Internet- Cabled and Squeezed

Price-gouging cable companies are our latter-day robber barons | Heidi Moore | Comment is free | guardian.co.uk: "Competition drives down prices, and the world of cable and internet access has largely done away with the threat of competition. At home, if you don't like Time Warner's prices, you can't turn around and get Comcast; you'll have to spring for satellite service or hope Verizon FiOS serves your area. And once you have those, there's no guarantee they'll suit you or that their billing will be any better."

The result is that Americans are being willingly pick-pocketed. Internet service is costly because internet providers refuse to compete with each other, ensuring they can charge high prices. They rationalize it like this: even though the cable companies have a gross profit margin of around 97% – meaning 97 cents of every dollar they make is pure profit – they still have to pay to service cell towers and invest in broadband. They have expensive equipment to maintain, see? That's not monopoly pricing power. That's just basic subsistence.

Unfortunately, their arguments fail for two reasons: the first is that those companies are not actually investing in equipment as much as they would like you to think. There is a cable graveyard littered with "overbuilders" that tried to create fast, wide internet access networks to compete with the giant incumbents like Time Warner and Comcast.Those overbuilders failed.

Another problem with the argument is that "recovering fixed costs" is not a problem; the cable companies' networks are already bought and paid for, many times over. The cable companies have such incredibly high profit margins – "comically high" in the words of one Sanford C Bernstein analyst – that they don't have any problem covering their costs. The Open Technology Institute noted in a recent report, "cable companies invested over $185bn in capital expenditures between 1996 and 2011. But these networks generated close to $1tn in revenue in the same time period."

The lack of either existent or upcoming competition taught the larger cable companies that it pays, literally, to get lazy and complacent: not only would they refuse to compete with each other, but there was also nothing to fear from any aggressive startups."