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.