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Is Comcast marking up its internet service by nearly 2000%?!


Is Comcast Marking Up Its Internet Service by 2 000 Percent

Source: https://np.reddit.com/r/technology/comme...

And this is why Comcast should be regulated the same way as any other utility. The potential for rent-seeking in this kind of monopolistic environment is just too high.

Edit: Copying this from another comment of mine on a similar topic to explain why this gives Comcast such an unfair advantage.

The market is structured in such a way as to give them (telecoms) an unfair advantage.

Let me be clear. There are definitive economic benefits in allowing a company with incredibly high infrastructure costs to have a monopoly over a service area. In economics this is called Natural Monopoly theory. This prevents the duplication of efforts, and allows for a more efficient use of resources, avoiding problems like this and this (early 20th century NYC), where countless companies have overlapping, redundant infrastructure.

Due to the market power this gives a company, they must also be heavily regulated in order to prevent them from taking advantage of their customers. The alternative is to allow governments to take on this function for themselves.

The thing is, all water, gas, and electric utilities are heavily regulated by state and federal agencies in a way that telecoms are not. The three so-called "public" utilities are seen as necessities for life, while telecom has only recently begun to be viewed that way. As a result, public utilities cannot charge excessive fees for service, and in exchange we give them a near-monopoly over their service territory.

In California, for example, regulatory requirements only allow gas and electric utilities to make money on capital investments. This gives utilities a direct incentive to invest in new infrastructure, because that's how they make money. This simultaneously removes any incentive to overcharge per kWh or to induce customers to use more electricity - even if they did, California utilities wouldn't make any additional money from this practice.

Instead, the California Public Utilities Commission (CPUC) authorizes a certain rate of return - usually a 5%-10% markup on base electricity cost - based on capital investments and how well the utility runs its business. (Bit of an oversimplification here - this is called "decoupling" if you want to look for more details.)

If we had a policy like that for telecoms, you can bet it would be cheaper and bandwidth would be higher.

What's more, most states don't restrict a city's right to establish a utility for water, gas, or electric. So why do we do that for telecoms?

Telecoms, meanwhile, are given the same preferential access to service territories in most states, but are not subject to the same price controls. They exploit this advantage by charging unreasonable prices, lagging behind in infrastructure investment and in providing higher bandwidth, and instituting datacaps that, by Comcast's own admission, are there exclusively to pad the bottom line (see thisthis, and this for details).

If we're going to allow a company monopolistic control over a service territory, we can't also allow them carte blanche with their price structure. Basic economics says they'll abuse the privilege, and that's exactly what they've done.

This is one of many examples of what we economists would call a market failure. Part of the problem is the way the regulatory agencies view telecom. It needs to be considered a necessity and regulated in the same manner as a public utility. Recent changes at the FCC have moved in the right direction, but there's a lot further to go.

Sources: I have a M.S. in Ag and Resource Econ and worked for Pacific Gas & Electric.

TL;DR: Telecom access is a necessity, just like electric, water, and gas, and should be regulated as such. When you allow a company to have unfettered control over a service area without also regulating their business practices and cost structure, the customers (read: everyone) lose.

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LOL at the "Comcast Cares" logo. 

I agree with the Redditor. 

This guy is confused.  Comcast isn't a natural monopoly, it's a monopoly that was created by government intervention.  That's why DirectTV, which serves a similar market in one respect, doesn't totally suck they way they do. Dudes like don't want to hear that the problem was created by government and always have more government intervention ready to "fix" the problems the first level of intervention caused.

There are very few examples of natural monopolies.  And it's very arguable that a bona fide example would allow for exploitative pricing.  That's why it's difficult to name an genuine example of both characteristics.  Whereas you'll find just any famously exploitative monopoly you could name was set up by government... going back at least to the Robber Barons (which like Comcast weren't nationally-dominant monopolies but rather monopolized specific areas). 

Now that you say it I know you're right:

Monopolies are created by government, whether explicitly or implicitly.

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