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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 so

by 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?
  - rayiner 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. No they're not. They cover, e.g., marketing to get you to hook up in the first place, but not, e.g., marketing to keep you from switching to Comcast a year later. They account for the cost of hookup, but not, e.g., ongoing maintenance. As to your other point, charging up front is not the same as charging services that operate on top. The former effectively creates a cross-subsidy: my parents who just want fast-loading web pages end up subsidizing Netflix junkies. Now you can charge per-GB, but Netflix really doesn't want to go in that direction. They're quite happy with this implicit cross-subsidy. "Market transparency" is a red herring. You pay $10 per month to Netflix, because that's the value of that content to you. You don't care if some of that money goes to Verizon any more than you care that some of it goes to the studios that own the content. Indeed, the "backroom deals" ultimately have the effect of allowing Verizon to capture the costs from the people who derive the most value from the infrastructure, because the consumer value represented by one GB is not equal across services.
    - jbooth 12y ago
      I must be doing a really bad job of writing, because you're not addressing the point I was trying to make at all. I'm ok with paying $100 for internet access (well, not really, but still). If $100 cannot get me internet access at the advertised speeds, I'm ok with paying 120, or whatever additional cost per GB. What I'm not ok with, is if $100 doesn't do it, Verizon goes out and shakes down the companies I do business with on the internet connection that I ostensibly paid for, who then raise their prices (gotta pay the bills) for reasons I don't understand. I'm still going to pay, there's no such thing as a free lunch. And not only does this obscure information about the real cost of my connection and the services I use (and that does matter), not only does it open the door to all kinds of anti-competitive practices around who gets the best deal with comcast/verizon, it's guaranteed to be less efficient than just upgrading the network and charging me for what it costs. Now I'm paying for all the hotel rooms and buffet spreads that went into that deal being struck? In addition to the cost of the fiber? Just build the fiber, and charge the customer (me) for it.
larrys 12y ago
"If they're not getting enough money to continue building, first off, I find that hard to believe" Entirely possible that they are getting enough money to continue but they want to take a break to inhale some excess profits not hindered by more expansion. Get something in the bank. (Kind of opposite of what Amazon is doing I guess.)

by jbooth 12y ago

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?
- rayiner 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. No they're not. They cover, e.g., marketing to get you to hook up in the first place, but not, e.g., marketing to keep you from switching to Comcast a year later. They account for the cost of hookup, but not, e.g., ongoing maintenance. As to your other point, charging up front is not the same as charging services that operate on top. The former effectively creates a cross-subsidy: my parents who just want fast-loading web pages end up subsidizing Netflix junkies. Now you can charge per-GB, but Netflix really doesn't want to go in that direction. They're quite happy with this implicit cross-subsidy. "Market transparency" is a red herring. You pay $10 per month to Netflix, because that's the value of that content to you. You don't care if some of that money goes to Verizon any more than you care that some of it goes to the studios that own the content. Indeed, the "backroom deals" ultimately have the effect of allowing Verizon to capture the costs from the people who derive the most value from the infrastructure, because the consumer value represented by one GB is not equal across services.
  - jbooth 12y ago
    I must be doing a really bad job of writing, because you're not addressing the point I was trying to make at all. I'm ok with paying $100 for internet access (well, not really, but still). If $100 cannot get me internet access at the advertised speeds, I'm ok with paying 120, or whatever additional cost per GB. What I'm not ok with, is if $100 doesn't do it, Verizon goes out and shakes down the companies I do business with on the internet connection that I ostensibly paid for, who then raise their prices (gotta pay the bills) for reasons I don't understand. I'm still going to pay, there's no such thing as a free lunch. And not only does this obscure information about the real cost of my connection and the services I use (and that does matter), not only does it open the door to all kinds of anti-competitive practices around who gets the best deal with comcast/verizon, it's guaranteed to be less efficient than just upgrading the network and charging me for what it costs. Now I'm paying for all the hotel rooms and buffet spreads that went into that deal being struck? In addition to the cost of the fiber? Just build the fiber, and charge the customer (me) for it.

larrys 12y ago

"If they're not getting enough money to continue building, first off, I find that hard to believe" Entirely possible that they are getting enough money to continue but they want to take a break to inhale some excess profits not hindered by more expansion. Get something in the bank. (Kind of opposite of what Amazon is doing I guess.)