U.S. Broadband: Too Expensive, Too Slow, Too Monopolized
David is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The Internet is as essential to the modern economy as roads, railroads, and shipping ports are. Since you're reading this, you probably don't doubt that.
Unfortunately, U.S. broadband, as much of an improvement as it was over dial-up access, is laughably slow compared to other countries. Try bragging about how fast your connection is to someone from South Korea, Japan or Sweden. They will actually laugh at you.
Yahoo Finance recently posted a fascinating interview with David Cay Johnston, author of The Fine Print: How Big Companies Use "Plain English" to Rob You Blind.
Johnston highlights the difference between the "triple play" packages that include phone, Internet and TV service between the U.S. and France. The American package costs $160 from companies like Verizon (NYSE: VZ) and Comcast (NASDAQ: CMCSA). The French package costs only $38 and is not only cheaper, but is faster and even better, with TV channels from around the world.
The telcos pocketed $360 billion in fees that were intended to build up fiber networks, but instead they used it for other purposes. Johnston believes they used it to build up their mobile networks at the expense of their terrestrial networks.
You could argue that the telcos had valid reasons for doing so. It's expensive and time-consuming to dig up people's streets. First, they have to get permits to dig. Then they have to get the equipment in, then they have to make sure they don't hit the gas line. Finally, they can lay down the cables and put the dirt the dug up back on top of it, then repave the street. This is why telcos often have a "natural monopoly" on the actual wires that go from your town into your house.
This focus on mobile, even though it's made life more convenient for users, is rather misguided. The wireless networks ultimately connect to wired broadband infrastructure, or at least what passes for broadband in America.
In an ideal world, the telcos would make the necessary investments based on their own self-interests -- the growth of smartphones, constantly pushing massive amounts of data onto their networks and choking them. But with profits last year of $4.1 billion for Comcast, $2.4 billion for Verizon, $3.9 billion for AT&T (NYSE: T), $1.6 billion for Time Warner Cable (NYSE: TWC) and $573 million for CenturyLink (NYSE: CTL), they probably don't see a need to fix what's not broken (at least for investors).
What ultimately needs to happen is the dreaded "R word": regulation. If the state of affairs makes you angry, you should get in touch with your Congress critters, and demand that they hold hearings into how they are building their networks. The reason AT&T was broken up in the '80s was so that customers would get better service for less money. If you've looked at your phone or cable bill recently, it's obvious that that's not happening. Perhaps it would be better to look at telecommunications networks the same way U.S. law looks at the airwaves: as belonging to the citizens, leased out to companies to run as a public benefit.
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