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Except that it's not created by government regulation, tt just doesn't make economic sense. Broadband is very much a natural monopoly, like electricity or water

by necubi 17y ago

Except that it's not created by government regulation, tt just doesn't make economic sense. Broadband is very much a natural monopoly, like electricity or water. In a free market, the first few incumbents (usually the phone provider and the cable provider) who have already built out their infrastructure for old services (phone and cable TV) have a huge advantage over any other company, which would have to spend billions to lay their own wires. Thus market forces prevent any other company from entering the market. Furthermore, it's not really clear that the socially desirable outcome is to promote competition at the line level. Because each producer has to spend billions on infrastructure to serve fewer people (because the more providers there are, the fewer customers for each), costs will be higher and profits lower the more companies enter the market. The best solution is in fact government regulation. Instead of promoting competition at the line-level, governments should (and most OECD countries do, with the exception of Mexico, the Slovak Republic and...the US) require local-loop unbundling, whereby the incumbent telco is given a monopoly on laying lines to houses but is required to lease their lines to competitors at a set price. For more information, read the Berkman Center's Broadband report, which was commissioned by the FCC and is presently the more thorough empirical look at these topics. It's available here: http://cyber.law.harvard.edu/pubrelease/broadband/ http://cyber.law.harvard.edu/pubrelease/broadband/.

jquery 17y ago
A government commission studying [subject] recommends more governmental control over [subject]? I don't find that impressive.
- necubi 17y ago
  The study was merely commissioned by the FCC, but it was actually conducted by Harvard's Berkman Center for Public Policy. And your curt comment neatly avoids actually evaluating this very well-done study. I've done my own analyses of the data (which is mostly all publicly available from the OECD) and found similar conclusions (for example: about 68% of the variance in price of "fast" connection (12-36Mb/s) in the OECD is attributable to the presence of various government regulations, including LLU, as is about 30% of the variance in price per mbit). If you doubt their methodology or results, I invite you to look at the data and make your own conclusions.
  - jquery 17y ago
    How can you possibly isolate something to a percentage point that involves things as nebulous as "various government regulations" operating on vast industries spanning multiple countries? My skepticism meter is off the charts here.
    - necubi 17y ago
      It's not actually that nebulous (I was simplifying because it seemed more appropriate for the setting than to give a thorough discussion of the relevant analysis). The technique, though, is regression analysis, which is widely used in econometrics (amongst other fields) to gauge the marginal effect of various variables. Obviously the exact percentage should be taken with a grain of salt, but those numbers (which are significant at 5% confidence) clearly demonstrate the point. Again, the Berkman Center's study is very well-done, and if your skepticism remains I encourage you to at least skim it. Otherwise, you're arguing from a position of ignorance and are contributing little to this discussion.
CWuestefeld 17y ago
Broadband is very much a natural monopoly, like electricity or water. ATT used to say that the phone network was "a natural monopoly". Today we'd laugh at that. Really, this example is so glaring that I'm surprised you'd offer this argument. And in fact you acknowledge that the local loop is separate from the actual network. But the difference in the US is that this is a free market -- I can choose to use Embarq (the traditional copper-wire circuit-switched carrier), or I can (and do) use Vonage, or scads of other IP-based carriers, or I could do like many people do and just use cellular. We the consumers are getting to choose just how this unbundling happens. If, for some reason, you think that there's something sacred about telephone, while data is different (or vice versa), there are other counterexamples as well. In New York, while electrical transmission remains a monopoly, generation has many choices. It works just like the phones: where the infrastructure demands a single source, that's what we get, but that doesn't mean that the people that provide the wires can be the only one involved in the business. (I pay more for electricity that's generated in part by windmills) And most obviously, it seems to me that most people have access to two broadband carriers, albeit their capacity varies widely (but that's what markets are all about, right?). Virtually everyone I know has a choice of a DSL provider or a Cable provider.
- r0s 17y ago
  I can (and do) use Vonage, or scads of other IP-based carrier You're missing the point, services like voip could end up priced arbitrarily in the interest of the carrier. What if non-AT&T voip services were priced out of the market? This is not beneficial to the consumer. It's easy to claim wireless or some new technology will always provide innovation and options, now, when the market is new and less consolidated. 10 years from now, there's no reason to think a single company won't own cell networks as well as cable networks, or any other medium for that matter. The status quo sucks! I don't know about your area, but around here ISPs rarely, if ever invest in infrastructure, and upgrades are unheard of. My parents in a rural area have been waiting for years for any land based broadband options, 3g doesn't even work there!
- necubi 17y ago
  You're missing the point, but not for the reason given below. The pipe is the natural monopoly, not the services provided over it. This is so obvious that it hardly bears repeating, but again: it makes no more economic sense for multiple companies to run fiber to each house than it does for multiple companies to run electric wires to each house. Sure you can use Vonage for phone instead of AT&T (or whatever), but you can only do that because you have a pipe to the internet. VoIP services are means of getting phone over a different pipe, but you still need a pipe. You also seem to miss the point of my comment: governments should have policies like mandatory local-loop unbundling (also called line-sharing) which produce competition where it makes sense (providing backbone) instead of where it makes little sense (providing the "last-mile" connection). Finally, a duopoly is better than a monopoly, but not by much. It still gives the players far too much control of the market.

by necubi 17y ago

jquery 17y ago

A government commission studying [subject] recommends more governmental control over [subject]? I don't find that impressive.

necubi 17y ago
The study was merely commissioned by the FCC, but it was actually conducted by Harvard's Berkman Center for Public Policy. And your curt comment neatly avoids actually evaluating this very well-done study. I've done my own analyses of the data (which is mostly all publicly available from the OECD) and found similar conclusions (for example: about 68% of the variance in price of "fast" connection (12-36Mb/s) in the OECD is attributable to the presence of various government regulations, including LLU, as is about 30% of the variance in price per mbit). If you doubt their methodology or results, I invite you to look at the data and make your own conclusions.
- jquery 17y ago
  How can you possibly isolate something to a percentage point that involves things as nebulous as "various government regulations" operating on vast industries spanning multiple countries? My skepticism meter is off the charts here.
  - necubi 17y ago
    It's not actually that nebulous (I was simplifying because it seemed more appropriate for the setting than to give a thorough discussion of the relevant analysis). The technique, though, is regression analysis, which is widely used in econometrics (amongst other fields) to gauge the marginal effect of various variables. Obviously the exact percentage should be taken with a grain of salt, but those numbers (which are significant at 5% confidence) clearly demonstrate the point. Again, the Berkman Center's study is very well-done, and if your skepticism remains I encourage you to at least skim it. Otherwise, you're arguing from a position of ignorance and are contributing little to this discussion.

CWuestefeld 17y ago

Broadband is very much a natural monopoly, like electricity or water. ATT used to say that the phone network was "a natural monopoly". Today we'd laugh at that. Really, this example is so glaring that I'm surprised you'd offer this argument. And in fact you acknowledge that the local loop is separate from the actual network. But the difference in the US is that this is a free market -- I can choose to use Embarq (the traditional copper-wire circuit-switched carrier), or I can (and do) use Vonage, or scads of other IP-based carriers, or I could do like many people do and just use cellular. We the consumers are getting to choose just how this unbundling happens. If, for some reason, you think that there's something sacred about telephone, while data is different (or vice versa), there are other counterexamples as well. In New York, while electrical transmission remains a monopoly, generation has many choices. It works just like the phones: where the infrastructure demands a single source, that's what we get, but that doesn't mean that the people that provide the wires can be the only one involved in the business. (I pay more for electricity that's generated in part by windmills) And most obviously, it seems to me that most people have access to two broadband carriers, albeit their capacity varies widely (but that's what markets are all about, right?). Virtually everyone I know has a choice of a DSL provider or a Cable provider.

r0s 17y ago
I can (and do) use Vonage, or scads of other IP-based carrier You're missing the point, services like voip could end up priced arbitrarily in the interest of the carrier. What if non-AT&T voip services were priced out of the market? This is not beneficial to the consumer. It's easy to claim wireless or some new technology will always provide innovation and options, now, when the market is new and less consolidated. 10 years from now, there's no reason to think a single company won't own cell networks as well as cable networks, or any other medium for that matter. The status quo sucks! I don't know about your area, but around here ISPs rarely, if ever invest in infrastructure, and upgrades are unheard of. My parents in a rural area have been waiting for years for any land based broadband options, 3g doesn't even work there!
necubi 17y ago
You're missing the point, but not for the reason given below. The pipe is the natural monopoly, not the services provided over it. This is so obvious that it hardly bears repeating, but again: it makes no more economic sense for multiple companies to run fiber to each house than it does for multiple companies to run electric wires to each house. Sure you can use Vonage for phone instead of AT&T (or whatever), but you can only do that because you have a pipe to the internet. VoIP services are means of getting phone over a different pipe, but you still need a pipe. You also seem to miss the point of my comment: governments should have policies like mandatory local-loop unbundling (also called line-sharing) which produce competition where it makes sense (providing backbone) instead of where it makes little sense (providing the "last-mile" connection). Finally, a duopoly is better than a monopoly, but not by much. It still gives the players far too much control of the market.