Like an infomercial on cable TV, the promise of cable modem service
strikes one at first as a wonderful package at an impressively low
price. But the limitations of cable modems would render them
unattractive if alternatives were available at a reasonable cost. And
wait–there’s more. Cable modems keep us in the dark ages of Internet
access, seriously distorting Internet usage, economics, and policy.
Cable modems are a great advance over dial-up access, no one could
deny that. People who experience the convenience of always-on
connections and instantly downloaded Web pages declare, “I could never
go back to 56K.” But while we can each individually enjoy the
pleasures of this service, we should not be blind to the social havoc
How cable modems distort Internet usage
Customers, competitors, and industry analysts alike complain bitterly
about the terms of service enforced by cable companies. Just last
Friday, the Washington Post
a complaint filed at the Federal Communications Commission by an
industry consortium that included Microsoft, Dell, IBM, Sun, and
others. I don’t have a handle on the ax this group is grinding, but
their points were all valid and familiar: that users are not
allowed to run servers, that artificial restrictions are placed on
certain types of high-volume downloads, and that companies often
intrude into user choices by ruling out home networks and even
Some observers like to talk of conspiracies behind some of these
impositions. They speculate, for instance, whether the cable
companies restrict video downloads because these could someday compete
with cable TV offerings. Well, that day is far off. While I don’t
place cable companies above such ploys, I don’t think the danger is
imminent enough to warrant dark machinations.
Nor do I expect these companies to use Quality of Service features to
slow down Web pages served by competing sites (another warning issued
by some observers). I trust that the Internet service components of
cable companies have the same attitude as Internet service providers
everywhere: they simply want to get packets to and from their
customers as efficiently as possible without hampering anybody’s
Cable companies’ terms of service do distort usage. But ultimately
the causes of the distortion are the asymmetric nature of the cable modem
connection and the architecture of the network as a shared LAN. These
are technical features, inherent to the cable system. The terms of
service derive directly from such technical constraints. And we must
remember this point later when discussing policy issues.
There is one common area of complaint–reliability and service–that
cable companies could ameliorate. But they won’t. These companies grew
up offering entertainment, and they just aren’t mobilized for the
serious business of handling people’s data. So when individuals
justify a subscription to cable Internet service because they use it
for key work functions, I wonder whether they also get their stock
tips from the bartenders and their marriage counseling from their
hairdressers. The reliability of a cable network just doesn’t justify
this kind of trust.
While I used the term Internet *usage* in the title to this section, I
could have just as well specified Internet *expectations*. Cable
modems promote the glitzy side of the Internet, because they allow
graphics and animation to work so well. But the most important aspects
of the future Internet, in my opinion, are precisely the ones
prohibited by cable companies: the ability to run servers or
peer-to-peer applications, and bidirectional, real-time audio and
video. Thus, users think they’re getting something special while
completely missing out on the real story.
But instead of berating companies for things they can’t change, I
would opt for truth in advertising. The Internet was originally a
symmetric environment where everybody could run a server and, given
the money, could increase bandwidth as much as they needed. So it’s
just misleading for cable companies to advertise that they offer
Internet service. They should advertise email and fast Web access,
because that’s what they really offer. People who want to get on the
Internet should understand that they have to look elsewhere. And that
“elsewhere” is the subject of the next section.
How cable modems distort Internet economics
High bandwidth is a costly and complex market problem, and solutions
will not come easy. But as long as people think cable modems are good
enough for their needs, solutions will not come at all. That’s how
cable modems, wonderful as they are for what they offer, distort the
market for Internet access.
The current competition to cable modems, of course, is ADSL. It has
its own set of problems: it is no more symmetric than cable modems, it
is unavailable to many people who live far from the central office or
have old wiring, and the phone companies often mangle it during
marketing, installation, or customer service because their staff is
undertrained and stretched too thin. Yet ADSL fixes many of the
problems of cable modems.
Cable companies can offer access at just enough of a lower cost to
hamper ADSL adoption (although it does rise from year to year). The
more consistent bandwidth and greater privacy of ADSL may be worth the
higher cost, but plenty of people can’t afford it or don’t understand
This issue of cost is controversial in itself. Public interest
advocates are at least as suspicious of phone companies as they are of
cable companies. It seemed in the late 1990s that incumbent phone
companies were pricing their ADSL just low enough to undercut
competitors who were leasing or buying lines from them.
When a financial plague hit the competitive local phone market in 2000
and 2001, killing off many promising small providers, and when the
incumbent phone companies then suddenly hiked their ADSL prices,
public interest groups called it an obvious case of anti-competitive
This is quite possible, but there’s another way to look at the same
history. Perhaps ADSL is naturally higher-priced than cable access.
Perhaps competition in the 1990s forced the incumbent phone companies
to price their service lower than their costs, and when the
competition disappeared they could for the first time let prices
In that scenario, high-speed Internet access ironically
benefited–briefly–from a kind of subsidy reminiscent of
the universal service subsidies built into the phone system through
regulation and tradition. The difference between the subsidy of ADSL
and the subsidies in the universal service fund was that low ADSL
costs benefited the most privileged sector of the market: affluent
consumers with plenty of disposable income.
At any rate, ADSL now competes poorly with cable modems. We must
remember that ADSL, like cable modems, was a hack to a system not
designed for it. As a society, we must look for other solutions. Some
combination of the following may finally provide the widespread
high-bandwidth Internet we seek:
Consortia of neighbors who come together to string fiber from
central offices to their local streets, and each of whom pays a couple
thousand dollars for the last 100 feet to the home
Municipal networks that turn high bandwidth into a utility like
water or electricity
Wireless local networks, run by volunteers or innovative companies
But the urgency of these projects is undercut by the presence of ADSL
and cable modems alike. A critical swath of potential pressure groups
are just satisfied enough that they don’t raise the kind of ruckus
necessary to push forward a radically better Internet.
A few optimists will say, “Don’t expect the Internet develop in an
ideal manner. Cable modems are low-cost, low-performing, and offered
by companies outside the traditional Internet service providers–well,
those are the hallmarks of a disruptive technology.” But that
reasoning is flawed. Cable modems masquerade as a disruptive
technology, but in certain key traits they fail the definition.
For instance, new companies that successfully champion disruptive
technologies are risk-takers who have burnt their bridges and put all
their bets on the new technology. The cable companies have a
diametrically opposed attitude, using Internet access as a loss leader
to acquaint users with their more lucrative offerings. Furthermore,
disruptive technologies contain the potential for upward mobility.
But the limits of the lines used by cable companies are well-known and
fully explored; in the pursuit of better variants they would have no
head start over other companies.
The question is whether the demand for servers and real-time
high-speed media will grow to the point where it breaks through the
inertia created by cable modems and ADSL. That I cannot predict. We
shall have to wait to see whether a killer app emerges. (I’m waiting
for something with a firmer business model and legal justification
than file-sharing, which just fills a gap left by technologically
backward music and movie studios.)
But there’s a serious question as to whether people could exercise
their market power even if they did want something better than they
have now. And that’s because cable modems are leading policy-makers to
enforce bad choices through laws and regulations.
How cable modems distort Internet policy
Competitors and critics of cable companies pursue an “open access”
movement, whereby they want to force these companies to allow
competing providers on their networks. Open access is fair in theory,
but there’s not much it would actually offer consumers.
Remember that the most serious drawbacks of cable Internet service are
part of the architecture; no amount of competition can remove them.
Another layer of drawbacks lies with the unreliable operation of the
physical network, which would remain the province of the cable company
even if competitors could offer their services on that network. So
cable modems will always be what they are today, and people who ask
for competition will be disappointed with what they get.
The pressure of the open access movement has waned along with the
existence of actual competitors who could take advantage of it, but
the monopoly position of cable companies has created problems
elsewhere. It creates the impression in the minds of the public and
of technically unsophisticated policy makers that phone companies
deserve the same privileges. This is the most serious distortion that
cable modems introduce into society: the distortion of law and
Amply funded Congressional friends of the local phone companies have
introduced bill after bill, the best-known of which is
to remove various competitive requirements from the phone companies. A
similar effort is underway at the FCC.
The buzzword for the plans of these Congressmen and regulators is
“intermodal competition,” which supposedly pits phone monopolies
against cable monopolies. Essentially, the economic downturn that was
so lethal to small telecom companies caused policy-makers to give up
on the possibility of real competition by new, robust innovators.
Instead, they hope that the behemoths of two industries (both
financially struggling themselves) will somehow find their way toward
The choice is profoundly tragic, for neither the cable industry nor the
local phone industry is capable of the sorts of radical innovation I
mentioned in the previous section. Both are largely satisfied with
pursuing traditional markets, and neither would countenance a new type
of service that could eat into those markets.
Our only hope is to push for more openness and opportunity, not less.
We need to make it easier to string fiber, easier to reach customers,
and easier to interconnect with existing systems.
If you use cable modems, don’t feel guilty. You have the right to
enjoy it to the fullest. But look at what’s missing and figure out how
much it would be worth it to you to have true high bandwidth. Then
support efforts to create markets for promising alternatives.
Does cable modem service satisfy the needs of your home or small office?