1 / 16

The Case for ISP Choice in Broadband Internet Services

This document advocates for the necessity of choice among Internet Service Providers (ISPs) in the delivery of broadband services to homes. It argues that the public benefits from lower prices, broader access, higher quality of service, and a greater variety of options. Despite the dominance of a few major players in the cable and telecommunications industries, true competition can only exist if cable infrastructure is opened to multiple ISPs. This analysis highlights the impact of the Telecommunications Act of 1996 and emphasizes the potential of a two-layer model to foster greater competition and consumer benefits.

kolina
Download Presentation

The Case for ISP Choice in Broadband Internet Services

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Should Broadband Internet Services To The Home Offer Choice of ISP? YES! Group E: *Brian Bohan *John Musacchio *Randi Thomas *Wanyu Tsai

  2. Criteria for Answering the Question • Public Must Benefit through • Lower Prices • Broader Access • Variety of Services • Higher Quality

  3. Narrowband to Broadband • Nearly all home users using dial up access • Barrier to entry for dial up ISPs low • over 4,000 ISPs available • Appetite for bandwidth causing migration to broadband • barrier to entry prohibitively high to ISPs • ISP choice threatened

  4. Broadband Internet Players • Cable Industry • Telecommunications Industry

  5. Cable Industry • A few big players getting bigger • Regional monopolies • Only one ISP per Regional Cable Co. • Usually partially owned by cable co. • @Home-TCI • Road Runner-Time Warner • Controls how end user experiences Internet • Controls quality of service

  6. Telecommunications Industry • Pre 1996: Looked a lot like cable today • RBOCs Monopoly provided high price solutions: • ISDN, TI, T3 • Sat on DSL technology • 1996 Telecommunications Act • unbundled infrastructure and services

  7. Impact from the Act • Data CLECs emerge • Introduced DSL to market • RBOCs forced to respond • Multiple Broadband ISPs offering variety of services

  8. Does Sufficient Competition Exist in Cable Today? • Negative will Argue Current Competition between Broadband is sufficient • We will show that it is not • To have true competition, the cable infrastructure must be opened to ISPs

  9. DSL vs. Cable Not Sufficient • Pocket Argument • More profit in Virgin areas • Cost Argument • Cable = $40/mo vs. $60 for DSL • Cable technology enjoys greater economies of scale due to shared resources • Momemtum • Cable outselling DSL 10 to 1 • Merger Mania • AT&T planning to spend $5.7bn on TCI network upgrades • Industry planning to spend $10bn in ‘99 on upgrades

  10. Introduce Two-Layer Model • Cable Company leases/sells infrastructure to ISPs at “reasonable rate” • ISP and cable company split monthly fee • Cable companies continue to pay for infrastructure build out • ISPs pay for web servers, caching, content, etc.

  11. ConsumerSurplus Demand for cable Internet access in a built-out region PM PC ATC MC QM QC Why this model • Within One Region • Increased Expansion into New Regions

  12. Build-Outs in Today’s Model • Big initial infrastructure + Marketing costs • Marketing for new build-outs involves huge cost/risk • Cable/ISP company assumes costs & risks • Must achieve subscription rate to cover these costs • Non-Trivial Issue: 500K subscribers out of 20 million with access = 2.5%: • Cable company manages this risk by building out slower than they could

  13. Build-Outs in Two-Layered Model • ISPs will assume the cost of marketing • They market agressively • AOL spends upwards of $300 for every new subscriber • 3.9 million new subscribers in 1998 • Primary demand stimulated nationwide • Cable companies can then rapidly expand service to new areas • Result: More Access for the Public

  14. Multiple ISPs Mean Variety • AT&T wants to be your big brother • $57 bn to buy TCI & $54 bn to buy MediaOne • TCI/MediaOne biggest cable provider • reaching 25 million homes, potentially 60 million • “They could rule the world” - Securities Analyst • Imagine NBC as your only TV station • @Home will be just that, controlling all content • Increasingly important as Internet goes multimedia

  15. Policy Goals Achieved The Consumer Wins! • Thanks to competition in ISP layer... • We have lower prices • As a result of shared risks and costs • We have broader access • Due to more choice of service providers • We have variety of services

  16. Vote Yes on Opening Cable

More Related