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Letter: ISP competition

Published: Sunday, April 6 2014 12:00 a.m. MDT

The proposed transaction between Comcast and Time Warner highlights the vast gap between the world the broadband industry’s critics imagine and the real world in which these companies compete.

Device, app and content companies are capturing most of the benefits created by ISPs. I recently studied two groups of companies — firms that provide the Internet (from AT&T and Verizon down) and those that use it (like Facebook and Google). The Internet giants earn six to eight times the rate of return of ISPs. ISPs must continually improve their networks to keep pace with rapidly growing bandwidth demands while the device and content providers realize the bulk of the value.

So while critics imagine a post-transaction Comcast dominating the market, it’s the content and device providers, not the cable providers, that hold the cards. Content costs drive cable price increases on consumers because your connection is worthless without them.

Comcast has far faster Internet speeds and more consumer offerings than TWC, so their combination will simply amount to a “trade-up” for TWC customers. But more importantly, the transaction will let them compete with Apple, Netflix, Google and the other true giants in the broadband space.

Ev Ehrlich

Bethesda, Md.

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