This is a companion diary to Part 1. In this I give a further explanation of how net neutrality could be achieved by breaking the power of the dominant 5 ISPs rather than explicit net neutrality regulation, using the UK experience where there are scores, if not hundreds of ISPs offering broadband services. I’ll go into how the huge number of ISPs developed from the privatisation of the monopoly British Telecom and how this “common carrier” approach also applied to gas and electricity privitisation. One result is that I buy my gas and electricity from one of the “Big 5” power companies which is London based but German owned.
The real threat to net neutrality is not any FCC regulation. It is the lack of choice of ISP faced by many Americans.
FCC reports have found that about three-quarters of the country's developed census blocks lack any high-speed broadband choice. The household analysis found a slightly better, but still troubling, situation, with nearly half of the 118 million US households lacking any wired Internet choice at the FCC's broadband standard of 25Mbps. (One caveat: this new analysis examined only download speeds, whereas FCC reports define broadband as services offering both 25Mbps download speeds and at least 3Mbps uploads.)
About 54.5 million households had access to at least two wired providers offering 25Mbps speeds, and 6.9 million had access to three such providers. The data goes up to June 2016.
Even at lower speeds, tens of millions lack any choice. There were 31.1 million households with exactly one wireline provider offering speeds of at least 10Mbps, and another 6.9 million households with zero providers offering such speeds over wired connections. At the paltry level of 3Mbps download speeds, 19.3 million households had access to one wireline ISP and 4.9 million households had no access at all.
In many cases the second choice will be broadband delivered using the local cable TV company’s pipelines. It is not inconcievable that a large vertical corporation as described in part 1 could own both the telco and the cable company. You might well think it no coincidence that Ma Bell was split into 7 Baby Bells and that the world’s 5 largest ISPs were US companies. In very few places would a rival vertical corporation install its own broadband or cable infrastructure.
New broadband options like 4G and 5G telephony might provide an alternative — I use a 4G modem myself. That will probably remain unavailable in most areas for some time and the same vertical corp could well own the cellphone company. The solution may be to approach broadband in the same way as long distance phone calls. The Baby Bell maintains the infrastructure but the consumer can send long distance calls over a rival system.
Choice in a real “common carrier” environment.
This sort of “common carrier” approach was used when the UK broke up the monopoly of British Telecom (previously Post Office Telephones and now BT). BT maintains the infrastructure but “wholesales” voice calls and broadband to other companies. They then retail their own product. The same applies to the cellnet providers — the network companies can retail under their own branding but other providers can buy wholesale and retail different packages. With similar arrangements for gas and electricity, there is a dazzling selection of choices. I could for example buy landline telephone, broadband, gas, electricity and cellphone services from my local supermarket or from several other companies. If I get cellphone, broadband and telephony from BT, I get a free PVR/Internet box with additional channels delivered by internet. I could get a similar deal from a “budget airline” type company they own that offer a similar but cheaper telephony and PVR (of a different cheaper brand)/broadband package but charge extra for the additional channels. The one monopoly, the cable TV company broadband obviously offers a TV service along with broadband and landline but they also give their customers a good deal on their own brand cellphone service.
I also go into more detail of the viewing habits of the U generation and the demographics of non-linear television viewing in my companion diary. Suffice it to say that the oldest will be very aware of the effects of throttling. The ISPs therefore have a demographic time bomb growing under them. As they get to voting age, they will demand changes.
Breakup of monopolies.
I already described how I currently buy my electricity and gas from one German owned company. I previously bought these two utilities from a joint company with its gas services based in Scotland and its electricity “company” in southern England (I think it was that way round). I am also at the end of a fixed price three year contract so my next project is to find a new provider. This is the game Brits play in place of Americans playing “find the healthcare insurer”. A rather fewer percentage of Brits take part but it is worthwhile. It’s reckoned that the average household changed from the provider they inherited at privatisation, they would save over £230 a year.
Few Americans, used to the idea of Britain being “socialist” realize that electricity, gas, telephony, broadband, water and sewage services are all provided by private companies. With the exception of water and sewage, consumers can buy any of these services from any company they select as best value for them. This all goes back to the ways in which these previously nationally owned suppliers were sold off in a way that encouraged competition.
Before privatisation, telephony and internet services were a virtual British Telecom monopoly back from the old Post Office Telephones days (for historical reasons, Kingston-Upon-Hull had a local council owned company providing these). The first attempt at competition was to open up long distance calls to competition. The main mover in this was Mercury. Making a call involved dialling a 3 digit code on your BT line, then a 10 digit identifier for your account and finally the phone number you wanted. This was made easier by a programmable button on your Mercury phone. The final privatisation was more radical. A little later, there was government push and incentives for cable companies to install services in the main urban areas, as an alternative to the proliferation of satellite dishes and to start the spread of internet services. These new cable companies were also allowed to install telephones using their cables but they were then dependent on interconnecting with the local BT switchboards. (In my case, they had insufficient interconnections to connect me!)
BT was sold off but was split into two operating units. One provided the infrastructure, the other retailed its landline and cellphone call services. Other providers could buy their “wholesale” service — providing the infrastructure and calls. They then sell a retail package and can either be just an ISP or phone provider or both. Their cellphone service already had competition from other networks which are also required to “wholesale” services.
The gas and electricity companies were similarly broken up. The National (electricity) grid was separated from the regional companies which were privatised on a geographical basis. A similar position applied to British Gas.
Customers were transferred en block to the new regionally based private companies but could chose to move to another provider at any time. The result of this competition legislation has been that the choices have become so extensive that specialist comparison sites are huge business in the UK, getting “introduction fees” from the providers chosen. Of course these incentives mean you have to compare the comparison sites!
Multiple Choice of ISP — Lower Cost + Better Service
From a consumer point of view, the selection means that they can taylor their package to suit their own lifestyle. For many a starting point will be how they have TV delivered. Sky, the main commercial satellite provider, sells packages that include a range of channels showing sports and movies including ones in UHD. They also retail cellphone, land line and broadband services, piggybacking on BT’s copper wire or fiber networks. Obviously they offer incentives for their customers to take as many of these as possible. Similarly, BT offers extra channels delivered by via internet and over the air and provide a PVR with their package too, an attractive offer for those relying on digital terrestrial television. Virginmedia, the virtual monopoly cable company (owned by US Liberty Global), offers TV, broadband and voice call services via cable and also offer cellphones.
The cellphone market is slightly different in that often the choice will be ofteb based on the best deal for the latest model phone they want. Moving your number to a new cellphone provider takes a working day. By including the cost of the phone in the “usage” charge, rentals offer an initial attractive offer although the total paid, especially if someone remains on the same contract, exceeds the cost of purchasing a high end phone (e.g. iPhone X) and having a “SIM only” deal.
With the exception of the “Big 3” ISP/TV content/telephony providers, more cany consumers use research, including those price comparison sites I mentioned, to get the best deal for their needs. I was previously a customer of Virginmedia but had reduced this to broadband only, using my cellphone or SkypeOut to save on the monthly fee just to have a BT landline. I have more than enough to watch on the main terrestrial HD channels, supplemented by catchup and Amazon Prime. Virgin provided my main requirement of a fast internet connection (around 50Mbps if possible) to stream while downloading in the background with a high or unlimited monthly data allowance. Their service deteriorated and their prices rose but I was stuck because of the lack of BT landline so there would be high installation costs. I found by accident a new company that uses their own 4G broadband only network. As I was just outside their declared service area (other side of the Thames), they let me try a modem/router and it worked. I offered Virgin the opportunity of price matching but they would only reduce their £30 per month fee to £20. I went with the 4G provider and saved another £5! Being a crafty consumer I also have a “SIM only” cellphone deal with more than enough calls, messages and data for my needs for £8 a month. Total £23 including VAT at 20%. I don’t think many US deals could offer unlimited 35Kbps+ download broadband and cellphone services for $25.50 plus tax a month. Two years ago, New Yorkers were paying double that for broadband only.
Price is not the only improvement that can be achieved through this sort of competition. Customer service and quality of service is another. I moved from Virgin partly out of price but also because I used to regularly get outages at the weekends as somebody stole a length of their copper wiring. They were also fairly sneaky in explaining price rises as resulting from improved services — speed and the availability of a wifi network. What they didn’t make very clear was that you only got access to their wifi if you signed up to have half your bandwidth allocated to it and your modem hacked so it sent out both your wifi network and their public one. Not only that, they sacrificed download speeds for reduced upload speeds. Very annoying if you are sending photos and videos to cloud storage at 1.5 mbs.
Which gets back to the question of how such competition would affect the question of “net neutrality” for the ordinary consumer at least. Put simply, if an ISP did throttle connections, customers could move, or realistically threaten to move to one that did not.