More puzzling to me is how ISPs squash towns plans to implement their own networks.
I'm very ignorant on how things got so bad over in the US, I've always had a multitude of ISPs over here in England.
It seems in the US the only people you can buy from own the physical infrastructure. Once one company has already built their network in an area they form a natural monopoly - it's not economical for competitors to come in and rebuild the network when they know they'll only be able to get a certain % of households to switch.
[edit] The above was from memory, and it is actually a lot more complicated than that. The decoupling of broadband from voice was challenged in court and the FCC had to change their rules somewhat. I'm not sure what current requirements are. See also:
http://openjurist.org/359/f3d/554/united-states-telecom-asso...
A quick key for reading that: ILEC == people who own the copper CLEC == people who want to use the copper.
When Comcast owns all the fiber in, say Chicago, it's pretty much impossible to encroach on their turf in a cost-effective way. Say Verizon wanted to come in. They'd have to build their own network, and so could never compete with Comcast on price because of the huge capital expenditure required.
Or something similar but maybe even better: Set up a cross-ISP subsidy program. Whoever has the fastest connections in the country receives a subsidy and whoever has the slowest connections has to pay it. Don't even put bandwidth numbers in -- just rank them all by the speed of the unmetered connections they offer for less than $80/month, then the slowest 33% pays a substantial tax to subsidize the fastest 33%. Presto, instant competition to be the fastest, even though they're all in different geographic areas.
But more than that, there is no reason to think that building a high speed network in a rural area would be impossible rather than merely expensive. So all they have to do is to do it first and they'll be the ones receiving the subsidy. And actually digging the hole in the ground is what costs a lot in rural areas, the terminating equipment doesn't cost anything more just because the wires are longer. So they install fiber to the home once and having paid that cost, the future upgrade costs become equalized with urban areas because all future upgrades come from upgrading the terminating equipment rather than having to put any new wires in the ground.
And if we ever want to have fiber in rural areas then that has to happen eventually anyway, so why put it off?
And, even if you're right, the result is still for urban ISPs to compete with each other to be the fastest and for rural ISPs to compete with each other to not be the slowest. The losers of that competition then have less profit for their shareholders -- or, if they lose very badly, their network is auctioned off to someone with more capital who can make the necessary upgrades. I am not seeing how we can lose here unless "we" are greedy telco shareholders who don't want to pay for upgrades.
It's like trying to incentivize competition in baseball by requiring losing teams to subsidize winning ones. Basically everyone would just be paying to make the Yankee's roster even more iron clad than it is now.
And let's go with it say you're right. Why can't we just create two or three classes of ISPs (like "cars" and "light trucks" for CAFE) based on their coverage density, so that rural and urban ISPs only compete with other rural and urban ISPs respectively?
This is true even if you separate rural and urban ISP's. Verizon has a great network in the DC area. If they win, then say a Houston ISP subsidizes them. At that point they have zero incentive to improve. Moreover, people in Houston are stuck with even worse service, because money that might be spent on capital expenditures in Houston are going to pad Verizon's profits in DC.
You're overly focused on the incentive part of the equation and ignoring the underlying market dynamics.
You're assuming that the effect would be that strong that fast -- that it would be large enough that they could never catch up. There is no reason the amount has to be that large.
And the Houston ISP doesn't have to catch Verizon in DC while Verizon is receiving the subsidy, it only has to catch the next-best ISP in the middle third who doesn't get anything and then it can get out of the bottom third who has to pay. Moreover, Verizon still has the incentive to improve even if they're the leader of everyone because the ISP currently at the top of the middle third is angling to get into the top third, and the ISP at the bottom of the top third is trying to get ahead of Verizon to keep themselves from being pushed out when that happens.
I mean what's your alternative? If you want ISPs to pay for upgrades either you reward them for doing better than average or penalize them for doing worse than average or both, and doing both has the added benefit of being revenue neutral. Is there some better alternative, or do you think the entire goal of upgrading connection speeds is unattainable?
If high speed Internet is such a national priority, and the market won't provide it because of natural monopolies, then simply break up the utilities and prevent consolidation.