"The television is just another appliance -- it's a toaster with pictures." That statement was made by Mark Fowler, Ronald Reagan's FCC Chairman who spearheaded a deregulatory trend that has continued for over three decades. Today, the FCC stands on the cusp of approving a giant deal between Verizon and Comcast/Time Warner that cooks communication competition. Fowler and the FCC have one thing right: with markets like these, consumer choice is toast.
Let's review the ingredients involved. Verizon is getting airwaves from the cable companies, and will transfer some of them to T-Mobile. In exchange, Verizon and the cable companies will co-market their services. They're also all going to be working together to integrate wireless and wired products.
The Obama administration could have blown up the deal, but the political consequences would have been severe -- and besides, the competitive situation was already terrible, making it unclear how much more harm this particular transaction would add. Like jam on toast, the companies tried to add some sweeteners to the deal to help regulators swallow this mess, and digest its consequences.
Here's the problem, in one picture (based on the FCC's own National Broadband Plan), thanks to our friends at Bernstein Research:
For the connection speeds Americans will need to work, study, build the next great company or just watch the next great movie online, more than 75 percent of us will have just one choice: the local cable monopolist. Verizon isn't planning to build out its fiber optic FiOS service, which is actually a better service than cable because users can upload files as fast as they download them. In an age of real-time global interaction between investors, entrepreneurs and consumers, she who reaches the market first has the advantage -- but at speeds 100 times slower than those in Hong Kong and Seoul, the U.S. is losing its competitive advantages by the minute. As the chart shows, only about 14 percent of Americans can actually be reached by FiOS, and a lot of them won't be able to afford it even if it comes near them. (According to the OECD, fiber access is much more commonplace for people in Japan, S. Korea, Sweden, Norway, Iceland, Denmark, and Portugal, among other countries.)
Comcast isn't affected unduly by competition from FiOS, because the two services overlap in only 15 percent of Comcast's territory. And what a territory Comcast has -- by July 2011, Comcast had already won SNL Kagan's designation for "Most Consolidated" markets, with 94 percent of the cable subscribers in San Francisco and 88 percent of the cable subscribers in Chicago. Comcast holds 86 percent of the cable subscribers in its hometown of Philadelphia, and over 85 percent of cable subscribers in Houston.
The Department of Justice says it's trying to ensure that Verizon's incentives to build FiOS remain unchanged. So as a condition of the deal's approval, Verizon won't be allowed to co-market cable company products in FiOS areas, and it won't be allowed to co-market at all after December 2016. But what competition does the Antitrust Division think actually exists? Verizon has already said, in effect, "You take wired, we'll take wireless." And with 85+ percent market shares, Comcast can be the gatekeeper for everything in its territories.
It's as if we've allowed General Electric to have a monopoly on selling electricity to your home and then allowed them to leverage this advantage into the market for their toasters. Imagine the spiel: "If you buy our GE toaster, you get higher-speed electricity that will cook your bagels faster. But only our bagels fit in the GE toaster." Today, rather than tangling with your tastebuds, Comcast is making decisions that affect what your ears hear, what your eyes see, and what your keyboard can reach. Comcast can give its own video on demand service an advantage via its Internet connections by removing it from the constraints of a monthly data cap. But unaffiliated content like Netflix - that'll cost you extra. It's the price you'll pay because you like a different brand of bread.
The FCC is poised to approve the deal in the next few days. Expect broad, hopeful statements about supporting T-Mobile's future with additional spectrum. But Verizon (and AT&T) have such a stupendous lead in spectrum and subscribers, and Verizon's deal with cable will give it such powerful synergistic bundled opportunities, that T-Mobile will have trouble competing in any way that will affect the prices consumers pay for bundles from Verizon.
We are stuck in this primitive state with company lobbyists who are buttering up policymakers just to jam consumers.
The DOJ has opened a broad inquiry into the practices and powers of the cable industry: that's the good news. As policymakers finalize this gargantuan deal, they should keep in mind that America's economic future needs a diet rich in fiber that enables competition and treats our digital future as something more than just an appliance.
Cable company won't extend cable, and via said cable, internet service to all of your community, despite repeated requests from the local government?
So local government decides to build it themselves?
Guess who gets a law passed to keep them from doing it so that the local cable company maintains a monopoly on areas they might get around to serving eventually?
The FCC suffers from internal conflict of interest since it has to survive and support itself from fees collected from those whom it is supposed to regulate. It was much, much different in the days when the FCC was a tax supported government agency tasked with ensuring equal access to the publicly owned airwaves and regulation of wireline infrastructure.
Unfortunately, those days are long over. The FCC's mandate now seems to be to ensure that the big telecom companies remain free to maximize their profits, minimize their competition and provide the lowest grade of service they can get away with.
Big Business colludes.
That's the NEW American Capitalistic business model.
Grow till you force out all competition, then charge whatever you darn well please, for whatever quality of service you choose to provide.
My cable bill goes up almost every single month, and when I research alternatives, they are just as bad or worse.
Freedom of choice.......................take what we offer, or take a hike.
Fast forward to today. The annoyance factor comes directly via the cable provider who's most enriching advertising dollar comes from political ads, which we are subjected to, year in, year out. Added to these are the big pharma ads, attempting to convince us that we should never feel pain, even if the meds may kill us.
Obviously, I am a strange remnant from another time. I feel outrage at the providers of "information" that is biased in the providers' current religious/political/moral/ethnic selection, and makes me pay through the nose for it. I am seriously considering going wireless and cutting all my connection to the web. This specific connection is what I will miss most; voicing my reaction to the news and reading the comments from other thought provoked readers.
1) force the incumbent to split into a commercial service provider and a network operator under regulated tariffs.
2) Force that network operator to provide network services to any provider at the same regulated cost.
That model was used in the Netherlands for fixed telecoms (last mile to subscriber) and the resulting competition drove down competition and drove innovation.
The same method was applied to energy distribution too. This model originated from the UK for Gas in the 90'.
Sadly I'm already there. While several alternative "high-speed" options exist in parts of my metro-area (Portland, OR), like CenturyLink, Frontier, FiOS and Clearwire, none of them are available at my home address. And I am not in a rural area, but rather just a few miles from downtown. My choices are either Comcast, or heavy overage charges & data throttling from my cell provider.
I'll be dead before I ever see fiber in this area.
I feel ya.