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Re: What do we mean when we say "competition?"
--On November 15, 2005 7:25:54 AM -0800 David Barak <[email protected]> wrote:
--- Matthew Crocker <[email protected]> wrote:That is the exact problem with a [mon|du]opoly. The incumbents drive the price so low (because they own the network) that it drives out an potential competition.So you're complaining that the problem with lack of competition is that the prices are too LOW? As a consumer, I'm thrilled with low price, and would only change providers for a well-defined benefit or a lower price.
I think what is really represented there is that because they own an existing network that was built with public subsidy and future entrants have no such access to public subsidy to build their own network, it reduces the costs to the incumbent provider well below those of any potential competition. Thus, faced with competition, they can afford to reduce prices until competition cannot survive, then, go back to charging whatever they think they can get away with.
We don't need 8 fiber networks overlaid to every home in the US to provide competition. We need a single high quality wholesale only fiber network which is open to use by all carriers. I don't want 200' telephone poles down my street with 10 rows of fiber. It doesn't make sense.So should the government charter such a build? My understanding is that Verizon and SBC (maybe others, but I don't know about them) are currently working on doing a FTTH build at this time. Presumably, as they're private companies doing it, they'd like to be able to be the ones that obtain the primary benefit. Do you think that a municipal build/new monopoly build as you describe would be cheaper or better than what SBC or Verizon are doing? If so, you should be able to convince some cities of the math.
The government should recognize that the existing build has actually been paid for mostly by public subsidy anyway and as such, should require the ILECs to split into two separate divisions. One division would be a wholesale only infrastructure delivery company that would maintain the physical infrastructure. As part of this, ownership of the physical infrastructure in place would be transferred to an appropriate local civil body (city, county, district, etc.) and said body should have an initial 5 year contract with the infrastructure portion of the ILEC to provide existing services on a provider- neutral basis (same price to all ILECs, Clecs, etc.). At the end of that 5 year contract, the maintenance of the infrastructure should be up for bid, and, if the existing ILEC infrastructure portion can't win the bid, they are out of luck. I realize there are tons of reasons this won't happen, not the least of which being that the government stupidly gave the infrastructure ownership to the ILECs in the first place and doesn't really have the authority to take it back.
Again, because of the monopoly held by the incumbents keeping the price low enough that you can't afford to build your own infrastructure.This is such an astounding comment that it needed to be singled out: most of the complaints about monopolies are that they artifically RAISE prices.
Right, but, faced with potential competition, they are notorious for temporarily lowering prices well below sustainable levels in order to eliminate said competition.
We don't need competition in the infrastructure business, we need competition in the bandwidth business. That can only happen if the infrastructure is regulated, open and wholesale only. The RBOCs should be split up into a wholesale *only* division (owns the poles, wires, buildings,switches) and a services *retail* division (owns the dialtone, bandwidth, customers ). The wholesale division should sell service to the retail division at a regulated TELRIC based price which will allow the wholesale division to make enough money to build/ maintain the best infrastructure in the world. Any competitive service provider can buy the same services at the same price as RBOC Retail. Regulated such that wholesale profit can't subsidize retail services. In high density areas there may be alternate infrastructure providers that can sell to CSPs and in rural america there will be one infrastructure provider and many CSPsAren't you pretty much describing the '96 telecom act? The result has been the glut of inter-city fiber, and a dearth of advanced access services at the rural/suburban edge. Saying "we don't need competition in infrastructure, only in bandwidth" ignores the fact that infrastructure upgrades are required to support increased bandwidth. In addition, why treat L0/1 infrastructure in a different way than L2/3 infrastructure?
Nope. The '96 telecom act did nothing to take the last mile infrastructure out of the hands of the existing ILEC.
> This IS the market at work. If you want it to be > different, what you want is more, not less regulation. > That may or may not be a good thing, but let's just > be very clear about it. More regulation of the physical infrastructure (the expensive piece) and less regulation of the bits to foster competitive solutions and bring along new innovations. The future innovations are not going to revolve around new types of fiber. They will revolve around what can be done with high bandwidth to everyone.First, I wouldn't be so sure to rule out new improvements in fiber or other physical transmission media as important - as an example, I think the widespread adoption of 802.11 has been part of a huge shift in the way people use the Internet. That said, I agree that the biggest innovations are likely to be applications, not media.
Agreed. However, for any given last-mile buildout, the people should retain title to the infrastructure(s) and management should be by a carrier-neutral party under contract to the people. (yes, practically speaking, s/people/government/, but, I use the term people to remind us that the government is supposed to be acting as our proxy for such things). If a company wants to deploy new infrastructure, they should have equal access to right-of-way to deploy it. However, such access should include a mechanism for transfer of ownership (with appropriate compensation) of said infrastructure to the people for carrier neutrality after some fixed period of time at the option of the people.
So let me take the devil's advocate position: why should prices be raised so that multiple ISPs can get a layer-2/3 connection to customers without having their own layer-1 infrastructure? Is there some service which is provided which wouldn't be cheaper/simpler to mandate that the incumbent provide? The content providers and innovators you mention should be able to work with the customers of any ISP, right?
They shouldn't. What should happen is that ILECS should be divided into two entities and the current infrastructure and service portions of the existing pricing should be determined. After that, the infrastructure portion should be the price anyone can pay the infrastructure management company for said service, and, the service portion should become unregulated. Now, the ILEC can continue to provide service at the same price, but, they no longer have a cost-basis advantage or the ability to delay, defer, interfere with CLEC installs on the same infrastructure.
I guess what I'm saying is that "competition" is a virtue only when it leads to either improved or cheaper service. Do you think that there are improvements to service that alternative providers could make which justify the cost of the regulation you describe?
I think there are improvements and cost reductions that could be made by alternative providers. I don't think we need more regulation so much as to recognize that the subsidized infrastructure should be owned by the public for the public good, managed by a trustee on a contract basis. Owen -- If this message was not signed with gpg key 0FE2AA3D, it's probably a forgery.