Beware the Monopoly ISP

When I do surveys in cities I know that the number one complaint from the public about the broadband situation is a lack of choice. As residents have given up on DSL they finally figure out that the cable company is the only game in town.  I generally tell cities that they should be worried because economics texts all describe the inevitable behavior of monopolies – they invariably will raise rates, cut service, and treat customers with disdain. It’s not always easy to show proof of monopoly behavior because it’s subtle and creeps in over time. An ISP that becomes a monopoly doesn’t turn into an ogre overnight – its bad behavior builds over time through a series of small actions that eventually result in monopoly misbehavior.

Economists say that monopolies always migrate over time to abusive monopoly behavior – it’s almost impossible for a monopoly corporation to not do this. Monopolies rarely act poorly due to devils in the board room that decide to take advantage of monopoly markets. Monopoly behavior comes more often from the employees of the monopoly who implement policies that benefit the company over customers. In a lot of the most egregious cases, the bad actions are driven by employees wanting to make bigger bonuses.

Consider two such monopoly actions taken by big ISPs during the pandemic. It’s not hard to find similar stories about every big ISP, but these stories are a pure demonstration of monopoly power.

Verizon quickly enrolled in the FCC’s Emergency Broadband Benefit (EBB) program when it was announced. This program provides a $50 discount off broadband bills to households who qualify either by being low-income or by being out of work due to the pandemic. Like every big ISP that enrolled in the program, Verizon crowed on its website how it was doing its bit to help folks through the pandemic. Other than perhaps the cost of advertising, the program costs Verizon nothing since the FCC reimburses the company for the discounts given.

But within days of Verizon’s introduction of the EBB plan, stories started coming out from Verizon customers who were told they had to upgrade to a higher-cost broadband product to get the discount. Some marketing folks at Verizon got the bright idea that this was an opportunity for the company to make more money through millions of upgrades. This meant that customers didn’t save the full $50 because they had to pay more for faster broadband. When the EBB discount ends, these customers will find themselves with a broadband package they can’t afford.

When Verizon was called out by the FCC for the practice, rather than do the right thing, the company gave customers 14 days to switch back to the older, less costly plan but didn’t notify any of them of the option. In an example of pure corporate gobbledygook, Verizon tried to justify to the FCC how its actions were not the same as upselling.

In a similar story, Altice has been hit with a class-action suit for not meeting the pledge it made in the Keep America Connected initiative. This was a voluntary pledge during the early days of the pandemic where FCC Chairman Ajit Pai asked ISPs to pledge to not terminate residential and business customers or levy late fees due to the inability to make payments.

Like 800 other IPS, Altice made the pledge, and the Altice USA CEO Dexter Goei was quoted as saying, “Altice USA is proud to do its part in ensuring that customers and business in our service areas have reliable access to the connectivity services that are critically important during this rapidly evolving public health situation.”

One of the complaints in the lawsuit came from a barbershop in the Bronx. Like many businesses, the barbershop was forced to shut its doors by a local ordinance during the pandemic. The barber says that Altice billed him during the 3-months of the mandatory shutdown and then terminated his service at the end of the three months. When he asked if he could pay his open balances to restore broadband and telephone service, the barber was told that he’d have to open a new account and pay a $180 reconnect fee. Further, Altice told him that he couldn’t have the telephone number he’d been using for decades. As a final insult, his new bill was double the old one.

While the Keep America Connected initiative was voluntary, the big ISPs made a big deal about it when they signed on. ISPs were loudly proclaiming how they were pitching in to get America through the pandemic. It’s hard to imagine how Altice could have violated the intent of that agreement any more than the way it treated this barber and many similar businesses.

Monopoly ISPs don’t need to do much soul searching to wonder why people dislike them more than any other type of company in the country. National satisfaction surveys annually rate big ISPs as the least-liked customer-facing business in the country, even lower than the IRS. I wish these were the only two recent cases of monopoly abuses by big ISPs – but the ways the big ISPs mistreat customers could fill a bookshelf. Monopolies invariably abuse customers – and that alone is justification for cities trying to attract new ISPs to their market. The only real cure for monopoly behavior is competition.

4 thoughts on “Beware the Monopoly ISP

  1. This is a classic example of why municipal broadband projects are the best solution to an oligopoly market condition….

  2. I notice that Independent Broadband Providers are not discussed. There are thousands of them across the US. They are part of their communities. They are often the first company to ever bring real Broadband into an area where Broadband was non-existent or terribly awful service. Many mortgage everything they have to build Broadband in their hometowns. Why are they never discussed in articles like this portraying the “evils” of the big, bad Monopoly ISPs and how Municipal Broadband is the new savior? I think 5000 Independent Broadband Providers across the US deserve some press…or at least be part of the discussion.
    John Scrivner – Mt. Vernon, IL

    • The reason is easy. Small telcos rarely exhibit the monopoly abuses displayed by the giant ISPs. I write about small telcos all of the time and they are a big part of my client base.

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