• The Economist, Monday, April 27, 2009 11:30 AM

In the U.S., "the land of free enterprise and the home of discount shopping, there can sometimes be an appalling lack of competition," notes The Economist. High-speed access to the Internet is one instance, and cable television is another. The reason for this "appalling lack of competition" is that cable television providers are also cable Internet providers, and they don't want one service cannibalizing on the other.

In Japan, consumers get speeds of 160 megabits a second from their local ISPs for $60 a month. In the U.S., Comcast and Cablevision want up to $140 per month for "a stingy" 50 megabits per second. Meanwhile, selling broadband connections to the Web is the most profitable business for cable companies in the U.S., costing a mere $100 per household to upgrade their networks to the latest broadband technology standard, called DOCSIS 3. Yet they want to charge $140 per household per month. It costs phone companies, on the other hand, $1500 per household to wire a neighborhood with fiber optic cable. Why aren't the cable companies taking advantage of their price advantage?

In short, they are afraid of the consequences, says The Economist. Cable companies make a pile of money ($700 per household per year) selling TV packages, even though most consumers only watch 15 or so channels. The fear is that they might jump at the chance to watch only those channels they want to watch, rather than pay for hundreds just to get the 10 or so they like. The cable ISPs fear that higher-speed Internet may one day give them that choice. In other words, they are trying to suffocate Internet television, but as the Economist warns, they may already be too late.

Read the whole story at The Economist »