Companies therefore become de-facto monopolies on a neighborhood-by-neighborhood basis. The exception are cities where a dense population of people can support additional carriers for sake of competition. But at a basic level, the economic conditions just make the ISP problem complicated.
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Frankly speaking, all options to deal with natural monopolies kinda suck. Socialism simply has the government take over for example, so the legal monopoly is at least owned by the people.
Capitalism can't solve the problem. Its more efficient for companies to wire up other neighborhoods. Why become a competitor when you can simply become a monopoly holder somewhere else?
An interesting blend of capitalism / socialism is to have the wires owned by the municipality, or perhaps a highly-regulated entity (such as a utility company). The law is then rewritten to state: "It is illegal to be both a physical-wire company AND an ISP at the same time", or something to that effect.
Physical wire companies are then forced to rent out their wires to different ISPs. For example, if Verizon owned the wires of an area, they'd be forced to reorganize and split-off the wire-owning portion into a "Verizon Local utility coporporation".
Then, "Verizon Local Utility Inc." (now an independent company) will sell the time on the wires to various ISPs, like Verizon or Comcast.
ISPs will still be responsible for interfacing with the population, as well as bandwidth, routers, and other such details on the data-center side. The local-utility company will be responsible for physical maintenance of the wires, with a strict regulation regime to ensure that they provide equal-opportunity access to large ISPs, as well as any startups who wish to enter the space.
Its certainly "more regulations" towards this problem. But I've never heard of a more complete solution than this kind of scheme. Its not necessarily "Socialism" either, because the US has a long-record of tightly regulating local Utility companies, due to similar economic issues (the concept of local power companies being a natural monopoly. The "deregulation" schemes that exist today to allow local residents to buy solar energy or nuclear energy, delivered by local wires under a tight regulation / utility regulation scheme)
So its American, its a familiar model to many municipalities, and it works in practice. As demonstrated by power-companies and phone companies of ages past... as well as a few European countries who have adopted this scheme.
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Under such a regime, "Net Neutrality" can become an ISP's defining trait. And we can let the market decide if its worth the cost. If people want a "Net Neutral ISP", they simply pay for the competitors who offer such a service. So the overall regulatory burden is lowered, IMO.