Monday, July 23, 2012

If I lived in Riga, I would not bother to cut the cord

Triple play pricing from the top 15 ISPs
(Versions of this post appeared on aNewDomain and Slashdot. There is extensive discussion at Slashdot).

Living in the US, we can lose perspective, assuming that things are the same in other places as here. I am a cord cutter, but, if I lived in Riga or Paris or many other cities I would not have cut the cord.

Instead, I would be a "triple play" subscriber, receiving television, telephone and Internet connectivity from one service provider.

I cut the cord to save money. I live in Los Angeles and pay Time Warner $84.94 (plus $6.56 tax and fees) for telephone service and Internet connectivity at "up to" 20 Mbps download and 2 Mbps upload speed. Adding digital TV to round out the triple play would cost me an additional $58.99 per month -- just about what I paid for my Roku box.

If I lived in Riga, I would simply get a triple play subscription with 20 Mbps up and 5 Mbps down from service provider Balti-Com for $25.43. That price was disclosed in the New America Foundation report The Cost of Connectivity, which compares prices charged by 885 ISPs in 22 cities worldwide. (This report is no longer available -- see instead their 2014 Cost of Connectiivty report, in which Riga still looks a lot better than my home town, Los Angeles).

Above, you see the triple play prices of the 15 cheapest ISPs in the comparison. My triple play would be about $150 per month in Los Angeles. Now, to be fair, I don't know how the TV content in Riga compares to what I would get in Los Angeles, speed measurements can be slippery and parts of the city may not be covered, but the price difference is dramatic.

A clue to the source of that difference is the fact that five of the top 15 ISPs are in Paris. That is what competition looks like in "socialist" France. In my neighborhood in Los Angeles, the only alternative I have to Time Warner Cable for Internet service is Verizon DSL at 3.1 Mbps, a non-starter.

As study co-author Benjamin Lennett says, our telephone and cable companies have arranged a "negotiated truce" in which cable incumbents enjoy a de facto monopoly on high-speed broadband service, while Verizon and AT&T focus primarily on their wireless platforms.

The report attributes the French success to a regulatory decision in 2000 that forced the former state-owned monopoly, France Telecom, to open its network to rival operators. The US Congress tried to spur competition in a similar manner with the Telecommunication Act of 1996, but the incumbent operators defeated that attempt in courts and state houses.

William Kennard, who, as chairman of the United States Federal Communication from 1997-2001, was charged with implementing the Telecommunications Act, stated near the end of his term that “all too often companies work to change the regulations, instead of working to change the market,” and spoke of “regulatory capitalism” in which “companies invest in lawyers, lobbyists and politicians, instead of plant, people and customer service.” He went on to remark that regulation is “too often used as a shield, to protect the status quo from new competition -- often in the form of smaller, hungrier competitors -- and too infrequently as a sword -- to cut a pathway for new competitors to compete by creating new networks and services.”

Along with many many others, I've been writing about this sort of thing for years, but the situation seems to get progressively worse. In 1996, when the Telecommunication act was passed, I could choose among many ISPs. Today, I have only one viable choice, and the price is about six times what I would be paying in Riga.

Update 11/19/2013

Retiring Senator Jay Rockefeller has written a bill designed to save the US Internet by bringing competition to the ISP and video markets. Incumbents in both markets have succeeded in stifling competition, but maybe this bill has slim chance of doing what Congress tried to do with the Telecommunication Act of 1996. We can dream.

Update 12/28/2015

I've included a link to an updated version of New America's Cost of Connectivity report. Connectivity in Riga still looks a lot faster and cheaper than in my home town, Los Angeles.

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