There are essentially 3 reasons why the American Internet is bad and is going to get much, much worse.

First, under Clinton, the umbrella protecting consumers using the Internet from getting pissed on by their service providers was ripped away. (Specifically, under the 1996 Telecommunications Act, a special category – Information Service – was created to hold just the Internet. Because of this category, the law says that consumers don’t need to be protected with price regulations or anti-discrimination rules. The Internet should have been treated like phones and cable TV and regulated, but Deregulation Fever killed quaint notions of business rules and refs.)

Second, there are only a few serious ISPs in the United States. Why so few? One reason is that, while governments in other countries keep companies from getting too big, in the U.S. the same Deregulation Fever that has led us to this whole net neutrality debacle makes people think that companies should get to be as big and mean as they want. Beyond the governmental aspect, however, access to the market is blocked by the cost-prohibitiveness of installing the necessary equipment that makes the Internet possible. For instance, Level 3, one of the biggest Internet suppliers, spent $10 billion installing its initial network, making it the most well-funded startup ever. That cost is a huge barrier to entry (unless you are already in the market. In that case, the government reimburses part of the wire installation costs, effectively lifting a big portion of the economic barrier and ensuring that the number of competitors remains low small.) Finally, no internet provider has networks around the world – instead, they have to make deals to be able to use competitor networks. Without more broadband suppliers, costs will stay high (and costs stay high because there are so few ISPs). The owners of the monopoly have no incentive to fund innovation or even invest in updated infrastructure. Much of the US Internet networks are made of old copper wire – slow, inefficient and unreliable. It’s so serious and the monopoly owners are so craven, that Level 3 actually published a bunch of blogs accusing the big Internet suppliers in the US of purposely slowing – and breaking – the US Internet in order to extract a ransom to speed it up to its capacity.

The third reason, and the reason why none of this is going to get fixed, is that the big companies – Comcast, Verizon, AT&T, Time Warner – have bought the end of Net Neutrality, meaning slower Internet speeds and higher premiums.


Credit: Sunlight Foundation


Credit: Sunlight Foundation

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