David Cay Johnston has written a good piece in the New York Times this week outlining all the ways the American market for Internet services — and wireline services in particular — is truly godawful. Johnston’s arguments are familiar by now but that doesn’t make them any less relevant, especially his nuggets on how American consumers pay vastly more for “bundled” Internet, television and phone services than consumers overseas. For example, Johnston notes that “on average… a triple-play package that bundles Internet, telephone and television sells for $160 a month with taxes” whereas “in France the equivalent costs just $38.”
So it’s obvious that America has a problem when it comes to Internet services. The question, then, becomes what to do about it. Happily, I think there are some emerging solutions that are right in front of our eyes that don’t even require heavy-handed government intervention along the lines of breaking up the telecom companies. In no particular order, here are three ways both American citizens and the government can help create a much better ISP market than the one we have today.
- Support fiber initiatives wherever they sprout up. Google Fiber gets most of the attention, and rightly so since Google (GOOG) is the only company right now with the clout to do large-scale fiber deployments in several major cities in the United States. But there are other fiber-to-the-home projects out there, such as Gig.U, an initiative run by more than 30 universities throughout the United States that are dedicated to bringing fiber connectivity to their surrounding communities. Also be sure to check out the Fiber-to-the-Home Council’s homepage, which keeps track of small-scale fiber projects throughout the United States and tries to promote fiber deployments among smaller ISPs. Basically, signing up for fiber services is the best way to kick ISPs in the pants and let them know that we as consumers want a better, cheaper service.
- Consider switching to Sprint (S) or T-Mobile. Note how I said “consider” here. I understand both of these carriers have their issues with mobile voice and data coverage. At the same time, for people who live in areas where their coverage is strong, they do offer better deals. The best part of both carriers, of course, is that neither of them force you to accept smartphone data caps on their respective LTE and HSPA+ networks, so you never have to panic about uploading a cute cat picture to Facebook (FB) for fear of incurring a dreaded overage fee. Basically, companies that don’t implement obnoxious practices such as data caps should be rewarded for good behavior. If you find the coverage in your area acceptable, then Sprint and T-Mobile are certainly worth a shot.
- Quit letting the big carriers gobble up spectrum. America’s wireless carriers love to whine about not having enough spectrum, and in some sense I sympathize with them: There’s a lot of idle spectrum out there and the government should do its best to appropriate it for mobile data services. At the same time, there’s no reason that all the spectrum should go by default to AT&T (T) and Verizon (VZ), the two largest incumbent carriers. This is basically what’s been happening with recent spectrum auctions such as the 700MHz band auction in 2008, when Verizon and AT&T combined to bid a whopping $16 billion for spectrum licenses, or more than 80% of the $19.6 billion in total bids. If and when the government frees up more spectrum, it should strongly consider giving priority to upstart companies such as the Dish Network (DISH), which wants to use 40MHz chunk of satellite spectrum on the 2GHz band for terrestrial LTE-Advanced services. While new entrants to the wireless market don’t always work out — see LightSquared, for example — that doesn’t mean they shouldn’t be encouraged.
There’s no magic bullet to improve America’s ISP market, but there are several things that both the government and consumers can do to make things better over the long haul. And looking at all the potential new entrants into the market, such as Google Fiber and Dish, makes me feel more hopeful about the potential of Internet service in America than I have in a very long time.
