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> According to this reasoning, every year Google is "ripping off" the public to the tune of $6 billion. This comparison is invalid because Google's business is

> According to this reasoning, every year Google is "ripping off" the public to the tune of $6 billion. This comparison is invalid because Google's business is fundamentally different than a telecom in every relevant dimension. Telecoms sell a commodity product with technology they source entirely from third parties, the only form of product differentiation they have is geographical monopoly, and it is a zero-sum game: basically none of AT&T's budget goes to R&D [1], and all of it goes to operating AT&T's existing business exactly as it is now [2]. Meanwhile Google's core business is basically the opposite in every dimension. A much better comparison would be to a water company or power company that has "too high" of a profit margin. And of course people do complain about that. [1] http://www.cnet.com/news/meet-the-group-trying-to-make-at-t-very-un-at-t-like/ http://www.cnet.com/news/meet-the-group-trying-to-make-at-t-... [2] http://www.att.com/Investor/ATT_Annual/2013/downloads/att_2013ar_completefinancialreview.pdf http://www.att.com/Investor/ATT_Annual/2013/downloads/att_20...

rayiner 13y ago
This data point shows that AT&T spent about $1 billion on R&D in 2010: http://www.bizjournals.com/dallas/print-edition/2010/11/19/five-cos-spend-39b-on-rd.html?page=all http://www.bizjournals.com/dallas/print-edition/2010/11/19/f.... Yes, it's a "drop in the bucket" compared to their $20 billion in capital expenditures, as noted in your article ([1]), but it's hardly "basically none." Also, a lot of sophisticated engineering goes into building out infrastructure, even if it's accounted to capital expenditures and not R&D. Water companies and power companies are generally, true monopolies, in that they're protected from competition and guaranteed a rate of return on their investment. AT&T and the other telecoms are very different. They might have certain geographic advantages, but AT&T is rarely the only wireless or telecom provider in any given market, and its capital expenditures come out of it's own pocket. It can't turn to a rate setting board like a power company or water company to guarantee cash flow to cover investment. You can't have your cake and eat it too. If you want to develop telecom as a regulated monopoly, which worked just fine in the U.S. for the better part of a century, then you need to give companies monopoly protections. If you want to have a market, then you can't regulate rates of return. When you pretend to have a market, then encumber it with excessive regulation, you can't complain when companies don't invest private money into expanding infrastructure.
- drewcrawford 13y ago
  Your source states that AT&T spent "0.8 cents" "of each dollar of revenue" on R&D. Secondly, if you dig into the source [1] of your source, you find that R&D spending for North American telecom companies in 2013 are dead last against every other industry as a percentage of revenue. I renew my claim that "basically none" R&D spending is a fair and accurate description. > AT&T is rarely the only wireless or telecom provider in any given market That is technically true, but I would paint the same facts as "approximately 96% of the population has at most two wireline providers". [2] This is an optimistic estimate: "the data used here do not provide adequate information on price and performance to determine if multiple providers in a given area compete head-to-head". > If you want to have a market, then you can't regulate rates of return. I don't disagree with you there. I think where we disagree is that you think a competitive market for wireline broadband in the US in 2014 is a possible scenario. In my mind, the regulated monopoly (or public utility) is the only viable model. [1] http://www.strategyand.pwc.com/global/home/what-we-think/global-innovation-1000/rd-intensity-vs-spend-2013-v2stage http://www.strategyand.pwc.com/global/home/what-we-think/glo... [2] http://books.google.com/books?id=l8oI5rA_NpQC&pg=PA37&lpg=PA37&dq=broadband+competition+more+than+one+provider&source=bl&ots=HknYAyaKQL&sig=VEUkjObhaBXsGMJcB5cEsRvkSaE&hl=en&sa=X&ei=J5xVU8L8A8q92gXrpYDoAw&ved=0CEQQ6AEwAw#v=onepage&q=broadband%20competition%20more%20than%20one%20provider&f=false http://books.google.com/books?id=l8oI5rA_NpQC&pg=PA37&lpg=PA...
- AnthonyMouse 13y ago
  > You can't have your cake and eat it too. If you want to develop telecom as a regulated monopoly, which worked just fine in the U.S. for the better part of a century, then you need to give companies monopoly protections. This effectively became impossible when the internet turned out to work fine over both telephone and cable TV wires and then subsumed the respective franchises as over the top services. If AT&T had monopoly protections again then Comcast couldn't operate in the same geographic area anymore. I have to imagine the cable TV industry would object to its forced dissolution strenuously enough to scuttle any plans to do such a thing. But why do you believe that monopoly protections are necessary for utility regulations? Suppose we regulate AT&T as a utility and then let Comcast carry on unregulated in competition with them. Individual customers can choose whether they want the regulated entity or the unregulated one. In the worst case one of them goes bankrupt so the reason why monopoly protections are impractical is eliminated, and the other one becomes a regulated monopoly.
yuhong 13y ago
I wonder what would happen for such businesses if the quarterly earning game was ended, with CEOs paid on a salary basis. I think Ivan Seidenberg was fired because of short term returns on FiOS being low.

rayiner 13y ago

This data point shows that AT&T spent about $1 billion on R&D in 2010: http://www.bizjournals.com/dallas/print-edition/2010/11/19/five-cos-spend-39b-on-rd.html?page=all http://www.bizjournals.com/dallas/print-edition/2010/11/19/f.... Yes, it's a "drop in the bucket" compared to their $20 billion in capital expenditures, as noted in your article ([1]), but it's hardly "basically none." Also, a lot of sophisticated engineering goes into building out infrastructure, even if it's accounted to capital expenditures and not R&D. Water companies and power companies are generally, true monopolies, in that they're protected from competition and guaranteed a rate of return on their investment. AT&T and the other telecoms are very different. They might have certain geographic advantages, but AT&T is rarely the only wireless or telecom provider in any given market, and its capital expenditures come out of it's own pocket. It can't turn to a rate setting board like a power company or water company to guarantee cash flow to cover investment. You can't have your cake and eat it too. If you want to develop telecom as a regulated monopoly, which worked just fine in the U.S. for the better part of a century, then you need to give companies monopoly protections. If you want to have a market, then you can't regulate rates of return. When you pretend to have a market, then encumber it with excessive regulation, you can't complain when companies don't invest private money into expanding infrastructure.

drewcrawford 13y ago
Your source states that AT&T spent "0.8 cents" "of each dollar of revenue" on R&D. Secondly, if you dig into the source [1] of your source, you find that R&D spending for North American telecom companies in 2013 are dead last against every other industry as a percentage of revenue. I renew my claim that "basically none" R&D spending is a fair and accurate description. > AT&T is rarely the only wireless or telecom provider in any given market That is technically true, but I would paint the same facts as "approximately 96% of the population has at most two wireline providers". [2] This is an optimistic estimate: "the data used here do not provide adequate information on price and performance to determine if multiple providers in a given area compete head-to-head". > If you want to have a market, then you can't regulate rates of return. I don't disagree with you there. I think where we disagree is that you think a competitive market for wireline broadband in the US in 2014 is a possible scenario. In my mind, the regulated monopoly (or public utility) is the only viable model. [1] http://www.strategyand.pwc.com/global/home/what-we-think/global-innovation-1000/rd-intensity-vs-spend-2013-v2stage http://www.strategyand.pwc.com/global/home/what-we-think/glo... [2] http://books.google.com/books?id=l8oI5rA_NpQC&pg=PA37&lpg=PA37&dq=broadband+competition+more+than+one+provider&source=bl&ots=HknYAyaKQL&sig=VEUkjObhaBXsGMJcB5cEsRvkSaE&hl=en&sa=X&ei=J5xVU8L8A8q92gXrpYDoAw&ved=0CEQQ6AEwAw#v=onepage&q=broadband%20competition%20more%20than%20one%20provider&f=false http://books.google.com/books?id=l8oI5rA_NpQC&pg=PA37&lpg=PA...
AnthonyMouse 13y ago
> You can't have your cake and eat it too. If you want to develop telecom as a regulated monopoly, which worked just fine in the U.S. for the better part of a century, then you need to give companies monopoly protections. This effectively became impossible when the internet turned out to work fine over both telephone and cable TV wires and then subsumed the respective franchises as over the top services. If AT&T had monopoly protections again then Comcast couldn't operate in the same geographic area anymore. I have to imagine the cable TV industry would object to its forced dissolution strenuously enough to scuttle any plans to do such a thing. But why do you believe that monopoly protections are necessary for utility regulations? Suppose we regulate AT&T as a utility and then let Comcast carry on unregulated in competition with them. Individual customers can choose whether they want the regulated entity or the unregulated one. In the worst case one of them goes bankrupt so the reason why monopoly protections are impractical is eliminated, and the other one becomes a regulated monopoly.

yuhong 13y ago

I wonder what would happen for such businesses if the quarterly earning game was ended, with CEOs paid on a salary basis. I think Ivan Seidenberg was fired because of short term returns on FiOS being low.