Don’t Blame Big Cable. It’s Local Governments That Choke Broadband Competition
wired.com
wired.com
- Roads
- Water/Trash/Sewer
- Police/Fire service
- Electrical
- Telephone
- Cable TV
So, what do you do? Make the Electric company put up New Companies A-Z's lines for free? That doesn't work and would quickly lead to companies covering the lucrative part of town (read: "rich") and widening the digital divide.
It comes back to the bad decision that didn't force Cable to be a common carrier. Had that happened, we'd end up with a situation like DSL where there are multiple vendors, except the lines would have the same speed capabilities as Cable.
So, in short, it comes back to a bad FCC decision. Requiring a bunch of new physical infrastructure isn't needed when the existing could just be broken up and leased out as dumb pipes.
I do think it's fair to blame municipalities. Look at something that is much easier to build out: wireless networks. Cell coverage has dramatically improved over the past 10 years. In part, that's because multiple carriers are competing for customers and municipalities have largely stayed out of their way.
One could even argue that we're reliant on cable providers because there were no incentives for the highly regulated phone line providers to improve their networks.
Regional competition for services which require expensive infrastructure is non-existent once the first player has entered the market.
Any competitor trying to enter would need to build out the expensive infrastructure, only to be undercut in the following price war and lose because of recent costs. It's textbook game theory.
This lack of competition leads to a deterioration of quality of the service as the sole market holder doesn't need to continue to invest in infrastructure. Instead they can invest in lobbying which helps further cement their hold on their market, or invest in advertising to take customers away from shittier service alternatives, like DSL.
Quality is the exact reason why something like transportation is handled by local governments, as opposed to letting private toll roads dominate the market, which have no incentive to patch pot holes when it's the only option available.
This is just as true when the first player is a local (or State) government as when it's a private company.
> Quality is the exact reason why something like transportation is handled by local governments, as opposed to letting private toll roads dominate the market, which have no incentive to patch pot holes when it's the only option available.
Local governments often don't do a good job of patching potholes either. (Nor do State governments, which often own major highways.)
And don't cherry pick some individual poorer counties for road performance, even though on a whole they are better. I could cherry pick Somalia as an example of privately maintained transportation monopolies.
You only have a single road leading to your house. But you already have at least two communications lines, perhaps more.
DSL is an inferior good, not the same service, for what can be considered high speed internet. It's not a duopoly when you need high speed internet.
Being stuck at the speed of light sounds ok to me.
These are essentially utilities (excepting Cable TV, but I'm pretty sure there's not a meaningful infrastructure difference there).
What was the history that led to a the non-common carrier ruling? Was it thought that cable companies would upgrade infrastructure more quickly if they didn't have to sell access to their lines?
Here's what the NCTA has to say about it now: https://www.ncta.com/platform/public-policy/why-its-a-good-t... Given the success of broadband in areas where the lines are sold like they would be in a common carrier situation, it's hard to believe anything they say.
You had the phone lines from the phone company (natural monopoly, common carrier), and completely separately you had an ISP with a modem bank hooked up to an Internet uplink (competitive, information service).
Then you had the Telecommunications Act of 1996 (I turned twelve that year!), where the phone company had to allow the ISPs to use the phone lines at wholesale rates. So you get ISDN and later DSL with that same split between who controls the wires and who controls the Internet uplink.
Then you get cable Internet. Which does not use common-carrier wires (I assume this is related to not-so-modern TV being entirely one-way). And which end up classified the same way as potentially-unbundled Internet that runs over the phone company's wires, despite being controlled by the same people as the wires it runs on.
Then for whatever reason all the independent DSL providers disappeared (or at least shrunk to where they can't afford noticeable advertising campaigns). I don't know if the phone companies found a way around having to share their lines, or put less effort into maintaining lines used by independent ISPs to discourage people using them (I know I heard this suggested back when it was new, no idea if it was reasonable or just a conspiracy theory), or just out-competed them based on there being a single bill and a single point-of-contact (and no finger-pointing) for problems. I guess it can't be the first option, since I've heard that a few parts of the country actually have more than 2 choices (cable company & phone company) for Internet service.
A situation where nobody wants to invest in DSL and everyone is looking to get out of the wireline telephone business?
We have a single company (BT Openreach) that's highly regulated by Ofcom which lays said cables and owns the relevant last mile infrastructure. This company then sells access to said infrastructure to retail ISPs.
Ofcom has enough teeth to force this company to perform upgrades, through both Government-based power, and the fact that because if the company didn't, the retail ISPs could reasonably band together and lay their own cables (at significant cost and likely regulatory nightmares, but they could certainly tear into Openreach's margins). There's a couple of companies which already do that on their own; Virgin is one, I believe, and it's trying to follow the US "media company" model.
So basically: we have a model in which we've managed to allow for a single company to exist without competition because that's the most efficient way to manage national physical infrastructure, but there's enough regulations and threats floating about that it more-or-less does what its customers (the retail ISPs) want, which in turn more-or-less do what their customers (Internet users) want due to competition. That is, we've built a system in which there's enough money floating around to potentially replace Openreach if we really, really had to.
http://www.ofcom.org.uk/static/archive/oftel/publications/br...
We had a time when a company spent billions of dollars building infrastructure for their competitors. We've never had as good competition since that time, the dial-up days.
Look, we own the roads. Not Ford, not Chevrolet, not Toyota. In some places the roads are not in great shape because the money isn't being spent where it should to keep it up. That is a government problem but it's mostly a lazy voter problem. There are people that argue less government is the solution to our problems when they're too lazy to hold the government accountable for misappropriating money and giving kickbacks to their corporate friends and future employers. Despite the problems, it's still better than having all of the roads owned by Ford and then anyone who wants to drive a Toyota on those roads has to pay a huge "wrong car" tax.. I mean fee.. or drive at half the speed or something else ridiculous. (you could call it road neutrality) I'm not even suggesting we should own the network. I'm not even saying we should "own" the dark fiber to each house. I'm suggesting we should make it so competition can flourish instead of being choked off.
You're not going to have it by making companies build out brand new infrastructure for every company. Completely eliminate all other barriers other than buying the lines and putting them up. That's still tons of money, even for a small area. In the old days a mom & pop ISP could start up by ordering a T1 and a few phone lines from the phone company. The phone company was the infrastructure. If there are 30 companies that want to offer service to a city do you propose all 30 build out some sort of cabling all over town? Don't be ridiculous. Can you imagine? Then most of them go out of business because there's not enough of a market to sustain that and billions of dollars sit rotting on the poles instead of being used for a good purpose.
I'm telling you. Fiber to the home with a colocation facility or facilities that they all run to. Put several strands so if someone wants to buy Fiber TV from Comcast, Fiber phone from Verizon and Fiber Internet from whoever else each company can have their own lines. Or hell, if they want all 3 from Comcast then they can just use 1 fiber line. If you get Internet from Mom & pop co and they go out of business then you can switch providers by subscribing to a new one and they will do what they need to in the colocation to move your fiber over to their system.
The only role in the government is, as the representative of the customers who are requesting the service, to set up relationships and take action when there's abuse such as price fixing or if the infrastructure company turns out to be a bunch of deadbeats.
Nobody is going to voluntarily build an infrastructure only company. It's a chicken and egg scenario, what use is it if no one is offering a service over it? What use is a service without the infrastructure to support it?
As an aside, If your only concern as a voter is how low your taxes are then you're part of the problem, not the solution. You should be concerned about what value your taxes are bringing you. You could be paying less taxes but much much more in other areas as a result. You'll never be able to pay as low taxes as the guy who can afford to make sure he's paying the lowest taxes.
Why is this coming up now? One of the interesting tidbits I picked up from industry coverage[2] of the current round of FCC rule making is "Wheeler intends to nullify state laws that prevent local governments from establishing broadband service". Which is something I don't think the industry wants to happen. So, yeah open access is great but giving cities the "If you don't provide acceptable internet service we will" stick is valuable as well.
[1] http://arstechnica.com/uncategorized/2008/07/telco-wont-inst... [2] http://www.cedmagazine.com/blogs/2014/05/fcc-four-more-month...
In my city (Albany, NY), the city signed a 10 year franchise agreeing giving Time Warner a monopoly on tv services, which makes the city much less attractive for FIOS, which is available in most surrounding communities.
Why did they do this? Some idiot activists got the city to demand that TWC provide a public access channel (hello, 1982) and to build a "TV studio" in the local high school.
And god forbid the municipality try to build out its own network. That will just inspire the incumbent cable company to take them to court until the project gets scrapped.
No, I think we can pretty easily blame Big Cable for this one.
I don't blame the big cable companies for doing it, since they'd be at a competitive disadvantage otherwise.
Remember that humans operate companies and governments alike. Except governments use force and companies are subject to it.
"Remember that humans operate companies and governments alike. Except governments use force and companies are subject to it."
What utter drivel.
When local governments (i.e counties) attempt to roll out their own broadband, big cable (i.e comcast) sue to prevent it from happening.
> In Kansas City and Austin, local governments wanted Google Fiber more than they wanted kickbacks. So they expedited the permitting process, gave Google rights-of-way access for little to no cost, and allowed Google to build-out selectively — i.e., in neighborhoods where consumers actually expressed demand.
Kansas City agreed to get the permits done in 5 days. Provo sold Google for $1 a fiber network they had spent over $30 million constructing. Most if not all of the cities declined to impose build-out requirements: enough users had to sign up in each "Fiberhood" to justify Google deploying there.
This stands in stark contrast to what happens when companies try to deploy fiber or cable in other places.
Read Comcast's franchise agreement for Wilmington, DE, a small, poor, city of about 70,000 people: http://www.wilmingtonde.gov/docs/1320/3716Rev1.pdf.
In addition to the hefty franchise fee, paid out of gross, the city extracts a couple of million dollars in funding for government programs, and imposes a built-out requirement that requires Comcast to build out to every neighborhood above a certain (low) density, even if enough customers don't sign up to make it profitable. Similar build-out requirements killed FIOS deployment in the city: http://www.fiercetelecom.com/story/verizon-defends-honor-wil....
In short, I can't have FIOS because Verizon wasn't willing to build it out to all the neighborhoods in the city that have 30-50% of its residents living under the poverty line.
This sort of article typifies the local response: http://seattletimes.com/html/businesstechnology/2023420101_b....
("Once cities provide these handouts, they don’t have much leverage. They’ll end up bowing and scraping and hoping that Uncle Google throws a bit more fiber their way, someday. The experience in Kansas City — where suburbs are stuck waiting for Google to extend its fiberhoods — suggests that cities in a region targeted by Google Fiber should work together on setting expectations and deadlines. Yes, a provider like Google may abandon a city that doesn’t play along. But is that such a loss if the company ends up cherry-picking and making the market less attractive to other providers — including public utilities — that might come and provide fast broadband for everyone?")
In other words, they want to subject fiber deployment to the typical class warfare that characterizes municipal politics. It's better for nobody to have fiber than for wealthier areas to get it while communities that can't afford it don't. In New York City, the mayor has turned Verizon's FIOS deployment into an economic justice issue and hired a civil rights lawyer: http://www.crainsnewyork.com/article/20140219/TECHNOLOGY/140....
Who do you blame for not having fiber? How many cities would already have competitors deploying fiber if they had adopted the kind of regulatory regimes Google is demanding as a pre-condition for launching fiber?
The reason that Verizon signs contracts to serve all of a city like Wilmington, DE is that there are enough households who can afford it to make it worth their while. If Google comes and picks off the highest-value customers, the mix of remaining customers may not be worth serving from Verizon's perspective, and they may exit the market. (And even if Google is blocked by municipal governments, alternatives like WiMAX and its successors are much harder to block).
I don't think there's an easy solution to this problem. If you just let the market do its thing, then fewer people will have access to Internet overall. The tradeoff isn't easy.
People often reply "this isn't politically feasible", but that's giving up the game. If the opaque, inefficient, and difficult-to-measure strategy is politically feasible but the transparent one is not, that's a good sign it's a bad choice.
We tried this in oz. A gov. built backbone to be sold off (the naturally competitive part), with a gov. built and maintained 'fibre to the home' access (the natural monopoly part).
Fox / News waged a months long campaign to have them booted out of office, in which they explicitly and repeatedly called the gov. nazi's, and outrageously lied about the associated costs for both the gov. and opposition broadband systems. Now we have a system which locks in contracts for the backbone, and rents copper infrastructure for the next 50 years for access. If you want fibre access, you have to pay for it to be hooked up at a prohibitively large cost.
We know we can deliver access to everyone in oz through gov. for close to the price of delivering access to a privileged few through market monopolies. At a certain point, you have to realise this isn't about bad political choice, but a deliberate and sustained attempt to lock in privilege for the wealthy at the expense of everyone else. This is the real market distortion.
Isn't this exactly what local governments are doing? It's just that the tax falls on the (shareholders of) broadband companies, who are presumably not, for the most part, local residents. The reason this is more politically feasible is not that it isn't a tax, but that the tax is not being levied on voters. Or does the name matter that much?
But isn't the point here precisely that without the tax or other barriers to entry, "they" would not have great service? Some might -- but it seems likely that far fewer would get it than with build-out requirements and so on in place. I think the government has an obligation to avoid leaving those people behind in this case.
An explicit tax on the company by the local government would still be better than a build-out requirement, since this would at least be transparent.
But even if you want to transfer money from someone to the poor, and (perhaps unethically) you want to take it from someone who's not a voter, it still makes no sense to pick on this particular company. Why not tax any of the other non-voting companies that service a locality? Say, the tax on coca-cola?
I guess I don't quite see how it's more transparent. What information would it provide, and to whom, that the current system obscures? And is the issue whether we call it a "tax" vs. "build-out requirement", or is the issue what is being taxed (land use vs. revenue from local customers vs. ...)? I can't picture what such a tax would look like, how it would really differ from the status quo, and why it would result in better service -- walk me through it.
> But even if you want to transfer money from someone to the poor, and (perhaps unethically) you want to take it from someone who's not a voter, it still makes no sense to pick on this particular company. Why not tax any of the other non-voting companies that service a locality? Say, the tax on coca-cola?
Well, I take it that there are some relevant differences here, as qq66 pointed out. Internet access is infrastructure, and increasingly, it is essential; access to Coca-Cola is not. I think the government has some obligation to avoid creating a disparity between haves and have-nots for infrastructure like this. It's not the only consideration, but that is one reason build-out requirements are appropriate for broadband companies, while not for soda vendors.
Also, this infrastructure often has to be built on public land. It's the government's job to make sure that land is managed well for an indefinite period into the future, presumably well beyond the life of whatever cable is being laid down. This is why it's appropriate for the government to demand more oversight of these companies in general, whether that comes in the form of build-out requirements, a fund for cleanup fees, or whatever. A story I've seen again and again is public land rights being granted to a private company, which subsequently damages the land and then tries to stick the public with the bill. The government has an obligation to protect public interest in the land and avoid that kind of situation. Again, it has no such obligation with respect to many other businesses: Coca-Cola doesn't need land rights to sell bottles in private stores, so that kind of oversight is not appropriate.
The transparency issue is that a build-out requirement isn't denominated in dollars. (There are other economic efficiency arguments, such as if the poor people would rather have the money than the cable connection, but I'm addressing your question on transparency.)
A cable company has much more expertise than a local government for what the long-run costs and potential profits are for a build-out requirement, and moreover they have a much higher incentives to apply their expertise to the local situation than a politician. If you institute a build-out rule, it does so without knowing the size of the costs; they are simply imposed silently. Any future public debate about revising the rule is enfeebled.
> I can't picture what such a tax would look like, how it would really differ from the status quo, and why it would result in better service -- walk me through it.
The company is charged $X per year to use public rights of way. The government hands this money to the poor people who can choose to buy cable connections or not. (If they don't, this is a sign that they have something better to use the money on.) If the government doesn't trust the poor people to use the money responsibly, then the government directly subsidizes their cable connection fees instead.
> Well, I take it that there are some relevant differences here, as qq66 pointed out. Internet access is infrastructure, and increasingly, it is essential; access to Coca-Cola is not. I think the government has some obligation to avoid creating a disparity between haves and have-nots for infrastructure like this. It's not the only consideration, but that is one reason build-out requirements are appropriate for broadband companies, while not for soda vendors.
You missed the point. I wasn't saying that we should have build-out requirements for soda, I was saying that if we use a tax instead, then we can take the subsidizing resources from anyone rather than just a company in the field whose customers we wish to help. This would allows us much greater flexibility in getting those resources in a non-distortive way.
> whether that comes in the form of build-out requirements, a fund for cleanup fees, or whatever.
A fund for cleanup fees is completely different idea, and indeed is generally economically sensible. (Clean up fees are about correctly pricing externalities. Build out requirements are about getting one group of people to subsidize another.)
> A story I've seen again and again is public land rights being granted to a private company, which subsequently damages the land and then tries to stick the public with the bill.
This has nothing to do with the topic. I've seen people litter all the time in public spaces. Should I institute the loud-car ban because some people have littered in the past?
OK, I think I see.
> The company is charged $X per year to use public rights of way. The government hands this money to the poor people who can choose to buy cable connections or not. (If they don't, this is a sign that they have something better to use the money on.)
But I'm still having trouble seeing how this scenario improves on the original problem.
I thought that local governments were already charging $X for uses of rights of way, and build-out requirements are in addition to this. So if I understand right, the idea is to charge more (say $(X + Y)) but not impose those requirements, and instead let the broadband companies decide where and when to build out; then distribute the excess $Y (and, possibly, funds from elsewhere) to subsidize Internet service for the poor.
The problem I see here is that, if I'm one of those N poor folks the broadband company decides it doesn't want to build out to, I'm out of luck. I don't even have the option of buying broadband service, and offering up my $Y/N dollars does not give me much leverage to change that. If enough of my neighbors got together and pooled our funds, maybe that would be enough to convince the company to build out to our neighborhood, but maybe not, especially if (1) the company has already decided our neighborhood isn't worth it, or (2) building out would require the company to pay more in right-of-way fees (though maybe this is included in the initial $X+Y price?).
In short, it seems like our government trades the relatively strong leverage we have as a collected political force for the relatively weak leverage we each have as individuals, plus $Y/N dollars apiece.
In this particular case, that does not sound like a good trade, for the reasons I mentioned: Internet access is more or less essential infrastructure, and there is public interest in having nearly-universal access to that infrastructure, rather than a class of haves and a class of have-nots.
I wouldn't think it's that the government doesn't trust the poor (or really, anyone not yet built-out-to) to spend this money on responsibly. Rather, it's that divvying it up and letting individuals make their own decisions on how to spend it sacrifices political and economic coordination, which is required in this case to serve a desireable public end, near-universal access. Solving coordination problems like this is a big part of why governments exist, and we shouldn't be rushing to give up that coordination for individual decision making. We can easily end up in a situation where we're all worse off that way.
Care to add some justification or reasoning behind this gigantic leap?
Or to put you comment another way, 'the poor can't afford computers or good internet access, so therefore they don't need them'.
But absolutely the bandwidth is sufficient to live in the present.. or at least the recent past. It is sufficient to access the services that poor people need because they are poor.
Let them eat bread I guess..
If they had framily plans and bling phones and could fool people into paying $10/gb for fiber than verizon would have put up fios everywhere 10 years ago. The trouble is that fiber is too cheap.
Wireless is the predominant form of internet access in the majority of Africa. The poor might not have a place to sleep, but I guarantee you, they have a cheap cellphone. The slightly better off have a smart phone or blackberry with data access.
It might not be perfect. They might not be able to watch Netflix or hours of educational videos on youtube, but it's a start and better than what the poor have traditionally had since ever. Please stop moving the goal posts, it's intellectually dishonest.
I am open to any suggestions on bandwidth conservation.
In the future, you may want to get the facts before jumping to judgement, though :)
Except, you know, for the government to stop being control freaks for a minute, let the people that can pay to pay, and as the cost of basic service eventually and inevitably drops have more and more people enjoy it. Of course, that means that somebody who doesn't have any money wouldn't be able to enjoy the fastest broadband service available on the market, so if it's absolutely imperative everybody would be equal - the solution is always the same, the lowest common denominator.
There is an easy solution, you just should be willing to see it.
It's not that there aren't offline alternatives for these, but they require maintaining an expensive infrastructure of buildings and people. It's going to be cheaper for everyone in the long run if we can move everybody to doing things over the Internet.
Really? Have you tried your bank's website over dialup? Or a typical bill pay site? (DSL typically meets the 2Mb or greater threshold, so it qualifies as broadband by your definition.)
Ah yes, you can use it for trivial things, so let's totally ignore all the crucial information and services that are only available on the internet. That seems reasonable.
Although “broadband” has always been a moving target, I think it is reasonable to say that essential services won't require gigabit internet access in the next decade or so.
> I think it is reasonable to say that essential services won't require gigabit internet access in the next decade or so.
And 640k should be enough for anybody.
I know as tech people we're inclined to think that more tech can always fix the world's problems. But that's a venus project type of fly-trap, and we must be careful not to fall for it!
How long did it take for electricity to be considered a necessity? And I'm legitimately curious how much of a factor radio was in motivating people to make the switch...
How much longer will we all have physical offices to work in as opposed to a virtual reality space that emulates the same thing? How many businesses like my own that don't actually have a physical address are there going to be? At what point do business completely stop accepting physical forms of payment? "Cutting the cord" completely is likely to get much more difficult in the future.
Probably for a very long time. Nothing is like actual human contact.
>>> At what point do business completely stop accepting physical forms of payment?
Depends on the business. Some already did - Amazon doesn't accept cash as far as I can see. Some - like your local grocery store - probably never will, because sizable part of its clientele will still have cash.
Why can't the rich get access to gigabit while the poor has access to a few megabit?
Just like ten years ago, when the rich had access to megabit and the poor used kilobit access.
Or ten years before that, when the richest could pay for high kilobit access while the poor were stuck to dialup low kilobit access.
I don't understand what's wrong with a long term rollout plan that finances the future scale with large costs to those willing to pay them.
Is it wrong because it's a utility? Why aren't we up in arms about the non-megabit (or barely megabit) non-low-latency access that so much of rural america is already stuck with?
I just don't get this. Fiber will get cheaper, but only if we train tens thousands about it in smaller rollouts while building up the supply side with increasingly larger rollouts.
We may want to avoid a scenario where fiber is unregulated, then incumbent ISPs also get deregulated out of fairness (Austin is currently at this step), then incumbent ISPs stop maintaining/installing service in poor areas, so rich people get gigabit and poor people get no bits at all.
http://articles.latimes.com/2012/nov/17/local/la-me-1118-lop...
Paid roads with less traffic, etc. or paid lanes are a commonplace, OTOH, but one doesn't have to be exactly rich to use them.
There's always a fixed labor cost for laying the pipes, but the endpoint hardware for fiber is currently pretty pricey. Compare to cable, whose modems used to be hundreds of dollars, and can now be had for $30.
I can't speak to the other cities, but please do not cite NYC as an example in your argument. De Blasio is not what's preventing FiOS expantion in NYC - Verizon is[0].
As someone who actually lives in NYC and has tried to get FiOS installed in multiple buildings, there are two problems. One is that buildings have exclusive agreements to provide television service through either Time Warner or Comcast (usually because the superintendant and/or owner gets free cable as a result of this agreement), and that Verizon refuses to provide FiOS Internet unless they can also provide television service.
Verizon is fully aware of this problem, and they've framed it in a way that allows them conveniently to point the finger at another entity.
Verizon is "trying" to deploy FiOS in New York, but they're not really interested in expanding their coverage.
> De Blasio has hired a civil rights lawyer to look into the issue of poor people not being able to afford FIOS! I would say the bottleneck is definitely NYC's government
This would only be relevant if the NYC government were the ones actively blocking people who can afford to pay for FiOS from having it installed, but as explained above, that's not the case.
(You mentioned this point in another thread, but I responded rather late, so perhaps you didn't see it. In any case, my response is still relevant here. )
[0] This should be evident even from the fact that De Blasio's only been in office for less than 6 months, and it's been years since Verizon made an honest effort to expand FiOS coverage in New York.
It's both. Verison could provide FiOS without television, but they choose not to. Both parties are at fault.
It's certainly the building's fault as well, but if Verizon really cared about expanding FiOS Internet, they'd agree to provide Internet service to a building even without providing television service[0].
Either way, whoever's fault it is, though, it's certainly not De Blasio's fault (which you asserted in your original post).
[0] Which they did do in the early days in some districts out in Long Island, but they stopped this around the same time as they stopped expanding FiOS into new areas.
Nothing Verizon, Comcast, or Time Warner offers compares to 5 Mbps/1 Mbps for a one-time $300 install cost.
This is like saying that if you can't bring poor people up, the answer is to bring rich people down, keeping everything frozen until the technology is cheap. And I presume that the assumption that underlies this is that the wealthy have done nothing, or not enough to deserve the lives they lead?
Do you have any idea how vicious that sounds?
(Also, the revenues generated from early adopters often pave the way for later generations of lower-priced goods. Do you have any idea where we'd be if no one was allowed to sell smartphones until they became cheap enough for "everyone?" We'd still be stuck with those awful feature phones if that were the case.)
I hope the Councillors were impeached for that. Lease it for $1 per year, sure, but to hand over public infrastructure to a corporation in that manner is appalling.
Either that or they can raise prices to, say, $300/month. The Google Fiber business model appears to require political concessions to be even remotely viable.
So I pay $75 for 15 mbps. I could be paying $25 less and getting twice the speed if I lived 10 minutes another direction.
Local governments are at least half the problem, but it's clearly a public + private collusion problem, in which both parties work together to establish monopolies. And the solution is simple (but will never happen): all telecom monopoly contracts should be voided nationally, immediately.
You can partly thank the FCC for this. They imposed limitations on Comcast's growth that effectively require Comcast to sell off an existing market if they want to enter a new market. I'm sure their intentions were good at the time but it turns out if you limit the growth of company they might try to find new revenue streams like I dunno... paid traffic prioritization.
Hooray for an independent press!
http://www.consumerwarningnetwork.com/2009/03/25/is-grandmom...
Major service providers are very much involved in the development process of industry specific/optimized equipment.
Well, then we should have seen $150 billion in delivered broadband, since we have given $300 billion in tax subsidies to broadband providers, in exchange for broadband development.
We have not seen $150 billion in delivered broadband value.
Ergo, this argument is wrong. I do blame Big Cable.
I've read his reports, and while there seems to be a kernel of truth, the numbers are not, IMO, substantiated. He gets big numbers by claiming the telcos are making undeserved profits, which even if true, is not a subsidy.
In 2008, 52MHz of adjacent spectrum was auctioned for $19B, so do the math on what 300MHz would be worth.
I'm going to need some evidence to believe that.
A copy/paste from my other comment:
The more direct subsidies come from many other places. A good place to start is the Universal Service Fund[2]. Every landline bill, every cable bill, every mobile phone bill has a line item for "Universal Service" on it. These funds are collected from consumers then 'disbursed' to companies for them to provide service extensions. This has been happening since 1997. They've disbursed over $80B back to telecom companies as part of the telecom act, the GAO isn't too impressed with how it was being spent.[3] Besides the direct subsidies, they got favorable depreciation schedules,
The oddly interesting Robert Cringely did a special for PBS on the mess, which is probably the origin of the $200B number[4]:
Over the decade from 1994-2004 the major telephone companies profited
from higher phone rates paid by all of us, accelerated depreciation
on their networks, and direct tax credits an average of $2,000 per
subscriber for which the companies delivered precisely nothing in terms
of service to customers. That's $200 billion with nothing to be shown for it.
[2] - http://en.wikipedia.org/wiki/Universal_Service_Fund
[3] - http://www.gao.gov/modules/ereport/handler.php?1=1&path=/ere...
[4] - http://www.pbs.org/cringely/pulpit/2007/pulpit_20070810_0026...
In the 1990s, all of the phone companies in the US applied for and received alternative regulations which was based on their commitment to replace the copper utility wire, known as the PSTN, Public Switched Telephone Networks, with a fiber optic wire. This was based on then Al Gore’s call for America to be completely upgraded by 2010, called the information superhighway.
And the state laws were changed to give the companies billions of dollars per state and this was done by multiple financial incentives—where the phone companies’ services were no longer examined for profits, even though there was no competition at the time – so ‘call waiting’ cost less than a penny, and the companies charged $4.00 – and this included almost all services, such as non-published numbers. Their profift jumped from 12-14% to 35-40%; they had major increases in dividends, they took massive tax write-offs for the networks, among other things.
And the companies lied about their deployments but continued to keep the excess profits. – So, all rate increases were tied to these financial perks, where the state never went back and changed the laws or got refunds when the companies failed to deploy.
While states, like New Jersey, where they collected about $15 billion, were supposed to be upgraded by 2010 with a fiber optic service capable of 45 Mbps in both directions. http://newnetworks.com/verizonnjbroadbandresources/
And it continues today with more rate increases. Our new report shows that regular POTS, plain old telephone service, customers were charged about $4 billion in New York State for ‘massive deployment of fiber optics’, even though the majority will never get any upgraded service.
http://newnetworks.com/verizonfiostitle2/
I wrote 3 books on this. The first is about 1980-1998, with Foreword by Dr. Bob Metcalfe, second was in 2005 and the third book is coming out next month. Book 2: http://www.newnetworks.com/broadbandscandals.htm
And we filed in multiples states over this since 1999, we have separate reports about the revenues and profits that’s been published.
If you got specific questions after you read the books, -contact me. I’ve been a telecom analyst for 32 years—and used to work for those who are now called Verizon, AT&T and Centurylink as a senior analyst at multiple telecom consulting firms. bruce@newnetworks.com
The profit margin for Verizon today is less than 12%:
First, the link is to 2014 financials; the tracking to charge for broadband by changing state laws started in 1993. Also, the numbers in Verizon's overall business reports are a garbage pail of revenues, etc. as the company has over 365 different investments and companies in over 150 countries.
On the earnings, my books use a standard EBITDA, earnings before income tax and depreciation and amoritization, and Return on Equity, among other indicators.
And we used the SEC-filed state-based annual reports, like a report for Verizon New York, but that data stopped in 2010; the FCC data stopped in 2007.
Worse, if you read our new report about Verizon New York you'll see that the numbers can't be ascertained easily anymore because of all of the cross-subsidies for all of the other businesses.
In fact, a previous report we wrote last year about Verizon NY is now part of FOIA challenge in court. It was used by Common Cause, Consumer Union, CWA in a proceeding calling for audits.
The overcharging is also different than just the 'corporate earnings'-- for example, In new york, Verizon got multiple rate increases on regular phone customers for 'massive deployment of fiber optics'; the additions come to about $4. billion from 2006-2013.
It's not legal to charge regular copper-based phone customers for a cable service, for example, or have expenses for the construction of the wireless cell tower wires.
However, at the same time, the company claims to have lost $11 billion in just New York for the last 5 years... the losses caused by the various affiliates (like Verizon Wireless is an affiliate of Verizon NY).. adding expenses.
Or is that a 'buy the book' sort of thing?
In 2008, as part of the digital transition, 52 MHz in the 700-band were auctioned off for $19B. The telcos were gifted 295mhz of spectrum for the digital expansion when they agreed to invest in broadband. Even if it's only half as valuable as that 52 MHz allotment, simple math indicates a value of over $400B.
LA Times article from the era making the same point (valuing the spectrum at $70B at the time) -- http://articles.latimes.com/1998/dec/07/local/me-51464
and I have no idea what TV broadcasters and fiberoptic broadband have to do with eachother... they're entirely different industries. Comcast and Time Warner don't use TV airways--that's why they call it "cable".
The spectrum giveaway to broadcasters was predicated on 'Universal Service' being supplied by telecom companies.[1] That digital TV spectrum would be immensely valuable for wireless communication today, so it should absolutely be considered a subsidy as a result of the Telecom Act.
The more direct subsidies come from many other places. A good place to start is the Universal Service Fund[2]. Every landline bill, every cable bill, every mobile phone bill has a line item for "Universal Service" on it. These funds are collected from consumers then 'disbursed' to companies for them to provide service extensions. This has been happening since 1997. They've disbursed over $80B back to telecom companies as part of the telecom act, the GAO isn't too impressed with how it was being spent.[3] Besides the direct subsidies, they got favorable depreciation schedules, and tax relief.
The oddly interesting Robert Cringely did a special for PBS on the mess, which is probably the origin of the $200B number[4]:
Over the decade from 1994-2004 the major telephone companies profited
from higher phone rates paid by all of us, accelerated depreciation
on their networks, and direct tax credits an average of $2,000 per
subscriber for which the companies delivered precisely nothing in terms
of service to customers. That's $200 billion with nothing to be shown for it.
[2] - http://en.wikipedia.org/wiki/Universal_Service_Fund
[3] - http://www.gao.gov/modules/ereport/handler.php?1=1&path=/ere...
[4] - http://www.pbs.org/cringely/pulpit/2007/pulpit_20070810_0026...
edit: read the article he linked before you downvote me... I'm right, he posted somethign that had nothing to do with the discussion...
The spectrum giveaway to broadcasters was predicated on 'Universal Service' being supplied by telecom companies.[1] That digital TV spectrum would be immensely valuable for wireless communication today, so it should absolutely be considered a subsidy as a result of the Telecom Act.
The more direct subsidies come from many other places. A good place to start is the Universal Service Fund[2]. Every landline bill, every cable bill, every mobile phone bill has a line item for "Universal Service" on it. These funds are collected from consumers then 'disbursed' to companies for them to provide service extensions. This has been happening since 1997. They've disbursed over $80B back to telecom companies as part of the telecom act, the GAO isn't too impressed with how it was being spent.[3] Besides the direct subsidies, they got favorable depreciation schedules, and tax relief.
The oddly interesting Robert Cringely did a special for PBS on the mess, which is probably the origin of the $200B number[4]:
Over the decade from 1994-2004 the major telephone companies profited
from higher phone rates paid by all of us, accelerated depreciation
on their networks, and direct tax credits an average of $2,000 per
subscriber for which the companies delivered precisely nothing in terms
of service to customers. That's $200 billion with nothing to be shown for it.
[2] - http://en.wikipedia.org/wiki/Universal_Service_Fund
[3] - http://www.gao.gov/modules/ereport/handler.php?1=1&path=/ere...
[4] - http://www.pbs.org/cringely/pulpit/2007/pulpit_20070810_0026...
Would this actually lead to an increase in competition or would it just lead to greater profits for the incumbents?
You are conflating different types of problems.
Things which are natural monopolies are phone, cable, internet, electricity, water, etc. It is needlessly expensive to lay in multiple cables/pipes to a house solely in order to provide competition. Oddly, cable/internet is one of the few places where this actually isn't completely true since pulling a single fiber is almost as expensive as pulling multiple fibers.
I don't know why you cite garbage collection, though. Garbage collection is completely different. I know many towns that have multiple garbage collection services. You don't have to lay in an infrastructure in order to collect garbage.