Austin and KC owe Californians a thank you card for paying their Internet bill

by Steve Blum • , , , ,

The gift that keeps on giving.

The fiber to the premise analysis done by the City and County of San Francisco summed up the likely competitive response to a municipal build in two words: Google Fiber. Incumbents in the markets Google targeted responded with upgrades and lower prices…

The incumbent providers’ responses to Google Fiber’s expansion in other cities may foreshadow their responses to a municipal network in San Francisco. After Google Fiber came to Kansas City, incumbent providers Comcast and Time Warner upgraded their networks to double residential speeds, which lowered the dollar per megabit cost of bandwidth for their customers. Industry experts interviewed by the Budget and Legislative Analyst estimate that these upgrades cost very little for incumbent providers and occurred because of the competitive threat Google Fiber posed. Similarly, AT&T deployed its high speed Gigapower network in Austin shortly after Google Fiber announced its intention to build in that City. AT&T is charging $50 less per month for Gigapower in Austin, where it competes with Google Fiber, than in other cities where it does not. Similarly, Comcast upgraded residential speeds at no additional cost to customers after the City of Santa Cruz announced its intention to form a public-private partnership to deploy a FTTP network.

AT&T isn’t lowering prices where its monopoly holds fast. Comcast and Time Warner aren’t raising speeds at no additional cost where their monopoly (or duopoly) status is secure. The difference between what AT&T, Comcast and the rest charge in a competitive market and what they charge everybody else is either pure profit, or a mix of profit and cross-subsidies into competitive areas.

That’s why AT&T, supported by the cable lobby, is fighting so hard to lock potential competitors out of taxpayer-funded broadband subsidies in California, and keep the money for itself. If they win, you’ll pay twice: once for the subsidy, and then forever for monopoly-priced service.