North American Network Operators Group Date Prev | Date Next | Date Index | Thread Index | Author Index | Historical Re: Lessons from the AU model
On 21/01/2008, at 10:49 PM, Tom Vest wrote: In the absence of competition (and esp. in the presence of risk of empowering competitive entrants), supply has no general/necessary effect on prices at all.
So infrastructure spending can (and does) affect the price. We get that every day in .au (Transmission on the monopoly route between Melbourne and Hobart costs 3 times more than transmission between Sydney and LA; and other potential cable operators have always known that the monopoly has an excess of supply hidden away somewhere which they can roll out at bargain basement prices if a competitor ever arrives in the market) [ housing ]
So hardly anyone has been selling below cost, but almost everyone has been selling below replacement cost. So everyone can extract profits for years, making out like bandits as they grow in to the excess capacity that was installed between 1999 and 2001, and they won't have a day of reckoning until they run out of capacity and find that they haven't been earning enough from their networks to service the debt they're going to need to take out to perform the next round of infrastructure upgrades. Example: You cannot seriously expect me to believe that the price of transatlantic connectivity actually reflects the cost of laying cables across the Atlantic. It defies common sense that a Gig-E tail from NYC to London is priced within an order of magnitude of a Gig-E tail from NYC to Boston. Metered charging systems are, to me, evidence of a realization that the business model underlying much of the Internet's last five years is unsustainable. You guys might think they're a novel and unwelcome arrival at the moment, but give it a few years and we'll see what happens :-) - mark -- Mark Newton Email: [email protected] (W) Network Engineer Email: [email protected] (H) Internode Systems Pty Ltd Desk: +61-8-82282999 "Network Man" - Anagram of "Mark Newton" Mobile: +61-416-202-223
|