4 ms·

GDP doesn't matter here. Average salary might... presuming employees that maintain the system are paid average salary, AND the cost is overwhelmingly in the "s

GDP doesn't matter here. Average salary might... presuming employees that maintain the system are paid average salary, AND the cost is overwhelmingly in the "salaries" category - which I sorta' doubt.

rayiner 7y ago
GDP per capita is a proxy for local price level, and it absolutely matters. Running a fiber service is overwhelmingly a matter of labor costs. Everyone from employees who deal with permitting and approvals to guys who run the cable to network operators to customer support representatives. The stuff that’s made in China—the fiber and the equipment, is a small part of those costs.
- rsj_hn 7y ago
  > GDP per capita is a proxy for local price level No, this is incorrect. GDP is a proxy for production in nominal terms. If it were just a proxy for local price level, then every place would have the same real income and would differ solely by relative prices. That the U.S. has a a GDP/capita that is 4x times some other nation does not mean that prices are 4x lower in the other nation.
  - rayiner 7y ago
    GDP is a measure of production in nominal terms. It’s a rough proxy for labor prices (the kind of price I was talking about). That’s because a dominant component of GDP is personal incomes.
    - rsj_hn 7y ago
      It's a rough proxy of production. Even assuming constant labor shares and working hours (which are not all constant), wages are higher in A than in B because workers produce more per hour in A than they do in B, and then there is a relative price effect. But it's not all a relative price effect, it's not a proxy for the relative price effect, and for large multiples, productivity dominates relative price effects for most occupations. When you are asking "how much would it cost to do something in B than in A", workers in B might be paid 4x more than in A, but you may also need 1/4 of the workers to do the same job. So the issue isn't wages, it's output per unit work, primarily because of accumulated human and physical capital, as well as things like infrastructure, legal system, needing to pay bribes or efficiency wages, etc.
ineedasername 7y ago
You don't have to take my word for it. There's recently been a push for expansion of Romania's broadband network to more rural areas. At an investment of about $110 million US, it will reach an expected 150,000 additional households, for a cost around $730 per household. Compare that to the US, where the estimate is closer to $3000 and as high as $8000 per household, a 7 to 11 fold increase over Romania. [0] Nearly all aspects of infrastructure build out are heavily weighted towards labor costs. A 2009 rule in the US required large projects use union labor, and just that marginal increase in labor costs increased infrastructure costs by around 15%. Anecdotally, I had a home addition some years back. Materials costs about 20%, labor about 80%. Also once built, the capital expenditures for something like broadband drop to negligible rates while the labor cost of maintenance & administration just keeps on going, maybe not as high as the initial build but you need new & different workers too-- sales reps, account managers, etc. Given that prices tend towards the marginal cost of production over time, in this case being mostly labor, it makes perfect sense that a country with 1/8 the labor costs could offer a service at 1/5 the cost in the US, the difference in those proportions accounting for the marginal capital costs of maintenance. [0] https://www.telegeography.com/products/commsupdate/articles/2019/04/30/romania-to-extend-fibre-optic-network-to-700-rural-localities/ https://www.telegeography.com/products/commsupdate/articles/...

rayiner 7y ago

GDP per capita is a proxy for local price level, and it absolutely matters. Running a fiber service is overwhelmingly a matter of labor costs. Everyone from employees who deal with permitting and approvals to guys who run the cable to network operators to customer support representatives. The stuff that’s made in China—the fiber and the equipment, is a small part of those costs.

rsj_hn 7y ago
> GDP per capita is a proxy for local price level No, this is incorrect. GDP is a proxy for production in nominal terms. If it were just a proxy for local price level, then every place would have the same real income and would differ solely by relative prices. That the U.S. has a a GDP/capita that is 4x times some other nation does not mean that prices are 4x lower in the other nation.
- rayiner 7y ago
  GDP is a measure of production in nominal terms. It’s a rough proxy for labor prices (the kind of price I was talking about). That’s because a dominant component of GDP is personal incomes.
  - rsj_hn 7y ago
    It's a rough proxy of production. Even assuming constant labor shares and working hours (which are not all constant), wages are higher in A than in B because workers produce more per hour in A than they do in B, and then there is a relative price effect. But it's not all a relative price effect, it's not a proxy for the relative price effect, and for large multiples, productivity dominates relative price effects for most occupations. When you are asking "how much would it cost to do something in B than in A", workers in B might be paid 4x more than in A, but you may also need 1/4 of the workers to do the same job. So the issue isn't wages, it's output per unit work, primarily because of accumulated human and physical capital, as well as things like infrastructure, legal system, needing to pay bribes or efficiency wages, etc.

ineedasername 7y ago

You don't have to take my word for it. There's recently been a push for expansion of Romania's broadband network to more rural areas. At an investment of about $110 million US, it will reach an expected 150,000 additional households, for a cost around $730 per household. Compare that to the US, where the estimate is closer to $3000 and as high as $8000 per household, a 7 to 11 fold increase over Romania. [0] Nearly all aspects of infrastructure build out are heavily weighted towards labor costs. A 2009 rule in the US required large projects use union labor, and just that marginal increase in labor costs increased infrastructure costs by around 15%. Anecdotally, I had a home addition some years back. Materials costs about 20%, labor about 80%. Also once built, the capital expenditures for something like broadband drop to negligible rates while the labor cost of maintenance & administration just keeps on going, maybe not as high as the initial build but you need new & different workers too-- sales reps, account managers, etc. Given that prices tend towards the marginal cost of production over time, in this case being mostly labor, it makes perfect sense that a country with 1/8 the labor costs could offer a service at 1/5 the cost in the US, the difference in those proportions accounting for the marginal capital costs of maintenance. [0] https://www.telegeography.com/products/commsupdate/articles/2019/04/30/romania-to-extend-fibre-optic-network-to-700-rural-localities/ https://www.telegeography.com/products/commsupdate/articles/...