Hi, this is Wayne again with a topic “Why Does the Internet Cost More HERE Than THERE?”.
When we talk about the monthly cost of home internet, we usually focus on how annoyingly expensive it is. But another odd aspect about internet prices is how much they can vary from place to place even inside the same country. It’S genuinely weird that you need to pay around $ 100 a month for internet service in Minneapolis that is roughly the same quality as Internet service. You can get for just $ 60 a month in Fort Worth Texas. The reason most commonly cited for high internet prices is lack of competition between internet service providers or isps and that’s not wrong, but it’s worth unpacking why that is and no the answer isn’t just because they’re dicks they are, but that’s not the whole story. The basic problem with the free market approach to broadband internet service is that it’s actually incredibly hard for new competitors to join the market and potentially financially runess, even to try similar to water pipes, electrical wires and Rail lines. Internet cables are both expensive to install and basically useless until you create an extensive network of them.
This creates an extremely high upfront cost that a private company will typically only take on if there’s a near absolute guarantee that they’ll be able to recoup their investment and more. This often results in what economists call a natural monopoly. These are usually relatively small markets, where the barrier to entry and startup costs are so high that once a single service provider establishes itself, no other competitor will even bother to tr.
Try, though, in larger markets, this is more likely to result in a duop or olop, with a small number of large, stable players who mostly stay out of each other’s way. You might think of the entire United States as a pretty big Market, but because each company needs to lay infrastructure into every single little Community, each contiguous urban area is effectively its own isolated Market. Therefore, many of us only have a choice between one or two isps, pretty much for the same reason that everyone else has only choice for their water utility. There’S only one set of pipes leading to the house. What determines whether a particular region winds up with one two or three isps is a combination of geography, population density and local regulations, the harder it is to install and replace cables and other infrastructure, the more customers you need to absorb the fixed cost of installation. This can be a big problem for countries with large, sparsely populated rural areas like Canada, the United States, stes and Australia, but it’s also a problem for places with lots of rivers, deserts and mountains like Canada, the United States and Australia. It’S exactly these kinds of high infrastructure costs that could make satellite internet a potential game changer for many rural markets if it became significantly cheaper in the near future.
In the meantime, however, shooting satellites into space is still relatively expensive for now. The places globally, where Broadband is both extremely fast and relatively cheap, typ, typically have extremely dense urban populations, and little or no rural population such as Hong Kong and Singapore must be nice, of course, just because a monopoly is natural does not mean there’s no funny. Business involved, and it doesn’t mean that there’s no way to fix it, we’ll explain more after we thank t for sponsoring this video paying over $ 30 for your phone bill in this economy. T Mobile aims to be a super reliable mobile provider with prices that won’t break the bank.
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It’S much easier to succeed through lobbying and bullying small competitors in order for a small ISP to grow, it will need to get any number of government permits, all of which can be tweaked to make them harder than necessary to acquire. Plus. The small company will typically need to be able to build enough infrastructure to actually appeal to some customers.
In the meantime, they might need to rent access to some of their larger competitors, infrastructure and bandwidth, something which which those competitors might not be willing to do unless compelled by the law. Most countries do require this kind of cooperation. For just this reason, theoretically, these small companies could eventually hit a Tipping Point and compete completely independently, but long long before they hit that point.
They’Ll hit a different Tipping Point where the smartest thing to do is to sell themselves to the biggest competitor in a natural monopoly scenario. The incentive of the primary players is to gradually gobble up all small companies and eventually merge into one massive company, so they can make bigger margins and stop investing so much in infrastructure. In this situation, antitrust action and legislative prevention of further mergers are likely.
The only option to restore competition regulation is messy and that’s why it makes everybody either bored or angry here again. Canada is a good example. We have both ineffective antitrust regulators and high regulatory barriers to entry, While most of the country has a om, itable internet prices. Due to astronomical infrastructure costs, Ontario and Quebec, the most populous provinces have worse prices than the next two most populous provinces, British Columbia and Alberta. Due to Greater consolidation, among isps so is the answer here.
Even more government involvement, some Telecom Industries are fully nationalized and run either directly by the government or by a semi-independent public corporation, while other countries heavily subsidize building infrastructure as a way of getting past the initial barrier of upfront investment. While this probably doesn’t reduce the overall cost of the infrastructure, it can at least encourage faster development by spreading out risk across the entire tax base of the populace, rather than concentrating it into a single company with a relatively small pool of customers. An interesting American example is that of Chattanooga Tennessee, which is very fun to say and has some of the cheapest fastest internet speeds in the United States, and it was the first US Community to adopt gigabyte speed internet back in 2010. Chattanooga I’ll never get sick of that businesses can even get 25 GB internet as of 2022, though it is understandably pricey in this case the Chattanooga Electric Power Board is the city-owned ISP and operates essentially like a normal local utility company. Some governments even take the middle- of the road approach of creating a public corporation without a monopoly so that it can provide a consistent competitor to private companies in the same Market such as sasel. The public corporation, created by the Canadian province of Saskatchewan. You’Ve heard of it for context, this is the very rough Canadian equivalent of Montana or one of the dtas. Despite its large area and low population density, many saskat residents have access to cheaper, faster internet than what’s available in large, dense population centers like Vancouver, but if you hate big government exactly as as much as you hate big corporations, there is always the option of a Telecommunications Cooperative, where the ISP is collectively owned by the customers. While they can vary a lot in size. Some are quite small. Telecom co-ops are found throughout the United States and around the world, often in rural areas that are typically neglected by traditional telecom companies and isps. Not only can this be a way of providing cheaper, higher quality, telephone and internet services in smaller markets, it can sometimes be the difference between decent internet access and no access at all, no matter what we wind up doing this problem of varying prices across regions is Not something that’s going to get better on its own. It’S going to require concerted effort, cooperation and investment to change the incentives that led us here, but that change is possible thanks for watching guys, if you like this video, why not learn more about how the internet works by checking out our video on top level? Domains? Surprisingly, very interesting, .