Who’s Sitting at the End of the Last Mile?

internet-backbone-usa We are! As users of Internet services, consumers are situated out at the end of the “pipes.” The last mile is the term for Internet pipes (including cable, fiber, wireless, etc.) that connect individual homes and businesses to service hubs. Internet service providers (ISPs) — such as Comcast, CenturyLink, AT&T, Verizon, etc. — build service hubs in each of the areas they serve. Because the hubs (called points of presence or POPs) need to be connected to each residence served, last mile connectivity represents a large financial investment by the ISP.

Last-mile ownership

So even though conventional wisdom says that no one owns the Internet, ISPs own the cables, routers, towers, satellites, and computing equipment that comprise the last mile. Over the last decade, as Internet use grew at incredible rates and technologies advanced rapidly, ISPs have had to build and update infrastructure to keep up with demand.

As owners of last-mile pipes, ISPs are guaranteed a huge number of customers, but at the same time they are required to invest some of their profits in infrastructure and keep “wheels on pavement” (send workers out to hook up service). ISPs have an obligation to enable Internet access for all, not just their highest-paying customers.

In the U.S., the last mile is “bundled”

Ever since the inception of the consumer Internet, we’ve wrangled with questions of oversight and regulation. In the late 1990s and early 2000s, many countries were sorting out Internet policies, and most required the owners of last-mile pipes to lease pipe space to many competing providers, creating an “unbundled” last-mile marketplace. However, the U.S. didn’t unbundle the last mile. U.S. policy specified that ISPs could retain sole operation of the last mile as long as they invested profits in network upgrades and expansion. A horizontal cap of 30% was placed on each ISP’s nationwide customer base.

The 30% cap has translated into a commitment to retain a minimum of 4 providers nationwide and has resulted in consolidation, with all sorts of stakeholders seeking to be on board with one of the four or so ISPs who will survive. Today’s market is dominated by a relatively small number of huge corporations (an oligopoly) and data shows that 75% of households have only one or two choices of broadband carrier. Analysis has proven that prices for connectivity are higher in areas with no competition.

So what do we find at the end of the last mile? Millions of consumers, complex infrastructure challenges, thorny policy issues . . . and a pot of gold.

Curious about a couple important changes to last-mile policy?