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You appear to be quite against this (judging by your other posts on the matter). The fact remains that the current system is not going to hold, and that left to

You appear to be quite against this (judging by your other posts on the matter). The fact remains that the current system is not going to hold, and that left to its own devices will end up with a bunch of walled gardens and other issues. I agree that it is wise to be wary of regulation in this case--but honestly, I think it's time we at least experiment. The market and regulatory forces at play have basically forced themselves into this position.

rayiner 12y ago
My complaint is that everyone's ignoring the economics of the situation. What becomes apparent if you dig into the numbers is that there's no money in building these networks, at least at scale--they are justified only when there's a money-making opportunity with respect to the content flowing through them. Historically, this has been the cable video service that brings in the lion's share of revenue. Even with Google--I have yet to see a story for the profitability of Fiber that isn't predicated on the nexus with Google services. You can't legislate-away economics. If you make cable and fiber networks into an unattractive investment, nobody will invest in them, and they'll go on life-support just like the phone network. Cable companies will pivot to content, like Comcast is already doing with its purchase of NBC. The vacuum won't be filled, because at the end of the day no VC is going to put up billions of dollars to eke out shit returns on a heavily-regulated service.
- angersock 12y ago
  Now, what is the way we've historically dealt with goods that aren't worth money but are required to for the general welfare...a sort of public good, if you will. What was the organization usually tasked with public goods, again? The way we got the buildout of the telephone networks was the creation of the AT&T monopoly by the government, and they took their job seriously. An alternate approach would be nationalizing it and forcing the government to take care of it. Free market isn't likely to fix the problem.
- OrwellianChild 12y ago
  I understand that there may be some "hidden costs" that current consumers of broadband in the US don't see. I can also imagine the possibility that un-bundled broadband may be more expensive than current rates (though I can imagine other possibilities as well). What I have a hard time understanding is your implied argument here: that by forcing a bundle on consumers that includes a high-margin product (cable TV) as well as a low-margin one (broadband), we're doing those consumers a favor. How do I benefit from a subsidized broadband service if I also have to participate in the over-priced and unwanted service that is allowing the subsidy?
  - potatolicious 12y ago
    You are working on a different notion of "bundling" than rayiner. He's not talking about selling you TV with your internet. Bundling, in the sense that the FCC is referring to it, is the bundling of internet service with the physical infrastructure it's delivered on. Un-bundling in this case doesn't mean they have to sell you ESPN without HBO, it means they have to let third-party operators operate on their wiring, switches, and other physical infrastructure for a regulated price.
    - OrwellianChild 12y ago
      Thanks for the clarification, though I'm not sure if that's exactly what rayiner meant, considering his comment here: https://news.ycombinator.com/item?id=8998934 https://news.ycombinator.com/item?id=8998934 Given your premise: I can imagine that, with improper price setting by the FCC, this mandatory wholesale infrastructure sharing could be problematic (long-term unprofitable and thus discouraging towards infrastructure investment). Priced appropriately to the cost of provision of service, however, how does this put the infrastructure builder (Comcast, Level 3, or whomever else) on unfair footing? It just means Comcast the builder has to expect the same rents from Comcast the service provider as it does from Netflix the service provider. Forgive me for missing the point - I expect you and rayiner understand this far better than I do and I'm trying to catch up.
      - rayiner 12y ago
- AnthonyMouse 12y ago
  > What becomes apparent if you dig into the numbers is that there's no money in building these networks, at least at scale--they are justified only when there's a money-making opportunity with respect to the content flowing through them. It seems like the crux of your argument is that it costs something like $60/month to provide internet service and $20/month on top of that to provide TV service but they charge $50/month for each, so they wouldn't be profitable without the TV service. But who is setting these prices? Is there some law that requires them to charge a money losing price for internet service and then make it up on TV service? Why don't they just charge a profit-making price for internet service?
  - rayiner 12y ago
    The market sets the prices of the services at what people are willing to pay. If the cable companies could charge more for internet than they are now, don't you think they would? People are willing to pay a lot more for television service,[1] so if the product you're selling is TV+internet, you can charge enough to justify building a modern fiber/coax network. If it's just internet, you probably can't, at least not in many places. [1] In my building, in downtown Baltimore, I can get 50/15 FiOS for $50/month, no cap but no TV service, or triple-play cable at 50/5, capped for $109 per month. Almost everyone subscribes to cable rather than FiOS.
    - AnthonyMouse 12y ago
      I don't get your argument. You seem to be saying that if the internet-only plan is made too expensive then customers will subscribe to the not very much more expensive TV+internet plan. Isn't that what they want customers to do?
      - rayiner 12y ago
        No, in this hypothetical the net neutrality advocates have won decisively and the cable companies are in the business of building "dumb pipes."
        12y ago
- foobarqux 12y ago
  I know you use Verizon as evidence of poor profitability, have you looked at other providers? I calculate 20-25% gross margin for TWC if I attribute all operating costs, some of which should be shared with TV and voice, to Internet.
  - rayiner 12y ago
    TWC's financial disclosures: http://ir.timewarnercable.com/files/2014%20Earnings/4Q14/Q4-2014-TWC-Earnings-Release-FINAL_v001_l4nw06.pdf http://ir.timewarnercable.com/files/2014%20Earnings/4Q14/Q4-.... Cost of programming content is $5.2 billion, but video programming generates $10 billion in revenues. Operating income is $4.6 billion. Obviously there's marketing, sales, and operational costs that also go away if you don't have video service. But there's also $1.1 billion in advertising revenue that probably goes away too. And really, the numbers are totally incomplete without looking at capex and depreciation too. Analysis is similar for Charter, except they're running a net loss straight-up.

rayiner 12y ago

My complaint is that everyone's ignoring the economics of the situation. What becomes apparent if you dig into the numbers is that there's no money in building these networks, at least at scale--they are justified only when there's a money-making opportunity with respect to the content flowing through them. Historically, this has been the cable video service that brings in the lion's share of revenue. Even with Google--I have yet to see a story for the profitability of Fiber that isn't predicated on the nexus with Google services. You can't legislate-away economics. If you make cable and fiber networks into an unattractive investment, nobody will invest in them, and they'll go on life-support just like the phone network. Cable companies will pivot to content, like Comcast is already doing with its purchase of NBC. The vacuum won't be filled, because at the end of the day no VC is going to put up billions of dollars to eke out shit returns on a heavily-regulated service.

angersock 12y ago
Now, what is the way we've historically dealt with goods that aren't worth money but are required to for the general welfare...a sort of public good, if you will. What was the organization usually tasked with public goods, again? The way we got the buildout of the telephone networks was the creation of the AT&T monopoly by the government, and they took their job seriously. An alternate approach would be nationalizing it and forcing the government to take care of it. Free market isn't likely to fix the problem.
OrwellianChild 12y ago
I understand that there may be some "hidden costs" that current consumers of broadband in the US don't see. I can also imagine the possibility that un-bundled broadband may be more expensive than current rates (though I can imagine other possibilities as well). What I have a hard time understanding is your implied argument here: that by forcing a bundle on consumers that includes a high-margin product (cable TV) as well as a low-margin one (broadband), we're doing those consumers a favor. How do I benefit from a subsidized broadband service if I also have to participate in the over-priced and unwanted service that is allowing the subsidy?
- potatolicious 12y ago
  You are working on a different notion of "bundling" than rayiner. He's not talking about selling you TV with your internet. Bundling, in the sense that the FCC is referring to it, is the bundling of internet service with the physical infrastructure it's delivered on. Un-bundling in this case doesn't mean they have to sell you ESPN without HBO, it means they have to let third-party operators operate on their wiring, switches, and other physical infrastructure for a regulated price.
  - OrwellianChild 12y ago
    Thanks for the clarification, though I'm not sure if that's exactly what rayiner meant, considering his comment here: https://news.ycombinator.com/item?id=8998934 https://news.ycombinator.com/item?id=8998934 Given your premise: I can imagine that, with improper price setting by the FCC, this mandatory wholesale infrastructure sharing could be problematic (long-term unprofitable and thus discouraging towards infrastructure investment). Priced appropriately to the cost of provision of service, however, how does this put the infrastructure builder (Comcast, Level 3, or whomever else) on unfair footing? It just means Comcast the builder has to expect the same rents from Comcast the service provider as it does from Netflix the service provider. Forgive me for missing the point - I expect you and rayiner understand this far better than I do and I'm trying to catch up.
    - rayiner 12y ago
AnthonyMouse 12y ago
> What becomes apparent if you dig into the numbers is that there's no money in building these networks, at least at scale--they are justified only when there's a money-making opportunity with respect to the content flowing through them. It seems like the crux of your argument is that it costs something like $60/month to provide internet service and $20/month on top of that to provide TV service but they charge $50/month for each, so they wouldn't be profitable without the TV service. But who is setting these prices? Is there some law that requires them to charge a money losing price for internet service and then make it up on TV service? Why don't they just charge a profit-making price for internet service?
- rayiner 12y ago
  The market sets the prices of the services at what people are willing to pay. If the cable companies could charge more for internet than they are now, don't you think they would? People are willing to pay a lot more for television service,[1] so if the product you're selling is TV+internet, you can charge enough to justify building a modern fiber/coax network. If it's just internet, you probably can't, at least not in many places. [1] In my building, in downtown Baltimore, I can get 50/15 FiOS for $50/month, no cap but no TV service, or triple-play cable at 50/5, capped for $109 per month. Almost everyone subscribes to cable rather than FiOS.
  - AnthonyMouse 12y ago
    I don't get your argument. You seem to be saying that if the internet-only plan is made too expensive then customers will subscribe to the not very much more expensive TV+internet plan. Isn't that what they want customers to do?
    - rayiner 12y ago
      No, in this hypothetical the net neutrality advocates have won decisively and the cable companies are in the business of building "dumb pipes."
      - 12y ago
foobarqux 12y ago
I know you use Verizon as evidence of poor profitability, have you looked at other providers? I calculate 20-25% gross margin for TWC if I attribute all operating costs, some of which should be shared with TV and voice, to Internet.
- rayiner 12y ago
  TWC's financial disclosures: http://ir.timewarnercable.com/files/2014%20Earnings/4Q14/Q4-2014-TWC-Earnings-Release-FINAL_v001_l4nw06.pdf http://ir.timewarnercable.com/files/2014%20Earnings/4Q14/Q4-.... Cost of programming content is $5.2 billion, but video programming generates $10 billion in revenues. Operating income is $4.6 billion. Obviously there's marketing, sales, and operational costs that also go away if you don't have video service. But there's also $1.1 billion in advertising revenue that probably goes away too. And really, the numbers are totally incomplete without looking at capex and depreciation too. Analysis is similar for Charter, except they're running a net loss straight-up.