5 ms·

Not at all "natural". The cost is so high partially due to special agreements between these corporations and governments, from local agreements to lay down fibe

Not at all "natural". The cost is so high partially due to special agreements between these corporations and governments, from local agreements to lay down fiber, to national agreements regarding the use of the electromagnetic spectrum.

jjoonathan 13y ago
US Telcos = Natural Monopoly + Regulatory Capture > The cost is so high partially due to special agreements This is true, but it doesn't contradict the fact that telcos are also natural monopolies. Let's play a game: pretend that all of these special agreements have suddenly become invalid and the market has become deregulated. Assume you have (or can acquire) the technical expertise to challenge them. What's your business plan?
- Benferhat 13y ago
  You love the phrase "regulatory capture", don't you? :)
  - deleted 13y ago
    [deleted]
  - jjoonathan 13y ago
    Not as much as I despise both the thing it refers to and the propensity of self-styled libertarians to pretend that it's the only problem in the world :)
- argumentum 13y ago
  There's a lot of ambiguity in your scenario. Do I get equal access to the existing infrastructure (presumably paid for by the existing monopoly)? Assuming this deregulation comes along with some law or judicial ruling that no local government can create such an ongoing monopoly, there would likely be created a separate industry that simply builds infrastructure at some price to the locality with no continuing agreement. Second, who am i? A startup? Since this is a fantasy world, I imagine I'd have invented some new tech that would substantially reduce the cost of operating an ISP. I'd pitch that to investors and raise enough to get of the ground? But that's only one way I might enter the market. I may be Google, or even an existing telco looking to expand my turf. My overarching answer is simply: I don't know, but let's get rid of the artificial constraints on the market and see what results. In most unregulated industries, quality rises and price falls (in the long run). There may be exceptions, but which industries do you see this not happening: 1. Finance 2. Medicine 3. Utilities 4. ? All industries with close connection to the state. I'd wager that sans these connections, things would be a lot different.
  - Retric 13y ago
    Umm, the only way you would have access to there infrastructure is with heavy regulation so no there is no access to any of it. Suggesting otherwise is seriously ignoring the question. PS: 1 billion in capital no regulation no access to any existing infrastructure no magic wand and the only way you can dig is to convince the local government or individuals that there is so reason to let you dig aka spend money. Which is clearly harder where there is already existing high speed internet. So what do you do you find city's without FIOS (etc) and build there at which point there yours and everyone else leaves them alone more or less. (Though if there is no natural monopoly then fighting in existing markets should be easy...)
    - argumentum 13y ago
      Clearly a local government is going to be less receptive to more digging if high speed service is in place, but it's not a "natural" monopoly if a deal with the government must be made as a prerequisite to provide services. You are also assuming that the "digger" is necessarily the service provider. In my view, local governments are basically seduced by telcos subsidizing or eliminating the up front costs of building infrastructure. In the long run, it's a bad deal. I would say the monopoly is "natural" if and only if the local government is required to allow anyone (or no one) to dig. Or if it pays for the digging itself.
      - XorNot 13y ago
        Ah, yes it is? Someone owns that land, and it's not you. And for that matter, you want to see expensive, wait till you have to convince 10,000 property owners individually to let you trench up their gardens.
      - markgraydk 13y ago
        A natural monopoly is an economic concept about how high fixed costs makes a single company the most efficient. Regulation of a natural monopoly is secondary to that. A telco might then be a both natural monopoly, due to how the business works, but also have a government-granted monopoly due to licenes etc.
- cam_l 13y ago
  > What's your business plan? Thanks, this is is a point I do not see expressed enough. Regulatory capture just one expression of a 'free market'. When you are a non-moral entity, free to do business however you want, you will cheat, you will find ways within any system to lock others out of your market, you will screw the customer for every last cent, you will break the law if you can get away with it - or at least the ones that do will end up ahead of the game. Liberalists seem to believe that free-marketism is a self-perpetuating algorithm. But when the unit tests fail, they suggest it should be unleashed system wide without thinking through the consequences. If your competitor has locked you out, and you are a non-moral entity, and there is no legal recourse, what do you do? How do you break a cartel? Car-bombs? The opposite of regulatory capture is not no regulation, it is public education and engagement and power. Consumer power is directly proportional to market freedom. edit: cool, so what do you call them in the states? there is no such distinction in oz, the current governing party is the liberal party and there is no way in hell they are progressives ;)
  - jjoonathan 13y ago
    > Liberalists seem to believe that free-marketism is a self-[optimizing] algorithm. It's worth noting that in the US, the term "liberal" is often used in association with those who are skeptical of the free market (moreso than their political opponents, anyway). Classical liberalism does promote laissez-faire economic policy, so you aren't incorrect, but the term is a bit ambiguous in context (see the 2nd paragraph in http://en.wikipedia.org/wiki/Classical_liberalism http://en.wikipedia.org/wiki/Classical_liberalism ) Anyway, I agree completely with your point. Business interests and consumer interests often oppose one another, and I believe that governments ought to put consumer interests first, even though presently they have a track record of doing the exact opposite. Campaign finance reform would be a good start (private campaign finance => bribery is a prerequisite for obtaining power).
    - argumentum 13y ago
      > I believe that governments ought to put consumer interests first, even though presently they have a track record of doing the exact opposite. For me, this is the part I'd emphasize, and probably where we could create a great deal of consensus. Whether or not we agree that the government should be interfering for the benefit of the consumer, we definitely agree that it shouldn't be interfering for the benefit of big business.
- markgraydk 13y ago
  Considering the economic defintion of a natural monopoly, deregulation would be the wrong path to go down. Instead, we should see more regulation like that of "last mile" and caps on or forced wholesale pricing. I was working on creating an MVNO (http://en.wikipedia.org/wiki/Mobile_virtual_network_operator http://en.wikipedia.org/wiki/Mobile_virtual_network_operator) at one point but after crunching the numbers we decided (among other reasons) not to pursue it further. We were looking at handing over about 80% of turnover, even with fairly good laws in place (EU). On top of that, the contracts we were looking at where all based on bundling of services (i.e. XX amount of data, minutes and texts) which would have made our business more of a game of demand estimation. We could perhaps have gotten a small margin if we could estimate what our users would use of services better than what we paid for them wholesale. This has also led to the unfortunate business strategy of most MVNOs around here where they look for a quick exit by being bought out by the infrastructure owner when they have gotten enough customers. Few make it into into black numbers before that.
- jessaustin 13y ago
  Are we throwing out the FCC's regulation of the spectrum? If so, then WISPs will sweep across the nation, competing to provide consumers the best wireless access at the lowest prices, on frequency bands previously wasted on broadcast, cell, and official uses. A great deal of money will be made in that sector, especially to whichever equipment maker rolls out the best first- and second-generation wideband modems. Another good business will be replacing car radios, at least for some time.
- fm8892 13y ago
  > Let's play a game: pretend that all of these special agreements have suddenly become invalid and the market has become deregulated. Assume you have (or can acquire) the technical expertise to challenge them. What's your business plan? My business plan is to be Google: Install duplicate infrastructure for 80% of what the incumbent paid (per your other post), using my massive cash reserves, and charge $0 for equivalent or better service. Revenue comes from my massive ad network (which my competitors don't have), so I can sustainably run the business like this for as long as necessary to force the incumbent to fold. I now have the local monopoly, which I can use as I see fit. I might (for example) give priority to packets originating from hosts who are also customers of my ad network. This creates a virtuous cycle for me--advertizes will only want to spend money with me, so I can upgrade my infrastructure more rapidly that the former incumbent ever could. That brings me more internet-users, which makes my ad network more valuable. Since I have a monopoly, I can also rent-seek with respect to internet access fees (though I might keep it at $0 to encourage end-uses to continue clicking on ads). I will then repeat this process in other cities until I have a nation-wide monopoly. Despite being in blatant violation of anti-trust laws, I will continue to do this by bribing^H contributing to the election campaigns of friendly politicians. Of course, this is cheating a little (because my business plan replaces one natural monopoly with another)--but not a lot, because you asked for my business plan to break into the current natural monopoly, not how one could sustainably obtain a competitive market. The answer to the latter question is obvious: You can't.
hristov 13y ago
You may be right but this is a moot point for the present discussion. Regardless how or why, there is a monopoly and it will be very difficult for any party to provide a competing service. The idea that a new competitor will jump in and make everything better is an absolute delusion.

jjoonathan 13y ago

US Telcos = Natural Monopoly + Regulatory Capture > The cost is so high partially due to special agreements This is true, but it doesn't contradict the fact that telcos are also natural monopolies. Let's play a game: pretend that all of these special agreements have suddenly become invalid and the market has become deregulated. Assume you have (or can acquire) the technical expertise to challenge them. What's your business plan?

Benferhat 13y ago
You love the phrase "regulatory capture", don't you? :)
- deleted 13y ago
  [deleted]
- jjoonathan 13y ago
  Not as much as I despise both the thing it refers to and the propensity of self-styled libertarians to pretend that it's the only problem in the world :)
argumentum 13y ago
There's a lot of ambiguity in your scenario. Do I get equal access to the existing infrastructure (presumably paid for by the existing monopoly)? Assuming this deregulation comes along with some law or judicial ruling that no local government can create such an ongoing monopoly, there would likely be created a separate industry that simply builds infrastructure at some price to the locality with no continuing agreement. Second, who am i? A startup? Since this is a fantasy world, I imagine I'd have invented some new tech that would substantially reduce the cost of operating an ISP. I'd pitch that to investors and raise enough to get of the ground? But that's only one way I might enter the market. I may be Google, or even an existing telco looking to expand my turf. My overarching answer is simply: I don't know, but let's get rid of the artificial constraints on the market and see what results. In most unregulated industries, quality rises and price falls (in the long run). There may be exceptions, but which industries do you see this not happening: 1. Finance 2. Medicine 3. Utilities 4. ? All industries with close connection to the state. I'd wager that sans these connections, things would be a lot different.
- Retric 13y ago
  Umm, the only way you would have access to there infrastructure is with heavy regulation so no there is no access to any of it. Suggesting otherwise is seriously ignoring the question. PS: 1 billion in capital no regulation no access to any existing infrastructure no magic wand and the only way you can dig is to convince the local government or individuals that there is so reason to let you dig aka spend money. Which is clearly harder where there is already existing high speed internet. So what do you do you find city's without FIOS (etc) and build there at which point there yours and everyone else leaves them alone more or less. (Though if there is no natural monopoly then fighting in existing markets should be easy...)
  - argumentum 13y ago
    Clearly a local government is going to be less receptive to more digging if high speed service is in place, but it's not a "natural" monopoly if a deal with the government must be made as a prerequisite to provide services. You are also assuming that the "digger" is necessarily the service provider. In my view, local governments are basically seduced by telcos subsidizing or eliminating the up front costs of building infrastructure. In the long run, it's a bad deal. I would say the monopoly is "natural" if and only if the local government is required to allow anyone (or no one) to dig. Or if it pays for the digging itself.
    - XorNot 13y ago
      Ah, yes it is? Someone owns that land, and it's not you. And for that matter, you want to see expensive, wait till you have to convince 10,000 property owners individually to let you trench up their gardens.
    - markgraydk 13y ago
      A natural monopoly is an economic concept about how high fixed costs makes a single company the most efficient. Regulation of a natural monopoly is secondary to that. A telco might then be a both natural monopoly, due to how the business works, but also have a government-granted monopoly due to licenes etc.
cam_l 13y ago
> What's your business plan? Thanks, this is is a point I do not see expressed enough. Regulatory capture just one expression of a 'free market'. When you are a non-moral entity, free to do business however you want, you will cheat, you will find ways within any system to lock others out of your market, you will screw the customer for every last cent, you will break the law if you can get away with it - or at least the ones that do will end up ahead of the game. Liberalists seem to believe that free-marketism is a self-perpetuating algorithm. But when the unit tests fail, they suggest it should be unleashed system wide without thinking through the consequences. If your competitor has locked you out, and you are a non-moral entity, and there is no legal recourse, what do you do? How do you break a cartel? Car-bombs? The opposite of regulatory capture is not no regulation, it is public education and engagement and power. Consumer power is directly proportional to market freedom. edit: cool, so what do you call them in the states? there is no such distinction in oz, the current governing party is the liberal party and there is no way in hell they are progressives ;)
- jjoonathan 13y ago
  > Liberalists seem to believe that free-marketism is a self-[optimizing] algorithm. It's worth noting that in the US, the term "liberal" is often used in association with those who are skeptical of the free market (moreso than their political opponents, anyway). Classical liberalism does promote laissez-faire economic policy, so you aren't incorrect, but the term is a bit ambiguous in context (see the 2nd paragraph in http://en.wikipedia.org/wiki/Classical_liberalism http://en.wikipedia.org/wiki/Classical_liberalism ) Anyway, I agree completely with your point. Business interests and consumer interests often oppose one another, and I believe that governments ought to put consumer interests first, even though presently they have a track record of doing the exact opposite. Campaign finance reform would be a good start (private campaign finance => bribery is a prerequisite for obtaining power).
  - argumentum 13y ago
    > I believe that governments ought to put consumer interests first, even though presently they have a track record of doing the exact opposite. For me, this is the part I'd emphasize, and probably where we could create a great deal of consensus. Whether or not we agree that the government should be interfering for the benefit of the consumer, we definitely agree that it shouldn't be interfering for the benefit of big business.
markgraydk 13y ago
Considering the economic defintion of a natural monopoly, deregulation would be the wrong path to go down. Instead, we should see more regulation like that of "last mile" and caps on or forced wholesale pricing. I was working on creating an MVNO (http://en.wikipedia.org/wiki/Mobile_virtual_network_operator http://en.wikipedia.org/wiki/Mobile_virtual_network_operator) at one point but after crunching the numbers we decided (among other reasons) not to pursue it further. We were looking at handing over about 80% of turnover, even with fairly good laws in place (EU). On top of that, the contracts we were looking at where all based on bundling of services (i.e. XX amount of data, minutes and texts) which would have made our business more of a game of demand estimation. We could perhaps have gotten a small margin if we could estimate what our users would use of services better than what we paid for them wholesale. This has also led to the unfortunate business strategy of most MVNOs around here where they look for a quick exit by being bought out by the infrastructure owner when they have gotten enough customers. Few make it into into black numbers before that.
jessaustin 13y ago
Are we throwing out the FCC's regulation of the spectrum? If so, then WISPs will sweep across the nation, competing to provide consumers the best wireless access at the lowest prices, on frequency bands previously wasted on broadcast, cell, and official uses. A great deal of money will be made in that sector, especially to whichever equipment maker rolls out the best first- and second-generation wideband modems. Another good business will be replacing car radios, at least for some time.
fm8892 13y ago
> Let's play a game: pretend that all of these special agreements have suddenly become invalid and the market has become deregulated. Assume you have (or can acquire) the technical expertise to challenge them. What's your business plan? My business plan is to be Google: Install duplicate infrastructure for 80% of what the incumbent paid (per your other post), using my massive cash reserves, and charge $0 for equivalent or better service. Revenue comes from my massive ad network (which my competitors don't have), so I can sustainably run the business like this for as long as necessary to force the incumbent to fold. I now have the local monopoly, which I can use as I see fit. I might (for example) give priority to packets originating from hosts who are also customers of my ad network. This creates a virtuous cycle for me--advertizes will only want to spend money with me, so I can upgrade my infrastructure more rapidly that the former incumbent ever could. That brings me more internet-users, which makes my ad network more valuable. Since I have a monopoly, I can also rent-seek with respect to internet access fees (though I might keep it at $0 to encourage end-uses to continue clicking on ads). I will then repeat this process in other cities until I have a nation-wide monopoly. Despite being in blatant violation of anti-trust laws, I will continue to do this by bribing^H contributing to the election campaigns of friendly politicians. Of course, this is cheating a little (because my business plan replaces one natural monopoly with another)--but not a lot, because you asked for my business plan to break into the current natural monopoly, not how one could sustainably obtain a competitive market. The answer to the latter question is obvious: You can't.

hristov 13y ago

You may be right but this is a moot point for the present discussion. Regardless how or why, there is a monopoly and it will be very difficult for any party to provide a competing service. The idea that a new competitor will jump in and make everything better is an absolute delusion.