Economists think that you should let markets set prices. shocking.
What is strange is all these free market people in tech who only like free markets that don't apply to them.
What is strange is all these free market people in tech who only like free markets that don't apply to them.
This is an infrastructure problem. And lot of free market people would have no problem seeing it managed by the state like roads, electricity and water infrastructure.
In the ultimate 'free market' - your healthcare would be priced based on your earnings, and it would be ~90% of your after tax take home pay. Why? Because you'll pay.
There's good reason we generally don't allow price discrimination, or things like collusion, it's not rocket science.
If the Telcos could price discriminate willy nilly over the information that goes through their pipes - then 100% of the profits of the company you work for will disappear into their bank accounts.
Imagine if some private entity owned all of the roads - and the toll was based on your income?
You can't talk about 'free markets' in such a cavalier manner.
FYI - there is one issue with 'Quality of Service' - which completely confuses the question above. Telcos must be able to discriminate based on this - i.e. lower latency, higher bandwidth = more cost. But they should be banned from looking at the contents of the traffic, or billing based on source/destination.
What's to stop a competitor offering it for 89%? And so on until the market finds its fair price.
In broadband, it would be completely stupid for carriers to compete on price because ultimately - they are competing with themselves. You reduce prices one day - the next you have to go lower - and so on.
It's better if they keep prices high and compete on other things.
It's easy to have implicit collusion if they are only 2 or 3 players.
Often, due to access rights there might not really be any competition in specific areas.
I worked at a small telecom switch company. We made a lot of gear that didn't make any sense just to get around regulations.
Example: we made a very expensive voice and dsl and t1 switch on a board. It was crazy expensive, didn't make sense. But the carrier wanted it, because if they had individual DSL cards (or something like that) - they'd have to allow CLEC (local exchange carriers) to compete. So they paid 2x for their networking gear to avoid competition.
The big money is in monopolies, oligarchies, and keeping competition away through legislation, barriers to entry etc..
In the short term, if supply is fixed, then you can always pay to exclude competitors by outbidding them.
For instance: the reason google makes so much money is that market incumbents bid above value (they lose money) on google ads to prevent new competitors from gaining market share and then they subsidize that money losing behavior with their profits from existing customers.
Should the government regulate what prices google and facebook charge for ads because that controls whether or not startups can get their products in front of customers just as much as the pipes.
Economists think that their big fat corporate overlords should get trillions in infrastructure subsidies from government money and then "let markets set prices", ie. those who got privileged by said money and monopolized the industry.