Wednesday, July 12, 2006

Hot Air about 'Net Competition' a Cover for Control

More Hot Air
Art Brodsky of partner organization Public Knowledge deflates industry hot air about choice in America's broadband marketplace, citing a recent report by Kagan Research that reveals little real price or choice competition between cable and telephone ISPs. Brodsky writes:
"We've argued that broadband is a duopoly, with Federal Communications Commission (FCC) statistics showing that just about everyone who has broadband gets it from either the telephone company or the cable company. The FCC has affirmatively pursued the policy of creating this situation, and it’s one of the main reasons we need a Net Neutrality policy. There is no real choice."
Brodsky writes that the new Kagan study, "Cable Modem Vs. DSL: Rivals Side-Step Big Price Wars So Far," shows not only a lack of competition in choice of broadband provider, a lack of real competition in broadband prices:
"Kagan puts it fairly simply: 'Though the battle for broadband access subscribers is intense, there’s no screaming price war between cable TV and telcos, and Kagan Research doesn’t expect one in the foreseeable future.'"
Kagan surveyed five top cable operators and four telephone companies in the first quarter this year. The average price for cable modem and DSL services were essentially the same across the country.

"These figures are national in scope, encompassing all sorts of markets – some with competition between the two and some without," Brodsky writes.

Broadband costs in the United States remain very high by global standards, according to "Broadband Reality Check," a 2005 report by Free Press, Consumers Union and Consumer Federation of America.

The cost of broadband in other countries has dropped dramatically while speeds have increased.

Not true for the United States. According to the Free Press report, on a per megabit basis, U.S. consumers pay 10 to 25 times more than broadband users in Japan, for example, while residential broadband speeds in countries like France, and South Korea are 10 to 25 times faster than the U.S. average. (For more, read Thomas Bleha's insightful report in Foreign Affairs,"Down to the Wire").

Don't believe the telco hype. The "fierce competition" among broadband platforms is seriously overstated. The FCC's own report shows that satellite and wireless broadband continue to lose market share. Today, cable and DSL providers control almost 98 percent of the residential and small-business broadband market.

Moreover, the Free Press report shows how such market control and lack of real competition combine to result in higher broadband costs to consumer (by comparison to other developed countries) and bigger profit margins for the likes of AT&T, Verizon and Comcast.

For these corporations, killing Net Neutrality is just icing on the cake of a U.S broadband market that's already in their grip. Clearly they don't want more competition, but more control of a broadband marketplace that's already lagging behind the rest of the world.

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