> It's the case with telcos.

Here in Australia the government owns the last mile (the government org is called the NBN), but you have to buy your connection off them through a retailer.

Our biggest retailers predate that arrangement. They are exactly as you describe. They are expensive. Their customer service is complete crap, echoing all the complaints you see here. The small ones the NBN enabled are the reverse: cheaper, and the customer service ranges from OK to brilliant. Brilliant invariably costs more, so you get what you pay for.

So your theory is wrong, or at least the equilibrium you paint is incomplete. I can give you a clue on how a large dominant ISP can survive in a highly competitive market: their advertising saturates the airwaves. They use their higher prices, lack of service and scale efficiencies to pay for it.

It doesn't work so well on me. I suspect like most people here I will happily do a couple hours of research on prices and forums before making a purchase. The continued existance of these big ISP's can be explained by one thing: most people don't put that effort in.

Putting in the effort only works if there are alternatives if course, and this is where there is a glaring difference between Australia and the USA: whereas everybody in Australia gets to choose from literally hundreds of ISP's (most tiny), I regularly see complaints from Americans they get no or very few choices. That's because Australia governments go out of there way to engineer competitive markets. ISP's are just example. You see similar efforts in water, banking, insurance - lots of places. In the case of the NBN it was extraordinarily heavy handed. After years of existing telcos refusing to upgrade the copper network without being given a monopoly the government owned NBN was created to overbuilt it with fibre, rendering the old copper network worthless.

I doubt the USA's worship of "free markets" would permit such behaviour, which I suspect is the real reason you are stuck with shitty customer service. There is no point providing good customer service if there is no competition, and if there competition the usual approach in the USA seems to be Peter Thiel's: eliminate it.