> In most cities, a startup cannot come in and build out neighborhood-by-neighborhood based on demonstrated demand. They're required to commit to building out the whole city in a short time frame, without regard to demand.
-- EDIT
I checked on this, and you're indeed correct. The franchise in my home town includes a non-exclusivity clause.
As you said, it also contains a clause stating that "The Licensee shall make its Cable System Service" available to all residents of the town within seven business days of a request". So the network must cover the entire town.
Finally, in the non-exclusivity clause, it states that if any other cable provider is ever granted a license with "more favorable or less burdensome" terms, then the town will renegotiate terms with Comcast.
To me, this is the same thing as "granting a monopoly" in practice. But I appreciate your clarification!
-- END OF EDIT
I want to also point out:
> The problem is not that municipalities are granting monopolies.
In the case of Chattanooga that I mentioned, the law preventing the municipal ISP from expanding is unfair in the same way, even if this is not a case of a monopoly being "granted". Why shouldn't a company created by a town be allowed to compete in the marketplace?
Because EPB is a monopoly. In Chattanooga, it's illegal for anyone besides EPB to provide electric service. It's fairly conventional thinking that companies shouldn't be permitted to leverage their monopoly in one area to expand into a different area.
I suspect you're not correctly remembering what happened. It's illegal under federal law for municipalities to grant telecommunications monopolies. Municipalities hand out cable licenses in return for 5% of gross receipts + random giveaways like school district grants. But there is absolutely nothing exclusive about it.
To pick a random example, here's the cable franchise in my county: http://archive.aacounty.org/OIT/Resources/CableAgreement.pdf (see Section 2.4, "Grant Not Exclusive").
> despite cost-per-bit plummeting over the years, the cost to consumers isn't going down.
Bits per second have been going up dramatically. My parents' house in Virginia, got 256 kbps SDSL sometime around 2000-2001. They got 50 mbps fiber over BPON around 2006. That got upgraded to 500 mbps over GPON around 2008. They just got gigabit this year. That's doubling of speed every roughly 15 months.
The problem is not that municipalities are granting monopolies. It's that municipalities impose restrictions on building that make it untenable to compete with the incumbent. In most cities, a startup cannot come in and build out neighborhood-by-neighborhood based on demonstrated demand. They're required to commit to building out the whole city in a short time frame, without regard to demand.