ISPs: Oligopoly or Monopoly?
Internet service providers appear to be an oligopoly at face value, but if you look closer at the ISP market, it starts to look more and more like a true monopoly. Companies like Comcast, AT&T, Sprint, and Verizon market themselves as competitors to one another, creating heavy advertisement campaigns to show consumers how they are different and better than each other, but the truth is that they are not really competitors for many consumers. In reality, many Americans find ISPs to be close to a monopoly due to geographic locations.
The problem with ISPs is that most Americans cannot get access to all the options. Unlike in an oligopoly where consumers can still choose between several options, in the ISP market, there are many locations in the country where people only have one or two ISP options to pick from. This creates a geographical monopoly, as consumers cannot simply move somewhere else to pick from a different selection of ISPs. In 2017, only 31% of ZIP codes had access to more than 2 ISPs and only 26% of ZIP codes had access to more than 2 ISPs with a download speed of at least 5 Mbps. Households who find themselves restricted to only one or two ISPs have to live with the plans offered by those ISPs, and the ISPs can change their internet plan options and essentially force consumers to accept these changes because consumers simply have no other options. The danger of ISPs is that in geographic monopolies, they have too much power over consumers.
Another contemporary problem with ISPs is the concept of net neutrality. Under net neutrality laws, ISPs would not be able to throttle certain internet services, essentially treating all websites equally. However, with the laws repealed by FCC Chairman Ajit Pai, ISPs have the ability to decide which websites get preference in terms of speed. They can force consumers to pay significantly more for access to certain websites compared to others. This is especially dangerous when these companies essentially have geographical monopolies for over two-thirds of Americans. Companies have the option to charge however much they want for these households to access the sites they want. The ISP market is very unhealthy for the public right now because of the sheer control that companies have, with little to no real competition. For now, we can only hope that ISPs don't go overboard with their power.
FCC Chairman Ajit Pai
The problem with ISPs is that most Americans cannot get access to all the options. Unlike in an oligopoly where consumers can still choose between several options, in the ISP market, there are many locations in the country where people only have one or two ISP options to pick from. This creates a geographical monopoly, as consumers cannot simply move somewhere else to pick from a different selection of ISPs. In 2017, only 31% of ZIP codes had access to more than 2 ISPs and only 26% of ZIP codes had access to more than 2 ISPs with a download speed of at least 5 Mbps. Households who find themselves restricted to only one or two ISPs have to live with the plans offered by those ISPs, and the ISPs can change their internet plan options and essentially force consumers to accept these changes because consumers simply have no other options. The danger of ISPs is that in geographic monopolies, they have too much power over consumers.
Another contemporary problem with ISPs is the concept of net neutrality. Under net neutrality laws, ISPs would not be able to throttle certain internet services, essentially treating all websites equally. However, with the laws repealed by FCC Chairman Ajit Pai, ISPs have the ability to decide which websites get preference in terms of speed. They can force consumers to pay significantly more for access to certain websites compared to others. This is especially dangerous when these companies essentially have geographical monopolies for over two-thirds of Americans. Companies have the option to charge however much they want for these households to access the sites they want. The ISP market is very unhealthy for the public right now because of the sheer control that companies have, with little to no real competition. For now, we can only hope that ISPs don't go overboard with their power.
FCC Chairman Ajit Pai
Sources:
https://www.businessinsider.com/internet-isps-competition-net-neutrality-ajit-pai-fcc-2017-4#-8
https://www.pcmag.com/news/357972/exclusive-data-shows-the-terrible-state-of-us-isp-competitio
Super interesting article! I had no idea about these statistics showing that most people have access to very few ISPs. I know for a fact that internet is much more expensive than it should be, which is a problem in itself. However, now that ISPs have more power due to Ajit Pai, this situation is even more dangerous.
ReplyDeleteOne question I have is: why aren't there many competitors in this industry? I'm sure it would be very easy for someone to set up a network in a specific area and begin growing from there, while offering the cheapest prices as opposed to all competitors.
This was a unique approach to looking at this topic and I enjoyed reading your post! When I looked into the issue further, I found out that the issue is also affect by how local governments deal with IPSs. One of the reasons these monopolies have been able to persist is because it is simply because governments regulate which IPS's can build and lay down their groundwork where. If a government chooses to not allow one certain company or make it hard for them, then these companies simply will not be able to be accessed in those regions. The problem is two fold and each side needs to take more action to stand up for competition and capitalism.
ReplyDeleteSource : https://www.wired.com/2013/07/we-need-to-stop-focusing-on-just-cable-companies-and-blame-local-government-for-dismal-broadband-competition/
I found this article very interesting, especially because I and people I know can relate to this. As you mentioned in your post, in some areas people have access to only a couple of different providers. This becomes especially problematic when you account for the fact that service providers have different performance and stability in different areas. As a result, you may be overcharged for a service that is under-performing simply because they are the only provider in your area. Furthermore, because these large companies know that they dominate certain areas and the market in general, some of them care less about monitoring their services. For example, I know many people who have complained Comcast's poor customer service. However, at the end of the day there is not much other than stay informed in order to prevent ISPs from overreaching their power.
ReplyDeletehttps://motherboard.vice.com/en_us/article/yw7e7g/the-future-of-american-broadband-is-a-comcast-monopoly
https://consumerist.com/2014/03/07/heres-what-lack-of-broadband-competition-looks-like-in-map-form/