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https://news.ycombinator.com/item?id=7184022 https://news.ycombinator.com/item?id=7184022 They got tax breaks for $200 billion, so not made up. They talked abo

by dalore 12y ago

https://news.ycombinator.com/item?id=7184022 https://news.ycombinator.com/item?id=7184022 They got tax breaks for $200 billion, so not made up. They talked about building fiber in congress to get the tax breaks. That's why people feel like they didn't live up to their bargain.

rayiner 12y ago
No, it was not $200 billion in tax breaks. That's 100% wrong. There's actually a book about this, which is online: http://www.ntia.doc.gov/legacy/broadbandgrants/comments/61BF.pdf http://www.ntia.doc.gov/legacy/broadbandgrants/comments/61BF.... Read page 210-223, especially page 222. The number is calculated by starting from the premise that telecom companies should be regulated as utilities, and make regulated returns on their investment. It also starts from the premise that the price of features should be proportional to their cost. From that premise, it computes $103 billion as the "excess profits" when the telcos are compared to other utilities. Another $78 billion is chalked up to "excessive depreciation." This, in turn, is based on a calculation rooted in "[a]ssuming that depreciation rates should have remained constant after divestiture." (Page 220). Of course the assumption that the depreciation rate should have remained constant before and after the internet boom is ridiculous. Another $25-50 billion is "cross-subsidization overcharging for long distance, DSL, and wireless." This estimate is based on the claim that the telcos added charges to phone bills that should have been accounted as costs to non-regulated services. None of this amounts to getting a direct subsidy or even a direct tax break in return for building fiber. The whole point of the 1996 changes in the law was deregulation of the industry. The whole idea was that deregulation of the industry would lead to higher capital investment, which it did (just not in the areas people expected at the time). Nobody hid the ball on the fact that the 1996 law was about deregulation--everyone referred to it as such. Well, in a deregulated industry, if a company raises prices, we don't call that "excess profits." If they cross-subsidize their business lines, we don't call that "excess profits." Did the telcos make a ton of money between 1996-present? Yes, they did. Demand for internet exploded, and demand for mobile exploded, and they invested the money to build the infrastructure that made all that possible. That's why they made all those "excess profits."
- gnoway 12y ago
  It is amazing - or very, very ironic - that you're able to justify your argument with an excerpt from the book entitled "$200 Billion Broadband Scandal," which appears to be aimed towards educating the reader about the large amount of wool pulled over their eyes re: the NII.
  - rayiner 12y ago
    The book is where the $200 billion figure originated. Instead of throwing third-hand information around like everybody does in these threads, I went to the source to criticize its methodology. The book, as a whole, is handwaving. It's based on two fundamentally flawed premises: 1) That the internet and mobile booms are unrelated to deregulation and should not be factored into the analysis. Of course, that's ludicrous. For decades up to the mid-1990's, telephone service was an industry with steady demand growing based on population growth. Then the internet happened, and mobile happened, and demand skyrocketed. At a basic economic level, why should we not, then, expect: 1) providers of the infrastructure underlying those boom industries to profit more after than they did before? 2) providers of the infrastructure underlying those boom industries to depreciate infrastructure and invest in new infrastructure faster than before? The $200 billion figure is fundamentally rooted in assuming that the answers to those two questions should be "no." 2) That 1970's-style rate-regulation doesn't have an adverse impact on capital investment. If companies can make 30% returns investing in Twitter and 10% returns investing in laying fiber, then the money will go where the returns are. If these folks had been in charge of regulating wireless, we'd still be using 2.5G phones (but at least we wouldn't be "overcharged" for text messages!)
    - gnoway 12y ago
      OK, fine. The number is a sham. Were provisions for a particular level of broadband penetration and performance included in the 1996 Telecom Act? If so, was the inclusion of these provisions tied in any way to the more provider-friendly regulatory posture granted as a result of the Act? Assuming the answer to first question is yes, were those provisions met? If not, was it because they were just unrealistic, or was it because of some other reason? What I think: yes, yes, no and a little of both. What I don't think: doubling down on deregulation at this point - which is what this fast-lane stuff seems like to me - will be a long-term benefit for consumers, which (as a consumer) is what I currently care most about. To answer your questions: - Of course infrastructure providers enabling a boom industry should profit from their efforts. I also expect the provider to upgrade their infrastructure out of these profits, not go around with their hand out trying to get everyone else to pay for it every upgrade cycle. - I don't understand how this supports your argument. Isn't a part of the argument that they are not upgrading infrastructure fast enough? - re: 70's style regulation... Did you say handwaving? I'm not really disagreeing with you that companies should profit. However they want to try and do that is also fine, they basically have the right to try and earn profit however they want. But it's got to be OK to decide no, this method you're trying is unseemly and we're not going to permit it. That's what I think is happening here w/ Comcast, and I'd prefer if regulation was not changed (or established or whatever the appropriate term is) such that it's not only OK, but a big green light for _every_ provider to start running around doing the same thing.

by dalore 12y ago

rayiner 12y ago

No, it was not $200 billion in tax breaks. That's 100% wrong. There's actually a book about this, which is online: http://www.ntia.doc.gov/legacy/broadbandgrants/comments/61BF.pdf http://www.ntia.doc.gov/legacy/broadbandgrants/comments/61BF.... Read page 210-223, especially page 222. The number is calculated by starting from the premise that telecom companies should be regulated as utilities, and make regulated returns on their investment. It also starts from the premise that the price of features should be proportional to their cost. From that premise, it computes $103 billion as the "excess profits" when the telcos are compared to other utilities. Another $78 billion is chalked up to "excessive depreciation." This, in turn, is based on a calculation rooted in "[a]ssuming that depreciation rates should have remained constant after divestiture." (Page 220). Of course the assumption that the depreciation rate should have remained constant before and after the internet boom is ridiculous. Another $25-50 billion is "cross-subsidization overcharging for long distance, DSL, and wireless." This estimate is based on the claim that the telcos added charges to phone bills that should have been accounted as costs to non-regulated services. None of this amounts to getting a direct subsidy or even a direct tax break in return for building fiber. The whole point of the 1996 changes in the law was deregulation of the industry. The whole idea was that deregulation of the industry would lead to higher capital investment, which it did (just not in the areas people expected at the time). Nobody hid the ball on the fact that the 1996 law was about deregulation--everyone referred to it as such. Well, in a deregulated industry, if a company raises prices, we don't call that "excess profits." If they cross-subsidize their business lines, we don't call that "excess profits." Did the telcos make a ton of money between 1996-present? Yes, they did. Demand for internet exploded, and demand for mobile exploded, and they invested the money to build the infrastructure that made all that possible. That's why they made all those "excess profits."

gnoway 12y ago
It is amazing - or very, very ironic - that you're able to justify your argument with an excerpt from the book entitled "$200 Billion Broadband Scandal," which appears to be aimed towards educating the reader about the large amount of wool pulled over their eyes re: the NII.
- rayiner 12y ago
  The book is where the $200 billion figure originated. Instead of throwing third-hand information around like everybody does in these threads, I went to the source to criticize its methodology. The book, as a whole, is handwaving. It's based on two fundamentally flawed premises: 1) That the internet and mobile booms are unrelated to deregulation and should not be factored into the analysis. Of course, that's ludicrous. For decades up to the mid-1990's, telephone service was an industry with steady demand growing based on population growth. Then the internet happened, and mobile happened, and demand skyrocketed. At a basic economic level, why should we not, then, expect: 1) providers of the infrastructure underlying those boom industries to profit more after than they did before? 2) providers of the infrastructure underlying those boom industries to depreciate infrastructure and invest in new infrastructure faster than before? The $200 billion figure is fundamentally rooted in assuming that the answers to those two questions should be "no." 2) That 1970's-style rate-regulation doesn't have an adverse impact on capital investment. If companies can make 30% returns investing in Twitter and 10% returns investing in laying fiber, then the money will go where the returns are. If these folks had been in charge of regulating wireless, we'd still be using 2.5G phones (but at least we wouldn't be "overcharged" for text messages!)
  - gnoway 12y ago
    OK, fine. The number is a sham. Were provisions for a particular level of broadband penetration and performance included in the 1996 Telecom Act? If so, was the inclusion of these provisions tied in any way to the more provider-friendly regulatory posture granted as a result of the Act? Assuming the answer to first question is yes, were those provisions met? If not, was it because they were just unrealistic, or was it because of some other reason? What I think: yes, yes, no and a little of both. What I don't think: doubling down on deregulation at this point - which is what this fast-lane stuff seems like to me - will be a long-term benefit for consumers, which (as a consumer) is what I currently care most about. To answer your questions: - Of course infrastructure providers enabling a boom industry should profit from their efforts. I also expect the provider to upgrade their infrastructure out of these profits, not go around with their hand out trying to get everyone else to pay for it every upgrade cycle. - I don't understand how this supports your argument. Isn't a part of the argument that they are not upgrading infrastructure fast enough? - re: 70's style regulation... Did you say handwaving? I'm not really disagreeing with you that companies should profit. However they want to try and do that is also fine, they basically have the right to try and earn profit however they want. But it's got to be OK to decide no, this method you're trying is unseemly and we're not going to permit it. That's what I think is happening here w/ Comcast, and I'd prefer if regulation was not changed (or established or whatever the appropriate term is) such that it's not only OK, but a big green light for _every_ provider to start running around doing the same thing.