6 ms·

I disagree fundamentally with Ajit Pai's reasoning that minimal regulation will lead to innovation and lower consumer price. There are some industries that are

I disagree fundamentally with Ajit Pai's reasoning that minimal regulation will lead to innovation and lower consumer price. There are some industries that are natural monopolies, like water and electricity, because it's incredibly expensive to build both last mile connections and core infrastructure. They're also natural monopolies because you don't really have great, cost competitive alternatives to water and electricity provided on a large scale. When you consider hard wired internet, it bares of a lot of similarity to utilities, in the cost and difficulty of accumulating infrastructure and in the absence of effective alternatives. For that very reason, internet should be classified, like other natural monopolies, as a utility. Moreover, last mile lines should be rentable or available through competitive bidding. There's actually enough dark cable to make some regional ISPs viable if they could actually get access to consumer level last mile lines. But Comcast won't get off them unless they're kicked off them. And if you try to build lines then Comcast will half their rates in the areas that you offer service in! Of course, Ajit Pai will have a lobbying job earning well north of 400K the moment the Trump administration runs out the door so it's really not his concern.

ScottBurson 10y ago
Yes, I have been inclined toward this view as well. But I would be interested to hear counterarguments.
lupin_sansei 10y ago
This was the argument against privatizing the telcos in Europe in the 80s. But once they did competition and innovation thrived. Classifying something as a utility leads to stagnation.
- nitrogen 10y ago
  Unfortunately in the US the telcos and cable providers are already privatized, and have only continued to merge and grow larger. So we need something different from the current situation, whatever that may be.
  - ChefDenominator 10y ago
    The US telcos embed themselves into the local governments, keeping competition out. It's governments, all the way down.
    - ComradeTaco 10y ago
      That while Telco's do use regulatory capture well, you have to admit there's some sort of natural monopoly inherent to hard wired internet service.
      - AnthonyMouse 10y ago
        The known solution to this is local loop unbundling, but the ISPs lobbied their way out of that more than a decade ago.
      - ChefDenominator 10y ago
        This statement is usually made without any substantive evidence to support it, primarily because every monopoly, in practice, can only truly be a monopoly when the government mandates it. When firms are forced to compete on the open market, without the option of non-market strategies, someone will find a way to move in and compete. This is actually self-evident in the fact that these companies are actively engaging in non-market strategies. There would be no need to practice such tactics if they could simply hold a 'natural monopoly'. Others certainly disagree, but for me, this argument is the one I find most compelling.
    - fattire 10y ago
      That's an odd indictment of government. If government is taken over by private companies, that's government not working, and it's certainly not a democratic government to blame, it's an infiltrated, corrupt political system.
      - ChefDenominator 10y ago
        I may tweak your statement a little that the government is run largely by special interests, i.e. small minority wielding substantial influence (is a union a 'private company'?). Why must my city government make the decision on what company may drive a truck in a circuit to collect my refuse? Why was my local YMCA denied a permit to build an indoor pool while the city built a luxurious, beautiful, money-sucking 'Community Recreation Center' (that has an indoor pool)? Given the broad prevalence of this type of activity, it seems to at least suggest some fundamental breakdown within the system of representative democracy or, as you suggest, it is an indictment of governments, in general.
- skywhopper 10y ago
  I assume they required sharing of the last mile telephone lines, like long-distance competition in the US in the 90s? Because that's regulation that serves competition. Whereas the lack of regulation led to the AT&T monopoly that had to be broken up twice.
  - bonzini 10y ago
    Correct.
- ComradeTaco 10y ago
  All consumer level electricity supply is classified as a utility in the U.S.. Would you say that electricity transmission and generation have "stagnated"?
  - chimeracoder 10y ago
    > All consumer level electricity supply is classified as a utility in the U.S.. Would you say that electricity transmission and generation have "stagnated"? That's a pretty bad comparison, though, because the transmission of electricity is as commoditized as possible (given that the electricity gets somewhere, the only thing the consumer cares about is price - there's no such thing as "fast" electricity). So what does "stagnation" on energy transmission even mean? There's no innovation - at least, not that the end consumer would ever know or care about - which is the textbook characteristic of a fungible commodity. The production is not fungible (see: clean energy production vs. dirty), but that's the part that's also somewhat competitive. For example, in New York City, Con Edison has a monopoly on the infrastructure[0], but you can purchase your electricity either though Con Edison or through an ESCO, which can include clean energy providers. As a general trend, municipalities which decouple the generation from the transmission and allow competition between companies that generate electricity do tend to have more clean-energy options than those which monopolize both the transmission and the generation. [0] A few parts are serviced by another provider instead of Con Edison, but basically any given household is serviced by only one power company
    - Retra 10y ago
      The innovation is to find cheaper and more efficient ways to generate and deliver electricity to consumers. Both decreasing costs to customers and environmental impact, as well as increasing profit margins for the company.
      - chimeracoder 10y ago
        > The innovation is to find cheaper and more efficient ways to generate and deliver electricity to consumers. You're repeating the definition of a commodity, which was exactly what I addressed in my first paragraph. > Both decreasing costs to customers and environmental impact, as well as increasing profit margins for the company. "Decreasing cost and increasing profit margins" again is part and parcel of commoditization. The environmental impact is what I addressed in the rest of my comment. Again, the comparison is bad because the only part of the electric industry which is not fully commoditized and which has the potential for non-commodity innovation is the part that is already competitive and much less regulated. Broadband Internet, on the other hand, is not at all commoditized. There are at least four different things that consumers can care about besides cost per unit, so comparing it to a commodity utility is a bad comparison.
- dleslie 10y ago
  They are privatized and regulated. Being a utility doesn't necessitate a government monopoly, and regulation needn't describe only a narrow range of allowed approaches.
- tyfon 10y ago
  What happened in Norway at least was that when the state telephone company Televerket that is now Telenor was privatized, they required them to lease the land lines and mobile spectrum to others at cost. This worked really well so now there is a health population of companies in both the telephone/mobile and isp sectors. I can get at least 5 different wired isps and maybe 50+ mobile broadband providers in the outskirts of a town of 60k people.
  - ksrm 10y ago
    The same thing happened in the UK with BT. There is genuine competition and it works reasonably well.
  - zo1 10y ago
    I can attest that the same thing happened with the telephone company here in South Africa. A while after its monopoly was taken away and regulation required that public infrastructure be rented out to any ISP that wished to use it, things started thriving after a long period of stagnation. In fact, ISPs thrived, and a lot of them are now installing and contracting the installation of their own Fibre to a lot of residences. Essentially, side-stepping the existing copper infrastructure that kept people tied to the telco monopoly.
- Broken_Hippo 10y ago
  I very highly doubt that classifying something as a utility leads to stagnation: Furthermore, I would argue that with some utilities, it is a boon to us if we don't grow. We don't actually need electricity or water use to increase. In addition, it is quite possible to have competition while still regulating something as a utility. Regulation is really more what the classifacation is about. You want clean water standards, companies that don't turn you off for being a few hours late, and so forth. This stuff is doubly important since in many areas, utilities are a natural monopoly. The classifacation can also ensure that the large companies venture out into small and rural cities and areas. Some folks in the US have only had home phone service less than 20 years despite such laws, after all, and I doubt they would without regulation.
- genericpseudo 10y ago
  That came with local loop unbundling, neutrality rules, and two competition authorities (local and pan-European) with real teeth.
dmritard96 10y ago
For the most part agreed. In general, if there is a 'natural monopoly' AND the private sector is failing to provide better service or better pricing or both as a result of competition, I don't understand why we wouldn't simply treat it as a utility or fully make it public. One counter here is that the reason they have a monopoly is the last mile lines and easements, but arguably there is enough spectral bandwidth in the wireless realm that perhaps whats really missing is competition for home internet from wireless operators. I'm not sure where I stand here but I do think its interesting to consider whether it would be better to help bring competition somehow from that side into the home broadband realm or whether the landline route should be made more public. I'm sure there are some capacity limitations on the wireless side also that may make this a pipedream.
- ComradeTaco 10y ago
  I believe what you're talking about is called a Wireless Internet Service Provider (WISP). Netlinx is one example of it (http://netlinx.net/ http://netlinx.net/) I've read a bit about WISPs, because they seem like a happy solution to the whole monopoly problem but they haven't caught hold in the way that I've hoped. Latency seems to be a pretty significant issue. Consistency in signal strength is also a problem. I also sort of think that this is kind of the way we get out of problems without ever getting at the root cause. We look to technology that may exist at a later point to fix problems caused by underlying political, organizational and infrastructure issues. Always looking for the next band aid for the bullet hole I suppose.
  - trome 10y ago
    Latency is often better than Cable ISPs and DSL (even with VDSL2 or Fastpath) on a WISP, and can easily compete with Fiber in terms of latency (wireless has less latency than optical glass), but where it falls down is in suburbia, where there isn't enough customer density to justify small cells and pole attachment costs don't allow you to feasibly put up nodes to blanket the neighborhood. Clearwire ran into many of these same issues, but they were able to operate at two orders of magnitude more power than most WISPs can (1 watt vs 150 watts) and had way more bandwidth around 2Ghz to work with, all of which was pristine.
RyanZAG 10y ago
> There are some industries that are natural monopolies, like water and electricity, because it's incredibly expensive to build both last mile connections and core infrastructure. Is this not beginning to change though? Setting up a local solar farm for a neighborhood and selling on that electricity seems like a valid business model to me. Same with setting up automated water desalinization and treatment plants. But because of regulations, the cost to do either is extreme. I think the very regulations that add so much cost may be the one's that have us thinking all about 'natural monopolies' today. The more people you can service, the easier it is is to spread the cost of regulation. But why do you need that cost in the first place?
- riffraff 10y ago
  Electricity production has never been a monopoly, and local generation has been done for a long time. Still, the distribution grid is a natural monopoly, if somehow it became obsolete because everyone was producing energy at home it would become useless but still have the same characteristics that made it a monopoly.
dingo_bat 10y ago
> Of course, Ajit Pai will have a lobbying job earning well north of 400K the moment the Trump administration runs out the door so it's really not his concern. Hasn't Trump banned this?
- tomp 10y ago
  Can he even ban it at all? AFAIK he's banned (or was talking about banning) the other direction - lobbyists getting government jobs.
  - dingo_bat 10y ago
    https://www.whitehouse.gov/the-press-office/2017/01/28/executive-order-ethics-commitments-executive-branch-appointees https://www.whitehouse.gov/the-press-office/2017/01/28/execu... "1. I will not, within 5 years after the termination of my employment as an appointee in any executive agency in which I am appointed to serve, engage in lobbying activities with respect to that agency."
    - mhuffman 10y ago
      > with respect to that agency ... and there is the "out". Just engage in lobbying activities with respect to another agency, where you now have a lot of contacts. Or consult with an agency that does engage in lobbying activities with respect to that agency. You get the idea. I am happy that the "Revolving Door", made famous by Larry Lessig (whose writing and classes, if you are lucky, can't be recommended enough) is getting more than lip service from some branch of government. However, this is just barely more than lip service.
- cptskippy 10y ago
  Trump's executive order banned federal employees from becoming registered lobbyist for 5 years. Unlike the Obama order it doesn't prevent lobbyists from working in the government agencies they lobbied, and it doesn't prevent government employees from going back to work in the industry they regulated in an influential position. It is speculated that much of the lobbying that occurs is by the influential people in an unregistered capacity and it's known as "shadow lobbying".
sametmax 10y ago
In France we have great competition among the the Internet providers, way more than for energy or water. So it's probably not exactly the same.
- simonh 10y ago
  Same in the UK, we change providers every few years depending on what deals are available. BT generally owns the last mile but is required to share it with other providers, then there are regional cable and fiber networks. I do believe in the power of markets, but as Adam Smith pointed out they must be regulated in order to be free and fair.
  - richieb 10y ago
    Who owns the wires?
    - simonh 10y ago
      British Telecom. Most of the infra was laid down when it was a government owned monopoly. When it was privatized and the ownership went into (mostly) private hands, it was required to lease out access to competing networks. I understand several other European countries have similar arrangements. In the UK we have the same for electricity and other utility provision as well. It's not ideal, but seems to work ok and has genuinely driven down prices for consumers a lot.
pharrlax 10y ago
>Of course, Ajit Pai will have a lobbying job earning well north of 400K the moment the Trump administration runs out the door Hahahaha, 400k? The man is the Chairman of the FCC. Try well into seven figures
concernedmale 10y ago
Nope, 5 year ban on lobbying after a govt job.

ScottBurson 10y ago

Yes, I have been inclined toward this view as well. But I would be interested to hear counterarguments.

lupin_sansei 10y ago

This was the argument against privatizing the telcos in Europe in the 80s. But once they did competition and innovation thrived. Classifying something as a utility leads to stagnation.

nitrogen 10y ago
Unfortunately in the US the telcos and cable providers are already privatized, and have only continued to merge and grow larger. So we need something different from the current situation, whatever that may be.
- ChefDenominator 10y ago
  The US telcos embed themselves into the local governments, keeping competition out. It's governments, all the way down.
  - ComradeTaco 10y ago
    That while Telco's do use regulatory capture well, you have to admit there's some sort of natural monopoly inherent to hard wired internet service.
    - AnthonyMouse 10y ago
      The known solution to this is local loop unbundling, but the ISPs lobbied their way out of that more than a decade ago.
    - ChefDenominator 10y ago
      This statement is usually made without any substantive evidence to support it, primarily because every monopoly, in practice, can only truly be a monopoly when the government mandates it. When firms are forced to compete on the open market, without the option of non-market strategies, someone will find a way to move in and compete. This is actually self-evident in the fact that these companies are actively engaging in non-market strategies. There would be no need to practice such tactics if they could simply hold a 'natural monopoly'. Others certainly disagree, but for me, this argument is the one I find most compelling.
  - fattire 10y ago
    That's an odd indictment of government. If government is taken over by private companies, that's government not working, and it's certainly not a democratic government to blame, it's an infiltrated, corrupt political system.
    - ChefDenominator 10y ago
      I may tweak your statement a little that the government is run largely by special interests, i.e. small minority wielding substantial influence (is a union a 'private company'?). Why must my city government make the decision on what company may drive a truck in a circuit to collect my refuse? Why was my local YMCA denied a permit to build an indoor pool while the city built a luxurious, beautiful, money-sucking 'Community Recreation Center' (that has an indoor pool)? Given the broad prevalence of this type of activity, it seems to at least suggest some fundamental breakdown within the system of representative democracy or, as you suggest, it is an indictment of governments, in general.
skywhopper 10y ago
I assume they required sharing of the last mile telephone lines, like long-distance competition in the US in the 90s? Because that's regulation that serves competition. Whereas the lack of regulation led to the AT&T monopoly that had to be broken up twice.
- bonzini 10y ago
  Correct.
ComradeTaco 10y ago
All consumer level electricity supply is classified as a utility in the U.S.. Would you say that electricity transmission and generation have "stagnated"?
- chimeracoder 10y ago
  > All consumer level electricity supply is classified as a utility in the U.S.. Would you say that electricity transmission and generation have "stagnated"? That's a pretty bad comparison, though, because the transmission of electricity is as commoditized as possible (given that the electricity gets somewhere, the only thing the consumer cares about is price - there's no such thing as "fast" electricity). So what does "stagnation" on energy transmission even mean? There's no innovation - at least, not that the end consumer would ever know or care about - which is the textbook characteristic of a fungible commodity. The production is not fungible (see: clean energy production vs. dirty), but that's the part that's also somewhat competitive. For example, in New York City, Con Edison has a monopoly on the infrastructure[0], but you can purchase your electricity either though Con Edison or through an ESCO, which can include clean energy providers. As a general trend, municipalities which decouple the generation from the transmission and allow competition between companies that generate electricity do tend to have more clean-energy options than those which monopolize both the transmission and the generation. [0] A few parts are serviced by another provider instead of Con Edison, but basically any given household is serviced by only one power company
  - Retra 10y ago
    The innovation is to find cheaper and more efficient ways to generate and deliver electricity to consumers. Both decreasing costs to customers and environmental impact, as well as increasing profit margins for the company.
    - chimeracoder 10y ago
      > The innovation is to find cheaper and more efficient ways to generate and deliver electricity to consumers. You're repeating the definition of a commodity, which was exactly what I addressed in my first paragraph. > Both decreasing costs to customers and environmental impact, as well as increasing profit margins for the company. "Decreasing cost and increasing profit margins" again is part and parcel of commoditization. The environmental impact is what I addressed in the rest of my comment. Again, the comparison is bad because the only part of the electric industry which is not fully commoditized and which has the potential for non-commodity innovation is the part that is already competitive and much less regulated. Broadband Internet, on the other hand, is not at all commoditized. There are at least four different things that consumers can care about besides cost per unit, so comparing it to a commodity utility is a bad comparison.
dleslie 10y ago
They are privatized and regulated. Being a utility doesn't necessitate a government monopoly, and regulation needn't describe only a narrow range of allowed approaches.
tyfon 10y ago
What happened in Norway at least was that when the state telephone company Televerket that is now Telenor was privatized, they required them to lease the land lines and mobile spectrum to others at cost. This worked really well so now there is a health population of companies in both the telephone/mobile and isp sectors. I can get at least 5 different wired isps and maybe 50+ mobile broadband providers in the outskirts of a town of 60k people.
- ksrm 10y ago
  The same thing happened in the UK with BT. There is genuine competition and it works reasonably well.
- zo1 10y ago
  I can attest that the same thing happened with the telephone company here in South Africa. A while after its monopoly was taken away and regulation required that public infrastructure be rented out to any ISP that wished to use it, things started thriving after a long period of stagnation. In fact, ISPs thrived, and a lot of them are now installing and contracting the installation of their own Fibre to a lot of residences. Essentially, side-stepping the existing copper infrastructure that kept people tied to the telco monopoly.
Broken_Hippo 10y ago
I very highly doubt that classifying something as a utility leads to stagnation: Furthermore, I would argue that with some utilities, it is a boon to us if we don't grow. We don't actually need electricity or water use to increase. In addition, it is quite possible to have competition while still regulating something as a utility. Regulation is really more what the classifacation is about. You want clean water standards, companies that don't turn you off for being a few hours late, and so forth. This stuff is doubly important since in many areas, utilities are a natural monopoly. The classifacation can also ensure that the large companies venture out into small and rural cities and areas. Some folks in the US have only had home phone service less than 20 years despite such laws, after all, and I doubt they would without regulation.
genericpseudo 10y ago
That came with local loop unbundling, neutrality rules, and two competition authorities (local and pan-European) with real teeth.

dmritard96 10y ago

For the most part agreed. In general, if there is a 'natural monopoly' AND the private sector is failing to provide better service or better pricing or both as a result of competition, I don't understand why we wouldn't simply treat it as a utility or fully make it public. One counter here is that the reason they have a monopoly is the last mile lines and easements, but arguably there is enough spectral bandwidth in the wireless realm that perhaps whats really missing is competition for home internet from wireless operators. I'm not sure where I stand here but I do think its interesting to consider whether it would be better to help bring competition somehow from that side into the home broadband realm or whether the landline route should be made more public. I'm sure there are some capacity limitations on the wireless side also that may make this a pipedream.

ComradeTaco 10y ago
I believe what you're talking about is called a Wireless Internet Service Provider (WISP). Netlinx is one example of it (http://netlinx.net/ http://netlinx.net/) I've read a bit about WISPs, because they seem like a happy solution to the whole monopoly problem but they haven't caught hold in the way that I've hoped. Latency seems to be a pretty significant issue. Consistency in signal strength is also a problem. I also sort of think that this is kind of the way we get out of problems without ever getting at the root cause. We look to technology that may exist at a later point to fix problems caused by underlying political, organizational and infrastructure issues. Always looking for the next band aid for the bullet hole I suppose.
- trome 10y ago
  Latency is often better than Cable ISPs and DSL (even with VDSL2 or Fastpath) on a WISP, and can easily compete with Fiber in terms of latency (wireless has less latency than optical glass), but where it falls down is in suburbia, where there isn't enough customer density to justify small cells and pole attachment costs don't allow you to feasibly put up nodes to blanket the neighborhood. Clearwire ran into many of these same issues, but they were able to operate at two orders of magnitude more power than most WISPs can (1 watt vs 150 watts) and had way more bandwidth around 2Ghz to work with, all of which was pristine.

RyanZAG 10y ago

> There are some industries that are natural monopolies, like water and electricity, because it's incredibly expensive to build both last mile connections and core infrastructure. Is this not beginning to change though? Setting up a local solar farm for a neighborhood and selling on that electricity seems like a valid business model to me. Same with setting up automated water desalinization and treatment plants. But because of regulations, the cost to do either is extreme. I think the very regulations that add so much cost may be the one's that have us thinking all about 'natural monopolies' today. The more people you can service, the easier it is is to spread the cost of regulation. But why do you need that cost in the first place?

riffraff 10y ago
Electricity production has never been a monopoly, and local generation has been done for a long time. Still, the distribution grid is a natural monopoly, if somehow it became obsolete because everyone was producing energy at home it would become useless but still have the same characteristics that made it a monopoly.

dingo_bat 10y ago

> Of course, Ajit Pai will have a lobbying job earning well north of 400K the moment the Trump administration runs out the door so it's really not his concern. Hasn't Trump banned this?

tomp 10y ago
Can he even ban it at all? AFAIK he's banned (or was talking about banning) the other direction - lobbyists getting government jobs.
- dingo_bat 10y ago
  https://www.whitehouse.gov/the-press-office/2017/01/28/executive-order-ethics-commitments-executive-branch-appointees https://www.whitehouse.gov/the-press-office/2017/01/28/execu... "1. I will not, within 5 years after the termination of my employment as an appointee in any executive agency in which I am appointed to serve, engage in lobbying activities with respect to that agency."
  - mhuffman 10y ago
    > with respect to that agency ... and there is the "out". Just engage in lobbying activities with respect to another agency, where you now have a lot of contacts. Or consult with an agency that does engage in lobbying activities with respect to that agency. You get the idea. I am happy that the "Revolving Door", made famous by Larry Lessig (whose writing and classes, if you are lucky, can't be recommended enough) is getting more than lip service from some branch of government. However, this is just barely more than lip service.
cptskippy 10y ago
Trump's executive order banned federal employees from becoming registered lobbyist for 5 years. Unlike the Obama order it doesn't prevent lobbyists from working in the government agencies they lobbied, and it doesn't prevent government employees from going back to work in the industry they regulated in an influential position. It is speculated that much of the lobbying that occurs is by the influential people in an unregistered capacity and it's known as "shadow lobbying".

sametmax 10y ago

In France we have great competition among the the Internet providers, way more than for energy or water. So it's probably not exactly the same.

simonh 10y ago
Same in the UK, we change providers every few years depending on what deals are available. BT generally owns the last mile but is required to share it with other providers, then there are regional cable and fiber networks. I do believe in the power of markets, but as Adam Smith pointed out they must be regulated in order to be free and fair.
- richieb 10y ago
  Who owns the wires?
  - simonh 10y ago
    British Telecom. Most of the infra was laid down when it was a government owned monopoly. When it was privatized and the ownership went into (mostly) private hands, it was required to lease out access to competing networks. I understand several other European countries have similar arrangements. In the UK we have the same for electricity and other utility provision as well. It's not ideal, but seems to work ok and has genuinely driven down prices for consumers a lot.

pharrlax 10y ago

>Of course, Ajit Pai will have a lobbying job earning well north of 400K the moment the Trump administration runs out the door Hahahaha, 400k? The man is the Chairman of the FCC. Try well into seven figures

concernedmale 10y ago

Nope, 5 year ban on lobbying after a govt job.