> If I sell someone else my paper delivery route, is that an indictment of American capitalism?
It is if your customers don't have the option to switch to another paper.
It is if your customers don't have the option to switch to another paper.
Even if telecom/cable were fully deregulated, this is the situation you would face. A cable company may make $1 billion in revenue off of a city, but it probably costs them $900 million to serve the city. If someone else comes in and is able to radically undercut their costs at $600 million while simultaneously winning 50% of the market, both companies would still only make $500 million and lose money. The incumbent cable company probably has enough of a war chest to wait out the challenger's funding.
Infrastructure businesses are very expensive. There is no easy solution short of the government seizing the cable infrastructure, which would set such a dangerous precedent that it would probably destroy our economy.
Emphasis added. This is not what "able to undercut" means to me. Furthermore, the situation described is great for consumers.
And yeah, it looks like Comcast has low-ish margins, for a monopoly:
http://ycharts.com/companies/CMCSA/profit_margin
But they also have nation-wide monopoly and revenue, so 10% of that is "a lot."
Sure, I mean, there's no way that the government could simply recognize the monopoly and regulate it as such.
What seems good for the consumer is not always good for the consumer. See how Verizon halted their national rollout of FiOS and instead plowed $130 billion into purchasing the 50% of Verizon Wireless they didn't already own if you want a very recent example of this.
I completely agree, it's no surprise that a business that naturally tends toward a natural monopoly has a hard time with long term investments if the investors are chomping at the bit for immediate ROI. Hence the need to treat infrastructure as a local utility, regulate it as one, and fund the infrastructure improvements with bonds.
This is scaremongering, in the UK we have BT the almost national monopoly and Ofcom the regulator.
BT is required to grant competitors access to its infrastructure for cost price, which Ofcom sets. The UK has faster and cheaper broadband than the USA.
The American internet service provider market in no way sounds like capitalism but it does sound like protectionism. Just because you live is a country that is capitalist doesn't mean everything is.
Please direct criticism to the proper source: government interference.
The real reason is the FCC doesn't require the infrastructure businesses to sell wholesale access to competitors. Once upon a time, Comcast et al would've leased you the line, but you would've had choice in your ISP service. A stroke of the pen eliminated all serious competition in the ISP game, and made it so Comcast owns the entertainment pipeline all the way from movie studio lot to your internet connection.
Odd that the studios aren't allowed to own movie theaters [1], but they're heading straight for the same end result by controlling your internet access.
[1] http://en.wikipedia.org/wiki/United_States_v._Paramount_Pict....
Even if the regulation allowed you to start your own cable company, what investor in their right mind would put up the money to do so? Trying to VC pitch a startup ISP would be the worst pitch ever. "Why am I going to give you a billion dollars for a 10% margin business that you're not even guaranteed to be successful in?"
If by government regulations you mean "the fact that running cable means acquiring access rights across large numbers of privately held properties, and government protection of property rights makes you have to negotiate with each of them for the right to access unless you can piggy back on someone else that already has an easement without exceeding the scope of the existing easement", then, sure, its about government regulations.
But its the kind of government regulations that even the people who complain about government regulations generally support (often, support most emphatically).
Though I do agree that subscriber pricing is much better in areas where you see both a cable company and a telco video provider like FiOS or U-Verse.
I would state this with a key qualifier: it's expensive to serve even an affluent area the way our society currently works. The way our society currently works is that local municipalities are strongly discouraged from doing local development sanely--where "sanely" means that when a new subdivision goes in, say, all the easements for running wired high-speed Internet go in as well.
The best way of doing this would be for the local developer to simply run the cables, and have them owned in common by the municipality, homeowner's association, or whatever entity owns the common areas in the development. That entity then leases access to the cables to all Internet providers on an equal basis.
The next-best way would be for the local developer to put in all the cable trenches, space for connection hubs, etc. in while the development is being constructed, right along with the water lines, gas lines, storm sewers, and other utilities, and with all the permits, easements, etc. already in place. Then an Internet provider just has to do a cable pull, which is only a small fraction of the cost of installing high-speed Internet in our actual society.
When municipalities actually try to do either of the above, however, they find themselves embroiled in lawsuits and negative publicity from the large Internet providers, who can't stand the idea that nobody really wants to buy their overpriced services, and if a way of routing around them became common, their business would be kaput.
They use to use pairbonded dial-up, then ISDN. Been on Satellite (high-band down, dial-up up then bi-directional) for the last 10 years or so. They've been thinking of switching to a 4g hotspot recently, which is similar bandwidth and half the latency (and similar cost for their uses).