The New Broadband Monopolies

I’ve been working in several communities lately where AT&T is the incumbent telephone company. AT&T stopped installing DSL in October 2020, so in my mind, AT&T can no longer be considered as a broadband option. AT&T won’t connect a new customer. That means if somebody suddenly needs to work or attend school from home, AT&T won’t connect them. I’ve heard stories of people who say that if DSL is disconnected for any reason that the company won’t reconnect it. If somebody buys a house already served by AT&T, the new owner can’t get DSL. If somebody gets disconnected for late payment, they aren’t being allowed to reconnect. I heard stories lately of customers who had technical trouble with DSL who have been told that the company can’t and won’t fix it.

In a city where AT&T is the incumbent telco and where the only other broadband option is from a cable company, we are witnessing  the reemergence of a pure monopoly situation. This is the case in many smaller towns and county seats throughout the country. We have a lot of experience knowing how monopolies act – and it’s just a matter of time until the cable companies in these markets start acting like pure monopolies. It’s been less than a year, but over time we can expect the following behavior from the cable companies:

Higher Prices. Monopolies raise rates because there is nothing to stop them from doing so. The big cable companies all set rates at a national level. We already can see that Comcast and Charter are on the path towards $100 basic broadband, and I think the smaller cable companies are trailing yet emulating them.

But the price increases in a monopoly market are more subtle than the basic rates being increased. Cable companies have offered special rates in the past to lure customers from DSL. Over time these introductory rates will disappear because where AT&T stopped competing, the cable companies know they will eventually get the rest of the customers without incentives. Cable companies also offer bundling discounts, and over time those discounts will shrink and disappear in monopoly towns. Finally, in a competitive environment, cable companies are open to negotiating with customers who threaten to leave. But in a monopoly town, there is no reason to negotiate – customers can’t leave. These various discounts will continue for a while, but as it finally sinks in on the cable companies that they are in a monopoly position, they will pull back from giving discounts. If no other ISP ever comes to a monopoly market, then in the long run, everybody in that town will pay the full list prices from broadband, telephone, and cable TV.

Degraded Maintenance. This won’t happen overnight, but it’s inevitable due to the way that big ISPs operate. There is always pressure from corporate for local managers to cut costs. Cable companies don’t conspire at the corporate level to be poor ISPs, but they have budgetary practice and a bonus structure that rewards local employees for cutting corners and costs. One of the easiest things to eliminate in a monopoly environment is maintenance. The local managers for the cable companies likely will not eliminate jobs but rather fail to fill vacant positions over time. We’ve seen this in practice for decades from the big telcos, which have eliminated a huge percentage of technicians over the last few decades. In markets where the cable companies become monopolies, this is bound to happen.

Little Innovation or Upgrades. Cable technology has been improving rapidly over the last decade. Most markets have been upgraded now for download bandwidth to the DOCSIS 3.1 standard. From what I can see, most systems have stuck with the older DOCSIS 3.0 standard for upload speeds. Within a few years, cable companies will have the option to upgrade again to DOCSIS 4.0 – an upgrade that will allow for symmetrical gigabit broadband products to compete against fiber.

Cable companies have no motivation to upgrade in monopoly markets. They may end up doing so over time as part of a corporate-wide effort to have the same technology everywhere. Cable companies will always upgrade competitive markets before non-competitive ones. If they can get by with half-measures to save money, they’ll do so in monopoly towns.

It’s unimaginable to think that cable companies aren’t already having these discussions in markets abandoned by AT&T. Those are the markets where the cable monopolies will maximize the bottom line.

4 thoughts on “The New Broadband Monopolies

  1. Agree. And this is why new entrants, including fixed-wireless, need to be encouraged and supported instead of being ruled out. An affordable 50-100 Mbps fixed-wireless offering is well received in communities with few options. Perhaps wireless becomes the competitor to cable instead of DSL?

  2. Every AT&T state had multiple changes in state laws– alternative regulations — where the company got price caps for upgrades, starting in the 1990’s, then again for state-wide cable franchises — u-verse. At the same time, we found that that Verizon et al. have cross-subsidized their wireless business, illegally using the wireline construction budgets to do wireless. — Where’s the state investigations? Why isn’t anyone calling to remove their phone and cable franchises or taking them to court for not fulfilling previous obligations — as it’s billions of dollars per state on the table. Every AT&T state is still a telecommunications public utility… a fact that seems to have been lost,

    This link is to our recent analysis of Verizon NY’s 2020 Annual Report — and it shows massive financial cross-subsidies. Published on May 27, 2021, it is based on the USOA accounting formulas that were set in the year 2000, and it is corrupted and now puts the majority of all expenses into local ervice, making the networks appear unprofitable — and this has been used as an excuse to not do upgrades and for rate increases and every state utility we know of is still using the exact same corrupted formulas. — Every state can start proceedings to go after the money… which we will be doing once the dust settles with the new governor in NY.

  3. Aren’t the instances being cited of AT&T “abandoning” towns talking about them phasing out their original DSL service which runs completely over copper landlines and maxes out at about 6 Mbps down? I don’t think AT&T is phasing out their fiber-to-the-node DSL service (originally marketed as Uverse).

    Slow DSL, at speeds of 6 Mbps or less and a cost of $40-50 per month, simply isn’t competition for cable anyhow. Which is why consumers have been voluntarily ditching it for cable (if available) for years now. FTTN DSL, with download speeds typically ranging from 18 to 100 Mbps, also priced around $40-50, does provide some real competition for cable. But I’ve seen no indication that AT&T is trying to abandon those addresses. Rather, they’re going back to a lot of those neighborhoods and upgrading them to full FTTH.

    Anyhow, as Alan states above, fixed wireless is replacing DSL as the lower-end telco alternative to cable. (Fiber is obviously the higher-end telco option for those lucky enough to get it.) For those few who can’t get fiber, cable or fixed wireless, they’ll have to resort to one of the satellite services.

    Wonder whatever happened to AT&T’s wireless broadband guided by power lines system dubbed AirGig? My guess is that they can’t figure out a way to deploy it cheaply enough.

    • They aren’t phasing out DSL. As of October they won’t install DSL. If an addresses loses service for some reason it can’t be reconnected. I’ve heard cases where somebody had a problem with DSL and customers are being told that it won’t be fixed.

      They are not shutting off paying customers for now, but you have to imagine at some point that they will want to start turning off copper, like Verizon has actively been doing.

      AT&T seems to be now shooting for a network that builds fiber to just selected parts of cities, and not entire markets. They had 14.5 million fiber passings at the end of last year and said the goal is 25 million passings by the end of 2025.

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