|Computer Professionals for Social Responsibility|
High-Bandwidth Internet Access
Monopolies or Markets
By Stephanie Rotter, Mills College
Abstract: In the last few years millions of Americans have switched from using a dial-up modem to access the Internet, to the modern high-speed alternative. Because of the high demand for this relatively new technology, many new and old companies have begun offering these services, trying to get into the market. This paper begins by looking at the growing trend of people signing up for high-speed Internet access to get a sense of the relevance of the issues involving this technology. We then discuss the arguments for and against the possibility of monopolies in the high-speed access market, illuminating the concerns people have, and what approaches are being suggested to regulate companies and protect consumers. Discussions of high-speed Internet access technologies will focus on cable modems and DSL connections and examinations of markets and regulations proposed will involve the United States economy and government.
With all the opportunities that require a fast Internet connection, such as downloading full length movies, listening to streaming radio and even watching live satellite communication from reporters embedded with United States troops in Iraq right on your home computer, a dial-up modem is no longer good enough. Today one of the most sought after computer accessories is broadband Internet service. Many telecommunications and cable companies are now offering their customers broadband Internet access, and countless new companies are forming to compete in this high demand market.
The Merriam-Webster dictionary online defines broadband as "of, relating to, or being a communications network in which a frequency range is divided into multiple independent channels for simultaneous transmission of signals (as voice, data, or video)."11 This paper uses the terms broadband and high-bandwidth to refer to the new generation of high-speed transmission services aimed at residential and small business users. "The term refers to the substantial bandwidth that a high-speed connection can provide a user."5 Todays high-speed connections are much faster than the traditional dial-up modem that was the previous way people connected to the Internet.
The rapid growth in the number of customers even in face of the increasingly high monthly rates customers have to pay for access is evidence that high-speed Internet access is here to stay. As of December 2002 approximately 15% of households nationwide had a high-speed Internet connection and "nearly three in 10 Bay Area households have a high-speed connection to the Internet, double the national average."7 These numbers are quite high considering that broadband has only become popular in the last few years. Articles on xDSL.com, a site that analyses DSL technologies, report that the number of United States DSL lines tends to increase by approximately 15% every 3 months. The U.S. had 3,821,640 DSL lines in service at the end of 2001 and 4,884,827 DSL lines in service by May 2002.8,9 These totals do not even include customers with cable modems. This trend looks to continue, especially since expanding broadband access is also a "national priority of the Bush administration as well as Silicon Valley high-tech companies, which have been heavily lobbying for more federal resources to expand the rollout and demand for broadband services."7
The number of customers signing up for high-speed Internet access is rising even while the cost of access also increases. "The average monthly price for cable broadband Internet service increased 4 percent to $44.95 at the end of March 2002 from $43.21 in December 2001," and DSL increased "1.4 percent during the same time frame to $51.82 a month from $51.09," 10 as reported by the market research firm ARS. Broadband access also costs around twice that of a regular dial-up modem connection, yet customers continue to switch to the high-speed choice. The willingness of the general public to sign up for broadband service even at such high prices demonstrates the importance of this technology to people. Since it appears that high-bandwidth Internet access will be around for some time, it is necessary that care be taken to ensure consumers are protected.
Monopolies in the Broadband Industry
Some worry that the large, already established cable and telephone companies, who plan to offer cable modem and DSL Internet connections, respectively, and own the cable and telephone lines will be able to monopolize the high-bandwidth Internet access industry. The major cable company trying to control most of the cable modem market is AT&T/Comcast. Since AT&T already owns the cable lines, it can open them up for AT&Ts cable modem connections. The problem lies in how AT&Ts competitors bring cable modem service to consumers. Unless AT&T opens its high-speed lines to other companies, it is very difficult for them to offer these services, and AT&Ts monopoly in the industry is perpetuated.
The main telephone companies working to control the DSL market are the Regional Bell Operating Companies. The Bell Companies monopoly over the phone lines is the same as AT&Ts; they built the phone networks and control them and therefore can more readily establish their Internet services and control the market for these services. Local competitors do not have the financial resources to build their own networks and must rely on the Bell Companies to provide them access to the telephone networks.
Once a company has the broadband monopoly in an area, it can bundle services and impose restrictions on its customers, since consumers are limited in where else to get high-speed service. While bundling can be convenient, "it prevents customers from exploring other options that could be cheaper or include better technologies."4 A few of the restrictions Internet Service Providers (ISPs) tend to force on their subscribers are video limits, server restrictions, filtering, and higher rates if a customer does not subscribe to all the services a company offers.
Some Internet service providers limit the amount of time a customer can view "streaming video" over the Internet. This keeps people from offering whole televisions shows or movies online. While the steaming video technology is not up to par with regular television, it may be one day, and streaming video could replace the need for people to order cable, pay for movies, or even just own a TV. Providers argue that they do not have the resources to provide streaming video for all customers at the same time. But cable companies who are also Internet service providers have a conflict on interest, since they are restricting a service that will one day compete with cable TV. 4
Even though the benefit of always being able to have your Internet connection on is often a selling point in high-bandwidth service provider advertisements, many restrict customers from using their always on connections as web servers. The companies again complain that they do not have the capacity to provide bandwidth for all the traffic their customers' websites could be attracting. But many wonder if in reality, the Internet company does not want people serving their own pages since the providers themselves have website hosting services they want their customers to use.4
Several Internet service providers have also begun filtering content over their connections and discarding some information. Companies argue that many customers do not know that their computers are being used for file sharing or that they are sharing material they do not have the rights to or is illegal. However customers who want to share files and are doing so legally end up also being restricted. 4
Companies that monopolize the broadband market in an area, try to use this control to influence their customers into also subscribing to the companys other services. This "influence" often takes the form of raising the prices for high-speed access in cases such as when a customer signs up for broadband cable Internet access with a company but not also cable TV or signs up with a company for DSL but not with their telephone long distance plan. Consumers report being charged $10-$15 more a month for Internet service when they do not subscribe to their respective Internet service providers other services.
In Northern California "although several Internet service providers offer DSL, none offers the service to customers who don't have SBC [a Bell Company] as their local telephone service."12 This is just another example of how the company that holds a monopoly can restrict its customers and force its services on consumers.
Markets, not Monopolies
There are those who argue that there is competition in the broadband industry and that monopolies do not exist. David Kopel, research director at the Heartland Institute, references the ways in which competition is thriving in the broadband industry and does not feel that there are monopolies we should be concerned with. He states, "competition within the cable industry and among cable and providers of other broadband technologies is intense," and that giving small businesses access to cable networks would harm rather than benefit consumers. 6
He points out that 1) cable companies are making massive investments in broadband Internet access, setting off an explosion of innovation, competition, and growth, 2) cable's competitors are not making similar investments, yet they demand access to cable's customers through the new broadband networks, 3) competition, not monopoly, characterizes the broadband market, 4) it is technically impossible for cable companies to accommodate every ISP or portal that demands access to their customers, 5) forced access would reduce investments in all types of broadband systems, to the detriment of consumers everywhere, and 6) continued reliance on markets, not new regulations, will insure the freedom and growth of the Internet. 6
Jerry Ellig and Jason M. Thomas also argue that broadband today is anything but a monopoly and that markets are currently working and government regulation is not needed. They maintain that "telephone companies, cable TV companies, electric utilities, satellite firms, and wireless vendors are all positioning themselves to offer broadband service to residential customers [and] it is unlikely any one technology or company will dominate."1
Regulation and Legislation
Those who believe that some cable companies are monopolizing the cable modem industry are working to pass legislation that would require forced access. "Forced access regulation would compel cable companies to provide non-discriminatory use of their lines to competing ISPs"1 This action would allow ISPs who do not own cable lines to "reach their customers in the same way and on the same terms as ISPs owned by cable companies."1
Those who uphold that the major telephone companies are monopolizing the DSL industry are taking similar action. Some organizations believe that the Telecommunications Act of 1996, written to ﾒpromote competition and reduce regulation in order to secure lower prices and higher quality services for American telecommunications consumers and encourage the rapid deployment of new telecommunications technologies,"2 already mandates that telephone companies open their phone lines and networks to their competitors and are appealing to the Federal Communications Commission (FCC) and local governments to enforce the Act. They argue that phone companies should be required to share their networks with local competitors, but "monopoly companies havent kept up their end of the bargain."3 They continue to make it difficult for smaller phone companies to get access to phone networks and introduce DSL services in areas already dominated by the larger businesses.
Parties on both sides of the argument have proposed several bills to either regulate or deregulate the high-bandwidth industry. The Telecommunications Fair Competition Enforcement Act of 2001, introduced on August 3, 2001, argues that the requirement of the Telecommunications Act of 1996 should be more strictly enforced and companies required to provide competitors access to their networks, whereas the Broadband Deployment and Competition Enhancement Act of 2001, introduced June 28, 2001, and the Internet Freedom and Broadband Deployment Act of 2001, introduced April 24, 2001, call to remove open access requirements on companies that provide Internet services.13
Of February 27, 2002, the U.S. House of Representatives passed the Internet Freedom and Broadband Deployment Act of 2001.13 This deregulates the industry, no longer requiring that telephone companies open their networks to their competitors, which could harm competition, and as a result consumers.
The FCC has also made decisions that have reinforced the monopolies within the broadband cable industry. When Internet service providers, who do not own the cable lines, appealed to the FCC in 1999, it "rejected the Internet companies' request to force cable operators to open their high-speed lines to competitors at a competitive price."14
The new high-bandwidth technologies provide Internet users with quite a few benefits. If current trends continue, at least tens of thousands of Americans will be signing up for high-speed Internet service every month. It is important that we pay attention to how the growing broadband Internet industry is conducting business and how consumers are affected.
Steps need to be taken to ensure consumers are free to make choices amongst various Internet service providers and the services they offer. A single company should not be the dominant service provider for a given area because it owns the cable or telephone lines and is the only company with the ability to bring its services to customers. Customers should be presented with alternatives and be able make their own decisions about which company they want to sign up with. This way the dominant company will end up being the one that offers its customers the best service and options, not one forced on the people.
The best way to ensure that there is competition in the industry is to force the companies who own the cable lines and telephone networks to open these resources to their competitors. Although the federal government has sided often with the companies monopolizing the industry, legislation that enforces the need for open access must continue to be proposed and fought for. We cannot allow consumers to be forced to sign up with a certain company in order to get the services they want and not have to pay higher rates for those services.
Forcing open access to cable lines and telephone networks will increase competition, but it will not solve all the issues consumers face. Customers should also not be restricted in their use of the Internet services they pay for. While competition may provide Internet service providers the incentives they need to lift restrictions on their customers in order to keep them, it is not guaranteed. Other fair practice guidelines that protect people who have broadband Internet connections need to be described and companies made to follow them.
1. Ellig, Jerry and Thomas, Jason M. "Broadband Forced Access: Still a Solution in Search of a Problem" Citizens for a Sound Economy. 22 Oct. 2000. <http://www.cse.org/informed/issues_template.php/198.htm>.
2. United States Federal Communications Commission, Telecommunications Act of 1996. <http://www.fcc.gov/Reports/tcom1996.txt>
3. Gerencher, Kristen. "Hung up on; Deregulation fails to break local phone monopolies" CBS MarketWatch. 14 Jan. 2003. <http://www.aispa.com/1031/wrapper.jsp?PID=1031-10&CID=1031-011403M>.
4. Saltzer, Jerome H. "Open Access is Just the Tip of the Iceberg" 22 Oct. 1999. <http://web.mit.edu/Saltzer/www/publications/openaccess.html>.
5. National Academy Press, National Research Council. Broadband: Bringing Home the Bits. National Academy Press, 2002.
6. Kopel, David "Access to the Internet: Regulation or Markets?" Heartland Policy Study No. 92. 24 Sept. 1999. <http://www.heartland.org/archives/studies/kopel-sum.htm>.
7. Ostrom, Mary Anne. "Bay Area embraces high-speed Net access, poll finds" Mercury News. 9 Dec. 2002.
8. Hurley, Pat. "North American DSL Market Reaches 4.7 Million" TeleChoice, Inc. <http://www.xdsl.com/content/tcarticles/wp112701.asp>.
9. Hurley, Pat. "North American DSL Market Reaches 6.2 Million" TeleChoice, Inc. <http://www.xdsl.com/content/tcarticles/wp051402.asp>.
10. Ames, Sam. "Look out! Broadband prices rising" CNET News.com. 30 May 2002. <http://zdnet.com.com/2100-1105-928512.html>.
11. Merriam-Webster Dictionary Online. Merriam-Webster, Incorporated. 2003. <http://m-w.com>.
12. Wallack, Todd. "SBC has lock on DSL / Customers can't keep current high-speed Internet connection if they switch local phone providers" San Francisco Chronicle. 21 Dec. 2002. <http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2002/12/21/BU9296.DTL>.
13. "Broadband Legislation Watch" Center for Digital Democracy. 7 May 2002 (last updated). <http://www.democraticmedia.org/news/legislationtracker>.
14. "Cable ISPs Keep Their Monopoly" Reuters Limited. 29 Jan. 1999. <http://www.wired.com/news/politics/0,1283,17615,00.html>.
Created before October 2004