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Re: What do we mean when we say "competition?"

  • From: Owen DeLong
  • Date: Tue Nov 15 21:28:43 2005

--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

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

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
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
infrastructure providers that can sell to CSPs and
in rural america
there will be one infrastructure provider and many
Aren'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

> This IS the market at work.  If you want it to be
> different, what you want is more, not less
>  That may or may not be a good thing, but let's
> 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,

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

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.


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