"there will be no rate regulation, no tariffs, no last-mile unbundling"
Translation?
Translation?
These things are bad, which is why the FCC is saying it will not apply these provisions. For example, even today most municipalities set a regulated rate for basic cable service. It averages about $20/month nationwide, and doesn't come close to covering the cost of actually building a modern cable network out to a neighborhood.
Unbundling kills investment into the network, because why spend billions of dollars on infrastructure that you'll have to lease out at wholesale prices to your competitors?[1]
My theory is that unbundling is what killed DSL as a competitor to cable here in the U.S. FTTN has been quite successful in the U.K.,[2] as a gradual scheme for building fiber further into the network, with a last-hop of VDSL that can get faster as it gets shorter. There has been little FTTN deployment here in the U.S., because there's just no way for telcos to recoup the billions of dollars spent on fiber if they're forced to lease the VDSL at the other end to competitors for a song.
[1] See this Brookings Institute (not exactly a conservative hotbed) analysis, which calls the U.S. experiment with unbundling "disastrous" and concludes that it reduces capital investigate. http://www.pff.org/events/eventpowerpoints/022207BrusselsCom....
[2] Unbundling is part of the strategy in the U.K. too, but it's structured so that the prices BT charges to competitors are guaranteed to generate a substantial profit.
I agree that it is wise to be wary of regulation in this case--but honestly, I think it's time we at least experiment. The market and regulatory forces at play have basically forced themselves into this position.
You can't legislate-away economics. If you make cable and fiber networks into an unattractive investment, nobody will invest in them, and they'll go on life-support just like the phone network. Cable companies will pivot to content, like Comcast is already doing with its purchase of NBC. The vacuum won't be filled, because at the end of the day no VC is going to put up billions of dollars to eke out shit returns on a heavily-regulated service.
What was the organization usually tasked with public goods, again?
The way we got the buildout of the telephone networks was the creation of the AT&T monopoly by the government, and they took their job seriously. An alternate approach would be nationalizing it and forcing the government to take care of it.
Free market isn't likely to fix the problem.
What I have a hard time understanding is your implied argument here: that by forcing a bundle on consumers that includes a high-margin product (cable TV) as well as a low-margin one (broadband), we're doing those consumers a favor. How do I benefit from a subsidized broadband service if I also have to participate in the over-priced and unwanted service that is allowing the subsidy?
Bundling, in the sense that the FCC is referring to it, is the bundling of internet service with the physical infrastructure it's delivered on.
Un-bundling in this case doesn't mean they have to sell you ESPN without HBO, it means they have to let third-party operators operate on their wiring, switches, and other physical infrastructure for a regulated price.
Given your premise: I can imagine that, with improper price setting by the FCC, this mandatory wholesale infrastructure sharing could be problematic (long-term unprofitable and thus discouraging towards infrastructure investment).
Priced appropriately to the cost of provision of service, however, how does this put the infrastructure builder (Comcast, Level 3, or whomever else) on unfair footing? It just means Comcast the builder has to expect the same rents from Comcast the service provider as it does from Netflix the service provider.
Forgive me for missing the point - I expect you and rayiner understand this far better than I do and I'm trying to catch up.
People who think that either rate-setting in the context of unbundling or in the context of municipal-fiber will be based on a rational analysis of how much revenues will be needed to justify investment are delusional. Rates for everything from electricity to sewage are artificially low, and consequently in many cases utilities are stuck with century-old infrastructure. Public utilities are a big reason the American Society of Civil Engineers estimates we have a multi-trillion backlog of infrastructure capital expenditures.
The folks who think we should upgrade the fiber networks to enable cloud services will have to get in line with the folks who think we should upgrade our power plants and get rid of century-old polluting coal ones, or upgrade our sewage systems so they don't dump raw sewage into rivers when it rains. And they'll be shouted down by the folks complaining that grandma's electric/water/internet bill is too high, and asking "how can you afford fiber service when you can barely feed your family?"
That's an interesting notion, given that market pressure would be to invest as little as one possible can while extracting as much cash as possible. I certainly have the impression that, in Sweden, the public utilities, which were making sure the power grid had adequate excess capacity and good reliability because this infrastructure is in the "national interest" did a much better job in that respect than the market-based solution. There is simply no comparison between power reliability in the U.S. and in Sweden.
It seems like the crux of your argument is that it costs something like $60/month to provide internet service and $20/month on top of that to provide TV service but they charge $50/month for each, so they wouldn't be profitable without the TV service. But who is setting these prices?
Is there some law that requires them to charge a money losing price for internet service and then make it up on TV service? Why don't they just charge a profit-making price for internet service?
[1] In my building, in downtown Baltimore, I can get 50/15 FiOS for $50/month, no cap but no TV service, or triple-play cable at 50/5, capped for $109 per month. Almost everyone subscribes to cable rather than FiOS.
If the ISPs at this point charge a price for just internet service that makes offering that service profitable, what are you expecting customers to do? Go without internet service?
Cost of programming content is $5.2 billion, but video programming generates $10 billion in revenues. Operating income is $4.6 billion. Obviously there's marketing, sales, and operational costs that also go away if you don't have video service. But there's also $1.1 billion in advertising revenue that probably goes away too. And really, the numbers are totally incomplete without looking at capex and depreciation too.
Analysis is similar for Charter, except they're running a net loss straight-up.
"there's just no way for telcos to recoup the billions of dollars spent on fiber if they're forced to..."
The Telco's can't recoup their money AND pay exorbitant salaries to upper management, lobbyists, and still convince wall street that there is "growth potential" quarter over quarter.
If we were just talking about building a network...
The network owner could set the wholesale price at one that is still profitable, no?
Yes. For example $10,000 per month.
I'm not trying to be clever here. The ISPs seemingly don't want to lease out their lines, or else they would probably have done it already. So if we wish to force the ISPs to lease out their lines, we will have to set a maximum price, either explicitly (as a dollar value) or a price that is somehow related to the costs incurred by the ISP.
So then, how did unbundling + price setting negatively impact the expansion of telephone lines?
Now that I'm in the US, I don't see why Comcast can't lease out the last mile to other ISPs for reasonable wholesale rates.
This has been a boon for small-time ISPs but a huge thorn in the side of phone companies like Bell and Telus, who are forced to compete with cable giants that are not playing under the same rules.
"As retail Internet service demand has evolved to higher speeds, the Commission has required the large telephone companies and cable carriers (collectively, the incumbents) to make some of their high-speed access (HSA) services available to competitors to ensure that these services remain subject to competition and thus protect consumers’ interests."
These regulations that are part of the law are all going to be removed as part of a process called "forebearance", where the FCC can basically not enforce those parts if they feel it would be contrary to their overarching goal of increased broadband adoption in the country.
So does this mean that the FCC will force Comcast to allow competition to operate on the existing last mile of cable for broadband?