In Chattanooga, TN: Public: 1 gigabit, $70 a month; Comcast: 25 mbps, $45 a month (I just looked it up for a zip code in the city)
25 mbps / 1 gbps = 0.025
Assuming linear scaling: 1gbps at Comcast would cost $1800/mo. Holy shit.
This is exactly what economic theory predicts will happen in the absence of competition. What's often ignored is the efficacy of the government getting stuff done is largely dependent on the competency of the officials. But if you have good officials, the government solution to the high speed problem is a fantastic one.
Look at the various information floating around about Verizon's ROI on FiOS. There is a lot of speculation that they don't even break even on the average deployment unless the customer buys the bundled video services.
Then why are AT&T, Grande and Google fiber are all priced at $65/mo for 1Gbps/1Gbps FTTx?
So you're saying $70/month can cover capital costs, and its terribly inefficient regulation that's causing excessive costs; and that Google is able to sidestep that costly regulation, whereas Comcast and other incumbents can't.
No one begs Comcast or Time Warner to come service their community like what occurred with Google Fiber. I think that's pretty damn telling.
We have more insight into Verizon's financials: http://bits.blogs.nytimes.com/2008/08/19/a-bear-speaks-why-v.... This article estimates that Verizon will ultimately lose money on FiOS. Indeed, if anything the estimates in the article, written in 2010, are a bit more optimistic than what turned out to happen. Verizon really struggled with uptake, which have only touched the 40% assumed in the article this year. That means the interest and marketing costs in the calculation are probably too low.
The numbers also explain why the company is reluctant to expand the service:
> Through 2010 the company will pay an average of $817 to run the fiber past the 19 million homes, on poles or under the ground. It will also incur $172 per home passed in other costs related to the video infrastructure.
It costs $1,000 to run the fiber past each home. The uptake rate is crucial--if only 10% of people in a neighborhood actually subscribe, then the cost just to run wires past the house is $10,000 for each subscriber. If 50% subscribe, that cost drops to $2,000 per subscriber. Verizon has thus resisted expanding to cities like Baltimore, where only a small sliver of the city really has customers who can afford $70/month for fiber. Google gets around this by only building out to neighborhoods where enough people sign-up to subscribe. Indeed, before they had to change their procedure in Kansas City due to marketing backlash, their sign-up process left most of the poor neighborhoods in the city without fiber.
You can call these build-out requirements inefficient regulation, and they are, but they're unavoidable in U.S. cities, whose political structures are dominated by those representing lower-income people.
> This is exactly what economic theory predicts will happen in the absence of competition.
Well, I would expect competition to emerge in the absence of competition, if the existing firm is charging so much that competition can be profitable (and if competition isn't prohibited by force). It's true that in an actual natural monopoly (which, remember, I think is rare for Internet access) the monopoly firm has notable market power (the ability to set prices higher than marginal cost). But that market power is not unlimited, and the government solution to a natural monopoly requires the government to be both able and willing to produce at a favorable marginal cost and set prices accordingly.
> What's often ignored is the efficacy of the government getting stuff done is largely dependent on the competency of the officials. But if you have good officials, the government solution to the high speed problem is a fantastic one.
Certainly true. That would be one of the "inputs" I mentioned in my previous comment. Of course, "good officials" probably doesn't mean much more than "true Scotsman."
Ha maybe I'm banking too much on those competent government officials. The variance in quality is certainly high.
You literally described what we already have today. We already know how that turns out, too: horribly.
> Could you explain why you believe that last-mile infrastructure is inevitably a monopoly?
Could you explain why you think we don't already have one? DSL lost against DOCSIS.
If you want last-mile internet of a decent speed, your choice almost everywhere is cable, period.
In terms of simple economic efficiency having multiple redundant last mile networks doesn't really make any sense. That's why no city has multiple competitive sewer and water systems.
You don't need multiple last mile systems to have a competitive ISP/TV/phone market. You just need good policies to allow entities that want to sell data services to get access to the last mile infrastructure. You can even bill for the LM infrastructure separately if you want to prevent bundling.
Both sentences are debatable. Regarding the first sentence, it's possible that the optimal firm count in some communities and especially sparsely populated areas is one (i.e. an actual natural monopoly), but in most communities I would expect it top be at least two or three, since broadband can be delivered through phone lines and cable television lines (which most communities are wired for). There are obviously other feasible media, like power lines and wireless. Could you explain why you believe that last-mile infrastructure is inevitably a monopoly?
Regarding the second sentence, it's debatable that government control is a good solution even in situations where the optimal firm count is one. An ideal government solution may be better than the average private solution, but likewise the ideal private solution may be better than the average government solution. We ought to compare the average case for both solutions, which is to say, the actual outcome we can reasonably expect to get given our specific inputs (our system of government, existing infrastructure, market demand, etc.). I won't claim to have any convincing evidence either way, but I'm not so confident that a government solution is obviously going to be better than a private solution, even in a true natural monopoly.