Re: Should we oppose the Data Superhighway/NII?
Perry writes:
Mike Godwin says:
But cable service would be far more valuable to me (and I'd pay more for it) if I could, say, upload a video of my little girl taking her first steps and send it to Tim. (Not that he'd necessarily pay for that privilege, but you get the idea.)
Why do we need government for this?
We don't. We need private providers for this.
Seems to me that bandwidth is going to be nearly free in both directions in a few years whether government intervenes or not.
I agree about the potential for it to be free, but, I gotta tell you, the monopolists running the cable systems in this country have no inclination to share that nearly free bandwidth with you, even if you're willing to pay for access to it. In order to get to a world in which free markets can meet our demand for high-bandwidth connectivity, we have to dig ourselves out from the market-failure position we're in now. And because government is part of the problem, changing government policy is part of the solution. So, that's one of the major thrusts of EFF's NII policy. --Mike
Mike Godwin says:
I agree about the potential for it to be free, but, I gotta tell you, the monopolists running the cable systems in this country have no inclination to share that nearly free bandwidth with you, even if you're willing to pay for access to it.
Wouldn't the solution then be to eliminate the capacity of local municipalities to grant cable monopolies? Fiber is compact -- five or even twenty cable companies could coexist happily in New York (where I live) if the city didn't grant "franchises", which it charges exhorbitantly for. With large scale competition between cable companies, monopolies would no longer be a problem.
In order to get to a world in which free markets can meet our demand for high-bandwidth connectivity, we have to dig ourselves out from the market-failure position we're in now.
Isn't the problem in question the result of government granted, rather than natural, monopolies? Isn't it thus wrong to call it a "market failure"? Seems more like yet another government failure. Perry
Wouldn't the solution then be to eliminate the capacity of local municipalities to grant cable monopolies?
That might be one solution. It certainly will be part of the ultimate solution.
Fiber is compact -- five or even twenty cable companies could coexist happily in New York (where I live) if the city didn't grant "franchises", which it charges exhorbitantly for. With large scale competition between cable companies, monopolies would no longer be a problem.
Which cable company has to eat the cost of digging the original groundwork? Or are you saying that every new cable entity will have to lay its own infrastructure? The capital costs of that create an immense barrier to market entry, and ease of market entry is a pre-requisite for free-market competition. The only reason the first cable companies even invested in laying cable is that they were guaranteed a local monopoly. Since government, in effect, participated in the creation of that part of the infrastructure, there are serious issues as to whether the first cable provider in a local area should continue to profit from a government-granted incentive while new potential providers are left high and dry. These are the kinds of issues that need to be addressed as we move from monopoly to free-market competition--how do we correct for the distortions caused by the initial government intervention in the market?
Isn't the problem in question the result of government granted, rather than natural, monopolies? Isn't it thus wrong to call it a "market failure"? Seems more like yet another government failure.
"Market failure" is a term of art. It refers to a condition, which may in fact be caused by government, in which market mechanisms have been prevented from ensuring competition. --Mike
Mike Godwin says:
Fiber is compact -- five or even twenty cable companies could coexist happily in New York (where I live) if the city didn't grant "franchises", which it charges exhorbitantly for. With large scale competition between cable companies, monopolies would no longer be a problem.
Which cable company has to eat the cost of digging the original groundwork? Or are you saying that every new cable entity will have to lay its own infrastructure?
Well, in NYC, the utility tunnels are municipal, so its a question of leasing a slot from the city. (Frankly I wish the tunnels were privately held, but thats another story.) In most rural and suburban areas in the US utility poles are still used and its a question of leasing slots from the owners of those (which is easy since fiber is quite lightweight, is typically strong when kevlar reinforced, and presents little or no lightning hazard.) In some areas it might mean digging new infrastructure -- modern cable laying equipment has dramatically reduced the cost of this, especially for buried fiber optics. In practice, none of this is a real problem. Many areas DO have two or more cable companies because there is no local prohibition on competition, and a few areas even have multiple electric companies because there are enlightened governments that permit such heretical violation of the "natural" (read, government granted) monopoly thesis.
The capital costs of that create an immense barrier to market entry, and ease of market entry is a pre-requisite for free-market competition.
Its not a real barrier. Capital costs for such structures are typically sunk via mortgage bonds -- its possible for most utilities to raise vast amounts of money in the debt markets. If you wish, I can direct you to people at the Cato Institute who can give you plenty of good data on why there is no legitimate reason why two or more phone, cable, electrical, or even gas and water companies couldn't operate in most areas -- I mean hard data down to the costs involved and potential profits and the way that competitive utilities have functioned in areas permitting them. The reasonable conclusion the data leads to is that the only reason such things don't happen much in the U.S. is that in most places competition is prohibited by law.
The only reason the first cable companies even invested in laying cable is that they were guaranteed a local monopoly.
Well, the fact that multiple cable companies do in fact exist in many places gives lie to this premise. The fact that multiple phone companies used to operate in the early days of the century before the government put a legal end to that also tends to discount this thesis. I've heard the argument given time and again about dozens of industries that "The X industry requires a government monopoly to operate" or "The Y industry needs subsidies or we would be left without a Y industry" and the like. I've checked up on many such claims, and have yet to see one where the numbers or the facts actually backed up the claim. The practice of granting monopolies was started in England under the Tudors as a way of earning money for the crown (which it still is in many states if you look at franchise fees and utility tax structures). There was initially no pretense about the practice being needed to preserve certain businesses -- that, of course, eventually arose as an excuse and is perpetually the monopolists argument for why competition should not be permitted. Ultimately, one must ask the hard question of the monopolists. "If competition is impossible in this industry, or if competitors could not raise money for infrastructure, why do you need legal protection from competition? If competition it would render the business unprofitable, why would people seek to compete with you?"
These are the kinds of issues that need to be addressed as we move from monopoly to free-market competition--how do we correct for the distortions caused by the initial government intervention in the market?
Eliminate the intervention by stopping the monopoly? Perry
Well, in NYC, the utility tunnels are municipal, so its a question of leasing a slot from the city.
Is that true? How many slots are there? Is access to the slot unregulated?
In some areas it might mean digging new infrastructure -- modern cable laying equipment has dramatically reduced the cost of this, especially for buried fiber optics.
The question is less one of creating new conduits than of seeing that the conduits already in place (invariably under a government regulatory regime, if not an outright monopoly) get used to their fullest potential. Perry, you think that just letting things happen alone means that someone's going to give you purchasable video uplink. I'm glad to hear it, but I don't share you belief. Where we do agree, of course, is that access to the cable part of the infrastructure (whether by building new conduits or allocating sections of existing ones) shouldn't be subsidized by government money, except of course to the extent that the government is buying such services for itself.
In practice, none of this is a real problem. Many areas DO have two or more cable companies because there is no local prohibition on competition ....
I wouldn't say this is accurate. Even in multiple-cable areas, I understand, the cable companies have government licenses and operate under government regulation. In the Boston area, there are multiple cable companies, but you can't choose which one your particular home will use if you subscribe to cable.
, and a few areas even have multiple electric companies because there are enlightened governments that permit such heretical violation of the "natural" (read, government granted) monopoly thesis.
Do those electric companies each have different wires? So that if I move into the house where you used to live, and you bought power from company X, I can call up company Y and say "You're supplying power here now"? How is this implemented. I don't think discussion of "natural monopolies" is relevant here, because it doesn't matter whether the monopolies that exist are natural or not. They're here in any case.
The capital costs of that create an immense barrier to market entry, and ease of market entry is a pre-requisite for free-market competition.
Its not a real barrier. Capital costs for such structures are typically sunk via mortgage bonds -- its possible for most utilities to raise vast amounts of money in the debt markets.
I disagree that it's possible for all cable utilities to do this. If you're the second cable system in a duopoly, maybe. But I don't know of a debt market that will buy the bonds of the tenth cable company to lay cable in a certain area. If you know of one, let's start it together--lots of money to be made in cable!
If you wish, I can direct you to people at the Cato Institute who can give you plenty of good data on why there is no legitimate reason why two or more phone, cable, electrical, or even gas and water companies couldn't operate in most areas -- I mean hard data down to the costs involved and potential profits and the way that competitive utilities have functioned in areas permitting them.
I regularly read Cato Institute publications and white papers.
The only reason the first cable companies even invested in laying cable is that they were guaranteed a local monopoly.
Well, the fact that multiple cable companies do in fact exist in many places gives lie to this premise.
I overgeneralized. But the scenario I mention here is the most common one.
The fact that multiple phone companies used to operate in the early days of the century before the government put a legal end to that also tends to discount this thesis.
They used the same wires, Perry.
I've heard the argument given time and again about dozens of industries that "The X industry requires a government monopoly to operate" or "The Y industry needs subsidies or we would be left without a Y industry" and the like.
This seems to be a digression. No one around here is arguing for government monopolies. At least not so far as I can tell. --Mike
Mike Godwin says:
Well, in NYC, the utility tunnels are municipal, so its a question of leasing a slot from the city.
Is that true? How many slots are there? Is access to the slot unregulated?
Well "slots" is a misnomer. There is space in the tunnels. They were designed for holding lots of phone cable, much of which has dried up since the copper has started to be replaced with fiber. Fiber takes up extraordinarily little space, so unless hundreds of companies wanted to use the same space there wouldn't be real trouble. The space is both directly and indirectly owned by the city -- some of it is in the form of subway tunnels and subway access tunnels that are officially controlled by the MTA, but are de facto controlled by the city. And no, they have to like you to let you use them.
In some areas it might mean digging new infrastructure -- modern cable laying equipment has dramatically reduced the cost of this, especially for buried fiber optics.
The question is less one of creating new conduits than of seeing that the conduits already in place (invariably under a government regulatory regime, if not an outright monopoly) get used to their fullest potential. Perry, you think that just letting things happen alone means that someone's going to give you purchasable video uplink. I'm glad to hear it, but I don't share you belief.
I can buy one now. It expensive, but the price is falling. Lehman can purchase lines from Nynex, Teleport, Metrofiber, and several other vendors. Vendors WANT to be in the business -- it makes them money, after all. Car companies don't conspire to avoid selling people cars, and I doubt deregulated carriers would spend their days trying to find ways looking for methods to avoid selling people services. What IS a problem is that many of these carriers can't yet gain access to customers because of regulations. Manhattan Cable has fiber to every block in the city -- but was forbidden by the city from competing with the phone companies for data transmission services. Indeed, the only companies I ever see looking for ways to avoid having to provide services are regulated monopolies.
Where we do agree, of course, is that access to the cable part of the infrastructure (whether by building new conduits or allocating sections of existing ones) shouldn't be subsidized by government money, except of course to the extent that the government is buying such services for itself.
Yes.
In practice, none of this is a real problem. Many areas DO have two or more cable companies because there is no local prohibition on competition ....
I wouldn't say this is accurate. Even in multiple-cable areas, I understand, the cable companies have government licenses and operate under government regulation.
In the Boston area, there are multiple cable companies, but you can't choose which one your particular home will use if you subscribe to cable.
The same is true in New York, where there are multiple companies serving distinct areas of the city. This is not universally true, however. There are some areas where multiple cable companies provide overlapping service areas.
, and a few areas even have multiple electric companies because there are enlightened governments that permit such heretical violation of the "natural" (read, government granted) monopoly thesis.
Do those electric companies each have different wires?
I believe so, since it would otherwise be difficult to meter the power usage. If both companies shared a customer grid, how could you know who's power was being used? (Power companies do have a grid for transfering power between their generators, but thats another story.)
So that if I move into the house where you used to live, and you bought power from company X, I can call up company Y and say "You're supplying power here now"?
Apparently.
How is this implemented.
I imagine its much like the way one switches heating from oil to gas -- someone comes to your house and does a bit of physical work, usually leaving the old infrastructure in place.
I don't think discussion of "natural monopolies" is relevant here, because it doesn't matter whether the monopolies that exist are natural or not. They're here in any case.
Ah, but it is important. If a monopoly is an artificial creature of government, and not natural, that means that prices are being artificially kept high BY THE GOVERNMENT. That also means that your dream of universal access is being blocked.
The capital costs of that create an immense barrier to market entry, and ease of market entry is a pre-requisite for free-market competition.
Its not a real barrier. Capital costs for such structures are typically sunk via mortgage bonds -- its possible for most utilities to raise vast amounts of money in the debt markets.
I disagree that it's possible for all cable utilities to do this. If you're the second cable system in a duopoly, maybe. But I don't know of a debt market that will buy the bonds of the tenth cable company to lay cable in a certain area.
You are certainly correct -- but thats part of the way the free market works. When you can't get financing for your project it probably means people don't believe there is a market any more. The first five cable companies get business, and profits shrink as price wars occur, and then few new players enter the market. I suspect the first several players will get money, and thats all you need. Hell, nothing is more expensive in capital costs than starting an airline -- and yet people get financing for airlines all the time. I'd leave the worries about how to finance these things to the investors, who are after all the people who's money is at risk.
If you wish, I can direct you to people at the Cato Institute who can give you plenty of good data on why there is no legitimate reason why two or more phone, cable, electrical, or even gas and water companies couldn't operate in most areas -- I mean hard data down to the costs involved and potential profits and the way that competitive utilities have functioned in areas permitting them.
I regularly read Cato Institute publications and white papers.
Then I would suggest calling them up and asking them for something on utility regulation.
The fact that multiple phone companies used to operate in the early days of the century before the government put a legal end to that also tends to discount this thesis.
They used the same wires, Perry.
Nope, they didn't. If necessary, we can dig up references.
I've heard the argument given time and again about dozens of industries that "The X industry requires a government monopoly to operate" or "The Y industry needs subsidies or we would be left without a Y industry" and the like.
This seems to be a digression. No one around here is arguing for government monopolies. At least not so far as I can tell.
Ah, but you have been arguing against the elimination of state granted cable monopolies, haven't you? If not, please let me know because then there is no reason for me to argue. Perry
Perry Metzger writes:
I imagine its much like the way one switches heating from oil to gas -- someone comes to your house and does a bit of physical work, usually leaving the old infrastructure in place.
This doesn't sound like a true free market to me--there are barriers other than mere price to switching among power providers. It will be cheaper in terms of opportunity costs to stay with the same provider. Contrast this with long-distance services, where competition forces providers to give you incentives to switch.
Ah, but it is important. If a monopoly is an artificial creature of government, and not natural, that means that prices are being artificially kept high BY THE GOVERNMENT. That also means that your dream of universal access is being blocked.
I just don't see how whether we agree on the existence of natural monopolies or not has to do with this discussion. We both think the monopolies and government subsidies should end.
I disagree that it's possible for all cable utilities to do this. If you're the second cable system in a duopoly, maybe. But I don't know of a debt market that will buy the bonds of the tenth cable company to lay cable in a certain area.
You are certainly correct -- but thats part of the way the free market works. When you can't get financing for your project it probably means people don't believe there is a market any more.
Okay, now let's look at Tim May's hypothetical case. Tim wants X-rated cable. But the first nine cable companies don't want to provide it. And the Metzger-Godwin Cable operation, which would provide it, can't get financing. There's a market for it, but there's also a barrier to entry. If the only way to reach that market is to invest independently in one's own infrastructure, then that market simply goes unsatisfied--no reasonable entrepreneur would bother. I leave to your imagination what happens in the event that we *do* start the P-G Cable company, but content providers won't sell other programming to us so Tim is forced to choose between only X-rated cable--us--and cable services that provide other kinds of programming. (Tim may have no problem with this, but lots of other people in our market will want to watch CNN as well as X-rated videos.) And don't forget that the cable infrastructure we're talking about duplicating here includes coax to the individual home. So, when Tim decides to switch over to P-G, we've got to go out to his house and install a brand-new cable and yank out the old one--we can't just turn on the existing cable. This is the consequence of duplicating cable infrastructure. My understanding, by the way, is that cable in multi-provider areas is not duplicated--that when a municipality awards a contract to a new cable bidder, they don't yank out the old cable or add a whole new cable infrasture. Instead, they turn the existing infrastructure over to a new provider.
The first five cable companies get business, and profits shrink as price wars occur, and then few new players enter the market.
So, what happens when, in a system in which the only way one can enter as a competitor is to invest in a whole new infrasture, and nobody will fund it, and the existing cable companies won't carry your service? How does the market, in a world that treats cable in the ground as somebody's private conduit rather than as true infrastructure, provide Tim his X-rated cable service? Wouldn't it be better to live in a world in which the cable infrastructure, like the telephone infrastructure, could be serviced by competing providers, and at the individual level? We already have this with long-distance--if I want, I can have Sprint, MCI, *and* AT&T accounts and use them all from the same phone. Ultimately we'll have it in the local loop. In this world, Tim could contract with Warner Cable to get some of their programming, and with P-G Cable to get that little something Xtra that helps him get through the day.
Hell, nothing is more expensive in capital costs than starting an airline -- and yet people get financing for airlines all the time.
All this illustrates is the inadequacy of comparing air providers to infrasture providers.
I regularly read Cato Institute publications and white papers.
Then I would suggest calling them up and asking them for something on utility regulation.
Why? I've already read their stuff. Reading is not the same thing as agreeing.
The fact that multiple phone companies used to operate in the early days of the century before the government put a legal end to that also tends to discount this thesis.
They used the same wires, Perry.
Nope, they didn't. If necessary, we can dig up references.
Oh, you're saying that one couldn't make a phone call from one local phone company to another?
This seems to be a digression. No one around here is arguing for government monopolies. At least not so far as I can tell.
Ah, but you have been arguing against the elimination of state granted cable monopolies, haven't you? If not, please let me know because then there is no reason for me to argue.
I'm not. I think they should be eliminated. --Mike
Wouldn't the solution then be to eliminate the capacity of local municipalities to grant cable monopolies? Fiber is compact -- five or even twenty cable companies could coexist happily in New York (where I live) if the city didn't grant "franchises", which it charges exhorbitantly for. With large scale competition between cable companies, monopolies would no longer be a problem.
That's certainly part of it, though not part of the immediate EFF Open Platform initiative, which is more national in scope. This "franchise" problem is a local matter, and would best be handled by local organizations. If you are really concerned with this, try contacting the Society for Electronic Access (SEA), since you live in NYC. They may already be working on this, though I cannot of course vouch for them. Mailing simona@sea.org or simona@panix.com should put you in touch with them.
In order to get to a world in which free markets can meet our demand for high-bandwidth connectivity, we have to dig ourselves out from the market-failure position we're in now.
Isn't the problem in question the result of government granted, rather than natural, monopolies? Isn't it thus wrong to call it a "market failure"? Seems more like yet another government failure.
Why would a "natural monopoly" be any better? This is a rather moot point. The problem here is that such monopolistic entities, whatever their provenance, don't give a rat's ass for whether or not you want a lot of bandwidth for multimedia email, or whatever. Left to their own devices, they'll happly feed you 5000 channels of tv, plus perhaps some oh-so-interactive teleshopping clubs and the like. Part of the effort that must be made is to knock some sense into the rapidly merging entertainment/information/telecom conglomerates, and try to at very least keep a large section of the "data highway" (or whatever one chooses to call it) an Internet-like many-to-many communications medium, if not fused with Internet itself. Convincing the govt. of this is will also take some doing. One certainly can't IGNORE the govt. No matter how much we may wish it'd just go away, it won't, and has to be dealt with. -- Stanton McCandlish mech@eff.org 1:109/1103 EFF Online Activist & SysOp O P E N P L A T F O R M C R Y P T O P O L I C Y O N L I N E R I G H T S N E T W O R K I N G V I R T U A L C U L T U R E I N F O : M E M B E R S H I P @ E F F . O R G
Part of the effort that must be made is to knock some sense into the rapidly merging entertainment/information/telecom conglomerates, and try to at very least keep a large section of the "data highway" (or whatever one chooses to call it) an Internet-like many-to-many communications medium, if not fused with Internet itself. Convincing the govt. of this is will also take some doing. One certainly can't IGNORE the govt. No matter how much we may wish it'd just go away, it won't, and has to be dealt with.
The beauty of cypherpunk technology is that it provides means to _avoid_ the tyranny of government, rather than trying to redirect that tyranny on behalf of one's own ends. Government gets its power from its hundred million clients. To join that clientele is not consistent with wanting government power to whither away. John E. Kreznar | Relations among people to be by jkreznar@ininx.com | mutual consent, or not at all.
participants (4)
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jkreznar＠ininx.com -
Mike Godwin -
Perry E. Metzger -
Stanton McCandlish