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RE: What do we mean when we say "competition?" (was: Re: [Latestdraft of Internet regulation bill])
--On November 15, 2005 8:14:38 PM -0800 David Schwartz <[email protected]> wrote:
--On November 15, 2005 6:28:21 AM -0800 David Barak <[email protected]> wrote:OK... Let me try this again... True competition requires that it be PRACTICAL for multiple providers to enter the market, including the creation of new providers to seize opportunities being ignored by the existing ones.The worse the existing provider it is, the more practical it is to compete with them. If they are providing what people want at a reasonable price, there is no need for competition. If they are not, then the it becomes practical for multiple providers to enter the market. If you assume that the cost to develop existing infrastructure is not insanely less than the cost to develop new infrastructure, the isolation from competition comes directly from the investment.
1. The existing infrastructure is usually all that is needed for many of the services in question. Laying parallel copper as a CLEC is not only prohibitively expensive, in most areas, it's actually illegal. Usually, municipalities have granted franchise rights of access to right of way to particular companies on an exclusive basis. That makes it pretty hard for a competitor to enter the market if they can't get wholesale access to the existing copper. 2. The existing copper was actually deployed (at least in most of the united States) using public subsidies. The taxpayers actually paid for the network. The physical infrastructure should be the property of the people. The ownership claim of the telephone companies is almost as baseless as the Verisign clame that they own the data in whois.
For example, if Bill Gates took a few billion dollars out of his pocket and launched 80 satellites to provide wireless Internet access, it would be damn hard to compete with him if he wasn't trying to recover those few billion dollars. But if you spend a few billion, you get a few billion worth. Anyone else can spend the same amount and get the same advantage.
3. Except when you consider that there are only so many orbital slots that can be maintained. (see 1 above as well). If Bill manages to launch N satellites and N leaves N/2 orbital slots available for other uses, then, it's pretty hard to launch another N satellites at any cost.
If he already has the satellites and is providing the service other people want at a low price, then other competitors will lose. But so what? Consumers win. And competition doesn't exist to benefit the competitors.
4. But, what tends to happen instead is that Bill charges whatever he can get to recoup his billions until someone else launches their satellites (has expended the capital). Then, when they start to go after revenue, Bill drops his prices to something they can't sustain because they don't have his bankroll and have to recoup their costs. They go out of business and Bill either buys their satellites, or, they become space-junk. Bill brings his prices back up to previous levels, and, consumers lose and the competition loses too. Even if Bill doesn't actually do this, the knowledge that he could causes investors to view the new satellite company as a bad risk, so, Bill's monopoly position prevents investment into competitive entry into the market. Finally, since Bill doesn't have to worry about anyone else being actually able to launch competing satellites, Bill has no reason to innovate unless Bill can see a much higher profit margin at the end of said innovation. (look at today's Telco as a prime example of this form of complacency. Actually, telco's are very innovative, but, they focus on regulatory innovation instead of technical innovation).
If he already has the satellites but is not providing the service other people want or isn't charging a reasonable price, or both, then anyone else can make the same infrastructure investment for a comparable cost. If he's not satisfying demand, the demand is still there, and he's just losing some of the benefits his infrastructure could be giving him.
5. But, if you want this analogy to match the current copper plant in the ground in most of the US, then, you have to also account for the fact that Bill received 30-45 of his 60 billion in investment in the form of public subsidies. Are you going to give all comers the same public subsidy (blank check)? Instead, you end up with exactly what we have today in the telcos. Semi-regulated monopolies that think they own an infrastructure built with taxpayer money. (see also 2 above)
No... Actually, the lack of market forces in the beginning is what allows the incumbent providers to have an advantage.There is only a lack of market forces if the incumbent is meeting the needs of the consumers. And if they are, there is no need for a competitor.
Nope. There is a lack of market forces for several other reasons. + Lack of access to right of way + Burdensome regulatory environment requiring huge up-front overhead -- you can bet that AT&T didn't start with 5 full time lawyers. It's pretty hard to run a CLEC in most states with anything less today. Even if you only want to serve your neighborhood. + Public subsidies for the ILEC's initial (and in some cases subsequent) buildout which is not available to CLECs. The list goes on, but, believe me when I tell you that there are plenty of consumers in California that do not feel that SBC is meeting their needs, but, they don't have access to a real CLEC.
Nope... What I want is LESS subsidy to incumbents and a recognition that infrastructure built with public funds belongs to the public. Said infrastructure should be equally open to all service providers on equal terms, regardless of who holds the contract to maintain it. Imagine instead of today's scenarios, an environment where SBC didn't think they OWNed the pipes, but, instead, the city's owned the copper in the street and contracted with <entity that doesn't sell direct end-services> to maintain said infrastructure for the city. Then, all RBOCs/ILECs/CLECs paid the same price to the City through said entity for the same services, whether dry copper connection, dark fiber, OC-X, etc. The city would have a term to the contract and would put it up for rebid periodically. That would be market forces at work and not MORE regulation.How would governments owning the infrastructure and setting the rules not be more regulation? And how would designing a system that favors one set of business models and effectively prohibits others that would otherwise be viable not be more regulation?
Huh? How does this favor one set of business models? What it does is take the portion of the infrastructure that was built with taxpayer money and put it back in the hands of the taxpayer so that whatever carrier the tax payer wants to buy service from has equal access to the infrastructure. The current bill actually has a pretty good chance of levelling this playing field by giving not only access to infrastructure, but, also access to right of way to all comers on a non-discriminatory basis. I think that's a good thing. If the people have control over the "last-mile" infrastructure and it is operated in a carrier neutral fashion, that creates a level playing field for innovation in everything outside of "last-mile" infrastructure. If the people also make sure that right-of-way is managed in a carrier-neutral fashion (no more exclusive franchises to single carriers), that creates a level playing field for innovation in infrastructure. All providers have the same difficulty getting stuff into the right-of-way and the same inherent costs. No carrier gets favorable treatment over another. Today, nobody can put CATV infrastructure anywhere in San Jose if their name isn't Comcast. Period. The city sold us out to an exclusive franchise deal. The current bill proposed eliminates that. That's a good thing.
Competition in business models, infrastructure technology, and the like is just as important (if not more so) as competition in price and services within a given model.
Yes... By taking away the subsidized monopoly infrastructure from the ILEC and making them compete on a level field with other LECs, they can do just that. The existing infrastructure was built with taxpayer money and should be equally accessible to all service providers.
What happens if the government builds a copper infrastructure and someone else wants to build fiber? How can they compete with the subsidized infrastructure you propose (what else can you mean when you say the "city's owned the copper")?
My point is that the subsidized copper infrastructure already exists. It's already in the ground and has already been subsidized (actually outright paid for in most cases). Unless you think we can get that money back from all the ILECs (i.e. they will buy the current infrastructure from the government at the current value of the subsidies at the time paid), the ILECs already have exactly that. OTOH, if you put that infrastructure into a pool where any provider that wants can use it on the same terms as the ILEC, that's a different scenario. Sure, FFTH is another roll-out. One way that could happen is when a new provider comes along and wants FFTH to provide their service, they are asked to provide a quote for the roll-out cost. Then, after roll-out, if another provider wants access, the people have the option of buying said infrastructure and rolling it into the existing management system for the price quoted. That way, the provider didn't pay for infrastructure being used by someone else and the people aren't forced to pay for infrastructure they don't want. Market forces still dictate which infrastructures get deployed, but, there's no early-deployment monopoly as a result.
What we have today is an attempt to reduce regulation without recognizing the need to correct the damage already done by regulation.You can't "correct" the damage. It's not possible. All you can do is pick winners and losers *again*. The previous chosen winners and losers don't really exist anymore in their previous form -- all you can do is more damage.
Actually, once AT&T and SBC merge, it will be pretty close to the original form of AT&T prior to Judge Greene's decision. Sure, there will always be winners and losers. The question is the selection method. Today, the selection method is the government selecting the incumbent carriers as winners and the ratepayers are the losers. Under the proposed bill, that changes and I think the ratepayers at least get more input into the selection process. Owen -- If this message was not signed with gpg key 0FE2AA3D, it's probably a forgery.