Monday, May 26, 2014

Like health insurance, tipping point of market dysfunction will come for premise Internet service

  • Low customer satisfaction levels and high churn
  • Rising prices and poor value
  • Little choice among providers
  • Market segmented into haves and have nots

All of these conditions describe the sickly individual health insurance market as it existed prior to the enactment of the Patient Protection and Affordable Care Act reforms that took effect at the start of the year. They also accurately define the market for premise Internet telecommunications service in 2014.

For the pre-Affordable Care Act individual health insurance market, a tipping point was reached in early 2010 when a California health plan issuer raised premium rates by nearly 40 percent for some plans. At the same time, millions of Americans not covered by employer or government health plans couldn’t purchase coverage at any price due to pre-existing medical conditions.

Today, millions of Americans face the same predicament when it comes to landline premises Internet service because none is available for sale to them -- two decades after most people accessed the Internet by slow, dialup modems still being used today. Mirroring poor customer satisfaction with health insurers, consumers give low ratings to telephone and cable companies.

Like the individual health insurance market, dissatisfaction with premise Internet telecommunications service will soon reach a tipping point that forces positive change. Tipping points are hard to predict precisely. They occur when the right combination of events and public sentiment converge at exactly the right time and place.

For landline Internet premise market dysfunction, it’s inevitable that point will soon be reached. It’s only a question of how and when we’ll get there.

One thing’s for certain. When a market for a product or service of vital importance to the nation’s economic well-being can’t remedy its own dysfunction, massive government intervention becomes more likely.

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