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Comment by cowpig | Hacker News Reader

I'd be interested to see some kind of economic analysis of this program.

On its face, the government subsidizing a for-profit company that has a monopoly seems like a terrible idea. Comcast already extracts monopolistic profits and thus captures as much of the economic surplus as possible.

Given that, price caps make a lot more sense to me. That's what has worked for utilities in general. If there's only one producer, they should be negotiating with one consumer.

But maybe I don't see the whole picture. Did the subsidy agreements work as a carrot to entire Comcast to lower its prices for enough residents that it was a net benefit? Are the positive externalities of a connected population worth the cost? Did this program work in some other way than subsidy?

Would love to learn more about this if anyone has good sources

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I'd like to see this as well. I suspect the money would be better spent subsidizing/establishing community-owned ISPs in underserved areas.

There are still old telephone co-ops from the early days of the telephone in the US. The one I'm thinking of is extremely rural (population density is < 2 people per square mile), with a median county household income under $25K. They put in fiber to the home years ago, and 1GBit symmetric is well under $100 a month. (They have cheaper plans too.)

Similarly, some places have started using companies like this:

http://nextlevelnetworks.ca

You pay them to build out a local fiber network. You just pay the line installation, and then the community owns the network. The minimum project size is about 100 houses because that leads to a $100/month per house bill from the incumbent network's $10,000/month fiber uplink.

Concretely, imagine there was a subsidy for any area that doesn't have 1GBit symmetric for under $100 a month. Starting in the poorest communities, use the ACP money to establish a local co-op (per community, creating jobs) that charges 1.1x the cost of the fiber uplink per month, and saves 10% for network expansion / maintenance.

The ACP burned through $14.2B since 2021. It costs about $10K to run fiber to a house (it's almost all labor, so in urban areas you have short runs with high cost of living for the workers, and in rural areas you have long unobstructed runs with low cost of living).

They could have wired 1.4M low income houses for fiber with that money, and the co-ops could then charge the houses well under $100 per month for connectivity.

This thought process makes some sense to me, though I have doubts about the implementation. Is fiber really the best fit for rural areas? What about some kind of wireless solution? Surely that would be more cost-effective?

Wireless could also work, but it requires line of sight, and you have to put it on a roof / poll, which isn't always feasible.

Another subtle problem with rural wireless is that you have to point to a well-connected area, so the cheapest way to service houses that are on the side of the hill facing away from town is often either fiber or putting the tower in orbit. Otherwise, you'd need to run a fiber trunk line to the middle of nowhere to support the ISP side of the wireless link.

Fiber has the property that you can run it in parallel to existing power lines, so any house with power already has an existing right of way to piggyback on (owned by the wrong person, but imminent domain exists). Also, you can choose to trench the fiber or run it on telephone polls.

If I were running things, I'd look into strategically deploying fiber-to-the-home to areas with good line of sight to poorly connected areas, and then use a hub and spoke network topology where the spokes are directional wireless and some of the homes are hubs.

That creates a second order problem though: You need backup power at the hubs or parts of the network will go down when the electricity goes out. Long term, it's probably cheaper to maintain a network of buried fiber than it is to maintain the electricity infrastructure needed to keep the towers online.

My experience living in Montana has been that wireless internet providers can be great but they don’t provide great low latency service. It creates a perception that one can’t live in certain areas and do remote work since it’s too hard to do video.

When it comes to broadband there is a question of “how good is good enough” but for the people living in Hamilton Montana (population 5k) I hope there can be a path to infrastructure investment that leads to high quality internet in town.

Wireless internet should be low latency (unless you're talking about geosynchronous satellite).

During high demand, our local WISP has 1 second latency to the internet because their wired backhaul link is terrible. It's less than 1ms to the tower. Starlink to the internet is in the 20-30ms range, and it's bouncing into orbit and back.

In the long run, fiber is the cheapest [1] and the best technological fit in rural and non-rural areas. Satellite internet is unreliable in storms due to attenuation, has decreasing bandwidth as more users sign up (which is one reason Starlink is expensive), and creates space junk down the line. Wireless solutions on land via 5G and the like require wires (will become mostly fiber) to carry the internet traffic to intermediate transmitters. 5G also needs more cells [2] per unit area compared to 4G to compensate for attenuation.

[1] https://www.eff.org/deeplinks/2020/06/why-slow-networks-real...

[2] https://www.lifewire.com/5g-cell-towers-4584192

I guess I spent a lot of words saying:

The ACP tries to make an expensive thing less expensive by artificially increasing demand. What if we tried increasing supply instead?

Is it really something that has the same supply and demand curves though? Once the wires are run and especially with fiber the ability to add another customer is pretty cheap. The main goal from what I've read is to encourage building out into poorer areas by boosting the customer base in areas where it might otherwise be uneconomical to build into. Most things diverge from the econ 101 model significantly.

I expect other parts of the business are more susceptible to the usually supply constraints, like customer service and maintenance.

What customer service? this is Comcast we are talking about. Consistantly ranked in the top ten worst companies in custom service nation wide. And maintaince already showed up only if the felt like when they felt and blamed your equipment when they do.

Quality of service and their budget for service aren't quite the same.

I worked at a major US telco for a while, their service wasn't anything to write home about either but you better believe they had very specific quotas of how many people they had to hire or contract relative to their customer count. At least in the US, union contracts often get extremely specific on that kind of thing.

Co-ops are fantastic for utilities, over half the landmass of the US is serviced by rural electric co-ops under the NRECA established by FDR during the Great Depression. Internet connectivity should absolutely be treated as a public utility similar to electricity.

I have outstanding fiber-to-the-door internet provided through my rural electricity co-op. I have no doubt that we'd still be waiting for internet if it was up to Verizon to supply it.

It's the USDA that provides grants for small community ISPs but their rules are clownshoes. your service area can't overlap any other service area, regardless of how awful it is. Well, technically, that's not true. If there's 1.5mbit in the area, they won't fund you - and it's not 1.5mbit in practice, it's 1.5mbit advertised.

I went around and around with the government saying that at&t obviously doesn't want to maintain this network so why not get something up before they let the copper rot in the ground.

Nothing doing.

>your service area can't overlap any other service area, regardless of how awful it is

That's regulatory capture by the majors. They don't want actual competition to reduce the value of their 'investments' so they avoid competing with each other, and smother all other parties in legislation and lobbying.

In California we have the CPUC which regulates utilities. Our three biggest utilities charge around 3x the national average for electricity. The largest--PG&E--has also been setting the state on fire and blowing up neighborhoods.

It doesn't seem like this model works either.

The actual implementation matters, when a bridge fails the issue isn’t bridges it’s the design of that specific bridge.

As the model works fine in other locations, fixing California’s issues with mismanagement/poor incentives should be the priority not simply giving up.

For example, for PG&E, the root cause of them blowing up that neighborhood was that the money that was supposed to go to upgrading the gas lines was embezzled and they faked the repair logs for the repairs.

Now, we have no idea which lines were repaired and not. Since this started decades ago, they have to dig up and inspect a huge number of lines.

Anyway, "mismanagement/poor incentives" is leaving out a lot of details involving graft and corruption, and malicious local governments.

For an example of corrupt/malicious local regulators: the Golden Gate Bridge maintenance road they recently built in Marin cost more than the bridge (inflation adjusted) and took longer to plan + build as well.

What i dont get is that you have a private company which mis managed its assets. Caused harm to the public. And the public bails them out with no equity or upside. Total shame as the CPUC could have demanded the state or rate payers get equity/bonds in the company for the bail out.

The USA basically has one politically viable solution to every problem it faces: “handing money to corporations.” That’s all Congress and States are willing to do. Electric utility graft and corruption? Hand them money. Banking failure? Hand them money. Airplanes falling apart? Hand them money. Health Care incentives misaligned? Hand them money. Poverty? Hand money to corporations that will embezzle most of it. People out of work during COVID? Hand their employers money. Top corporations getting too big and powerful? Believe it or not, hand them money. That’s the only tool in the toolbox. It’s helpful to think of Congress as a gigantic money funnel where our tax dollars go in and they take turns aiming it at their favorite corporations.

The government itself is akin to a perfect corporation: not liable, no accountability, monopoly on taking, monopoly on force. What’s this alternative that corporations that you’re alluding to?

Somehow voting reveals this government-is-godlike thinking that a magic superpower is going to bestow greatness upon humanity and achieve all of its hopes and dreams. When we look for a single example of this in all of history, the result is a null set, and in most cases the saviors are monstrous. Nonetheless, somehow this hope persists. See it every time in the votes here.

Jesus, in my mind the first thing you do there is arrest a bunch of people and nationalize (or statenize I guess, or whatever the word would be) the company.

Statenize, v.: to banish to Staten Island.

Can't say it couldn't help.

What seems to actually work is increasing market competitiveness. The open access rules that gave us MVNOs appear to have worked great. Texas electric customers have lots of choice and lower costs under similar rules.

These broadband subsidies might be too good, or at least too well captured by too few players. They may be a good idea generally, but it looks like it's time to revisit the details.

MVNOs share infrastructure. Nowhere has competitiveness in terms of the actual grid only on the energy production and billing sides.

The Texas grid is a massive failure in terms of both cost and reliability. Somewhere between 246 and 702 people were killed in 2021 when operators had already seen similar issues in 2011. Similarly people received bills that more than wiped out any long term savings they had received from hourly rate charging.

Is Texas electric a good example? It seems like a lot of people in Texas were swindled into buying variable rate plans that caused rate spikes resulting in $5,000 electric bills.

https://www.businessinsider.com/why-texas-residents-hit-with...

ERCOT is not a model that anyone should strive to emulate.

https://99percentinvisible.org/episode/grid-locked/

Not a swindle.

One company offered a plan where all of the electricity was purchased on the spot market. All of it.

Spot market purchases of electricity are very cheap. Except when they aren't.

Most months my electricity bill was 1/2 of current.

It’s a swindle because of the marketing of the plans and the exorbitantly high maximum rate caps. Every person who has knocked on my door to sell variable rate plans emphasizes the upside of the deal: why pay more than the current rate? You’re wasting your money on paying for the fixed rate that’s mostly higher than the going rate.

Like you said, most of the time you save a good amount of money. The salespeople and marketing pamphlets emphasize that. Do you really believe that the executives at these utilities are ignorant to the fact that most of their customers don’t fully understand the implications? I think they sell the plans specifically because customers don’t understand them.

Worse for Texas, their system’s market pricing setup incentivizes power utilities to minimize their overhead capacity. The closer their supply is to demand, the higher the price they can get. But it leaves very little wiggle room for emergency situations (99% Invisible has a good episode about this). Therefore, their grid is more prone to spikes in variable rate pricing than other states.

Like financial instruments such as options trading, financial games like this make sense for the wealthy who have a cushion of risk tolerance. I can make more money faster with options trading compared to an index fund!

But for the median and below wage earner, sudden bill surprises shouldn’t be something that the government enables for basic necessities like utilities.

we agree on all the facts.

i paid my $2,300.00 monthly electrical bill without complaint. (usual about $75)

the upside and downside were understood.

Great. I am sure that you can understand why you’re probably the exception in:

1. Fully understanding the potential of the downside.

and

2. Being able to financially cover the downside.

The median transaction account balance in America is $5,300, which includes money in the accounts for things like paying mortgage and rent.

https://www.bankrate.com/banking/savings/savings-account-ave...

So the median person signing up for that plan has to be ready to liquidate half their cash on an electric bill. If you’re below the median you’re even more screwed.

And I'm sure to all this you'll say "I made an informed choice and I should have that choice," but I think that's a highly debatable concept that depends a lot on the details – one of those critical details is the maximum rate.

But if we use the numbers above, that person is also saving $800 per year in a typical year. So even with the emergency liquidation, I'm not convinced they're worse off when we measure them across 5 or 10 years.

I can save a bunch of money on mortgage interest by buying a house in cash, too.

But of course that option isn’t realistic for the vast majority of people.

The piece of data I’m missing is how often a huge spike in costs like the one described happens. It’s unpredictable, it could happen any day for any reason.

Like I’ve said a couple of times, I’m doubtful that most people with these variable plans sincerely knew that a spike that high was even possible. If you bought a variable rate mortgage to save money you wouldn’t expect it to ever be adjusted to 200% APR.

And the truth of the matter is that a $2,000+ electric bill isn’t reflecting anything close to the actual cost of generating the electricity, just like paying $50 for a roll of toilet paper during the pandemic wouldn’t reflect the real cost of producing the item plus a reasonable profit margin.

That’s another good analogy because everywhere else in our society, price gouging due to emergencies is illegal.

> But of course that option isn’t realistic for the vast majority of people.

Your own numbers had it as doable but unpleasant. Should I not use those?

> I’m doubtful that most people with these variable plans sincerely knew that a spike that high was even possible.

That's a problem but it's a separate issue from whether they're better off financially.

> If you bought a variable rate mortgage to save money you wouldn’t expect it to ever be adjusted to 200% APR.

That would be pretty surprising, yeah, but if it was only affecting the payment for one month then it could still be a better deal overall.

> And the truth of the matter is that a $2,000+ electric bill isn’t reflecting anything close to the actual cost of generating the electricity, just like paying $50 for a roll of toilet paper during the pandemic wouldn’t reflect the real cost of producing the item plus a reasonable profit margin.

That's not true at all. It's not gouging.

The underlying principle of the Texas grid is that power plants that are almost never used get 0 dollars for months or years on end, and then they make all their money in a short window. The reason wholesale prices are allowed to go that high is to encourage those power plants to exist, because otherwise those power plants would not be built. That huge price is paying for years of maintenance and deprecation.

> Not a swindle.

I'm going to assume, based on this statement, that you have an education that allows you to forecast and do cost-benefit analysis. Most people do not, and just hear "you will pay less". When you knowingly do this to people, it's a swindle.

Yes, we do need to protect some people from bad choices, and yes, that will limit the economic freedom of the very well-educated to some small degree. That's society, baby.

As a resident of texas, allow me to describe / explain how electricity works.

Consumers can select from maybe 50 "retail providers". They all have some kind of marketing deal, like "all green" or "free weekends" or "0.14 a kwh fixed for 3 years".

You pick your deal and deal with this 'company'. All of the electricity comes from the same place. All of the wiring is maintained by one company.

Your "choice" is deciding who sends your bill and collects the money.

Seems like a monopoly would be a lot cheaper. Less employees, less infrastructure, less advertising.

A monopoly would be cheaper in a perfect world with no corruption, and no profit motive/incentive. Competition seems to be the only way in our current capitalist society to reduce the prices consumers pay.

A corporation operates in their own self-interest.

A corporation that is a monopoly has no motivation to keep pricing "fair" and, in fact, has an interest in making prices as high as possible. It is never cheaper this way.

We, as a society, seek to work around the problems that naturally-occur with monopolies by regulating them.

In Ohio, most of our residents have one provider (AEP). AEP owns the local infrastructure, and they also own the transmission infrastructure, and they are pretty tightly regulated.

To help keep pricing in check, it is required by regulation that the rate at which AEP buys their electricity at is set periodically by a competitive bid process. (This is, in theory, a process that works well for consumers and provides a reasonably low price: If a supplier can buy and sell (or otherwise produce) electricity cheaper, then they can put their bid in and have an opportunity to do so.)

The problem with regulation is that it is regulates. It is inflexible.

And sometimes, this bid process goes wrong: Early in 2023, for instance, it resulted in a generation price that was set to approximately double in six months[1].

The solution to both monopolies and regulation is consumer choice in a competitive marketplace.

Obviously, we in Ohio can't usually decide whose lines and infrastructure we use -- they're monopoly-owned. There's some exceptions to this like [2][3], but broadly speaking: Of course AEP is involved, because they have to be involved.

But we do get to choose our generation supplier[4], which is probably similar in function to how folks in Texas can pick their "retail provider" (except we don't get time-dependent metering).

And that very limited aspect of consumer choice does work for me, the consumer. I was able to completely bypass the 2023 price hike by selecting a different generation supplier. In fact, my total billed price per kWh of electricity used (inclusive of distribution, transmission, and fees) was actually slightly reduced compared to what I had been paying previously.

It's not a perfect system, as there are no perfect systems. But this little sliver of competition is better than being completely beholden to either an unregulated absolute monopoly or an inflexibly-regulated absolute monopoly.

[1]: https://puco.ohio.gov/utilities/electricity/resources/histor...

[2]: https://clydeohio.org/159/Clyde-Light-Power

[3]: https://www.columbus.gov/utilities/about/The-Division-of-Pow...

[4]: https://www.energychoice.ohio.gov/

You aren’t actually buying power from different people in states where you choose a “different” provider. Those are all middlemen offering a variety of more expensive rate plans and “benefits” that appear to be cheaper but actually are more expensive than buying directly from the main utility provider. (The middle man has to make money somehow after all) In reality the power travels over the main providers’ lines so the main provider is usually cheapest.

It’s just an illusion of choice and I would rather not deal with the constant door to door utility MVNO salesmen.

Are you saying the price capping model doesn't work? If so I don't follow the thought process: you're comparing California (price capped) against the national average (also mostly price capped to some degree)

That's a good criticism.

The comparison is more to cellular providers where there's open access to the same underlying infrastructure, and we have consistently good pricing nationwide thanks to competition.

The point in referencing national averages is to show that the electric utility model can result in sclerotic and under-performant regions that are impossible to fix.

The BLS actually maintains statistics on this, and while CA does pay higher than average prices, it's less than 2x the national average.

Considering the geographic size of the electricity grid in CA, that's not surprising. A bigger grid is more expensive to build and maintain.

The average price paid for a KWh is very different than what a median customer pays for a marginal KWh. There are myriad small utilities that drag down the average price paid for a KWh in CA, but the three big IOUs cover the majority of accounts. And they all use the same transmission network.

The numbers I am citing are based on the biggest utilities, unless you do not consider PG&E to be one of CA's biggest utilities.

If we included all CA utilities, CA customers would only pay slightly above the national average.

I'm not sure how the US average residential retail number is weighted, but let's take it at face value at $0.1619/KWh. [1]

Baseline allocations are very small (around San Francisco--territory T--you get 177 KWh/mo in the summer and 234 KWh/mo in the winter). Marginal consumption is almost guaranteed to be in the second tier. Under the old default E-1 plan, that means your marginal rate is currently $0.5257/KWh. [2] This is in excess of 3x the national retail average.

But E-1 isn't the default plan any more. These days that's TOU-C. It's more difficult to come up with clean comparisons with a time-of-use plan. To keep it simple, I'll just average the rates together. The variation across time and season is not huge, so it should be good-enough approximation. Under that plan your marginal rate is around $0.5388/KWh. [3] This is also in excess of 3x the national retail average.

What about at the other end of the state? I don't know as much about baselines around San Diego since I don't live there. If we use the same assumptions for SDG&E as we did for PG&E, the marginal KWh there comes out to $0.4833/KWh. [4] This is almost exactly 3x the national average retail rate.

And if you're somewhere between these two utilities and on SCE? The same assumptions put you at $0.43/KWh. [5] So you're just barely under 3x the national average.

[1] https://www.eia.gov/electricity/monthly/epm_table_grapher.ph...

[2] https://www.pge.com/tariffs/assets/pdf/tariffbook/ELEC_SCHED...

[3] https://www.pge.com/tariffs/assets/pdf/tariffbook/ELEC_SCHED...

[4] https://www.sdge.com/sites/default/files/regulatory/1-1-24%2...

[5] https://www.sce.com/residential/rates/Standard-Residential-R...

The idea on paper I think was to encourage building out the infrastructure to areas that would not otherwise be profitable enough to build to by increasing the number of available customers in a poor neighborhood.

Personally I think it's a tough spot. Infrastructure projects like ISP connections are best done once to a residence like power or water/sewer which is usually a city or heavily regulated natural monopoly. Ideally you could have the city run fiber to residences in the metro area and companies could compete for the service across those wires if we wanted to cling to markets like some places do with various billing providers for electrical power.

The program had/has many ISP participants, my small local fiber company participates ATT and Comcast just streamlined the application for their customers with applications on their sites, otherwise you apply with the government's ACP site which takes about an extra month longer to be approved. If approved it provides a $30 month credit to the ISP.

There's a huge need for subsidizing the internet for low income elderly/rural folks though. That's the intent. I work in digital equity and inclusion so tons of my learners/clients utilized the ACP. These are not middle class folks utilizing a loophole. I'm skeptical of these loophole claims as I know many who were denied for being ever so slightly over the poverty level.

So sure, on one hand giving more dollars to Comcast seems terrible, but that's like not wanting a school lunch free program because it's going to benefit Sysco or Aramark. There is a real need for helping low income access the internet.

Price caps could make sense, but in my experience the more important missing piece is a requirement that a lower tier be offered. Comcast keeps upping their lowest tier, and raising the price concomitantly. I started out at 12Mbps and am now at 80. I don’t remotely need 80, and would love to pay half of my current rate for half of my current speed. I’d even pay 2/3 of my cost for 1/3 of my speed. But Comcast does not offer a tier below 80/10 in my area.

>price caps make a lot more sense to me.

Will never happen. Comcast has the power, not the politicians. As Marx showed us 150 years ago, a state under capitalism tends to become a capitalist state.

How about we just stop subsidizing rural living and force big city liberals to allow more housing?

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