According to data from the Federal Communications Commission, about one-third of households in the United States have no choice when it comes to home broadband service. In other words, if they want reasonably fast home Internet service and they live in an area with access to wireline broadband, there is only one company they can pay. Another 37% of American households have a choice between just two Internet service providers for home broadband, which is defined by the FCC as Internet service with download speeds of just 4Mbps or more.
Why is the current state of home Internet service such a mess for consumers? One of the biggest reasons is so obvious that you might not have even considered it.
Ars Technica’s Jon Brodkin on Sunday published a great analysis of one of the biggest reasons competition in the home broadband industry is so terrible from a consumer standpoint: Starting an ISP is really, really difficult.
“A new fiber provider needs a slew of government permits and construction crews to bring fiber to homes and businesses,” Brodkin wrote. “It needs to buy Internet capacity from transit providers to connect customers to the rest of the Internet. It probably needs investors who are willing to wait years for a profit because the up-front capital costs are huge. If the new entrant can’t take a sizable chunk of customers away from the area’s incumbent Internet provider, it may never recover the initial costs. And if the newcomer is a real threat to the incumbent, it might need an army of lawyers to fend off frivolous lawsuits designed to put it out of business.”
The reporter gained some pretty fascinating insights while speaking with executives from a few small ISPs that are doing battle with giants like Comcast, Time Warner Cable, Verizon and AT&T in various regions.
One CEO of a small regional ISP told Brodkin that launching a broadband provider and competing with giant ISPs is like playing Starcraft or Civilization, but of course there are millions at stake. Another exec noted that in order to compete with larger companies, startup ISPs must be prepared to take the fight to court and combat companies with legal budgets that are “the size of Godzilla.”
“I have never seen an independent… start up without having to fight the incumbent legally,” Don Patten, general manager of small Oregon ISP MINET Fiber, told Ars Technica in an interview. “The incumbents are notorious for frivolous delay lawsuits. They know perfectly well they’re frivolous, but it’s a delay tactic. They have an army of lawyers and a budget to support lawsuits the size of Godzilla. That’s one of their tactics, it always has been. It probably will continue to be so for many years yet to come.”
The article is a terrific read, and it’s linked below in our source section.