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The Internet Businesses Networking IT

Why There Are So Few ISP Start-Ups In the U.S. 223

Posted by timothy from the cover-charge-is-so-high dept.
An anonymous reader writes "Despite whispers of growing dissatisfaction among consumers, there are still very few ISP start-ups popping up in communities all over the U.S. There are two main reasons for this: up-front costs and legal obstacles. The first reason discourages anyone who doesn't have Google's investors or the local government financially supporting them from even getting a toe in the business. 'Financial analysts last year estimated that Google had to spend $84 million to build a fiber network that passed 149,000 homes in Kansas City, with the cost per home at $500 to $674.' The second reason will keep any new start-up defending itself in court against frivolous lawsuits incumbent ISP providers have been known to file to bleed the newcomers dry in legal fees. There are also ISP lobbyists working to pass laws that prevent local governments from either entering the ISP market themselves or partnering with private companies to provide ISP alternatives. Given these set-backs and growing dissatisfaction with the status quo, one has to wonder how long before the U.S. recognizes the internet as a utility and passes laws and regulations accordingly."
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Why There Are So Few ISP Start-Ups In the U.S. More

Why There Are So Few ISP Start-Ups In the U.S.

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  • Ah, Crony-Capitalism! (Score:5, Interesting)

    by BlueStrat ( 756137 ) on Monday April 07, 2014 @05:56AM (#46681915)

    Where government creates regulations and laws to favor "connected" businesses and interests. That's how the established ISPs have come to have so much power.

    ."..one has to wonder how long before the U.S. recognizes the internet as a utility and passes laws and regulations accordingly."

    Now the author of TFS thinks *more* laws & regulations from the *same* crooks that have intentionally worked long and hard to *create* this situation are suddenly going to help!?

    If there's enough crap stirred up to occupy the news cycle for more than a day or two, they'll do what they always do. Put together some Bill with a great-sounding name and at a quick glance looks good, but there will be sub-clauses and sub-paragraphs buried deep in the weeds of the Bill that actually make things *worse*.

    Hmm, on second thought, where did I put that property title to that bridge? I may have found a prospect!

    Strat

  • There are 1000's of ISP's in the United States. WISPA [batchgeo.com] alone has a huge number of members, and those are only ISP's offering wireless.

    • Re: (Score:2)

      by thaylin ( 555395 )
      The first 3 links I clicked on took me to websites that did not work....Second what kind of wireless? Hotel rooms, airports? If so they are not the type of ISPs they are talking about here, and are more of just home network maintainers.

      • Re: (Score:2)

        by tmosley ( 996283 )
        I get my internet wirelessly off of a nearby tower. My small city of 200K has numerous companies offering the service at various qualities and price points.

        • Re:There are 1000's (Score:4, Insightful)

          by faedle ( 114018 ) on Monday April 07, 2014 @08:49AM (#46682619) Homepage Journal

          My small city of around 200K just had one big wireless player (who also happened to be the cable company) announce they are leaving the market (and selling the spectrum licenses to one of the big guys) and the other three I know of buy their bandwidth from.. well, that same cable company and/or the local telephone company. There's no other place to ultimately buy bandwidth: there are three companies that transport and transit: the big regional telephone company, the local cable company, and Facebook. Everybody else is buying and selling Internet from the big guys.

          I can't talk about the health of the small wireless ISPs here, but if you sit down and do the math, they are likely just barely making a profit. This may be why the local cable company has exited the wireless ISP market. (I live in an area with a small urban center surrounded by miles of farms and ranches, the cable company's strategy was to use the wireless to extend their range to these rural subscribers and infill in the few areas their cable network didn't cover). And this small cable company had the first LTE network on in the state, so they had a hell of a head start.

          That's pretty much the picture in most places: the little guys are very little and increasingly getting smaller, and the big guys are only getting bigger.

          • There may be a way for small, rural WISP operators to do this on part-time basis. How much daily attention does a small town WISP's infrastructure really need? It might make a nice supplementary income and you could offer it relatively inexpensively in return for a lesser service guarantee.

  • Address exhaustion (Score:5, Interesting)

    by Anonymous Coward on Monday April 07, 2014 @06:16AM (#46681975)

    Address exhaustion means all new entrants are locked out anyway. To become a major US ISP you would need to control several /8s worth of IPv4 address space. There is no longer enough unallocated space to grant that to a new company. So the only way, regardless of other considerations, to become a big ISP is to buy an existing big ISP.

    The same is true in Europe. You cannot build a new European ISP, because you would need a sizeable network allocation and they're all gone. As a new entrant you would receive roughly the address space needed to run your data centre, leaving nothing for customers. And that's it, forever. Could you buy what you need on the "open" market? Sure, buy from your competitors at a price they specify, that sounds like it would definitely work...

    • Re: (Score:2, Insightful)

      by Anonymous Coward

      Address exhaustion means all new entrants are locked out anyway. To become a major US ISP you would need to control several /8s worth of IPv4 address space. There is no longer enough unallocated space to grant that to a new company. So the only way, regardless of other considerations, to become a big ISP is to buy an existing big ISP.

      As long as you don't hide it from your customers I don't see a problem with providing IPv6 addresses to your customers and perform NAT for accessing IPv4 hosts.
      When you are open about it you give the customer a choice. Either to go with your service with its limitations or with the crappy service of one of the other players.
      Customers who wants to run an IPv4 capable server at home might not be able to enjoy your alternative but if the other services sucks then might opt for renting some server space elsewhe

    • > Address exhaustion

      I stopped reading after that part

  • Different views on a free market (Score:4, Interesting)

    by staalmannen ( 1705340 ) on Monday April 07, 2014 @06:30AM (#46682013)
    I often see to very different views on the concept of a free market. One is "free from intervention" and is producer-focused, which often leads to one or a few domninant players due to network effects and/or scale advantages. The second one can be interpreted as "optimal competition" and is consumer-focused, where regulations (antitrust, enforced standards, consumer protection etc) try to make sure that the consumer always has a choice and that a market can not stagnate into its stable state of one or a few dominant players. I think the telecom market in the US vs EU (and probably most of the world) is a good example. In most places, the government has mandated a single standard (for example GSM) and rules for roaming on a network. This has led to a big market of small service providers on a few networks (there is for example stiff competition on prepaid SIMs). What I have understood from the US, differing standards between the providers coupled with a subsidized payment plan for the phone effectively causes a lock-in situation for the consumer. I am definitely leaning in favour of the "optimal competition" interpretation of a free market (how can a market be free if the consumer does not have a choice?).

    • Re:Different views on a free market (Score:5, Insightful)

      by plopez ( 54068 ) on Monday April 07, 2014 @07:38AM (#46682253) Journal

      Free Market != unregulated market. In fact an unregulated market often becomes a captured market, e.g. monopolies. Too bad most people confuse that.

    • The internet is full of standards... and really, while some companies like to create this lock in situation, if there are enough companies it is not in the collective corporate interest to have such differing standards.

      Look at the computer industry. Are those standards mandated by the government? Nope. And yet they are maintained... why? Because it creates a mutual habitate for everyone to design and build upon.

      Will you get the occasional troll like apple or sony etc that will come up with their own standar

      • Standards is just one of the regulations in place to ensure a Free market (a market with choice for the consumer). In terms of ISPs it could be that there would be antitrust regulations and requirements that competing companies should be able to sell their services over the exising connections. Ideally the "network providers" and "service providers" are kept sepparate, and the "network providers" only billing the "service providers". This is how stuff works with electricity and gas, at least in the 2 countr

        • My concern is that the standards stifle innovation.

          How do you solve that problem?

          If you can find a way to manage that issue short of "oh the politicians will update the standards as needed" then I might get behind it. But so far that's how most standards work.

          And no better is "the unelected bureaucrats will manage it". Actually, its a lot worse. Remember how teh FAA recently said it was okay to have electronics on an airplane? Standards.

          Those the sorts of standards I want to avoid.

          Come up with a way for the

  • with dozens of satellites in orbit and then no ISP subscription needed, FREE internets for everybody with an internet capable device, smartphone, tablet, laptop, desktop, etc...

    that would make ALL ISPs obsolete

    • Re:maybe the internet should be put in space (Score:4, Insightful)

      by heypete ( 60671 ) <pete@heypete.com> on Monday April 07, 2014 @07:18AM (#46682173) Homepage

      with dozens of satellites in orbit and then no ISP subscription needed, FREE internets for everybody with an internet capable device, smartphone, tablet, laptop, desktop, etc...

      that would make ALL ISPs obsolete

      Who pays for the launches, the satellites and the constant adjustments needed to keep them in proper orbits, the ground stations, and the staff needed to run everything? Those are hardly free.

      • Yeah, if the FCC let us we do have the technology to build a terrestrial mesh network using various wireless tech like point-to-point microwave, short-wave, across a deregulated (license free) sections of spectrum in UHF, FM, 5GHz to 2GHz, and use info-hashes as resource names so that the store and forward system automatically deduplicates data so that your resources will pull from one or two low latency hops away at your neighbor's place instead of coming all the way from the source each time. Essentially

      • At $2Billion or so per launch for the satellite and the launch it gets real expensive real quick. And if you put them in geostationary orbit you can count on ping times counted in the seconds. We're not going to be getting reliable internet from satellites any time soon.

    • Re: (Score:2)

      by gnupun ( 752725 )
      Satellites are too expensive and slow. Instead, why doesn't the govt dig the trenches for the internet optical fibers using taxpayer money, then lease them out to competing internet providers. That is, the the conduit/hole/trench belongs to the govt and the local people, but the wires within the conduit belong to the internet companies. This way, many internet companies can compete because of they only have to install new fibers in already existing trenches, drastically reducing cost and encouraging competi

  • You people are so ignorant... (Score:5, Interesting)

    by Karmashock ( 2415832 ) on Monday April 07, 2014 @06:42AM (#46682047)

    All these idiot posts about how its the market that is constraining ISP development.

    Never mind that it is a heavily regulated industry that is very hard to launch on a small scale despite logistically being very easy.

    What drives the costs up are the pole fees. They're way too high.

    Sell the poles to a co-op. And then let that co-op spread the cost of maintaining the poles around its members.

    This should not be under the control of the cities. They just see it as a revenue making opportunity. And that attitude keeps the cost of using the poles high.

    Sell it to a co-op. Then we can all use the poles/pipeline for anything.

    You could have tiny mom and pop ISPs. That would be in everyone's interest except for the big telecoms.

    • You will never convince local governments to give up such a lucrative revenue source.

      • Re:You people are so ignorant... (Score:5, Interesting)

        by Karmashock ( 2415832 ) on Monday April 07, 2014 @07:05AM (#46682125)

        And that's fine. But at least recognize what the problem is instead of hairing off in a dozen retarded directions that have NOTHING to do with the problem.

        Then if people ACTUALLY care they can have an ACTUAL discussion about the ACTUAL problem.

        It doesn't stop at ISPs. Its a big deal with power companies as well. Take your monthly power bill. Do you know that a big chunk of that is a connection fee? Same deal as with the ISPs. Lets say you've got a big solar array on the top your house and you actually don't use any net power. Guess what... Local utility still wants a connection fee. And that connection fee is set by the cities and counties. Not by what it actually costs but by what they change YOU.

        All of this needs to get sold to a series of non-profit co-ops. They need to not turn into huge organizations or they'll get corrupt. Keep them small and problems will be local problems and corrupt leadership will be replacable.

        Let it get huge and you'll get some national political cartel in charge of it all and they'll just rape it like its already being raped.

        • All of this needs to get sold to a series of non-profit co-ops. They need to not turn into huge organizations or they'll get corrupt. Keep them small and problems will be local problems and corrupt leadership will be replacable.

          Let it get huge and you'll get some national political cartel in charge of it all and they'll just rape it like its already being raped.

          The same can be said of cities. Cut off water, power, food, roads to a big city and it can not sustain itself. Smaller decentralized developments are harder to force under your thumb, that's why off the grid communities and over productive farmers are frequently harassed by the feds.

    • Courtesy of Nat Torkington of O'Reilly and BoingBoing, video interview with Susan Crawford [vox.com] about why the Internet should be treated like a utility. She’s the only policy person I see talking sense. There’s a multilarity coming, when a critical mass of everyday objects are connected to each other via the Internet and offline devices become as useful as an ox-drawn cart on railway tracks. At that point it’s too late to argue you need affordable predator-proof Internet, because you’re

      • Re: (Score:2, Insightful)

        by Karmashock ( 2415832 )

        The government shouldn't run any utility.

        Beyond anything else its a threat to our very freedoms.

        I don't want the government in control of water, power, food, or the internet.

        All of that is just leverage. Something they can put over you to make you comply.

        You have rights? Where does it say they have to give you water or road access or electrical power etc? It doesn't... which means if you don't play ball they can cut those things off and you have no legal redress.

        Its how the federal government keeps getting

        • Re: (Score:2)

          by davecb ( 6526 )

          Relax, they're talking about letting someone run it and policing their behaviour. Just like Ontario Hydro, which misbehaved a few years back and got broken up into parts, with more oversight applied. We're about to have a provincial election where the main question is around the government's involvement in Hydro planning, which demonstrates that the electors (us!) are providing proper oversight.

          • That isn't the situation we have here... here the government owns the poles. And the government sets the rates to use those poles.

            So if we were in control we wouldn't be in the situation we are... and yet this is the situation we're in... so we can't be in control.

            The issue is that the poles are related fees are an obscure part of city and county policy that no one has the patience to pay attention to for more then two seconds. And as a result, they can put any fee they like on it for any reason they like a

            • Re: (Score:2)

              by davecb ( 6526 )
              I like the idea of a co-op, especially down at the level of cities and towns. To avoid eliminating rural areas, it should be bootstrapped from the existing companies, with the process of "rural electrification" under a single management, so we can keep it under tight oversight initially, when the expensive mistakes and bad behaviours are likely but are large-scale, then devolve operations onto the smaller areas. In my view, nothing bigger than a county or a city should manage day-to-day operations, like wa

    • Re: (Score:2)

      by Lumpy ( 12016 )

      "Never mind that it is a heavily regulated industry that is very hard to launch on a small scale despite logistically being very easy."

      This is not because of "regulations" it's because of anti competitive measures like "franchise fees" that are nothing more than mob style kick backs to local governments. Comcast loves them because it makes it near impossible for a new company to come in and compete with them in a market.

      Get rid of the fraking kickback corruption at the city and county (and state) levels

      • Re: (Score:2)

        by SEE ( 7681 )

        This is not because of "regulations" it's because of anti competitive measures like "franchise fees"

        So, it's not because of "regulations", just government . . . I guess we'll call them "rules" . . . that require payment of fees in order to be allowed to compete?

        If the government, at any level, has the regulatory power to say no to new competitors entering a business, the incumbents in that business will spend money at that level to convince them to say "no" to new competitors. It has happened every single time, with every single industry than any country every has ever allowed its government to regulate what businesses may enter a market. From medieval guilds to Elizabethan patents to taxi medallions to the FCC, it always happens.

        And it happens every single time because regulation causes corruption. Public choice economics can no more be repealed by the ignorant but well-meaning than pi can be made to equal exactly 3.

      • The franchise fees are regulation... so... we agree.

    • Don't forget the US has a low population density. (And telling people to move to the City will only lead to a shotgun pointed at your head.)

      We had a good run with the Dial-up ISP market. Because we worked over the Telephone line infrastructure that already existed. However to get the speeds we demand we need to go via Cable that is controlled by one company per area, or fiber which is owned by a particular company and isn't widely setup yet.

      Part of the problem as you stated there is too much cost to spread

      • Actually the places most likely to have multiple ISPs are rural areas... that is places where you'll find multiple cable companies laying their cable wire side by side to the same homes.

        If logistically that works in a suburban area then it must in an urban area.

        The logic on that is inescapable.

        Which means it isn't logistics or economics that is holding it back.

        And what is left when we remove logistics and economics?

        Politics and law.

        What you'll find is that the actual block is local ordinances that jack up c

      • Re: (Score:2)

        by dave420 ( 699308 )
        Your population density argument would not be so laughable if ISPs in large cities can't even get their acts together and offer a decent service for a decent price. Stop making excuses! Regulation in the US is killing ISPs.

  • Loser Pay Legislation (Score:3, Informative)

    by smpoole7 ( 1467717 ) on Monday April 07, 2014 @06:56AM (#46682087) Homepage

    Loser-Pay Legislation would take care of the second one. Been saying it for years.

    Eventually, those folks who oppose it simply because it seems too "conservative" for their politics are going to get their minds right.

    The United States is the only major Western Democracy that doesn't follow the "british rule," where the winning party in a lawsuit is generally allowed to recover the costs of bringing or defending a suit.

    • Re:Loser Pay Legislation (Score:4, Interesting)

      by Lumpy ( 12016 ) on Monday April 07, 2014 @08:40AM (#46682571) Homepage

      Except it makes it even easier to bully people in court.

      I crash my car into your house, I then show up with 500 lawyers and sue you for 22.2 million dollars for building your house in my way. you are looking at $10 million if you lose, How about we settle out of court for $150,000 instead? you cave in because your lawyer states that I can bleed you dry in legal fees and you really should take the settlement.

      It already happens today, but now I can financially MURDER you easier. What is needed is a LIMIT or CAP on legal fees that can be spent in a court case to 10% of the lowest income persons total income, so if AT&T sues you, they cant spend more than 10% of your income, thus keeping them from bleeding you dry.

      • I can financially MURDER you easier. What is needed is a LIMIT or CAP on legal

        I agree with this part. Yep, we need to kill all the lawyers.

    • We already have a legal system where the person with the best-paid lawyers almost always wins, regardless of the merits, and now you want them to be able to recover the cost of those high-paid lawyers?

      What you're saying makes sense if the courts provided some objective measure of justice, but that's not the case here - you're suggesting we double down on the corruption.

  • Stop dreaming. (Score:3)

    by hebertrich ( 472331 ) on Monday April 07, 2014 @06:58AM (#46682095)

    As long as politicians are involved and their little brown unmarked envelopes are passed from the actual players to them and industrials can contribute whatever they like to their campaigns , as long as money buys the politicians freely you think that politicians will actually do something ?

    Wake up. Politicians in the USA are owned by industry and rich contributors. The interest of the People ? they couldnt care less.
    In the USA , it's a governemnt of the people by the corporations for the corporations.

  • Why are there no oil company start ups?
    Why are there no new generation nuclear power plant start ups?
    Why why why .... why is that question on /. ?
    It is mainly the stupids question I have seen since ages.

    What is a start up? A small company of 5 to 10 or if you have the money 20 people. How should 20 people manage to be an ISP ... with what backbone, what grid, what wires?

    To become an ISP you need multiple of billions of money ... or new laws with access to existing wire infrastructure.

    • Re: (Score:2)

      by dkf ( 304284 )

      Why are there no oil company start ups?

      What makes you say this? Is it just because you don't notice them?

    • To become an ISP in an area that requires underground utilities you need a good stash of money, as it will take at least two years from start of negotiations with the city to providing service to your first customer. Call this about $2,000/customer passed for bridge funding. You also need to be able to spread your investment out over ~10 years to make good use of resources.

      That comes to about $2MM cash in order to serve your first 500 customers with 50% penetration, plus access to about $4-6MM in financin

  • Because NSA is tired of adding new ISP's to their list of "insert monitor here" entities? 8^O

  • There may be a way (Score:4, Interesting)

    by DaMattster ( 977781 ) on Monday April 07, 2014 @09:06AM (#46682717)
    To become a small town ISP by providing longer range WiFi and deploying it in the 5GHZ or 24GHZ spectrums. Ubiquity makes very reliable equipment to make this happen and if the area is terrain-friendly, it certainly is possible. To build out a high speed, broadband wired infrastructure is nearly impossible with the government and regulatory issues alone. Ever notice how the large telecom corporations wine about free markets when bills are introduced that don't favor them but when the legal winds are in their favor, it is "fuck free markets, we want to own it!"

  • US telco regulation does the opposite of what such regulation is supposed to do: promote competition, preserve consumer choice, reduce prices, and increase the quality of service. Monopolies granted by municipalities to cable operators, and the deregulation of the Baby Bells, do exactly the opposite-- they protect incumbents with entrenched positions and raise barriers to entry. It's a classic case of regulatory capture on multiple levels.

    The idea of municipalities now wanting to run their own ISPs, because it's so clearly a job they should be and can be doing better than the private sector-- is now resulting in lobbying groups sponsoring legislation to make it illegal to do so in order to preserve the monopolies-- is surreal to the point of absurdity.

  • I would argue this may be one of the largest reasons why we don't have more ISPs starting up any more. Now that the majority of people who have access to any kind of high speed connection have cable modem options it is incredibly difficult for anyone else to compete. For most homes, if there are options the options are cable or DSL. In most markets if you want to go DSL you have to contact your phone company to get the line set up, and then select an ISP. If you want a cable modem instead you have just

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