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> if providers can sell a fastlane to Netflix they can reduce prices for the consumer. Historically, this is not shown to be how companies act. The implicit a

> if providers can sell a fastlane to Netflix they can reduce prices for the consumer. Historically, this is not shown to be how companies act. The implicit assumption here is that a supplier has some sort of benevolent desire. But the reality is that if a company can increase revenue, they will do so without redistributing it to the benefit of their customers or even employees. > They would argue that in the end that's great for consumers too, but as far as I am concerned, that remains to be seen. We have seen it, and it's not great for consumers. Trickle-down economics is a fallacy. It's also been debunked by Economists very thoroughly.

wutbrodo 10y ago
> The implicit assumption here is that a supplier has some sort of benevolent desire. The assumption is not a bad one in general, and it doesn't depend on benevolence (if anything, most people's cartoonish view of corporations occasionally involves them hurting their bottom line to screw the consumer). It depends on a somewhat competitive market; as such, it's not a particularly valid assumption for the telecom market.
- vanattab 10y ago
  The problem with monopolies in critical utilities is that screwing over customers does not hurt the bottom line. My only choice for ISP (excluding 4g cell, dsl) is twc they flat out lied to me when I was signing up, the service while fast most of the time suffers random spikes frequently. The only other choice I have is forego the Internet but let's be honest thats not an option at all.
  - NoPiece 10y ago
    Is your DSL option so bad that it is worse than foregoing the internet in your choice space?
    - rhizome 10y ago
      Yeah, I've been using DSL for 15 years without hassle and never understand the exclusion. Sure, I don't get to brag about the 1.21 gigabits my bill says I'm supposed to be receiving (and constantly complain about not actually getting), but otherwise it's pretty much anything I could ask for in an internet connection.
  - malloryerik 10y ago
    In South Korea I have a 5 gigabit connection for $20/month. I could have chosen between at least three competing companies, and that's for regular land lines. The US is so much larger than the South Korea, but this shows that it is possible to have three companies' wires going through the same space. Interestingly the same companies provide telephone and TV; there's no distinction as far as I know between a phone and a cable company. They are data network companies. Btw you can read an interesting history of phone monopoly in Jeremy Rifkin's "Zero Marginal Cost Society," starting at page 49. From a technical perspective, couldn't you theoretically have a network of big tubes with several company wires inside? Maybe the mother tube could be paid for by municipalities, and then individual companies could add their wires to without having to rip everything up each time? The companies then pay for the space in the tube, perhaps like licensing air waves? There are probably problems with this, but isn't there a better way to accommodate competition? The situation in the US is awful.
    - rashkov 10y ago
      You're basically describing what some parts of Europe have, where the municipality owns a data center building in the middle of town, and runs a wire from that building to various buildings around town. The ISPs also have their equipment in that building, and they all have access to the wire that runs to your home.
entee 10y ago
I'm with you, I think it's not going to work, but these are the kinds of arguments people make. In some ways it's a question of whose freedom are you defending? The person who put the cable in ground or the person that cable goes to. Both want complete freedom to use that cable as they see fit, but those freedoms can be in tension. How do you choose? This is one of the issues with "freedom" based arguments, in anything but a trivial system freedoms collide and somebody has to make a call. Ajit Pai seems to lean toward the cable-layer. I lean toward the cable-user. I think he's wrong, but I'm not willing to question his motives. I think he also wants the best for all, and disagrees that putting the consumer first works out better in the long run.
- gshulegaard 10y ago
  I thought about how the best respond to your comment. I think your intentions are pure, but you conflate a lot of different issues together that it's kind of difficult to respond. So let's start with the economics. At the heart of Capitalism is the idea of Perfect Competition[1]. There is no ethical considerations in an Economic model, only a core set of assumptions one of which is that each individual acts in their own self-interest. But just because everyone acts selfishly doesn't mean that there can't be a benefit to both parties. In fact trade rests on the idea that two parties can engage in a mutually beneficial transaction[2] (and it is trivial to come up with an example). In a Perfectly Competitive market, a seller can't charge a high price because another seller will undercut their price. Likewise, a buyer can't demand a lower price, because no one will sell to them at a lower price. There is an implicit "equilibrium" where the seller maximizes their profit and the buyer maximizes their utility. So in a way, you could say that the buyer and seller "freedoms collide", but that precise collision should result in an mutually beneficial transaction of sorts. At this point you might be thinking that if competition means market equilibrium, then why does HN want regulation at all? Well the trouble with Perfect Competition is that it is an impossible ideal: > there is no actual perfectly competitive market in the real world [1] This is because of all the conditions required for Perfect Competition. Some of my favorites are: * A large number of buyers and sellers * Perfect information * Homogenous products * No externalities Some examples of real-world American failures pertaining to these examples: * A large number of buyers and sellers -- Internet providers. There are few providers outside of Time Warner and Comcast. * Perfect information -- Health care. When was the last time you saw hospitals post surgery prices online so you could pick most affordable option? Oh wait, an Oklahoma Surgery Center did that [3] and you know what happened? Californians flew out to have surgery because even with travel it was far cheaper than their local alternatives. * Homogenous products -- Coke vs. Pepsi. You could argue they are homogenous (both soda pop), but most people would disagree. Moreover with recipe protections, it may very well be impossible/illegal for Pepsi to make an exact clone of Coke or vice-versa. * No externalities -- Pollution (e.g. Global Warming). Pollution is often a cost to society as a whole and not on a corporation. If dumping your factory run-off directly into the river is cheaper than properly disposing of it, most companies would choose to do just that (e.g. the Mississippi pollution levels [4]). Well so if Perfect Competition is impossible, then what should we do? This is where Government regulation comes in and where there is often a debate. But from an Economic standpoint, I think it is pretty safe to say that we should do everything we can to maximize competition. That's why most of HN is fond of Tom Wheeler. By and large his policies protected net neutrality and ensured that ISPs couldn't artificially favor one service over another thereby reducing competition. How could a Hulu compete with a Netflix if Netflix just shelled out massive amounts of capital to buy "fast lanes" with contractual non-competes with all the major ISPs in America? But that was my point. The argument that ISPs will "reinvest" this new revenue into improving service for their customers is a fallacy. ISPs will only invest in things that increase revenue...not because they want their customers to have $10 cheaper internet service. [1] https://en.wikipedia.org/wiki/Perfect_competition https://en.wikipedia.org/wiki/Perfect_competition [2] https://en.wikipedia.org/wiki/Trade https://en.wikipedia.org/wiki/Trade [3] http://kfor.com/2013/07/08/okc-hospital-posting-surgery-prices-online/ http://kfor.com/2013/07/08/okc-hospital-posting-surgery-pric... [4] http://www.stltoday.com/lifestyles/health-med-fit/health/mississippi-river-is-second-most-polluted-u-s-waterway/article_bce8579e-7449-11e1-9b27-001a4bcf6878.html http://www.stltoday.com/lifestyles/health-med-fit/health/mis...

wutbrodo 10y ago

> The implicit assumption here is that a supplier has some sort of benevolent desire. The assumption is not a bad one in general, and it doesn't depend on benevolence (if anything, most people's cartoonish view of corporations occasionally involves them hurting their bottom line to screw the consumer). It depends on a somewhat competitive market; as such, it's not a particularly valid assumption for the telecom market.

vanattab 10y ago
The problem with monopolies in critical utilities is that screwing over customers does not hurt the bottom line. My only choice for ISP (excluding 4g cell, dsl) is twc they flat out lied to me when I was signing up, the service while fast most of the time suffers random spikes frequently. The only other choice I have is forego the Internet but let's be honest thats not an option at all.
- NoPiece 10y ago
  Is your DSL option so bad that it is worse than foregoing the internet in your choice space?
  - rhizome 10y ago
    Yeah, I've been using DSL for 15 years without hassle and never understand the exclusion. Sure, I don't get to brag about the 1.21 gigabits my bill says I'm supposed to be receiving (and constantly complain about not actually getting), but otherwise it's pretty much anything I could ask for in an internet connection.
- malloryerik 10y ago
  In South Korea I have a 5 gigabit connection for $20/month. I could have chosen between at least three competing companies, and that's for regular land lines. The US is so much larger than the South Korea, but this shows that it is possible to have three companies' wires going through the same space. Interestingly the same companies provide telephone and TV; there's no distinction as far as I know between a phone and a cable company. They are data network companies. Btw you can read an interesting history of phone monopoly in Jeremy Rifkin's "Zero Marginal Cost Society," starting at page 49. From a technical perspective, couldn't you theoretically have a network of big tubes with several company wires inside? Maybe the mother tube could be paid for by municipalities, and then individual companies could add their wires to without having to rip everything up each time? The companies then pay for the space in the tube, perhaps like licensing air waves? There are probably problems with this, but isn't there a better way to accommodate competition? The situation in the US is awful.
  - rashkov 10y ago
    You're basically describing what some parts of Europe have, where the municipality owns a data center building in the middle of town, and runs a wire from that building to various buildings around town. The ISPs also have their equipment in that building, and they all have access to the wire that runs to your home.

entee 10y ago

I'm with you, I think it's not going to work, but these are the kinds of arguments people make. In some ways it's a question of whose freedom are you defending? The person who put the cable in ground or the person that cable goes to. Both want complete freedom to use that cable as they see fit, but those freedoms can be in tension. How do you choose? This is one of the issues with "freedom" based arguments, in anything but a trivial system freedoms collide and somebody has to make a call. Ajit Pai seems to lean toward the cable-layer. I lean toward the cable-user. I think he's wrong, but I'm not willing to question his motives. I think he also wants the best for all, and disagrees that putting the consumer first works out better in the long run.

gshulegaard 10y ago
I thought about how the best respond to your comment. I think your intentions are pure, but you conflate a lot of different issues together that it's kind of difficult to respond. So let's start with the economics. At the heart of Capitalism is the idea of Perfect Competition[1]. There is no ethical considerations in an Economic model, only a core set of assumptions one of which is that each individual acts in their own self-interest. But just because everyone acts selfishly doesn't mean that there can't be a benefit to both parties. In fact trade rests on the idea that two parties can engage in a mutually beneficial transaction[2] (and it is trivial to come up with an example). In a Perfectly Competitive market, a seller can't charge a high price because another seller will undercut their price. Likewise, a buyer can't demand a lower price, because no one will sell to them at a lower price. There is an implicit "equilibrium" where the seller maximizes their profit and the buyer maximizes their utility. So in a way, you could say that the buyer and seller "freedoms collide", but that precise collision should result in an mutually beneficial transaction of sorts. At this point you might be thinking that if competition means market equilibrium, then why does HN want regulation at all? Well the trouble with Perfect Competition is that it is an impossible ideal: > there is no actual perfectly competitive market in the real world [1] This is because of all the conditions required for Perfect Competition. Some of my favorites are: * A large number of buyers and sellers * Perfect information * Homogenous products * No externalities Some examples of real-world American failures pertaining to these examples: * A large number of buyers and sellers -- Internet providers. There are few providers outside of Time Warner and Comcast. * Perfect information -- Health care. When was the last time you saw hospitals post surgery prices online so you could pick most affordable option? Oh wait, an Oklahoma Surgery Center did that [3] and you know what happened? Californians flew out to have surgery because even with travel it was far cheaper than their local alternatives. * Homogenous products -- Coke vs. Pepsi. You could argue they are homogenous (both soda pop), but most people would disagree. Moreover with recipe protections, it may very well be impossible/illegal for Pepsi to make an exact clone of Coke or vice-versa. * No externalities -- Pollution (e.g. Global Warming). Pollution is often a cost to society as a whole and not on a corporation. If dumping your factory run-off directly into the river is cheaper than properly disposing of it, most companies would choose to do just that (e.g. the Mississippi pollution levels [4]). Well so if Perfect Competition is impossible, then what should we do? This is where Government regulation comes in and where there is often a debate. But from an Economic standpoint, I think it is pretty safe to say that we should do everything we can to maximize competition. That's why most of HN is fond of Tom Wheeler. By and large his policies protected net neutrality and ensured that ISPs couldn't artificially favor one service over another thereby reducing competition. How could a Hulu compete with a Netflix if Netflix just shelled out massive amounts of capital to buy "fast lanes" with contractual non-competes with all the major ISPs in America? But that was my point. The argument that ISPs will "reinvest" this new revenue into improving service for their customers is a fallacy. ISPs will only invest in things that increase revenue...not because they want their customers to have $10 cheaper internet service. [1] https://en.wikipedia.org/wiki/Perfect_competition https://en.wikipedia.org/wiki/Perfect_competition [2] https://en.wikipedia.org/wiki/Trade https://en.wikipedia.org/wiki/Trade [3] http://kfor.com/2013/07/08/okc-hospital-posting-surgery-prices-online/ http://kfor.com/2013/07/08/okc-hospital-posting-surgery-pric... [4] http://www.stltoday.com/lifestyles/health-med-fit/health/mississippi-river-is-second-most-polluted-u-s-waterway/article_bce8579e-7449-11e1-9b27-001a4bcf6878.html http://www.stltoday.com/lifestyles/health-med-fit/health/mis...