Internet Racket Reaps Obscene Benefits

Is your Internet bill too high? You can thank the phone and cable companies for that.

Today, high-speed broadband services offered by these national carriers cost more than $500 a year and even more when customers are forced to bundle Internet access with cable or phone packages. These rates put access out of reach for millions.

And the Americans who can afford this essential service can choose from only one or two kinds of providers: either a big phone or cable company.

Market dominance suits the phone and cable giants. As the real cost of hooking up your home declines, they keep hiking their rates. Naturally, this arrangement lets operators record obscene profit margins.

Craig Moffett, an industry analyst for Sanford C. Bernstein & Co., noted that the margin for Comcast’s broadband service is around 80 percent. In other words, Comcast charges customers $45 for something that costs the company $9 to supply. This is a racket. And AT&T, Comcast, Verizon, and other industry titans are fighting tooth and nail to protect it. They’ve mobilized hundreds of lobbyists and legislators to paint any alternative — including locally owned networks — as an affront to American free enterprise.

Towns and cities across the country have smart ideas about how to deliver affordable and locally owned Internet access to their residents, including creating their own networks. But in many states, those ideas can’t take root before companies like AT&T, Comcast, Time Warner Cable and Verizon stomp them out.

Their weapon of choice is state-level legislation that restricts cities and towns from offering homegrown Internet access at reasonable rates. Thanks to this cable-and-phone lobbying onslaught, 19 states have already passed laws that hamper or ban municipal broadband networks.

But that hasn’t stopped municipal broadband efforts from sprouting up elsewhere. From Seattle, Washington, to St. Cloud, Florida, and many points in between, communities have invested in building their own fast and affordable Internet infrastructure.

It’s easy to understand the appeal. Community Internet creates market competition for communications services, improves schools, enhances public safety and social services, and encourages entrepreneurs to keep their businesses local. These networks are increasingly cheaper to build, bringing technology — and economic opportunities — to communities that are routinely passed over by the large commercial providers.

Even so, Internet incumbents don’t like the hint of competition. The industry’s latest fight to stop community Internet took place in Georgia last month, where phone and cable lobbyists lined up to support a bill that would have prohibited towns and cities from creating local networks.

“To me this is a philosophical situation,” Rep. Mark Hamilton, the bill’s chief sponsor, said as he urged others in the Georgia statehouse to pass his legislation. “A vote ‘yes’ for this bill means that you support free markets and free enterprise,” he said.

The good news is that Hamilton’s bad bill didn’t make it to the Georgia governor’s desk.