviors out of the private entities that do so, in no small part because of their use of right of way, the limited useful spectrum, and the fact that they seem to have taken our money and stolen it. Governments should not be prohibited from stepping in and providing services in those areas where private companies don't want to, which of course is what private companies have been buying into law for some time now.

          It's not black and white, this or that, etc. There are ways to make things better without giving all the power to one side or the other. The point is right now the power is too far on the private side when it comes to money, the "force" is all directed against the citizens, and it's not helping anybody.

        • Re: SOCIALIZE! (Score:5, Insightful)

          by Rolgar (556636) on Tuesday September 25, 2012 @06:24PM (#41457541)

          You don't have to have it done by the government. In rural areas in the central U.S., power lines are often provided by co-op because of the lack of profitablit. Essentially the same owners although directly (as customer-owners) instead of indirectly (through the government). I never had any complaints with my power lines through the coop. I imagine I wouldn't have any problems with coop internet service either. And the great thing for rural folks, who already have a co-op organization, the right of way and necessary machinery are already under control. They'd just have to lay down the wiring.

          Folks in town need to convince their rural neighbors to get their coop to do this, then extend their reach into town. And the coops could even connect to each other and provide a competitor to the companies that connect the various ISP networks together. Then you don't need network neutrality, because the coop will belong to and therefore serve the customers.

        • by Omestes (471991)

          Which is why the Postal Service censors my mail... oh... nevermind.

          Stop being paranoid, please. It doesn't add anything.

      • by epyT-R (613989)

        yeah, and since the USG (and other governments) is oh so big on allowing free xfer of data and free press like wikileaks, it'll be sure to be a utopia...and of course with joe biden and his ilk in office, we'll be able to send whatever files we want to whomever without the media companies, who make money selling make believe restrictions on distribution of data, will never get in the way. Seriously, the whole net neutrality thing is a double edged sword.. Either way we're cut. While the shapes of the bla

      • by Dahamma (304068)

        Yes, absolutely, that's a great idea. And it should be administered by the NSA!

        I think a lot more people are worried about their right to privacy than freedom of speech.

      • Get rid of them, implement a government-designed system, like the roads.

        Europe had government-provided telecom systems for decades and it was a total disaster. European Internet and wireless is so fast today because European governments (uncharacteristically) killed off government telecom services and forced companies to compete by making it easy for consumers to switch. We need to change our telecom market so that there is competition, not nationalize it.

        What should be done? Prohibit long-term contracts

  • by bbeesley (2709435) on Tuesday September 25, 2012 @05:10PM (#41456579)
    There was an interesting NY Times article on the cost per customer for Verizon to deploy their FiOS product. Essentially it was $4k per subscriber. That's an awfully long payback when you are only getting less than a few hundred bucks a month and you also need to have money to operate the network, provide sales and technical support, etc http://www.nytimes.com/2008/08/19/technology/19fios.html [nytimes.com] Perhaps continued development in technologies like LTE will provide less expensive methods to get customers in the future
    • Re: (Score:2, Insightful)

      by Anonymous Coward

      Essentially it was $4k per subscriber. That's an awfully long payback when you are only getting less than a few hundred bucks a month

      *facepalm*

      $100/mo is 30% ROR - I don't know, but that is quite good. Even for 10% ROR, you know, $33/mo, it is not that expensive as infrastructure goes. And you can upsell your customers with lots of stuff over these connections, be it TV, or phone service, or security systems, etc.

      • by Comrade Ogilvy (1719488) on Tuesday September 25, 2012 @05:37PM (#41456979)

        Agreed. Somehow lots and lots of suburban households are able to be serviced with telephone, electricity, water, natural gas, and even cable television for ballpark $50-$100 per month each. It is just a basic consumer infrastructure problem, one that has been solved before literally billions of times already. Why are broadband companies so especially less competent than others at providing this kind of service?

        I am paying $45 per month for a decent DSL service. There is plenty of money up for grabs to pay for these things, if the malignant monopolies can be pushed aside.

        • by rrohbeck (944847)

          That happens only if those utilities are socialized or at least heavily regulated.
          The issue here is that networking and wireless are in the transition phase from newfangled with high investments to utilities which have to be regulated because otherwise the providers can squeeze the customers because there's no market, hence no competition.

      • by rrohbeck (944847)

        Not if you're used to making money with hardly any investment at all (because you're the incumbent) and have to pay off many people (execs, politicians ...)

    • by Vancorps (746090) on Tuesday September 25, 2012 @05:23PM (#41456757)
      That's cool, what about the billions in tax payer subsidies to pay for it as well?
    • Re: (Score:2, Interesting)

      by Anonymous Coward

      Then explain why Verizon is on the forbes 50 and has one of THE highest margins in the fortune 500...

  • went in to the fat paychecks and bonuses of all the bigshots & executives in the businesses
    • by rrohbeck (944847)

      And into greasing the wheels:
      http://www.followthemoney.org/database/topcontributor.phtml?u=259&y=0 [followthemoney.org] (scroll down to see who they greased.)

    • by anubi (640541) on Tuesday September 25, 2012 @06:14PM (#41457447) Journal
      We have passed law that allows business to exact full payment for undefined partial service. Clever business use of phrases like " service up to " followed by phrases like " for only $$$.$$/mo* " then " * other charges may apply " and the like have led to a business environment where business can provide whatever they feel like and customers have to take what they are lucky enough to get.

      Just one change in the interpretation of the law, where the customer's right to withhold payment for service not received, regardless of what the business printed on their contracts would do the trick.

      It would incentivize customer service instead of incentivizing legal trickery as it does now.

      Can you imagine the legal representatives of some company defending themselves against a defamation lawsuit where some plaintiff is suing because the company screwed up his credit report ? The plaintiff shows the judge a http://www.speedtest.com/ [speedtest.com] report showing 23kB/sec when the company claimed a 3MB/sec speed? The corporate lawyer approaches the judge and shows the bill clearly showed $53.93 and the plaintiff only paid fifty cents!

      The judge looks at the plaintiff's speedtest report and asks the corporate rep if the IP address on the sheet is theirs.... well follow your imagination of how that meeting should go.

      A business license should not be an open pass for theft-by-one-sided contract.
  • by djh101010 (656795) on Tuesday September 25, 2012 @05:19PM (#41456683) Homepage Journal
    The country is big, with lots of low density areas. Thousands of miles of cable don't just pay for and install themselves, and the incentive to cover a lightly inhabited area just isn't there.
    • by CannonballHead (842625) on Tuesday September 25, 2012 @05:24PM (#41456767)

      This breaks down when you *aren't* far away from major, major cities (1 million plus), aren't far away from commuter towns (30k)... and can't get anything but Satellite or line of sight wireless. I am in this situation. It takes me 5 minutes, more or less, to get to town. I am within range of the circuit. The problem? There's a load coil in the line. Good for phones, bad for DSL. That's really the only thing stopping me from having way cheaper roughly 1.5mbps DSL.

      This also breaks down when you pay lots of money *in the middle of the city.*

      IMO, the basic, fundamental problem is that, because of the nature of the service - like electricity - we have monopolies with basically no competition. You either get DSL or Cable, pretty much... unless you're in one of the few fiber areas. That doesn't exactly generate much competition - one DSL company, one cable company. It's difficult to maintain a market-driven good-for-consumer-pricing environment when there's only one player, maybe two.

      And then we get into caps and speed and all that, and it gets worse. ;)

    • by Scutter (18425) on Tuesday September 25, 2012 @05:26PM (#41456805) Journal

      The country is big, with lots of low density areas. Thousands of miles of cable don't just pay for and install themselves, and the incentive to cover a lightly inhabited area just isn't there.

      There were huge federal subsidies given to the telcos to build out internet infrastructure for exactly that reason. It was stolen and used to line the pockets of the telco investors instead.

    • by petes_PoV (912422)
      Yes, this is so blindingly obvious that the only surprise is that people are still asking the question.
    • Yet we managed a national phone network with less density and you ignore the fact that actually many states have similar population densities as European countries. Not every state is like the ass end of the mid-west.
    • by rrohbeck (944847) on Tuesday September 25, 2012 @06:13PM (#41457437)

      That's the usual crap excuse by people who don't want to admit that it's just a matter of money, i.e. regulation, incentives, taxation etc.
      Europe and Russia have well developed (hence popular) passenger railway systems. Oh and the US used to also. You may want to look up why it was run down.

      • Europe and Russia have well developed (hence popular) passenger railway systems

        They are also heavily subsidized and protected from competition, and they are still very expensive. In the end, they are not a good deal.

    • by Stanza (35421) on Tuesday September 25, 2012 @06:44PM (#41457769) Homepage Journal

      I hear this all the time. Sweden is less population dense than the US is! Estonia is less population dense than the US is! Norway is much less population dense than the US is! Why does New York City and San Francisco (the most population dense areas in the United States) get slower and more expensive internet than rural areas in Germany? Hey, Mexico has slower and more expensive internet than the US, and it is more population dense! Maybe it's an inverse relationship after all!

      If you plot population density vs internet quality in countries, I don't think you'll come up with any clear trend. And if you only look at urban environments, internet in the USA is still crappy, which is another reason not to bother considering population when wondering why US telcos charge lots of money for low quality service.

      • Well said. Also Telcos sue the local governments when they compete. Apparently the state competing with a monopoly is unfair. I'm still waiting for UPS and FedEx to sue away the Post office.
    • by evilviper (135110)

      France is roughly equivalent to the state of California in size and population density. Please explain why California doesn't have passenger rail and internet service equivalent to France (listed in TFA).

  • Your US and local Gubmint wrote, rewrote and and continues to rewrite rules to keep themselves funded and local monopolies de jure.
    Pleas stop blaming the (now thousands of) companies because you keep electing leeches.

  • Don't different countries subsidize the internet in different ways, and to different extents?

    If I pay $20 a month to my ISP, then another $20 to my government, to subsidize the ISP, it's the same as paying $40 a month for an unsubsidized ISP. But this calculation may only look at the money paid directly to the ISP.

    • by MtHuurne (602934) on Tuesday September 25, 2012 @07:20PM (#41458119) Homepage

      According to TFA, telecom companies received $3000 per household in subsidies over the years, so it's not like US internet is unsubsidized.

      In my country (the Netherlands) local governments put coax in the ground in all non-rural areas for radio and TV. Then at the time of the dot-com boom, those coax networks were sold to telecom operators at ridiculously high prices. They financed that by issuing stocks, which lost most of their value when the bubble burst. So effectively it was the stock holders who bought overpriced telecom stocks who paid for the broadband infrastructure.

  • There is no problem that cannot be solved, or created, by adding another layer of regulation.

  • Any book that wants to claim to talk about US Internet speeds has to deal with the fact that our average local loops are significantly longer than those of most other countries.

    I think there is a great detective story here, because it isn't just a rural or suburban detached house issue, but even in cities the average local loop length is longer, and every meter cuts down on DSL speed.

    I suspect that in the 70's and 80's a lot of central offices were consolidated, which made tons of sense for efficient voice

    • by roc97007 (608802)

      People still use DSL?

    • by roc97007 (608802)

      Ok, so, we've known for awhile that our landline infrastructure really doesn't make sense for data. I believe we have some of the oldest phone infrastructure still in use on earth.

      ...and I understand what an endeavor it is to lay new infrastructure. That said, I don't think the answer is DSL. To fix long local loops means more COs and a lot of rewiring. If you've got to do that, why not lay fiber and be done with it?

  • It could half the price or twice as fast and someone would still write this article. Just like computers, which are thousands of times faster than they were a few decades ago, our use of the internet and the services made available by the providers expand with it. We haven't had streaming HD video all that long, but lots of people want it and will complain if they get it on their connection (I can't). In a few years' time it'll be streaming 3D video. Then it'll be streaming immersive virtual reality, and no
    • It'll always be of a certain speed and at a certain price. Some people will be happy with that. Some will think it's too slow. Some will think it's too expensive.

      Is "substantially slower than what is available in other countries at a comparable price" objective enough?

  • Most locations have one or two sources of broadband and cable. A few lucky places may have three or for (two fiber, satellite ...). Price increases should be regulated like a utility then. Our power company has to justify increases due to capital projects and pass-through commodity increases/decreases. So should broadband.
  • sure (Score:4, Interesting)

    by PopeRatzo (965947) on Tuesday September 25, 2012 @05:59PM (#41457281) Homepage Journal

    The main reason American Internet service is slow and expensive is that it's been left in the hands of private corporations instead of treated as a regulated utility.

    The secondary reason is that there has been such an enormous consolidation among providers that there are now 3 or 4 companies providing most of the nation's Internet.

    End-game laissez-faire looks like this: dog eat dog leaves just a few very big dogs, and they can then pretty much just split up the customers so there is practically no need for competition. It's happened across American corporate culture. Five or fewer corporations where there were once hundreds if not thousands. I was reading the other day that there used to be hundreds of corporations in the packaging business. You know, making boxes and cartons? Now there are basically two and one of them is a multi-national based in New Zealand. The number of banks has been cut in half every couple of years for three decades.

    Does anyone believe that AT&T feels it has to be competitive?

  • by Catbeller (118204) on Tuesday September 25, 2012 @06:08PM (#41457385) Homepage

    This Catbeller has been banging this drum for over eleven years, may I just say?

    The "free market" ain't, and never can be, free, when you are dealing with players who understand the markets better than you do, and, furthermore, will cheat like motherfuckers. Conspiracy isn't necessary. The unwritten rules are always clear. Manufacture scarcity.

    The new forestry corporations did it in the late 80s, buying up forests and rights, until in 1992 they tripled wood prices overnight, blaming Clinton and his evil environmental regulations, which didn't exist yet, being as he just was elected, for the cause. They cornered the market and fixed prices. The on;y congresscitter to object was fabulously ejected by them funding his shiny new opponent. No one else dared say a word.

    Enron INfamously pretended that evil regulations made them incapable of restraining costs as they shut down power plants on mathematicians say-so to jack prices. California's entire budget mess for the last ten years can be traced back to that robbery. Free market is only free for those who control the market.

    Enron not-so-famously was hell-bent on cornering the world's water supplies in drought areas - guess why... but don't worry, in their absence other bastards have bought up water rights, and soon "scarcity" will quintuple water prices across the world.

    Kucinich in Cleveland was right, when he said the new private power companies would raise rates after they took over power grids. Cleveland to this day still has lower electrical bills than all the surrounding cities with free-market electric companies gouging them for decades.

    And internet and radio internet... ah, so damned obviously they have refused to build infrastructure and have been "forced" to raise prices while the rest of the world simply licenses companies to build infrastructure at a decent price. Eleven YEARS ago, here, I posted a quick calculation: how much have people paid, in total, for DSL, cable, and modem charges combined - and how much had the telcos actually spent. It's eleven years later. We've pumped a good chunk of a trillion into their pockets, and they've spent a tiny fraction of that on actual buildout. They are taking us like a lost tourist.

    Most of the rest of the world does it correctly. Scale has nothing to do with it. We don't have a limited amount of cash and a limited workforce; our companies can scale up any buildout. THEY DON'T WANT TO.

    Copy whatever country did it right. Let local muni governments build out the systems for a fraction of the cost that these lying sacks of excrement quote. Let this end. There Ain't No Such Thing As A Free Market. Not when the "free" market companies can buy each other or merge, thus eliminating the market, or simply cooperate by obeying unwritten rules to jackup prices.

  • well cable can do better but it needs more newer hardware to make room.

    Most cable systems are stuck if lot's of old MPEG 2 only boxes and stuff that top's out at 750 MHz - 864 MHz and lot's of sd only boxes as well.

    node splits and SDV can help as well.

    DSL is running on the old phone wires and it's needs RT near by to be able to offer high speeds.

    Fiber is fast but digging up to install it is the hard part and all the other wires and pipes in the way makes it even harder to install.

  • by Picardo85 (1408929) on Tuesday September 25, 2012 @06:18PM (#41457485)
    Speaking as a Finn I find this ridiculous. We have a population density of 16/km2 or 41/sq mi for you who go by the imperial system, that is 201st in the world. The United states has 33.7/km2 or 87.4/sq mi.

    In Finland we, in contrary to Sweden, have the industry building out the networks for their own money. Very little is subsidized unlike in Sweden. Still we are able to have really good internet connections. Currently we pay around 30-50euro/month for 24 / 2mbit ADSL (depending on where you live and ISP) in most places where fiber isn't avaliable but fibre is in general being expanded in most population centers and then some local areas such as small municipalities build their own fiber networks.

    Where you can get access to fiber you pay the same for a significantly faster connection. I know for example that in my appartment building I would get 250mbit for 50/euro month.

    As a matter of fact we are aiming at being able to provide 100mbit to everyone by 2015 source from the finnish broadcasting company [yle.fi]

    It doesn't matter how you reason, there's absolutely no reason what so ever that the major population centers in the US wouldn't have high speed internet access for affordable prices except the telco cartels.
  • by Required Snark (1702878) on Tuesday September 25, 2012 @06:26PM (#41457561)
    What passes for capitalism in the US is a collection of cartels. Each sector of the economy is dominated by a small set of entrenched insiders. They compete among themselves, but only to dominate the sector and reap larger profits. The competition always has a negative impact on consumers.

    To take a current example, look at Samsung vs. Apple. No matter who wins, users loose. Where Apple is winning they are trying to eliminate Samsung, and vice versa. Whoever wins, your costs will be artificially high, and your service will suck.

    The banking industry is the same way. So is agribusiness. At the consumer level supermarkets have razor thin profit margins, but the big players in food production also form a corrupt insiders club: Monsanto, Cargill, Archer-Daniels-Midland. Individual farmers are not agribusiness insiders, they are another group of victims.

    This is capitalism in name only. It does not produce the benefits for society that is the claimed rational for a capitalist economy. As a consumer you have no meaningful choices because all the vendors are corrupt and inefficient. It's organized theft at a global scale.

  • "The US has the best government money can buy." This whole regulatory capture issue starts at the top. With de facto bribery being legalized, people who are best at that fundraising game become politicians. They are the ultimate regulators, a frightening thought. They are first legislators. They write the laws and appoint people to see that they are enforced.

    "Crony capitalism" is the term we're looking for. When government intervenes in the markets, hold onto your wallets. It's always done under the gui

  • News at 6, featuring Republican and Libertarian pundits declaring: "it's all because there's too much regulation - deregulate everything and ... umm ... they will magically feel compelled to start a costly (for them) and profit-damaging innovation war". Or setting up a strawman argument: "yeah, but what are you gonna do about it? SOCIALIZE everything? *krak-a-thoom*"

    Yeah yeah, I know, the above could also be branded strawman argument. Except that I've heard flesh-and-oil^H^H^Hblood Republican and Libertar
  • I think US Internet and wireless service suck: they are slow and overpriced. And Johnson is right: that's due to regulatory capture, insanely consumer-hostile regulations written by Internet and wireless companies. We either need a lot more regulation of these companies or a lot less regulation (and more competition), but right now, regulations make entry into the market hard, yet allow these companies to screw consumers any way they want.

    Having said that, however, keep in mind that the French have much le

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