Broadband Duopoly

Want to see broadband competition in your city? Don't bet on seeing more than two high-speed internet providers: your cable company (selling cable-modem service) and ...
by | August 4, 2005

Want to see broadband competition in your city? Don't bet on seeing more than two high-speed internet providers: your cable company (selling cable-modem service) and your phone company (selling DSL).

That'll be the result of some rules that the FCC is expected to pass by the end of the week. As the rules are reportedly shaping up, the Baby Bells will no longer have to share their phone lines with other DSL providers such as Earthlink or America Online. In other words, DSL as we know it will become something that you'll only be able to buy from Verizon, SBC, or whomever your local phone company is.

In a way, this is only fair. The cable industry essentially won the same battle two months ago when the US Supreme Court ruled in its favor. But it does represent a big change in how we view telecom competition in this country. It's also a giant leap of faith: should we really leave deployment of something so important as broadband up to regional duopolies?

The cable and phone titans surely think so. They do have a point. The old rules of competition discouraged investment. Why sink billions of dollars into new cable or fiber optic lines if you only have to share them with your competitors?

What worries me is that even in competitive broadband markets, prices are still high. Where I live, in Washington, D.C., Verizon and Comcast are supposedly slugging it out--yet broadband still sets you back more than $50 a month. That's a bit steep for a service that is on the way to becoming an essential utility.

Verizon recently cut its rate on DSL a bit, but you have to sign a 12 month contract with them to get it. (You also still have to buy a phone line from them, whether you want it or not).

Comcast also uses the bundling trick to scratch more money out of you. You can get cable-modem service for $43 -- but only if you're a cable TV subscriber. People who don't want to pay for a million TV channels (like me) are stuck paying $58.

No doubt, the duopoly approach is good news in those places that still haven't gotten broadband yet -- or have only one provider to choose from. But everyone else should be wary. If nothing else, the new broadband rules are all the more reason why municipalities that are embarking on their own broadband projects should be allowed to continue to do so -- and not banned from it, as some legislatures have done.

MORE ON BROADBAND: The Big Band Era (Governing, January 2005)