“Internet provision is a natural monopoly!” How many times have you heard some economic illiterati say that? I’m sure you’ve heard it a few times even though the entire concept of natural monopoly is a myth. To demonstrate this I’m going to provide a couple of examples of decentralized Internet architectures. First we’re going to look at the corporate world where one Internet Service Provider (ISP) has decided centralized infrastructure isn’t fulfilling all of its needs:
Well T-Mobile wants to fix all that… by putting an LTE tower in your house. Yes, the unconventional carrier has announced a 4G LTE CellSpot that it says will offer 3,000 square feet of LTE coverage for your home or business. Plug it into the wall outlet, connect it to the internet, and your LTE connection will get a boost anywhere T-Mobile has spectrum. The CellSpot supports up to 16 calls at a time, and will work with any 3G, 4G, and LTE device on T-Mobile’s network.
T-Mobile’s biggest limitation is coverage. Improving coverage isn’t easy for a cell carrier because building towers is expensive and the bureaucracy between them and their customers is significant (my hometown kept denying AT&T permission to build a new tower simply because the city council didn’t want travelers to see an “ugly” tower when they passed through town). Being able to install a lot of microcells is a lot easier than building a tower simply because the carrier doesn’t have to buy land and get permission from local bureaucracies.
Two mistakes T-Mobile is making, in my opinion, is only allowing its customers to install these CellSpots and not paying people who choose to install them:
And the price is right too — eligible Simple Choice customers can get the LTE CellSpot for free (with a refundable $25 deposit), and keep it as long as they are customers of T-Mobile.
I bet T-Mobile would quickly find itself enjoying spectacular coverage if it paid anybody willing to install one of these in their home or business a little kickback (these microcells, after all, are consuming electricity and using bandwidth). For the right price (which means enough for me to make a little bit of profit) I’d be willing to install one of these in my home and I’m not even a T-Mobile customer.
Admittedly relying on a centralized ISP, even if they’re utilizing a decentralized architecture, isn’t exactly demonstrating that Internet provision isn’t a natural monopoly. Fear not! T-Mobile isn’t the only game in town:
When you live somewhere with slow and unreliable Internet access, it usually seems like there’s nothing to do but complain. And that’s exactly what residents of Orcas Island, one of the San Juan Islands in Washington state, were doing in late 2013. Faced with CenturyLink service that was slow and outage-prone, residents gathered at a community potluck and lamented their current connectivity.
“Everyone was asking, ‘what can we do?’” resident Chris Brems recalls. “Then [Chris] Sutton stands up and says, ‘Well, we can do it ourselves.’”
When somebody says, “Well, we can do it ourselves,” you know they’re on the right track:
Faced with a local ISP that couldn’t provide modern broadband, Orcas Island residents designed their own network and built it themselves. The nonprofit Doe Bay Internet Users Association (DBIUA), founded by Sutton, Brems, and a few friends, now provide Internet service to a portion of the island. It’s a wireless network with radios installed on trees and houses in the Doe Bay portion of Orcas Island. Those radios get signals from radios on top of a water tower, which in turn receive a signal from a microwave tower across the water in Mount Vernon, Washington.
[…]
Back in 2013, CenturyLink service was supposed to provide up to 1.5Mbps downloads speeds, but in reality we “had 700kbps sometimes, and nothing at others,” Brems told Ars. When everyone came home in the evening, “you would get 100kbps down and almost nothing up, and the whole thing would just collapse. It’s totally oversubscribed,” Sutton said.
That 10-day outage in November 2013 wasn’t a fluke. At various times, CenturyLink service would go out for a couple of days until the company sent someone out to fix it, Sutton said. But since equipping the island with DBIUA’s wireless Internet, outages have been less frequent and “there are times we’re doing 30Mbps down and 40Mbps up,” Brems said. “It’s never been below 20 or 25 unless we had a problem.”
A better, more reliable service for less. What more could one ask for? Anybody who lives in a rural area knows the struggle of getting fast, reliable Internet access. Unfortunately many people in rural areas turn their frustrations into political campaigns. By the time they’re done they have higher taxes and promises from the local, state, or federal government that go unfulfilled. Had they taken the money they invested in political shenanigans and instead built a network they would have fast, reliable Internet connectivity. This is why you should listen to the person who says, “Well, we can do it ourselves,” instead of the idiot who tries to start a political campaign.
Internet provision isn’t a natural monopoly. A community can come together and build their own network and attach it to the Internet. This is even easier now that wireless connectivity is no longer slow or outrageously expensive.
“my hometown kept denying AT&T permission to build a new tower simply because the city council didn’t want travelers to see an ‘ugly’ tower when they passed through town”
Probably not. That was the EXCUSE. The REASON was that the carriers who already had towers in the area lobbied behind the scenes to keep new towers out.
At least that’s how it was back in the 1990s when I attended city council meetings in the city I lived in. A cell carrier was trying to get a permit to build a tower there and the city council came up with all kinds of excuses to delay it, including “a six-month moratorium on new towers” while they “studied” the coverage situation.
When I moved away, that six-month moratorium had been renewed three more times. The carrier(s) that already had towers there were whispering in the politicians’ ears, and of course making strategic campaign contributions and so forth.
the internet is not a “decentralized network,” just to be accurate. Its an example of a scale-free, small network(the number of hops between any two nodes is small). The number of tier 1 providers is going to follow a power-law dynamic(although the language of 20th century neoclassical economics is the wrong language for modern network theory).
of course, last-mile, tier-3 follows no such dynamic, particularly with the practical advent of wireless meshes. Unfortunately, network-neutrality with the have the effect of fossilizing a corporate monopoly over the “last mile.” And the national security state will decry tier-3 wireless mesh as an intolerable “going dark” affront to necessary surveillance.
So, taxes are the price we pay for the natural monopoly in the last-mile problem.