RE: What do we mean when we say competition? (was: Re: [Latest draft of Internet regulation bill])
--On November 15, 2005 11:02:18 PM -0800 David Schwartz [EMAIL PROTECTED] wrote: --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. For now this may be true. But you'll set up another generation of the same problem if you continue to advocate subsidized infrastructure. At some point that infrastructure will be inadequate, and you will have done nothing to make it easier to build competitive new infrastructure. If munipalities granting monopolies is a problem, then stop such monopolies -- don't advocate them! The problem is that because of cost and other factors of last-mile deployment of terrestrial infrastructure, these are natural monopolies whether you like it or not. For example, how many streets from how many different providers pass in front of your house? How many different telcos have copper to the junction box that could be used to provide service to your home? How many cable companies have fiber or co-ax in your street? For the vast majority of the united States, it is very hard to answer anything other than 0 or 1 to any of these questions. The primary problem as I see it is not the monopoly of the infrastructure, but, the inherent connection between the management of that monopoly infrastructure and one of the competitors for the provision of services over that infrastructure. 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. It doesn't much matter and it can't be fixed. The static value of the infrastructure is basically depreciated to zero by now. The profits have been reaped. Don't justify future bad decisions on past inquities that can't be fixed anyway. Just start right from now on. If I thought what I was suggesting was a bad decision, I wouldn't be suggesting it. However, I think there is much more justification for this decision than past inequities. As long as you have an area that tends to create a natural monopoly and allow one competitor that uses that infrastructure to also own said infrastructure, it creates an unfair environment for other competitors. Are you really advocating that the market is best served by multiple providers laying last-mile fiber? Doubling the cost of FTTH to create just two FTTH providers in an area seems pretty stupid to me. OTOH, a 10% increase (probably much less) in the cost of FTTH to facilitate a virtually unlimited number of service providers being able to access said fiber on a consumer-choice basis doesn't seem so stupid to me. 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. The present infrastructure in no way impedes the construction of future infrastructure. If it did, this would be a valid point.
RE: What do we mean when we say competition? (was: Re: [Latest draft of Internet regulation bill])
In any case, the bottom line is that whether through subsidy, deal, or other mechanism, the last-mile infrastructure tends to end up being a monopoly or duopoly for most terrestrial forms of infrastructure. As such, I think we should accept that monopoly and limit the monopoly zone to that area (MPOE-B-Box or MPEO-MDF) and prevent an unfair advantage by separating the management of that section of infrastructure from the service providers offering services which use said infrastructure. This is the same create a free market through extensive regulation that has created the disaster we have now. Any last mile technology whose cost of deployment can only be justified by the value of a monopoly on its deployment just won't be deployed in this model. That's not a free market. This separation model may turn out to be a very good one or a very bad one. But if we choose it and stick with it, what will happen in 50 or 100 years when it's either broken or irrelevent? Remember, we got to where we are now by choosing models that made sense in the voice telco time and make no sense at all now. Had we done this twenty years ago, the last mile would be dialup and billions of public dollars would have been spent to create and maintain an irrelevent technology. Meanwhile, the newer technologies wouldn't be deployed. This, at least on a theoretical level creates a carrier-neutral party managing the monopoly portion while maximizing and levelling the playing field in all other areas. A carrier-netural party may not be technology neutral, business model neutral, or neutral in many ways that may turn out to be important. As I see it, you give up on everything that's important from the very first step. What if a non-carrier neutral last mile turns out to be the scheme most people really want when it's offered to them? Competition in last mile technologies, deployment strategies, contract terms, and the like are not just important, they're absolutely vital. If you try to pick the winners and losers, or worse let local governments do so, you'll just get another generation of publically financed mediocre solutions while the truly innovative technologies get shut out by the monopoly arrangements. DS
RE: What do we mean when we say competition? (was: Re: [Latest draft of Internet regulation bill])
Right, and this is appropriate. Large investments in infrastructure should *not* be made if there's already adequate service. Better to invest in places where there isn't. Is that still true if the adequate service is being provided at a price which is two to three times what it should be costing and the provider is enjoying the ability to do this because nobody else is in the market space? It depends how much they invested. In some areas that are very expensive to serve, that may be precisely what happens. In areas that are easy to serve and customer dense, you won't get away with this for very long. You need prices to be high where it really is expensive to provide access because that's what provides the incentive to develop cheaper ways to provide access. Perhaps we don't all fly personal planes today because the government chose to build roads. The government can't do a good job of picking winners and losers, so stop letting it. Agreed. So, let the government do what it does well... Manage the things that tend to be natural monopolies and keep it out of everything else as much as possible. Are you arguing that there should be competition for the provision of highways, for example? Yes. How would you see that working? Do we stack six copies of I-80 on top of each other, or, do we allocate multiple semi-parallel routes for freeways and let different companies build different routes and charge what they want for each of them? How do you see that working on a neighborhood level? Even if you think it works at the highway level, we're really talking about the neighborhood streets here. Now you are asking me to pick the winners and losers and claiming that if I'm not smart enough to pick the winners and losers, a free market won't work. I am the one saying nobody is smart enough to figure out how to do it. You are the one saying governments will be smart enough to build the right infrastructure and now slow innovation. (As they always have in the past despite every effort to provide 'equal access'.) The last-mile infrastructure for terrestrial services looks a lot more like a local roadways inside a neighborhood than any other analogy I can think of. I have yet to see any environment where this has been accomplished on anything other than a monopoly basis. The monopoly is not the problem. The lack of competition is the problem. Perhaps you don't see the difference. If a monopoly is the most efficient result, then competition will lead to an efficient monopoly. It's when you choose a monopoly and shut out other efficient results that you have a problem. That's the situation we have now and that's the situation you propose to maintain. If it's expensive or impractical to run eight company's fiber in a city, then make the companies pay that expense to run fiber or don't let them. That way, we'll have eight fibers if that really is the right solution and we won't if it isn't. If someone wants to run carrier-neutral fiber, they can do so. But if that's not the best model or best solution, don't shut out the others. 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. Oh, I know that story, believe me. So, do you really think that if SBC had the same terms for access to the MDF-MPOE leg that any competitor had this would not actually change or would get worse? I don't. I think it would actually solve many of the current problems and encourage many of the CLECs to re-enter the market. I think if SBC had to open their circuits, they wouldn't build as many of them unless they were forced to. Living in an area with no local high-speed access options, I want them to have every incentive to build new infrastructure. If you force them to build new infrastructure, or subsidize it publically, then you are again picking winners and losers. The big losers will be the new technologies, because they'll never have a chance If a free market naturally creates a problem, then it creates an incentive for a clever solution. No person or group could engineer a solution as clever as the one the market will evolve. But your proposal requires such a group. It essentially extends exactly what we have now. And what about a carrier that needs different infrastructure to provide the type of service it wants to provide? They can build it, and, if they get a competitor that wants equal access to it, they get reimbursed for the build. You realize that that is absolutely crazy. That's like saying you can buy a lottery ticket, and if you win, give me the ticket and I'll reimburse you its cost. And repeating the same problem 50 years from now when innovative services can't compete with the maintained subsidized infrastructure.
RE: What do we mean when we say competition? (was: Re: [Latest draft of Internet regulation bill])
This separation model may turn out to be a very good one or a very bad one. But if we choose it and stick with it, what will happen in 50 or 100 years when it's either broken or irrelevent? Remember, we got to where we are now by choosing models that made sense in the voice telco time and make no sense at all now. This separation model has been proven in the UK with electrical utilities, gas utilities and railroads. Some serious mistakes were made in the railroad model but they are being remedied over time and the model is being adjusted. In the UK, you can buy your electricity from your gas company or your telephone company. Or you can get your home phone from your gas company. There is a regulated utility that builds, repairs and operates the infrastructure and last mile but they do not sell to consumers and business users. Go to the website http://www.uswitch.com and have a look at the suppliers under the various categories. The separation exists in its purest form with gas and electric suppliers but you will notice that there is a broadband category because from the consumer viewpoint, DSL internet access appears to be structured in the same way. I think that the UK model is the model of the future and I suspect that the BT Openreach separation is an attempt by regulators to move telecom into the same type of structure. You may find the background documents at this site to be of interest http://www.reform.co.uk/website/transport/thefutureofrail.aspx because they show how the complexities of the rail industry are adapted to this model. I can't imagine telecom to be any more complex than rail. --Michael Dillon P.S. I have no personal knowledge of BT Openreach other than what I can find via google.
Re: What do we mean when we say competition? (was: Re: [Latest draft of Internet regulation bill])
Hello; On Nov 16, 2005, at 1:16 AM, Owen DeLong wrote: --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. I do not think that the ITU allocates orbital slots except for geostationary satellites (not even 24 hour inclined orbits, such as are so useful for satellite transmissions to cars). So, if you want to launch a Teledesic or Iridium clone, you can, assuming your credit cards are good for a few billion $. Frequency assignment is, of course, another matter. 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. snip Owen Marshall -- If this message was not signed with gpg key 0FE2AA3D, it's probably a forgery.
RE: What do we mean when we say competition? (was: Re: [Latest draft of Internet regulation bill])
--On November 16, 2005 4:23:20 AM -0800 David Schwartz [EMAIL PROTECTED] wrote: In any case, the bottom line is that whether through subsidy, deal, or other mechanism, the last-mile infrastructure tends to end up being a monopoly or duopoly for most terrestrial forms of infrastructure. As such, I think we should accept that monopoly and limit the monopoly zone to that area (MPOE-B-Box or MPEO-MDF) and prevent an unfair advantage by separating the management of that section of infrastructure from the service providers offering services which use said infrastructure. This is the same create a free market through extensive regulation that has created the disaster we have now. Any last mile technology whose cost of deployment can only be justified by the value of a monopoly on its deployment just won't be deployed in this model. That's not a free market. This separation model may turn out to be a very good one or a very bad one. But if we choose it and stick with it, what will happen in 50 or 100 years when it's either broken or irrelevent? Remember, we got to where we are now by choosing models that made sense in the voice telco time and make no sense at all now. The model we have now is a certain amount of facilities from a given center to each residential unit within that centers serving area. For any form of terrestrial facilities, I don't see many alternatives to that model. I don't see how you plan to change that model. Please explain to me what the alternative model for deploying last-mile terrestrial facilities is. As long as we are stuck with that model, I don't see how you will ever get to a point where parallel facilities are cost effective to deploy, and, I don't think that's necessary to get them deployed. The reality is that a monopoly on the facilities isn't required to make them cost effective to deploy, but, it is unlikely to ever be cost effective to deploy parallel facilities to create competition. This is the natural monopoly scenario of which I speak. If such facilities would never be deployed under said model, then, why do we have: The golden gate bridge The bay bridge The Carquinez straits bridge The new Carquinez straits bridge The Interstate Highway system Residential Telephone service without party lines CATV Realistically, for last-mile base infrastructure, there are really only a few options today. Co-ax, UTP, and Fiber. A carrier neutral monopoly provider of these base facilities in a given serving area (and nothing says the same monopoly has to run all three) could serve multiple providers of just about any possible service. If we come up with a new terrestrial delivery method which has sufficient promise, I'm betting it won't be that hard to get it deployed. Fiber, however, scales pretty far. A single DWDM pair to the home really is a pretty large amount of bandwidth. We'll have many years of warning on superior technology as it will have to be well and truly deployed in the backbone prior to any need for it at the edge. Had we done this twenty years ago, the last mile would be dialup and billions of public dollars would have been spent to create and maintain an irrelevent technology. Meanwhile, the newer technologies wouldn't be deployed. Nope... That shows me how much you truly don't understand how little I'm talking about monopolizing. The UTP between the MPOE and the MDF can be used to serve POTS, ISDN, DSL, DS0, T1, and other services. Since any service provider could put any equipment they wanted at the ends of any of those wire pairs, paying the monopoly maintainer only for the lease of the dry copper pair, we would have seen a much more rapid deployment of ISDN and DSL because the RBOCs would not have had any power to delay it. We would have seen multiple providers competing for PSTN service on an equal footing. We might have seen providers offering true T1 services at residential pricing. This, at least on a theoretical level creates a carrier-neutral party managing the monopoly portion while maximizing and levelling the playing field in all other areas. A carrier-netural party may not be technology neutral, business model neutral, or neutral in many ways that may turn out to be important. As I see it, you give up on everything that's important from the very first step. What if a non-carrier neutral last mile turns out to be the scheme most people really want when it's offered to them? What technology... This is literally just the dumbest layer 1 part of the network. It's Wire or Fiber. There aren't really any other options. I don't care if we create a monopoly for each of these technologies. Since all they can do is lease an unlit/unpowered piece of wire or fiber from a serving center to a building MPOE, and, nothing else, and they are not allowed to discriminate about what equipment, technology, service, etc. the
What do we mean when we say competition? (was: Re: [Latest draft of Internet regulation bill])
--- Owen DeLong [EMAIL PROTECTED] wrote:
True
competition requires the ability
for multiple providers to enter into the market,
including the creation
of new providers to seize opportunities being
ignored by the existing ones.
Technically, lots of other providers CAN enter the
market - it's just very expensive to do so. If there
are customers who are not receiving service from one
of the incumbent providers, a third party is certainly
welcome to {dig a trench | build wireless towers | buy
lots of well-trained pigeons for RFC 1419 access} and
offer the services to the ignored customers.
The problem is that the capital expenditures required
in doing so are very, very high, and most companies
don't see the profit in doing so.
If two companies can act as gatekeeper for the
entire market in a given
area, that is not an environment where market forces
carry much meaning.
Actually, here's where I'd disagree: market forces are
exactly the thing which is keeping other providers
OUT. It's too expensive for them to buy their way
into these areas, and during all of the time when
access was mandated to be (relatively) cheap by law,
very few third parties actually built their own
infrastructure all the way to homes. There are some
competitive cable plants in some cities (I remember
Starpower/RCN doing this in DC), but I'm not aware of
any residential phone providers who built all the way
out to houses exclusively on their own infrastructure.
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.
David Barak
Need Geek Rock? Try The Franchise:
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Re: What do we mean when we say competition? (was: Re: [Latest draft of Internet regulation bill])
Technically, lots of other providers CAN enter the
market - it's just very expensive to do so. If there
are customers who are not receiving service from one
of the incumbent providers, a third party is certainly
welcome to {dig a trench | build wireless towers | buy
lots of well-trained pigeons for RFC 1419 access} and
offer the services to the ignored customers.
Technically anything is possible, I could walk on the moon if I had
enough $$.
The problem is that the capital expenditures required
in doing so are very, very high, and most companies
don't see the profit in doing so.
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.
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.
Actually, here's where I'd disagree: market forces are
exactly the thing which is keeping other providers
OUT. It's too expensive for them to buy their way
into these areas, and during all of the time when
access was mandated to be (relatively) cheap by law,
very few third parties actually built their own
infrastructure all the way to homes. There are some
competitive cable plants in some cities (I remember
Starpower/RCN doing this in DC), but I'm not aware of
any residential phone providers who built all the way
out to houses exclusively on their own infrastructure.
Again, because of the monopoly held by the incumbents keeping the
price low enough that you can't afford to build your own infrastructure.
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 CSPs
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.
--
Matthew S. Crocker
Vice President
Crocker Communications, Inc.
Internet Division
PO BOX 710
Greenfield, MA 01302-0710
http://www.crocker.com
Re: What do we mean when we say competition? (was: Re: [Latest draft of Internet regulation bill])
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. This is more or less what BT has done in the UK by splitting off all the field engineering into a separate company called Openreach. UK already has had a thriving digital radio network and digital TV network for several years. They are already starting to shut down analog TV transmitters. We have lept ahead in deployment of broadband with a variety of providers in most cities. Perhaps there are lessons to be learned here? 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. I doubt if even the RBOC executives understand this fundamental distinction. --Michael Dillon
Re: What do we mean when we say competition? (was: Re: [Latest draft of Internet regulation bill])
--On November 15, 2005 6:28:21 AM -0800 David Barak [EMAIL PROTECTED]
wrote:
--- Owen DeLong [EMAIL PROTECTED] wrote:
True
competition requires the ability
for multiple providers to enter into the market,
including the creation
of new providers to seize opportunities being
ignored by the existing ones.
Technically, lots of other providers CAN enter the
market - it's just very expensive to do so. If there
are customers who are not receiving service from one
of the incumbent providers, a third party is certainly
welcome to {dig a trench | build wireless towers | buy
lots of well-trained pigeons for RFC 1419 access} and
offer the services to the ignored customers.
The problem is that the capital expenditures required
in doing so are very, very high, and most companies
don't see the profit in doing so.
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.
If two companies can act as gatekeeper for the
entire market in a given
area, that is not an environment where market forces
carry much meaning.
Actually, here's where I'd disagree: market forces are
exactly the thing which is keeping other providers
OUT. It's too expensive for them to buy their way
into these areas, and during all of the time when
access was mandated to be (relatively) cheap by law,
very few third parties actually built their own
infrastructure all the way to homes. There are some
competitive cable plants in some cities (I remember
Starpower/RCN doing this in DC), but I'm not aware of
any residential phone providers who built all the way
out to houses exclusively on their own infrastructure.
No... Actually, the lack of market forces in the beginning
is what allows the incumbent providers to have an advantage.
The incumbent providers received huge subsidies from the
government to build the existing infrastructure, and, continue
to receive said subsidies (universal service). New providers,
OTOH, are being forced to build parallel infrastructure
and collect USF taxes while not receiving USF subsidies.
In some cases, rather than build parallel infrastructure,
they have the option of leasing infrastructure from
the incumbent providers, but, that has it's other lack-of-
market force problems.
If it were equally expensive for the existing providers and
the new providers, there would be no lack of competition.
The fact that the existing providers have an economic
advantage as a result of subsidies is not a market force,
it is the lack of a level playing field preventing
market forces from acting.
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.
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.
What we have today is an attempt to reduce regulation without
recognizing the need to correct the damage already done
by regulation.
Owen
--
If this message was not signed with gpg key 0FE2AA3D, it's probably
a forgery.
pgpgNN760pctr.pgp
Description: PGP signature
RE: What do we mean when we say competition? (was: Re: [Latest draft of Internet regulation bill])
--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. 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. 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. 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. 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... 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? 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. 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)? 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. DS
RE: What do we mean when we say competition? (was: Re: [Latest draft 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
RE: What do we mean when we say competition? (was: Re: [Latest draft 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. For now this may be true. But you'll set up another generation of the same problem if you continue to advocate subsidized infrastructure. At some point that infrastructure will be inadequate, and you will have done nothing to make it easier to build competitive new infrastructure. If munipalities granting monopolies is a problem, then stop such monopolies -- don't advocate them! 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. It doesn't much matter and it can't be fixed. The static value of the infrastructure is basically depreciated to zero by now. The profits have been reaped. Don't justify future bad decisions on past inquities that can't be fixed anyway. Just start right from now on. 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. The present infrastructure in no way impedes the construction of future infrastructure. If it did, this would be a valid point. At best this just shows that the my analogy is not so good. 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. This doesn't work in practice. It only does in theory. There are many, many reasons why. One is that service is often contracted for on a long term. Another is that spot competitors can compete in small areas when prices drop and you can't locally vary your prices forever because it's hard logistically. As soon as the prices go back up, the competitors come back. And the screwed customers don't. 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. Right, and this is appropriate. Large investments in infrastructure should *not* be made if there's already adequate service. Better to invest in
Re: What do we mean when we say competition? (was: Re: [Latest draft of Internet regulation bill])
On Tue, 15 Nov 2005 [EMAIL PROTECTED] wrote: This is more or less what BT has done in the UK by splitting off all the field engineering into a separate company called Openreach. Telia in Sweden did that (Skanova), now that they're privatised (partly) they're merging that unit back again, and it never was a really separate unit. Having a separate cable company with airtight divide to the service company is a must. Economy of scale says only one cable is needed to the consumer, but from there it seems there is enough different ways of doing things that it warrants a plenthora of companies to supply service, I would say at least three. Price of bw in Sweden which generally has at least 3 different ISPs colocating with telia in the larger phone stations, is at $25 per month plus tax for ADSL 8/1, personally I think that if we had a separate cable company this would actually be slightly lower, if not, we would at least have equal access to the premesis (currently something like 30% of the phonestations are claimed to be out of space by Telia, but they can still build-out new services themselves as they prioritize their own equipment). -- Mikael Abrahamssonemail: [EMAIL PROTECTED]
