Item — HN Reader

> If the Monopolistic ISPs can extract more wealth out of the content-to-consumer pipeline, doesn't the GDP go up?

Perhaps you are being sarcasic, but I cannot tell. This is a version of the broken window fallacy[0]. The money spent on the ISPs is now unavailable for netflix (as an example) to spend hiring new people, buying rights to new movies, etc. So it is not a given that this increases the GDP, or that it would do so in a healthy or beneficial way.

[0] https://en.wikipedia.org/wiki/Parable_of_the_broken_window

1 comments

Yes. (: Definitely being sarcastic, just playing some mild Devil's Advocate. It's how I spend karma. I think you're almost right. It's almost exactly the broken window parable. The only difference I have is that it's not [just] Netflix's money being wasted on broken glass, it's the ISP customers.

Netflix has to pay because they're too lazy to run their own ISP. In a way. Get your own 'last mile' customers, or pay the man. But why are there no other ISPs Netflix can choose from? Certainly a competitor could charge less, or nothing. But the customers all seem to want throttled access! They certainly pay the monthly fees. But why would a rational customer do that?

When would a rational customer pay for cracked windows? Why would Netflix, the stained glass entertainer, deliver their product on cracked glass? When there's only one glassmaker in town, I'd guess.

> Netflix has to pay because they're too lazy to run their own ISP. In a way. Get your own 'last mile' customers, or pay the man. But why are there no other ISPs Netflix can choose from? Certainly a competitor could charge less, or nothing. But the customers all seem to want throttled access! They certainly pay the monthly fees. But why would a rational customer do that?

Because the end customers do not have a choice. In most areas of the US, the large ISPs have a government granted monopoly.

Take the house where I live as an example. I can choose Comcast or no internet. Great choice, right? In the region where I live, there are exactly 2 high-speed internet providers. So that lets the ISPs claim that there is competition. In reality, there's only a handful of houses in this region that can choose between the 2 options. Most houses are stuck with one choice or no connection.

At my work, the choices are even more limited. We pay crazy amounts for a T1 line at 1.5Mbs because that's the only option! Neither of the two high-speed options will provide access to our building. (They call regularly, "would you like our high-speed business package", "YES!", "oh, sorry, we can't connect to that address", "Then stop calling.")

Why have no new companies entered the market to provide better service? There's an enormous capital outlay to get started. Even worse, the local government regulations about running new cable or fiber make it cost-prohibitive or downright impossible.

Google is laying out new fiber networks right now. They have adequate capital, and they have the clout so that local governments are willing to change laws to get google fiber. The average startup does not have that kind of sway.