Why Super-Fast Internet Is Coming Super Slowly

http://online.wsj.com/news/articles/SB10001424052702304315004579381463769362886

by bocalogic • 12 years ago

129 124 12 years ago

online.wsj.com

memming• 12 years ago

"AT&T is slowing Google Fiber deployment in Austin by denying access to its utility poles": This is why I am not getting Google Fiber yet?

edraferi2• 12 years ago

Yup.

http://arstechnica.com/tech-policy/2013/12/why-att-says-it-c...

bsbechtel2• 12 years ago

In theory, if Google Fiber was widely available, would this drastically dilute the effects of net neutrality problems? Or are these two issues completely unrelated?

valas• 12 years ago

"Net-neutrality" means different thing to different people.

If by net-neutrality you mean the system where a paying broadband customer can consume any content, irrespective of that content owner ability to pony up to cash to broadband provider, then yes, these two issues are related. More competition in consumer broadband market would keep providers in check.

In an ideal world (at least my ideal), broadband providers would strive to do everything they can to deliver content to me. In current world, it's well documented that Comcast is passively allowing interconnects to fill up, causing congestion, and forcing content providers to pay up for better interconnect.

edraferi2• 12 years ago

It becomes much harder to violate net neutrality in the face of competition. Here's an example:

Say you have two ISP options at your home. Firm A forces Netflix to pay $1/month for access to enough bandwidth to stream movies in HD to your house, because they want you to use janky-streams.com, which they own. Firm B keeps their peering infrastructure up-to-date without charging Netflix. Where does this leave you as a consumer?

All else equal, you'll switch over to Firm B. Why? Because Netflix works there even without paying a ransom for their data. It costs Netflix more money to provide their service to you on Firm A. They could pass that cost along to you directly (increase Netflix bill $1/month) or reduce the stream quality and blame the ISP. The end result is that you're paying more or getting worse service because of the Net Neutrality violation.

However, Firm A understands this logic. They know that charging Netflix would push consumers to Firm B. Thus they decide to play nice and pass along the data you already pay them for.

bsbechtel2• 12 years ago

That's what I was suspecting, just wanted to be sure I understood things correctly.

'Your margin is my opportunity' -Jeff Bezos

I guess that only holds true when there aren't artificial barriers to entry into a market.

VLM• 12 years ago

To complete the analogy, even more comically, to enforce the punishment by firm A against netflix, they probably had to make a capital investment in sabotage gear of perhaps 75 cents per month TCO.

Thats kind of how it was in telecom before they gave up on detailed long distance billing. You'd spend 4 cents/min on billing infrastructure which was OK when a LD call from CHC to NYC was $4/minute, not so great when Sams Club was selling LD cards for 5 cents/min.

Never forget that creating false scarcity of a non-scarce good takes a lot of time, effort, and money.

a_c_s• 12 years ago

The problem is that instead, Firm B could just follow the lead and also charge $1/month for Netflix, leaving the consumer with no choice. Or they could charge $1/month for other streaming services and leave Netflix alone, so the consumer gets to choose between slow Netflix or slow Hulu & Amazon, with no chance to 'vote' with their wallets for fast everything.

This is the danger of oligopolies - even when they don't collude, their interests are in not competing 'too hard' to gain customers. If there are two firms, and each has roughly half of the customers, then the most money Firm A could get with no competition is 2x what they already have, so getting into a price war could easily result in lower total profits. For example, if they have a 50% profit margin, then lowering consumer prices by 25% (and thus cutting profits to only 25% margin) only breaks even if they are able to sign up every customer of their competition.

Free markets work best when there are many players and markets are easy to enter, as there is much more incentive to compete, which is not the structure of broadband markets.

gress• 12 years ago

If Google Fiber was widely available Google would be the one controlling traffic priority.

quokka2• 12 years ago

That is true, and why to the solution to the US's slow internet providers isn't "get Google fiber to everyone". It should be "make it easy for new companies to provide service, even if another fast service is already available".

jfasi2• 12 years ago

I view the broadband industry as a fascinating example of what happens when an infrastructure industry meets the technology industry. TWC and friends were established to enact a business plan that's been viable and profitable for centuries: laying down expensive infrastructure is economically feasible if most of the cost comes up front and you can charge rents on it for decades. Stability is crucial. This is the economic reasoning that built the cable TV network, and the phone network before that, and the power grid before that, and the railroad network before that, etc.

Trouble is, this business model severely discourages new development (witness the "No one wants gigabit" rationale). Why interrupt your twenty year plan just to extend its life a year or two into the future? This isn't a bad thing if your industry is basically a utility industry, where technological changes move at a glacial pace. God help you if you enter into the technology industry armed only with the economic and managerial tools of a utility juggernaut.

So we've got ourselves a conflict. On one side there are irritated customers wondering why their service is so poor and why their bills are so high. On the other there are communications utilities providers: while they have a legitimate business need to keep their networks profitable, they are paying the price for committing the gravest sin possible in the technology world: complacency.

mahyarm• 12 years ago

So why does broadband in other countries not have this problem, like Scandinavia, or Korea & Japan?

mbesto• 12 years ago

For the same reasons those countries implement things like universal health care. The crux of the issue with the US however is that being powerful here can mean greater power elsewhere. For example, if I have 100% market share in Sweden, it doesn't necessarily give me the capital and muscle to become the biggest internet provider in all of Europe. Whereas if you become the superpower in the US, expansion (read -> growth) is much easier to obtain.

saosebastiao6• 12 years ago

Sprawl makes infrastructure investment orders of magnitude more expensive. For example, a small business [1] provides the fastest consumer access in the city of Seattle, but they refuse to do business outside of extremely high density buildings. There is no way a small business could do the same in McSuburbia. In the sprawly world outside of the US's dense cities, only municipal governments with a lot of political willpower have the resources to invest in the infrastructure needed for fast internet.

[1] http://www.condointernet.net/

Moru• 12 years ago

Sweden here: 15 years ago we were happily renting a 1.5Mbps internet connection in a very small village in the desolate areas of northern sweden. The network was fiber though and was quickly upgraded to 10 and 100 Mbps. Cost was about $60 per month in the start, now it is $38 per month. No limits the last 10 years.

njsteinsund• 12 years ago

Take Norway; here all the copper lines used for DSL used to be owned by the national phone company. Then competition was established by forcing the national phone company to sell access to the lines at a set rate to anyone that wanted to deliver internet access. A monthly "line rental" is charged to the end customer - so that the cost is transparent. "Line rental" is about $13/month and a 20Mb/1Mb ADSL is $50/month (Cheapest 100Mb/100Mb (fiber) is $80.) There is a site for comparing prices (telepriser.no) run by the equivalent to the FCC, showing all the suppliers offerings.

chimeracoder2• 12 years ago

I view the broadband industry as a fascinating example of what happens when an infrastructure industry meets the technology industry.

I don't disagree with your comment, but your argument would seem to apply to the rest of the world, whereas in fact the US is in a fairly unique situation among developed countries.

Most of the current situation can be explained by the fact that broadband is currently the only unregulated public utility.

In NYC, I don't really pay much attention to electricity, gas, and water. ConEd kind of sucks, and I wish they were better, but really, they work well enough most of the time, and I'm not sure that I could name anybody else who would do it better.

The problem is that we sold off monopoly rights to broadband without attaching any strings of regulation, etc. Why should they bother to upgrade their infrastructure? Heck, we literally paid the cable companies billions of dollars of government money to do exactly that, and because we failed to enforce that with any real teeth, they just took the money and ran. Of course they're not going to listen when consumers say they "want gigabit". It would make no business sense to do otherwise, especially when 80% of your customers are unable to vote with their wallet and use a competing service[0].

There's a case to be made for either a free-market approach to broadband, or a more "socialized", regulated monopoly. Unfortunately, what we currently have is a hybrid of both, and it happens to hit upon the worst of both worlds.

[0] There's a South Park clip that does a great job of describing this relationship. I won't link to it here, because it's rather crude and possibly (?) a bit NSFW, but searching "south park cable" on Youtube should lead you to it if you want to laugh, sigh, and cry all at the same time.

jfasi2• 12 years ago

I disagree in terms of regulation: there is plenty of regulation on broadband internet, except it tends to discourage competition against broadband providers.

This isn't a problem that is going to be solved by placing regulations on the industry. Your example of past subsidies provides an excellent argument for this: given the political clout these entities hold and have in the past used to stilt legislation in their favor, what leads us to believe we're going to do any better with new regulations?

At the end of the day, the market is demanding better internet service. While telecommunications providers are certain to wage war against the injection against honest competition into their sector, things are actually looking pretty good in my mind. The FCC sees market demand and is working to tear down anti-competitive legislative barriers [1]. Smaller efforts such as Google Fiber are doing the hard work of convincing the public that better service is within reach.

http://www.slate.com/blogs/future_tense/2014/02/20/fcc_s_pla...

rayiner5• 12 years ago

Your whole post is based on a false premise, which is that customers have a problem with the status quo. I think internet companies have a problem with the status quo. They want somebody else to build the fat pipes crucial to their business. That's why Google fiber is a marketing and lobbying tool and not a real business.[1] But I don't think consumers here are any less happy than in other places. According to Akamai's state of the internet, the U.S. ranks #8 in average connection speed, ahead of places like Sweden. They have no reason to be. I've never heard someone outside my engineer friends complain about the lack of gigabit or even 50 Mbps+ connections. As long as its enough for Hulu, people are happy.

There are also other problems with your post. For example, we didn't sell off monopoly rights. Its been illegal for municipalities to grant exclusive franchises since 1992. Also, franchises don't come without strings attached. Here in Phila, Comcast has to run cable to a bunch of poor neighborhoods and charge $13 per month for service. Distribution requirements and regulated rates exist in the cable world.

[1] At the end if the day, if Google bought TWC instead, Google's average profit margin would go down.

jseliger• 12 years ago

and the railroad network before that, etc

And don't forget: The telegraph industry! Neal Stephenson writes about it in "Mother Earth, Mother Board:" http://www.wired.com/wired/archive/4.12/ffglass_pr.html , which is fascinating and worth reading.

On one side there are irritated customers wondering why their service is so poor and why their bills are so high

One other "don't forget": a lot of people who pay attention are unhappy about franchise agreements and telco efforts to prohibit local utility fiber deployments by outlawing them at the state level (see https://news.ycombinator.com/item?id=7271044). Local municipalities that say, "Fuck it, we're going to roll our own" often find themselves forbidden because of successful lobbying at the state level.

bluedino2• 12 years ago

> this business model severely discourages new development (witness the "No one wants gigabit" rationale)

It's not that I want/need gigabit, it's that the only thing I can get in some locations is unusable. I'm looking at you, 1.5mb/768k DSL lines. It's barely enough for web surfing and useless for streaming video or doing things like gaming, video conferencing....

dba7dba• 12 years ago

US achieved its greatness because of free flow of movement of people and their ideas. Roads and freeways and highways were plenty, fast and easily accessible, to both sellers of services/goods and consumers.

In this new world, internet access is the new road. Good internet access will generate new services/goods and encourage consumption by consumers. This will inevitably lead to snowball effect of creating more wealth for the society.

US shouldn't be held hostage by a few people in an executive suite in Philadelphia who want to make a few bucks so they can own a few extra mansions and a private jet or 2. US is a greater country than that.

pseudometa• 12 years ago

This is going to be a mess to slog through over the next 15 years until wireless speeds (and costs) leapfrog hardlines completely.

xcrunner529• 12 years ago

I've seen articles that it is just not feasible or even possibly to put all of the burden the wired networks carry onto the wireless ones. Besides the ugly data caps we have to deal with there, there's not enough room in the frequencies. Wireless is used as an excuse to not put in effort with wired and it's going to screw us.

amirhirsch2• 12 years ago

There's plenty of room in the frequencies, even just using linear momentum encoding with directional transceivers. Add in MIMO/OAM and and suddenly there's even more bandwidth. the FCC / ownership of spectrum is a whole other chimera. Wireless today is like using a LED and a photodiode instead of a screen and a camera.

nextweek2• 12 years ago

I thought the USA was the model of capitalism. However it appears the opposite, monopolies run rampant. The free market is killed rather than encouraged.

rhizome• 12 years ago

Monopoly is the apotheosis of capitalist desire, competition is merely the measuring stick.

bryanlarsen• 12 years ago

Infrastructure is the quintessential example of a natural monopoly. Free markets encourage natural monopolies. A non-free market is required to avoid natural monopolies.

Consultant32452• 12 years ago

If you read the article it's plain to see that the monopolies are enforced and encouraged by the currently existing regulations. There is no free market in ISPs in the US.

res0nat0r6• 12 years ago

You mean natural monopolies?

seventytwo• 12 years ago

What are you talking about? Monopolies ARE capitalism run rampant.

praxeologist2• 12 years ago

Nonsense. Leftists conflate "state capitalism", cronyism or corporatism with real, free-market capitalism. Internet monopolies like Comcast or TWC enjoy are state-granted monopolies, not "natural monopolies" (which have never existed).

alexeisadeski35• 12 years ago

I thought the USA was the model of capitalism.

You mean to tell me that the NYT has been lying to me all these years?

gcb0• 12 years ago

thats a borderline moronic article.

starts by saying incumbents deny access even to city cabling and explaining the duopoly on most cities and ends by saying that allowing netflix to pass the fee to comcast subscribers is good because people will move companies and a free market is the answer.

is this april 1st or something? also extra moronic points for not understanding the first thing about isp to isp agreements and peer pricing.

quokka2• 12 years ago

The writer is suggesting that the "FCC can mandate right-of-way rules similar to those granted Google Fiber to all credible competitors".

He isn't saying that the "free market" will fix things by itself. He observes that there isn't a free market in providing internet access because the incumbents control things like telephone poles (to hang optical cable on) and municipalities are so addicted to the kickbacks they get from cable franchisees that they won't let anyone else in. The magic of the invisible hand only works if there is actual competition. Those supply and demand curve charts only describe reality if there aren't monopolists.

His claim is that if the FCC mandated right of way to anyone wanting to hook homes up then a company like Google would already be serving many more homes as incumbents wouldn't be able to block them as AT&T is doing in Austin.

This is true, but I'm not convinced that it is the right way to get proper competition here. Is the solution really to have 5 companies each run optical fiber down a street? Better would be for one company to run super-fast tubes, and then sell the bandwidth in bulk to ISPs. Maybe that is the business model that would emerge, but maybe not.

mlangdon• 12 years ago

Leave it to the WSJ to blame a problem that needs old school trust-busting on excess regulation. They've got libertarian rabies.

marknutter• 12 years ago

I have gigabit fiber internet and it doesn't feel all that much faster than my old Comcast 20Mbs connection because the bottleneck isn't my connection, it's the servers I'm asking for content from. For some things it's blazingly fast (downloading updates, torrenting, etc) but for general web surfing the benefit is barely noticeable.

I think that's why fiber adoption is slower than broadband adoption was. There's not much that you can do over a gigabit connection that you can't do over a 20Mbs connection for the average subscriber. Until some killer app that requires a gigabit connection to work starts to become popular, people just aren't going to demand it and adoption will continue to limp along.

rictic• 12 years ago

A bit of a chicken and egg there though. Who's going to build services that use >20mbps in bandwidth if almost no one has that much?

endeavor• 12 years ago

I read some VC stories regarding Skype recently. At the time they were looking for series A (?), broadband penetration was still poor. Obviously they managed to get by until the broadband environment tipped to their advantage. The point is that you don't want to wait until it's obvious that gigabit is really coming. At that point you may already be way behind.

insuffi2• 12 years ago

Agreed; the difference between downloading a movie in 10 minutes and 1 minute is rather miniscule.

Additionally, I don't think even streaming sites would generally require more than 50 mbps to watch comfortably. Not even talking about regular apps/static content.

talmand3• 12 years ago

As kyrra suggested elsewhere; you don't need the fat pipe for one stream, you need it for multiple streams. My household doesn't have cable TV so it's nice to be able to have the kids watching their stuff on Netflix in the other room while the wife and I are watching The Walking Dead in the living room. Without our FIOS that might not work out quite as nicely.

kalleboo• 12 years ago

Does that killer app exist in Europe or Asia? Otherwise, why would they have a faster adoption rate than the US?

kyrra• 12 years ago

One of the arguments I saw for faster internet outside of a single-user app is when you have multiple people using a connection. If you have a family of 5 people all using a Cable connection in the US today, it is very easy to overload that line. And since upstream sucks on most home connections today (1.5 to 2 Mbps upstream), a single person uploading a video to youtube (or backing up data) will kill the connection for every other person using that line.

In the current ecosystem, I see gigabit connections being useful for multi-user connections where a lot of video is being streamed. Or using cloud storage solutions like Dropbox or Google Drive.

In the future, I could see other use cases. For what we know about Google's self driving cars, the first time a road is driven on (manual driving) it gathers a ton of data about that road. When you park in the garage, it may have to upload gigabytes worth of data for Google to process to make available to other cars. Doing that over the current connections most people have would be painful. If you have a large pipe for uploading lots of data, this becomes a lot more feasible.

talmand3• 12 years ago

For your first thought; that's one of the reasons as to why we love our FIOS connection, we can have multiple streams going at the same time and doesn't disrupt normal web surfing as well. It's a must with a large family.

As for the rest, I would say that it's hard for us to imagine the might single killer app with a gigabit connection because so few have it. Once a certain level of market penetration has happened, whatever that may be, there's no telling what things will come along once bandwidth is no longer a concern.

skywhopper• 12 years ago

One of the biggest missed opportunities of the 2009 government stimulus was a failure to heavily invest in new infrastructure that would pay dividends for the next 50-100 years. A government project to connect every household in America to gigabit Internet connection is more than doable, and would pay enormous benefits for individuals and corporations alike. It's not too late, although it would be much much harder today.

anigbrowl2• 12 years ago

I agree, but the problem was that it would have run into a wall of local and state regulations, and the majority of such deployments would be getting fought over in court.

sehugg• 12 years ago

I've got to imagine the availability of cheap and fast broadband influences property values in a given area. I've seen numbers like $5k thrown around; I'm tempted to think it's more like $10k-$30k.

When you multiply that amount by the number of homeowners in the country, that's a lot of potential influence. How could it be leveraged to improve broadband?

kokey• 12 years ago

It is quite refreshing to see an article clearly stating the problem and the right solution. The barriers to competition needs to be broken, then the neutrality issue sorts itself out. We don't need to see entrenched cartels and monopolies 'fixed' through additional regulation imposing certain quality standards. That makes it hard for new players to enter the market and distinguish themselves, and more importantly it makes it hard for the dominant players to do the stupid things that will make their customers leave them faster for the competition.

alisnic2• 12 years ago

come to Moldova, we have 100 mbit for 10$ month

RankingMember• 12 years ago

Interesting...isn't boardband penetration somewhere around the 35% mark there?

alisnic2• 12 years ago

no, every home has cheap and fast internet now

logfromblammo3• 12 years ago

In brief, faster network connections are rolling out slowly because practically everyone that wants to do it faster is prevented from doing so thanks to statutory or logistical roadblocks thrown up by the incumbents, who have zero incentive to do it themselves because they enjoy a territory-designated monopoly.

The logical thing for most towns to do is to use their eminent domain powers to force the sale of easements and utility poles/tunnels to the municipality, and charge all utilities a flat rate based on pole capacity used. While two wires on a line of poles doesn't seem all that wasteful, two wires on two parallel lines of poles sounds pretty stupid. Digging up the street with two parallel trenches is even worse. As a consumer, I don't want a service provider in a position where it can keep its competitors from reaching by house via the best route possible. I want that access controlled by the cartel enforcer rather than any of the cartel members.

As a bonus, the town could allow residents or HOAs to hire qualified contractors to run and maintain their own cables to anywhere the poles/tunnels go. That way, if an ISP won't come to you, you can go to anything else you can reach.

anigbrowl2• 12 years ago

Read the WSJ comments and you'll see another reason for the delay :-/

Why Super-Fast Internet Is Coming Super Slowly

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