Coalition of Organizations for Accessible Technology

[Commentary] The proposed merger between Comcast and Time Warner Cable highlights the vast gap between the imagined world the broadband industry's critics and the real world in which these companies must compete.

Tthe substance of these criticisms is simply wrong. The latest rankings from Akamai show the US eighth and rising in global Internet connection speeds, and a new report from the International Telecommunication Union depicts US wireline broadband as being the most affordable among our trading partners as well. But even more dissonant are the data on profitability.

In a new study set to be released by the Progressive Policy Institute, I examine the rates of profit of two subgroups of the Fortune 500 -- companies that provide the Internet (from ATT and Verizon down to Level 3 and Frontier) versus companies who reside on it (from Apple and Microsoft to Facebook and Yahoo). The (average weighted) rate of profit on sales for the "providers" is 3.7 percent, versus 24.4 percent for the "residers." Calculated on assets, the rates are 2.1 percent versus 17.7 percent, respectively.

So the companies that use the broadband Internet are making six to eight times the margins of the allegedly monopolistic companies who provide it -- the exact opposite of what you'd see if the price gouging accusation was real. [Ehrlich is president of ESC Company, an economics consulting firm, and former undersecretary of commerce in the Clinton administration]