"regulation" prevents "competition". That is why people want regulation.
Look at this thread at the people who do not want to be competed-with at L1, for example.
How do you get around the problem of natural monopolies, then? Or should
we be moving to a world where, say, a dozen or more separate companies are
all running fiber or coax on the poles on my street in an effort to get to
my house?
IMHO, the only way to get real competition on the last mile is to have the
actual fiber/wire infrastructure being owned by a neutral party that's
required to pass anyone's traffic.
How do you get around the problem of natural monopolies, then? Or should
we be moving to a world where, say, a dozen or more separate companies are
all running fiber or coax on the poles on my street in an effort to get to
my house?IMHO, the only way to get real competition on the last mile is to have the
actual fiber/wire infrastructure being owned by a neutral party that's
required to pass anyone's traffic.
Which closely resembles what the original goal of "the National Infrastructure
Initiative" was, back in the early 1990's. Fiber to the homes. 86 million
of them by 2006. The Bells volunteered to do it in exchange for incentives,
which they got, and kept, and then never delivered what was promised.
The best short summary of what happened is probably here:
http://www.newnetworks.com/ShortSCANDALSummary.htm
This boooklet is now maybe ~5-10 years old so it doesn't reflect more
recent developments.
We *let* the monopolies (er, duopolies in some cases) get away with the
regulatory and legislative manipulation that led to the current outcome,
and the irony that the message I'm responding to was authored by someone
who appears to work for one of those companies would write such a message
is not lost upon me.
... JG
How do you get around the problem of natural monopolies, then? Or should
we be moving to a world where, say, a dozen or more separate companies are all running fiber or coax on the poles on my street in an effort to get to my >>house?
We already did it. The Telecommunications Act allows competitive service providers to buy access circuits on the incumbents infrastructure. There are some limitations in that you can't always get competitive access to new networks like FIOS (this to allow the incumbent to recoup their costs by exclusive access for some period of time). The access rates are low only when the infrastructure is already in the ground. That is why the new stuff is not factored in.
IMHO, the only way to get real competition on the last mile is to have the actual fiber/wire infrastructure being owned by a neutral party that's required to >>pass anyone's traffic.
Nice idea, too bad no one can make any money on building infrastructure but not selling the services on top of it. Remember Global Crossing? You are asking one company to put up all the capital expense and then try to recover it by allowing access to their infrastructure to anyone at low rates. Not gonna work. Just on a piece of paper, figure out what it costs to get fiber to your neighborhood from the nearest central office and then how much you have to charge to pay for that. If you can get a reasonable price that returns your investment within 20 years, I will be impressed.
The other way that is often suggested is that the municipality own the backbone. That might work except they want to tax you and then also nail the service providers so they do exclusive deals like you see in cable franchises that screw the consumer.
Steven Naslund
Summary: $200 Billion Broadband Scandal
This boooklet is now maybe ~5-10 years old so it doesn't reflect more
recent developments.We *let* the monopolies (er, duopolies in some cases) get away with the
regulatory and legislative manipulation that led to the current outcome,
That's definitely its own set of problems completely outside of where one
stands on any idea in the space or on the regulation vs. competition
debate in general. Regulation does no good unless it's enforced, and
competition can't exist meaningfully in an environment where unfair
business practices are allowed to exist.
and the irony that the message I'm responding to was authored by someone
who appears to work for one of those companies would write such a message
is not lost upon me.
I'm not wearing that hat right now, and I'm a Linux engineer anyway. =P
Like I mentioned, some countries Asia-Pac and Africa have
seen some of their governments deploying this infrastructure
for the citizens.
Things go belly-up when the governments sub-contract the
actual operations of the network. Either they use the same
old incumbents to run it, or they employ private contractors
(who are, sometimes, equipment vendors that build the
network - which means even more sub-contracting).
I've seen such builds focusing on access to the homes, as
well as core national backbones. I haven't yet seen both
initiatives at the same time in one country.
Mark.
IIRC, GLBX didn't receive taxpayer funded subsidies, nor municipal
bonds, in order to roll out their infrastructure.
I would gather that a fiber plant, on whole, costs less than the
number of subscribers, multiplied by average monthly bill, and again
by average length of service.... not to mention 20 years.
-Jim P.
Well, don't forget the labor, taxes, business licenses fees, county taxes
on chairs,
Obama care, accountants and time required.
Bob Evans
CTO
Bob Evans
CTO
Do you need IPv4 space to lease, space you can use until IPv6 is the
standard?
Which are both permitted and perpetuated in large part by the
regulatory environment we are made to operate under. Monopolies
usually require some sort of government support in order to survive.
Don't forget that it is the old companies (regardless of their current
name) making life difficult for the content carriers. They don't want
to adapt so they are lobbying to enact policies which make it easier
for them to sit there and be stagnant dinosaurs while the rest of the
world moves on. It's the same thing the record companies are doing on
with a different flavor.
-Wayne
What do you mean by average monthly bill? That is the issue here. The average monthly bill includes the services you are getting. In the Chicago area a fiber optic access circuit unbundled from the imcumbent carrier to a competitive carrier is something like $10 a month or so. How could you possibly think you can fund a build out in a new area for that price? It may be possible to pay for that over 20 years. The problem is that no one goes into business to break even over 20 years. Would you fund my business model if I told you I needed hundreds of millions of dollars in capital expense and I might show you a profit in 20 years?
How much are you willing to have added to your cable and Internet service bills for the access component of the service?
Now think of this. I am the guy who owns all of the layer 1 in your area. What if I go out of business? What if I overcharge you? What if I charge $100 a month to access the infrastructure? Who fixes that. The government regulations.
I think this business model existed before. It was called the Bell System and the only way they could pay for it was to charge you high rates for services.
Steven Naslund
Well, we were originally talking about regulation in the US as discussed by Level 3 in the subject article, but we can get into the international space if you like.
So, as far as the government or Wall Street funding the build out of the commercial Internet, that is not what happened.
I was there in the beginning selling dial-up service, dedicated data circuits, and finally DSL. Wall Street got into the game very late. We built our company into a $30 million operation before they cared to notice. The government, while they did the initial research that created the Internet, did not help us and was in fact a huge hinderance to progress until the Telecommunications Act where they attempted to deal with us upstarts trying to upset the status quo. Why people think the government was instrumental in the commercial Internet is beyond me. I think some politicians might want you to think so.
I see no reason why the US model would not work in any market economy. It is a simple matter of supply and demand. If your economy cannot afford the infrastructure or the people have no money to pay for services, you are going to have a problem. There is a huge problem in that people think GOVERNMENT FUNDED=FREE, it does not and in most cases is more expensive than the commercial alternatives since there is no motivation to be efficient.
In that case a hybrid approach like I used in helping schools in the Philippines will work better. We used government funding and private grants to provide high speed internet to rural schools and we did it by buying commercial available wireless and cable services. This helps the people and also helps grow the communications industry there. The government does nothing but pay the bills (and they rarely even do that right).
Steven Naslund
What is the average monthly (non-subsidized) access cost that your
friends and family pay each month?
-Jim P.
We don't know because the service provider rolls that cost up along with the services they sell. That is my point. They are able to spread the costs out based on the profitable services they sell. If they were not able to sell us services I am not sure they could afford to provide that infrastructure. In fact, having been a service provider I can tell you that I paid the LEC about $4 a month for a copper pair to your house to sell DSL service at around ten times that cost. I am sure the LEC was not making money at the $4 a month and I know I could not fund a build out for that price.
Steven Naslund
We don't know because the service provider rolls that cost up along with th=
e services they sell. That is my point. They are able to spread the costs=
out based on the profitable services they sell.
Okay.
If they were not able to =
sell us services I am not sure they could afford to provide that infrastruc=
ture.
That's a crock. You can always provide infrastructure without selling
services on top of it. It's wire. Or fiber. Or whatever. If you're
not able to subsidize the infrastructure with services, then what you
actually get is a less distorted reality where you can actually identify
the component costs (circuit, services, etc).
In fact, having been a service provider I can tell you that I paid t=
he LEC about $4 a month for a copper pair to your house to sell DSL service=
at around ten times that cost. I am sure the LEC was not making money at =
the $4 a month and I know I could not fund a build out for that price.
Why would you try to fund a build out on that?
Why wouldn't you instead charge for the build out as a NRC and then charge
for maintenance as a MRC?
What you're suggesting reeks of the deliberate cost distortion games that
go on so often. My personal favorite is cell phone contracts where the
cost of the phone is *cough* "subsidized" by the carrier. But what's
really happening is that the customer is paying for the phone over the
term of the contract, and if the customer doesn't get a different phone
at the end of the contract, then the carrier ... lowers their monthly
rate accordingly? No, of course not... they keep it as profit.
... JG
So, as far as the government or Wall Street funding the
build out of the commercial Internet, that is not what
happened.
Lots of terrestrial and submarine optical fibre was built in
the late 90's, and much of it has either gone unused until
now, or saw lots of M&A's as a result of the bust that left
hundreds-of-millions of dollars in investment with just a
few cents on the dollar, over night.
Many of those cable systems go by other names you may know
today.
The Internet isn't one thing.
I see no reason why the US model would not work in any
market economy. It is a simple matter of supply and
demand. If your economy cannot afford the
infrastructure or the people have no money to pay for
services, you are going to have a problem. There is a
huge problem in that people think GOVERNMENT
FUNDED=FREE, it does not and in most cases is more
expensive than the commercial alternatives since there
is no motivation to be efficient.
No one said they wanted anything free. Everyone knows free
Internet only exists at Starbucks and your next Internet
communit conference - and even that is not always reliable.
In Africa and parts of Asia, supply and demand is equally
rife. In fact, in some cases, supply outstrips demand. We
could get into a lot of reasons why supply won't reach out
to demand, but I'd be digressing.
Suffice it to say, while over-supply may be present, it's in
the hands of the few who all concert (mostly unknowingly) to
keep prices high. As you know, no one will invest in
something for a 20-year return. But by the same token, fibre
lives for a long while; trying to recoup your investment in
six months is not going to help anyone (except open up
competition against you, the one who probably went in
first).
The need for "neutral" infrastructure which is reasonably
and well commercially run is likely a solution to better
pricing with professional quality, or the knife that butters
the price decline wheat.
In that case a hybrid approach like I used in helping
schools in the Philippines will work better. We used
government funding and private grants to provide high
speed internet to rural schools and we did it by buying
commercial available wireless and cable services. This
helps the people and also helps grow the communications
industry there. The government does nothing but pay the
bills (and they rarely even do that right).
And I do agree that a hybrid approach with a neutral fibre
backbone is what is lacking with these national projects.
The governments building these backbones know little about
how the Internet really works (which includes DNS, ICANN,
and that free things don't work :-). What is needed is clue
going into these projects that help turn the national
project into a well-run, commercial businesses that looks
after itself, but also fufills the goal of ubiquitous
connectivity.
The hurdle isn't running the network. The hurdle is getting
the fibre into the ground - and that is a monumentous
hurdle. Running the network is where it all falls apart if
unchecked.
Mark.
We don't know because the service provider rolls that cost up along with the services they sell. That is my point. They are able to spread the costs out based on the profitable services they sell. If they were not able to sell us services I am not sure they could afford to provide that infrastructure.
Monthly fees do much more than finance the cost of infrastructure. Most large providers take a significant margin. It’s all about how these services are perceived. The preservation of this margin is the number one reason why internet access isn’t considered a utility or a basic right today. It also allows prices to increase unchecked, based on nothing other than the goals of specific companies.
There are many places where infrastructure is subsidized and controlled by the government. To them some things are more important than the need to make markets. They just trust that the overall benefit to society is worth modifying the market.
In fact, having been a service provider I can tell you that I paid the LEC about $4 a month for a copper pair to your house to sell DSL service at around ten times that cost. I am sure the LEC was not making money at the $4 a month and I know I could not fund a build out for that price.
Being a LEC is more profitable than anything else because they control the prices. If you found an iLEC that charged $4 for something worth $40 that doesn’t mean being a LEC isn’t profitable. After the long-distance carriers were forced to divest from local the LEC’s grew and quickly bought them. It’s more profitable to be a LEC than to resell their services. The only large carriers left are former LEC’s AKA baby bells.
making money at the $4 a month and I know I could not fund a build out for
that price.
I take it you have not been a service provider for a while? Thanks to its
removal from the tariff list, that $4 DSL pair from the ILEC for a third party
ISP now costs $34... That doesn't include ISP cost.
Adrian
I for one would be willing to bear a high NRC start-up cost for someone building fiber to my home. Not everyone would make that tradeoff. I know people who trade between the two local DSL/DOCSIS incumbents every year because it's $5 cheaper/mo to get the next 12-month deal as a switcher. While their time may not be worth ($5*12)/hour to account for this minimal switching cost, it's certainly a real economic cost if you're waiting for a 4 hour window for a tech to show-up and do an install.
aside:
I recently got natural gas at my home, the install cost was something like $2k, the utility had an option, pay an extra $27/mo for however many months, or pay the $2k up-front. Some folks can't absorb a cost like that, others can. I've heard from FTTH providers their install cost is in that same ballpark. Really wish they would have been able to pull fiber at the same time as the HDPE. The fact that it was a contractor as well certainly means they could run a side-business building their own fiber using the other utility as the main seed-money and have a wholesale fiber network for "cheap".
- Jared
I was discussing the cost that the service provider had to pay in the
context of a "$4/mo copper pair" for rental of a copper pair that the
ILEC almost certainly did not need to install. I do not see why the
cost for build out needs to be included in the actual monthly cost an
ILEC needs to charge.
I think that utilities have a long history of proving that the cost
for build out can be successfully charged to the property owner in
several ways as you note. I don't see it as being an insurmountable
problem to find some way for an intermediate service provider to
deal with this if needed.
... JG
Which is why, in many cases, the most plausible solution is something like muni fiber where the infrastructure is rolled out as many initial public utility builds with tax dollars and/or government bonds, then operated on a cost-recovery basis where the costs considered include both operating and bond-repayment. All L2+ service providers are given equal pricing and access to any subscribers that choose to sign up.
Nothing wrong with $27/month for 'however many months' so long as 'however many months' doesn't exceed about 9 years (108 months = 2,916, which I believe approximates reasonable interest for the period in question). If it's $27/month in perpetuity, however, then that's as disingenuous as cellular rates that include phones and is the kind of pricing distortion that people are complaining about.
Owen