U.S. capitalism has long been envied as an American staple, promising innovation through competition, but delivering infinite corporate greed. This capitalistic model has been distorted, from originally intended, into a creation of Broadband Industry cartels. These DE Facto cartels control broadband speeds and prices which are miserably out of touch with consumer affordability and access. We have lower speeds and higher retail prices than many like countries. How did this happen?
Beginning with AT&T, Inc. (NYSE: T) and a government mandate to wire the nation with affordable and accessible telephone service, our nation was wired with cheap dependable phone service. Along came cable companies in the 1960’s looking to accomplish the same goal, only with cable TV, not telephone. The new industry also wires the nation with affordable cable service. The only difference between the two industries was regulation. Telephone regulations required wires to pass all Americans, in return for a guaranteed profit. The cable industry was largely left to its own devices, unregulated and unsubsidized.
Competition in the telephone industry proved to be non-existent requiring a break-up of AT&T into smaller regional companies. The cable industry created its own version of smaller regional companies serving separate areas. Without direct competitors in those regions both telephone and cable providers were allowed to raise consumer rates, telephone with regulation, cable without.
Over the years both industries began to aggressively raise rates on an annual basis, creating cartel-like corporations independent of real competitive forces. Satellite cable providers have proved somewhat successful in cable TV competition, but have not offered a competitive broadband service. See (Why Your Phone, Cable & Internet Bills Cost So Much)
Beginning in the last two decades a phenomenon began to proliferate in legislative circles, the corporate lobbying effort. With lobbyist traversing the halls of government extolling the virtues of innovation, companies were allowed to swallow up other same industry companies on a large-scale, eliminating regional competitors. Broadband became a household staple with both telephone and cable industries using built infrastructures to control markets, including now, broadband and cable TV.
A newly created cellular industry, began by the telephone industry looking for more profits due to a dying land-line phone service, began to emerge. Here, competition seemed to proliferate, created by real competitive forces between telecom providers. The industry grew rapidly upon the advent of the iPhone and its powerful use of wireless spectrum for enhanced consumer services.
Fast-forward to today; we are left with large corporations controlling the vast majority of broadband lines in the U.S. Competition is non-existent in most markets, except large metropolitan areas of the northeast, were prices are lower, speeds are faster, than other U.S. markets. Only the mobile phone market remains as some resemblance of competition across national markets. Now this is being challenged with marketing agreements, bypassing merger regulation, as with large broadband competitors Verizon (NYSE: VZ) and Comcast (NASDAQ: CMCSA), where each will sell the others services across markets, eliminating more competitive forces.
So, how do we undo those cartels to bring faster speeds and lower prices? Without congressional assistance in reigning in De Facto cartels, U.S. speeds and prices will not compare to other like countries. We will pay more and receive less for our dollar in broadband service. Without non-profit groups to shout foul in corporate greed, these issues would never reach mainstream America. Competition is disappearing by way of the lobbyist. Deals done behind closed doors to increase profits using less capital spending. Wake-up America, our future hinges on it.
Image via UCFToday