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Understanding the Price of the Internet

Understanding the Price of the Internet
Brough Turner

By Wednesday, 05 March 2014 12:58 PM Current | Bio | Archive

I recently sat down with Brough Turner, the founder of netBlazr, a revolutionary broadband wireless service that covers downtown Boston.

Grigonis: So what is the business opportunity with netBlazr, or broadband wireless in general, for that matter?

Turner: In the U.S. we have the most competitive Internet backbone in the world. We are still the leader when it comes to any Internet-related technology if you are talking about the backbone and the applications that run on top of it.

But when you are talking about access to the Internet — the connection from the backbone out to individual subscribers — we are stuck with, at best, a duopoly: basically two vertically integrated, somewhat different, but now competing monopolists; that is, the phone company and the cable company.

They’ve got access to the public right-of-way, which is a public good, and originally they were regulated for that reason. Now they basically still have access to the public right-of-way but are subject to very little regulation, and they enjoy less regulation every year.

What’s worse, many businesses have only one source of Internet connectivity – the phone company, because the cable company originally addressed only residences thus they don’t have cables in many commercial areas. The net result is that U.S. consumers pay more for their Internet access than many other developed countries. More to the point, there are price differences on a block-by-block basis through industrial and commercial areas, which can be as much as 20x. That’s incredible.

Grigonis: Yes, a difference in cost of that magnitude is on the unbelievable side.

Turner: Here’s an actual example from 2011. There’s a 26-story office building in downtown Boston called 177 Huntington Avenue. It’s the former Christian Science Administration building. A block away, in the Prudential Center, there is a 36-story office tower at 111 Huntington Avenue. If you compare broadband costs at these two buildings, there was more than a 30 times price difference for business Internet connectivity per megabit per second per month.

This incredible disparity occurred because there were seven different fiber providers who owned their own fiber in the Prudential Center; it wasn’t just Verizon and Comcast, but also Level 3, Lightower, Zayo, and so forth, so there was real competition. You could connect to the backbone via a competitive fiber provider.

But at 177 Huntington anybody who wanted Internet service needed to lease a tail circuit from Verizon. One of our first customers had 22 employees on the 16th floor of the building. They were serviced with three bonded T-1 lines, which is a total of about 4.5 megabits per second and the company was negotiating with their carrier to get a 10 megabit Metro Ethernet circuit. They eventually got that circuit at the cost of $2,200 a month, but it took eight months to get it installed.

Meanwhile, the people 105 yards away, across just one city street where there competitive fiber was available, could get a 100 megabit Internet connection for $700 a month. So if you compare 100 Mbps for $700 a month, or $7 per megabit, to $2,200 a month for 10 megabits, or $220 per megabit, and you look at the ratio of 220 to 7, that gives you a price at one location more than 30 times higher than at the other place.

Imagine that. Two premises 105 yards apart, a 30 times price difference in Internet connectivity in downtown Boston, and yet that’s typical of the few hundred buildings that have really competitive connections. A few thousand buildings have only the phone company serving them and the people there are completely screwed. Then there are about 10,000 buildings that have competition between the phone company and the cable company, but only those two sources are available – those customers are “partly screwed.”
That the U.S. can exhibit a 30 times price difference 100 yards apart is why we founded netBlazr.

Wireless is an order of magnitude less effective than fiber for long distances. If you want to send data long distances, fiber is the best way of moving the electromagnetic radiation—namely, light. But fiber requires access to the right of way, and that’s a political issue. With wireless, however, you can go point-to-point, rooftop-to-rooftop, window-to-window—there are all sorts of options. You can achieve a whole lot of capacity really inexpensively. So if you have a price difference, there’s a lot of room for competition. And that’s where netBlazr comes in.

Richard Grigonis is an internationally known technology editor and writer. He was executive editor of Technology Management Corporation’s IP Communications Group of magazines from 2006 to 2009. The author of five books on computers and telecom, including the highly influential Computer Telephony Encyclopedia (2000), he was the chief technical editor of Harry Newton's Computer Telephony magazine (later retitled Communications Convergence after its acquisition by Miller Freeman/CMP Media) from its first year of operation in 1994 until 2003.
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