6 ms·

Not necessarily -- if a net-neutral infrastructure as a whole is profitable to operate, then it can be constructed and operated by profit-making businesses with

by rst 12y ago

Not necessarily -- if a net-neutral infrastructure as a whole is profitable to operate, then it can be constructed and operated by profit-making businesses without subsidies. But in that case, you need regulation if you want to keep net neutrality -- which is what YC is asking the FCC for.

rayiner 12y ago
Merely being profitable is good enough if you're happy to maintain the status quo. If you want companies to invest billions of dollars of new capital to upgrade the infrastructure, you have to make that investment not just profitable, but an attractive one relative to other opportunities. Simple question: Silicon Valley talks a lot about the problems with the telecom industry, but why does nobody want to actually invest money building telecom infrastructure? Google is the only one doing it, and they're only doing it on the condition of not abiding by any build-out requirements. See: https://news.ycombinator.com/item?id=7889163 https://news.ycombinator.com/item?id=7889163.
- dragonwriter 12y ago
  > Silicon Valley talks a lot about the problems with the telecom industry, but why does nobody want to actually invest money building telecom infrastructure? The incumbent--descendants of local/regional/national monopoly telephone or cable--providers have little competitive pressure to do so, and other people face intrinsic (largely non-regulatory, except to the extent that real property rights are "regulatory", though there are some regulatory burdens as well) barriers to entering the market, which make it enormously expensive with very little chance of any positive return for most players.
  - rayiner 12y ago
    But don't telcos face the same issue: enormous capital costs with limited prospects for attractive returns? E.g. FiOS is profitable, but the margins have been quite disappointing to shareholders. Indeed, observers have been skeptical about the value proposition of FiOS since the beginning: http://bits.blogs.nytimes.com/2008/08/19/a-bear-speaks-why-verizons-pricey-fios-bet-wont-pay-off/?_php=true&_type=blogs&_r=0 http://bits.blogs.nytimes.com/2008/08/19/a-bear-speaks-why-v.... Note that this article was written in 2008. As of 2014, Verizon is still below the 40% penetration rate assumed in the article: http://www.dslreports.com/shownews/Verizons-FiOS-Growth-Slows-Dramatically-Will-They-Ever-Expand-128714 http://www.dslreports.com/shownews/Verizons-FiOS-Growth-Slow.... At the end of the day, the math has to work out. Everyone assumes, arguendo, that the value proposition of building out fiber is there, but if telcos continue to be required to offer universal service, and if they are forced to operate in a regulatory regime where they can't capture some of the money generated by services running on top of their infrastructure, it's not at all clear that the enormous investment into fiber is going to be justifiable for the shareholders of telecom companies.
    - jbooth 12y ago
      Nobody's asking them to build this stuff out for free. I'm cutting a check north of $100 to Verizon every month, last I checked. And that IS them capturing some of the money generated by services running on their infrastructure. If they're not getting enough money to continue building, first off, I find that hard to believe, second off, they should just charge more to consumers, either additional $/month or an additional fee per GB. Orrrrrr we could have a crazy system where they manage 50,000 unpublicized relationships with different websites, charge them, pay the people to manage those relationships, and the websites charge more to consumers, hiding the pricing information about network connectivity in the process. That sounds way more 'free market', not to mention more efficient. What's so anti-competitive and backward thinking about "I pay you $ for bytes, cough up the bytes"?
      - rayiner 12y ago
        Please see the NYT article I linked. The per-subscriber capital investment into FiOS is almost $4,000, assuming that 40% of potential subscribers actually sign-up (Verizon is almost there, but still below that benchmark). Now, you're cutting a $100 check to Verizon every month, but how much of that goes to: advertising,[1] maintenance, paying for video content, etc? FiOS is about 70% of Verizon's wireline business, and Verizon's operating margin in that segment is about 22%, so let's assume the margin in FiOS alone is 25%. What's the value of a $25 payment discounted by 5% over 15 years? About $3,200. As the author of the article above concluded, Verizon might not even come out ahead on each customer with FiOS. [1] You can ask "why spend so much on advertising?" and the reason is that you want to maximize uptake, otherwise you spend a lot of money running fiber past houses that don't actually subscribe.
        jbooth 12y ago
        First off, most of the things you're taking out of the monthly were already factored into the fronted cost in the linked article. Second off, if Verizon does that shitty of a job of cost control compared to foreign government bureaucracies, maybe we should consider nationalizing them. But back to my actual point -- It costs money to deliver the service? Charge more for the service if you can't deliver it profitably. That's fine, I even suggested that in my comment, charitably allowing for 2 different ways they can do it. I'm going to pay anyways, whether it's a check to verizon or additional costs on my amazon streaming -- I'd rather pay up front for the service I'm consuming than f-up the marketplace with a bunch of submerged hidden transactions. That's why libertarians are on board with liberals on this, they believe in market transparency. What's your objection to our actual point? Remember, raising the price for the service they deliver to their customers is ok, we're not arguing they should provide it at a loss. You'd rather the costs of the network were hidden in a bunch of backroom deals? You think that netflix paying comcast won't ultimately come out of consumer pockets anyways?

by rst 12y ago

rayiner 12y ago

Merely being profitable is good enough if you're happy to maintain the status quo. If you want companies to invest billions of dollars of new capital to upgrade the infrastructure, you have to make that investment not just profitable, but an attractive one relative to other opportunities. Simple question: Silicon Valley talks a lot about the problems with the telecom industry, but why does nobody want to actually invest money building telecom infrastructure? Google is the only one doing it, and they're only doing it on the condition of not abiding by any build-out requirements. See: https://news.ycombinator.com/item?id=7889163 https://news.ycombinator.com/item?id=7889163.

dragonwriter 12y ago
> Silicon Valley talks a lot about the problems with the telecom industry, but why does nobody want to actually invest money building telecom infrastructure? The incumbent--descendants of local/regional/national monopoly telephone or cable--providers have little competitive pressure to do so, and other people face intrinsic (largely non-regulatory, except to the extent that real property rights are "regulatory", though there are some regulatory burdens as well) barriers to entering the market, which make it enormously expensive with very little chance of any positive return for most players.
- rayiner 12y ago
  But don't telcos face the same issue: enormous capital costs with limited prospects for attractive returns? E.g. FiOS is profitable, but the margins have been quite disappointing to shareholders. Indeed, observers have been skeptical about the value proposition of FiOS since the beginning: http://bits.blogs.nytimes.com/2008/08/19/a-bear-speaks-why-verizons-pricey-fios-bet-wont-pay-off/?_php=true&_type=blogs&_r=0 http://bits.blogs.nytimes.com/2008/08/19/a-bear-speaks-why-v.... Note that this article was written in 2008. As of 2014, Verizon is still below the 40% penetration rate assumed in the article: http://www.dslreports.com/shownews/Verizons-FiOS-Growth-Slows-Dramatically-Will-They-Ever-Expand-128714 http://www.dslreports.com/shownews/Verizons-FiOS-Growth-Slow.... At the end of the day, the math has to work out. Everyone assumes, arguendo, that the value proposition of building out fiber is there, but if telcos continue to be required to offer universal service, and if they are forced to operate in a regulatory regime where they can't capture some of the money generated by services running on top of their infrastructure, it's not at all clear that the enormous investment into fiber is going to be justifiable for the shareholders of telecom companies.
  - jbooth 12y ago
    Nobody's asking them to build this stuff out for free. I'm cutting a check north of $100 to Verizon every month, last I checked. And that IS them capturing some of the money generated by services running on their infrastructure. If they're not getting enough money to continue building, first off, I find that hard to believe, second off, they should just charge more to consumers, either additional $/month or an additional fee per GB. Orrrrrr we could have a crazy system where they manage 50,000 unpublicized relationships with different websites, charge them, pay the people to manage those relationships, and the websites charge more to consumers, hiding the pricing information about network connectivity in the process. That sounds way more 'free market', not to mention more efficient. What's so anti-competitive and backward thinking about "I pay you $ for bytes, cough up the bytes"?
    - rayiner 12y ago
      Please see the NYT article I linked. The per-subscriber capital investment into FiOS is almost $4,000, assuming that 40% of potential subscribers actually sign-up (Verizon is almost there, but still below that benchmark). Now, you're cutting a $100 check to Verizon every month, but how much of that goes to: advertising,[1] maintenance, paying for video content, etc? FiOS is about 70% of Verizon's wireline business, and Verizon's operating margin in that segment is about 22%, so let's assume the margin in FiOS alone is 25%. What's the value of a $25 payment discounted by 5% over 15 years? About $3,200. As the author of the article above concluded, Verizon might not even come out ahead on each customer with FiOS. [1] You can ask "why spend so much on advertising?" and the reason is that you want to maximize uptake, otherwise you spend a lot of money running fiber past houses that don't actually subscribe.
      - jbooth 12y ago
        First off, most of the things you're taking out of the monthly were already factored into the fronted cost in the linked article. Second off, if Verizon does that shitty of a job of cost control compared to foreign government bureaucracies, maybe we should consider nationalizing them. But back to my actual point -- It costs money to deliver the service? Charge more for the service if you can't deliver it profitably. That's fine, I even suggested that in my comment, charitably allowing for 2 different ways they can do it. I'm going to pay anyways, whether it's a check to verizon or additional costs on my amazon streaming -- I'd rather pay up front for the service I'm consuming than f-up the marketplace with a bunch of submerged hidden transactions. That's why libertarians are on board with liberals on this, they believe in market transparency. What's your objection to our actual point? Remember, raising the price for the service they deliver to their customers is ok, we're not arguing they should provide it at a loss. You'd rather the costs of the network were hidden in a bunch of backroom deals? You think that netflix paying comcast won't ultimately come out of consumer pockets anyways?