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I'm all for the market in most instances, but I really hope Internet access starts to be treated like a utility in the United States. It is approaching the nec

I'm all for the market in most instances, but I really hope Internet access starts to be treated like a utility in the United States. It is approaching the necessity of electricity a century ago (or water, gas, roadways, etc.) The market had zero incentive to invest so heavily in these utilities for such a drawn out return before the government financed the basic infrastructure. I know the analogy isn't perfect for a few reasons, but imagine where we would be if all these other necessities were privatized?

smoyer 13y ago
Actually, the USF fee that's assessed on every phone bill you pay (in the U.S.) was originally supposed to be used to connect schools, libraries and municipal buildings both rural and urban areas with the understanding that once the fiber capacity was in place to service those institutions, the providers would supplement their income by connecting businesses and private residences. In the mid-to-late '90s, I was part of a team that built significant fiber-based distance learning systems in Kansas, Nebraska, Wisconsin, Texas and smaller installations in other states. The schools, a local fiber provider and our company cooperated to submit the grant proposal and the USF funds ended up offsetting enough of the equipment/infrastructure costs that the schools and SP could agree on a rate that the schools could afford. The last of our systems (that I was involved with) was installed in about 2000 but stopped the organization overseeing those services held applications for (from memory) about 18 months. I'm not aware of how the funds are distributed now (if at all) but I know for a while some of the schools we'd connected complained that they were no longer receiving their subsidies. I do know that the fee remained on my telephone bill. So the question is "why didn't the infrastructure installed using USF funds lead to lower prices for consumers?". I think the answer is that Internet pricing for home service in the U.S. is too lucrative - no guarantees on service (yes, you're quoted maximum through-puts but those can be affected by your neighbors) and relatively large bills. http://en.wikipedia.org/wiki/Universal_Service_Fund http://en.wikipedia.org/wiki/Universal_Service_Fund
- SystemOut 13y ago
  The USF funds are distributed (at least partially) through the e-rate program that school districts can use to help fund communication infrastructure. The amount varies but is primarily influenced by how "poor" the district is. I've been involved with some districts in some extremely poor areas that had full gigabit (or more) fiber links between their schools and the district office and then out to the Internet. They get this money by applying through the e-rate grant process. I know of cases where the funding paid for 90% of the cost of installation.
  - smoyer 13y ago
    It sounds like that portion of the program continued (after a period when now funds were disbursed) but I had moved onto another company before that happened. And yes, poor districts had an advantage ... we built systems primarily in rural and urban areas, but very few in suburban areas. Those rural areas were poor due to low population density, while the urban areas were poor due to demographics.
praxeologist 13y ago
You are off your rocker if you think this is a market problem. Where I live now and where I lived previously (downtown Baltimore) there is some sort of regulation that keeps Verizon/FIOS from being able to provide service so the ONLY option is Comcast besides some shit 3g/Clear service nobody should use. Just because the internet is important doesn't mean the same laws of economics don't apply to it and it will somehow be better provided by government.
- Amadou 13y ago
  A couple of years ago Verizon essentially halted all new fiber roll-outs -- nationwide. http://online.wsj.com/news/articles/SB10001424052702303410404575151773432729614 http://online.wsj.com/news/articles/SB1000142405270230341040... They are still wrapping up the details on a couple of long-term rollouts, but they decided they would rather spend their money on the more lucrative wireless oligopoly. They did manage to get the DoJ to sign off on a deal to collude with comcast so as not to poach each other's customers. http://stopthecap.com/2012/08/16/settlement-over-verizon-cable-cross-marketing-deal-collusion-ok-for-4-years/ http://stopthecap.com/2012/08/16/settlement-over-verizon-cab... So there may well have been regulatory hurdles in your case, but Verizon pussing out (with a new CEO) is the reason you will never get FIOS.
  - praxeologist 13y ago
    You don't know what you are talking about. Just so you get the point I am going to repeat myself, you don't have a clue of the situation if you think that the story is anything other than the Baltimore City Council erecting regulatory barriers to FIOS in Baltimore City. Yeah, they might call it a "business move" now but the unstated fact is that it isn't worth it to Verizon to pay the city for a license.
- josephlord 13y ago
  No need to insult people. There can be more than one problem. In your area regulation may be a significant part of the problem but in other places (e.g. Europe) regulation can really help in places to enable competition. Most economic "laws" apply in competitive markets with limited barriers to entry. It is hard to see how they apply even in an unregulated situation where infrastructure costs are so high and one market participant already has infrastructure in place. Looking at an existing market with an incumbent trying to move in and challenge them is rarely a wise move whatever their current price. They are in a position to reduce prices and make your entry unviable, they know it and you know it so they can continue charging high monopoly rates until a challenger does announce themselves. Government can do better (doesn't mean they always will) because: 1) They can look at community benefits not just the ROI for the provider. In a way they win if the incumbent just reduces prices and improves service even if they actually lose some money they have invested in a competitor. 2) They can look long term. 3) They can set rules such as requiring the infrastructure owner to allow other providers to use their lines and regulate the pricing in that monopoly market (happens in the UK). [Don't know what level of government in the US could be capable of this.]
toast0 13y ago
The problem with thinking of internet as a utility is that it doesn't behave the same way as any of the other utilities. Water, natural gas, and electricity are essentially fungible, with simple to express standards. An internet connection is much more complex to specify: you may have a gigabit fiber connection to the provider's local network node, but what connections do they have to everywhere else? Medium, location, bandwidth, etc. If all of my traffic is routed through [some other city on the other side of the country], that's not going to be a great experience regardless of the bandwidth.
- Zigurd 13y ago
  You are seriously claiming bits are less fungible than electric power, with the variety of ways power is generated?
  - twistedpair 13y ago
    Most people don't care how it was generated. They want 120V @ 60Hz. That's it. Power companies don't secretly throttle you and then claim they didn't. The poster is talking about broadband access, not 'bits'.
  - toast0 13y ago
    Absolutely, internet access is less fungible than electric power. In my area, I can purchase my electricity from specific generators, but they don't run a line to my house from the windfarm; instead, all of the generators are connected to the grid, and so is my house, and I get a nice sinusoidal 220-240 VAC @ 60hz. In contrast, if I choose between different ISPs, ignoring the inherent differences in latency and bandwidth of the medium and protocols, my packets could have a very different path through the internet depending on how my ISP is interconnected with the rest of the network. If they embrace local peering, then my bits may not need to travel over very many networks when connecting to relatively local destinations. If they shun local peering, but have good local transit, then my bits may have to travel over more networks, but not travel far. If they shun local peering, and their transit is also not local, then my bits will have to travel a long way to get where they want to go. If the peering or transit connections are inadequately sized, then there will be congestion there that's dependent on my choice of ISPs. There is fungibility in bringing my bits to a specific carrier neutral location; but bringing my bits to the internet at large is not fungible. If you want to regulate as a utility connecting homes to the nearest internet exchange point, for some definitions of nearest and internet exchange point, that's probably the limit of coherent regulation.
Zigurd 13y ago
Don't confuse "market" with "investor-owned." Cooperatives also operate in the market. But they are owned by their customers or suppliers.

smoyer 13y ago

Actually, the USF fee that's assessed on every phone bill you pay (in the U.S.) was originally supposed to be used to connect schools, libraries and municipal buildings both rural and urban areas with the understanding that once the fiber capacity was in place to service those institutions, the providers would supplement their income by connecting businesses and private residences. In the mid-to-late '90s, I was part of a team that built significant fiber-based distance learning systems in Kansas, Nebraska, Wisconsin, Texas and smaller installations in other states. The schools, a local fiber provider and our company cooperated to submit the grant proposal and the USF funds ended up offsetting enough of the equipment/infrastructure costs that the schools and SP could agree on a rate that the schools could afford. The last of our systems (that I was involved with) was installed in about 2000 but stopped the organization overseeing those services held applications for (from memory) about 18 months. I'm not aware of how the funds are distributed now (if at all) but I know for a while some of the schools we'd connected complained that they were no longer receiving their subsidies. I do know that the fee remained on my telephone bill. So the question is "why didn't the infrastructure installed using USF funds lead to lower prices for consumers?". I think the answer is that Internet pricing for home service in the U.S. is too lucrative - no guarantees on service (yes, you're quoted maximum through-puts but those can be affected by your neighbors) and relatively large bills. http://en.wikipedia.org/wiki/Universal_Service_Fund http://en.wikipedia.org/wiki/Universal_Service_Fund

SystemOut 13y ago
The USF funds are distributed (at least partially) through the e-rate program that school districts can use to help fund communication infrastructure. The amount varies but is primarily influenced by how "poor" the district is. I've been involved with some districts in some extremely poor areas that had full gigabit (or more) fiber links between their schools and the district office and then out to the Internet. They get this money by applying through the e-rate grant process. I know of cases where the funding paid for 90% of the cost of installation.
- smoyer 13y ago
  It sounds like that portion of the program continued (after a period when now funds were disbursed) but I had moved onto another company before that happened. And yes, poor districts had an advantage ... we built systems primarily in rural and urban areas, but very few in suburban areas. Those rural areas were poor due to low population density, while the urban areas were poor due to demographics.

praxeologist 13y ago

You are off your rocker if you think this is a market problem. Where I live now and where I lived previously (downtown Baltimore) there is some sort of regulation that keeps Verizon/FIOS from being able to provide service so the ONLY option is Comcast besides some shit 3g/Clear service nobody should use. Just because the internet is important doesn't mean the same laws of economics don't apply to it and it will somehow be better provided by government.

Amadou 13y ago
A couple of years ago Verizon essentially halted all new fiber roll-outs -- nationwide. http://online.wsj.com/news/articles/SB10001424052702303410404575151773432729614 http://online.wsj.com/news/articles/SB1000142405270230341040... They are still wrapping up the details on a couple of long-term rollouts, but they decided they would rather spend their money on the more lucrative wireless oligopoly. They did manage to get the DoJ to sign off on a deal to collude with comcast so as not to poach each other's customers. http://stopthecap.com/2012/08/16/settlement-over-verizon-cable-cross-marketing-deal-collusion-ok-for-4-years/ http://stopthecap.com/2012/08/16/settlement-over-verizon-cab... So there may well have been regulatory hurdles in your case, but Verizon pussing out (with a new CEO) is the reason you will never get FIOS.
- praxeologist 13y ago
  You don't know what you are talking about. Just so you get the point I am going to repeat myself, you don't have a clue of the situation if you think that the story is anything other than the Baltimore City Council erecting regulatory barriers to FIOS in Baltimore City. Yeah, they might call it a "business move" now but the unstated fact is that it isn't worth it to Verizon to pay the city for a license.
josephlord 13y ago
No need to insult people. There can be more than one problem. In your area regulation may be a significant part of the problem but in other places (e.g. Europe) regulation can really help in places to enable competition. Most economic "laws" apply in competitive markets with limited barriers to entry. It is hard to see how they apply even in an unregulated situation where infrastructure costs are so high and one market participant already has infrastructure in place. Looking at an existing market with an incumbent trying to move in and challenge them is rarely a wise move whatever their current price. They are in a position to reduce prices and make your entry unviable, they know it and you know it so they can continue charging high monopoly rates until a challenger does announce themselves. Government can do better (doesn't mean they always will) because: 1) They can look at community benefits not just the ROI for the provider. In a way they win if the incumbent just reduces prices and improves service even if they actually lose some money they have invested in a competitor. 2) They can look long term. 3) They can set rules such as requiring the infrastructure owner to allow other providers to use their lines and regulate the pricing in that monopoly market (happens in the UK). [Don't know what level of government in the US could be capable of this.]

toast0 13y ago

The problem with thinking of internet as a utility is that it doesn't behave the same way as any of the other utilities. Water, natural gas, and electricity are essentially fungible, with simple to express standards. An internet connection is much more complex to specify: you may have a gigabit fiber connection to the provider's local network node, but what connections do they have to everywhere else? Medium, location, bandwidth, etc. If all of my traffic is routed through [some other city on the other side of the country], that's not going to be a great experience regardless of the bandwidth.

Zigurd 13y ago
You are seriously claiming bits are less fungible than electric power, with the variety of ways power is generated?
- twistedpair 13y ago
  Most people don't care how it was generated. They want 120V @ 60Hz. That's it. Power companies don't secretly throttle you and then claim they didn't. The poster is talking about broadband access, not 'bits'.
- toast0 13y ago
  Absolutely, internet access is less fungible than electric power. In my area, I can purchase my electricity from specific generators, but they don't run a line to my house from the windfarm; instead, all of the generators are connected to the grid, and so is my house, and I get a nice sinusoidal 220-240 VAC @ 60hz. In contrast, if I choose between different ISPs, ignoring the inherent differences in latency and bandwidth of the medium and protocols, my packets could have a very different path through the internet depending on how my ISP is interconnected with the rest of the network. If they embrace local peering, then my bits may not need to travel over very many networks when connecting to relatively local destinations. If they shun local peering, but have good local transit, then my bits may have to travel over more networks, but not travel far. If they shun local peering, and their transit is also not local, then my bits will have to travel a long way to get where they want to go. If the peering or transit connections are inadequately sized, then there will be congestion there that's dependent on my choice of ISPs. There is fungibility in bringing my bits to a specific carrier neutral location; but bringing my bits to the internet at large is not fungible. If you want to regulate as a utility connecting homes to the nearest internet exchange point, for some definitions of nearest and internet exchange point, that's probably the limit of coherent regulation.

Zigurd 13y ago

Don't confuse "market" with "investor-owned." Cooperatives also operate in the market. But they are owned by their customers or suppliers.