That’s why you can fine boutique FTTH companies like Paxio and Sonic but not large ones. There is no source of financing to take a small provider and let them scale up.

Intel does keep producing faster and faster chips despite the fact that they make no more money than the previous product generations did. And Intel keeps their mitts off content. Everyone wants the latest iSore, and these need the latest chips. So Intel is more of a neutral arms dealer, for someone else’s competitions. But Intel doesn’t have the freedom to put it’s foot down and say “guys, we’re sick of spending our profit on R&D and constructing new fab facilities. Why don’t y’all just use our last generation product more carefully, until we feel there’s profit in a faster one?” Intel doesn’t own the ruling link of the food chain it lives in. Intel has to stay on top of things or they’ll be replaced. They can’t make profit by imposing tolls like the monopoly ISPs do.

ISPs aren’t feeling this kind of heat, and they’ve outlawed municipal competition, for all intents and purposes. They don’t make a bazillion dollars rolling out new and better things each year. Hipsters don’t whip out their sleek new cable modems or boast proudly about their ISP’s staggering new capacity. Monopoly ISPs aren’t innovative. They’re authoritative. So here too, the analogy breaks down.

Only one thing will even the playing field, and that’s reversing the unfair advantages the monopolies enjoy. It was a criminal mistake to rule that the monopoly ISPs could have exclusive use of publicly funded infrastructure. That should be remedied immediately. Nationalize that publicly funded infrastructure and light up all the dark fiber. Open it up to all competitors AT COST. And do it quickly, instead of slowly and painlessly for the incumbents.

I’d like to see a new round of infrastructure funding for municipalities and new competition that will run fiber to homes and businesses. The existing monopoly ISPs had their chance, and THEY BLEW IT, so they get excluded. Relieved of the burden of maintaining and expanding the networks, one would expect their services to become cheaper by a few cents. Faced with stiff competition, they would drop TO mere pennies. And they’d still be profitable.

The list of interrelated events and developments over the past 30 years is large and complex. I could go on for pages; and I didn’t even begin to mention wireless (802.11, smartphone, LTE, etc…). But one common theme remains; everything in those models was and is horizontally oriented and scaled. Even Apple develops vertically complete (and unfortunately siloed) solutions. Until the vertically integrated ISPs figure out or are shown horizontal business models and industry frameworks that make sense, the status quo will remain and we will continue to see bandwidth pricing disconnected from both Moore’s and Metcalfe’s laws. At the same time capitalists, regulators, academics and trade management need to realize that vertically integrated, balkanized networks, do not and cannot scale rapidly depreciating technology at every layer across constantly shifting demand that is constrained and limited by inefficient policies and industry structures.

Some might argue that’s reasonable, but I look at that trajectory and compare it to the computer industry where prices halve every 18 months to 2 years for the same performance (or even better) and I see a roadblock for innovation. Google, Sonic.Net, and I hope others, are proving that it doesn’t have to be that was for broadband.

So, even if you hate the Intel example, although I think the fabs and equipment investment and innovation that Intel pushes are analogous, it’s unrealistic for ISPs to constantly pull out the up front costs for their mindset without a) pushing for more innovation that would lower those costs or b) sharing with us the actual costs per MB for last-mile access.

Cable for example says it has 90-95 percent profit margins on broadband services, hardly something I’d cry over. Plus, as the chart I included shows their cost of transit is shrinking, so even if they are buying more of it, they are still charging consumers far more per megabit.

“ISPs are implementing caps and incentives that are aimed to preventing people from using broadband — or at least second guessing themselves when they do. Should I buy a Dropcam? It uses 60 GB a month of data? Should I download the entire Lord of The Rings trilogy in HD or will that push me over my quota for the month?”
- I wrote about this in 2011: https://jdrch.wordpress.com/2011/07/14/isp-bandwith-caps-disincentivize-faster-connections-for-consumers/