These days, that concept is called "net neutrality" in the context of the Internet, and I suppose you may have heard it mentioned in the news recently once or twice. (I think it was a mistake to rename common carrier, but too late I guess.)
Personally, I think that private buildouts are a better way to go than a government-funded network infrastructure. Private industry is better at investment and product development than the government, and any enterprise that generates a profit contributes to the long-term economic sustainability of innovation. A government-run economy becomes starved for capital and innovation slows way down; that is why the Soviet Union lagged U.S. technology and why Cubans still drive 50-year-old cars.
But privately run networks need regulation to deliver the results that citizens want. Railroads needed it, telephone companies needed it, airlines needed it, and yes, ISPs need it. And if that is thwarted, then sure, let municipalities take a swing at it. My town is looking into muni fiber now, and I'm in favor of it because the local service from Comcast is so bad and so expensive and there seems to be no other way to do something about it.
Yes, and no.
The electric and telephone companies built out the cities and big population centers, but left 50%+ of the nation without service. Much like today's ISP's would like to do.
Some places only got wired because they formed local electric co-ops and what were called "rural telephone" cooperatives.
Even then, it wasn't always enough, and the feds had to add a Universal Service Fee to every phone bill to redirect that money to the big telephone companies so they would serve the entire nation, and not only the most profitable areas.
Forcing the places that do have it to subsidize the places that don't have it, however, is incredibly destructive to competition. It prevents smaller entrants, and entrenches incumbents. Those are the only entities that can afford to both operate an infrastructure business and run a money-losing government service on the side. It is, in fact, why we're in this mess to begin with. It was municipalities that granted cable franchise monopolies (before that was made illegal), to ensure universal build-out.
Except every time a government tries to do just that, the ISPs sue to stop it. Even if they have no plans to provide the service, themselves. They don't want the precedent.
Do you have any citations?
There are lots of citations:
http://fortune.com/2016/08/10/municipal-internet/
"An appeals court on Wednesday sided with the telecom industry, and with North Carolina and Tennessee, in a major decision that upheld the ability of states to pass laws that restrict municipalities from offering broadband internet services."
And in Colorado:
https://www.techdirt.com/articles/20171106/09481638554/comca...
And here's an argument for why they're doing it. It's all about never allowing taxes to be collected to be spent on something that benefits, well, anyone. Basically since government is inherently bad and can't do anything right, it will cost too much money and they won't work and only private companies have the "expertise" to run "an internet":
http://thehill.com/blogs/pundits-blog/technology/339232-the-...
Putting up these laws as a reason for the limited deployment of municipal broadband is misleading. Most stages have no legal barriers, and for most of the states that do, the barriers aren’t really significant. They don’t explain why New York, LA, San Francisco, Baltimore, Philadelphia, Boston, Seattle, etc., don’t build their own municipal systems.
Taxes are how the government funds those sorts of things, and taxes are collected from everybody. So the subsidization still happens.
Take tobacco taxes, for example. We put special taxes on tobacco because we don't want people to smoke, and we want to discourage people from smoking. Taxing tobacco effectively raises prices, which reduces demand. Various governments employ similar taxes to discourage things like soda, sugary foods, etc. This is a well-understood concept: you put extra taxes on things you want to discourage (relative to the rest of the economy).
Paying for rural telecom by putting a special tax on telecom service achieves exactly the same effect. It increases the price of service, reducing demand and reducing investment (relative to the rest of the economy, which does not bear that tax). But in theory, telecom infrastructure is something we want to encourage, not discourage.
It's even worse when you impose a general public obligation on individual service providers. For example, instead of paying for universal healthcare with general tax dollars, you could simply direct hospitals to treat poor people for free. Nobody does that--they pay for the broad public benefit with equally broad public taxes. But we do it for telecom--we tell companies that in order to be allowed to offer any service in a city, they must shoulder the burden of building out infrastructure even to neighborhoods where few people could afford to subscribe (i.e., neighborhoods that can only be served at a loss). That essentially makes it impossible to have a "minimally viable ISP." You can't compete with an incumbent by stealing away customers neighborhood-by-neighborhood. If the government simply let companies build infrastructure where it was profitable, and built subsidized infrastructure itself using general tax dollars where it was not, you could have that sort of competition.
Actually, I believe that's exactly what happens in the US with emergency departments. Although it supports your point about such a practice being distortionary, it also draws attention to the fact of the sheer complexity of all this.
That's mostly what bothers me about seemingly-simple statement or analogies about economics (or, really, economic theorizing in general), that the reality is far more complex and interconnected.
Yes. That's why we have no interstate highways to move goods around, spurring commerce.
Oh, wait...
Yes, taxes to pay for roads do indeed discourage economic activity.
This is a cost.
And the benefit that we get is the roads.
And in this case the benefits outweigh the costs.
But just because the benefits outweigh the cost doesn't mean that the cost doesn't exist.
Yes roads have benefits. They also have costs.
The benefits are greater than the costs, but we should be aware that the costs still exist.
And the benefits outweigh the cost.
In other words, if Option A is "get zero dollars", and Option B is "spend $1 to get $2", it is unfair to complain about B's "cost" (spending $1) in isolation.
So, what it does is constantly relay wires, build out to rural areas, etc. and thereby extend their network and keep it up-to-date (wires only last 30 years anyway). This I think is what we need to companies such as Comcast.
Your post actually highlights the problem. What makes 10% the proper profit margin? BT OpenReach, the U.K.'s regulated infrastructure monopoly, has a profit margin of double that. That number becomes a political football, and the political result probably isn't what most people on HN would want. People are happy with 25 mbps DSL; they're not going to vote to raise Internet rates to drive returns high enough to incentivize investment in replacing everything with fiber. That's exactly what you see in other rate-regulated utilities. People don't vote to replace lead pipes that poison kids, because they would rather have cheaper water rates; they don't vote to replace sewers that leak raw sewage into rivers when it rains, because they'd rather have cheaper sewage fees.
I'm not sure how not having cheap fibre to ge doorstep is an externality.
This is one reason why the have nots tend to vote for candidates the haves dislike, no?
This assertion of causality is sorely lacking in accuracy. Your examples alone are sufficient for highlighting this.
Being among the most ‘government-run economy’ on earth at the time, the astounding innovation achieved within the Soviet Union is the most glaring contradiction. Cuba is just an awful case study subject, due to so many drastic incongruencies, but let’s remember technological innovation has been fairly low on Cuba’s priority list. If it weren’t their access to the world’s selection of material and media resources would have likely remained open. And this access was very obviously the reason they are driving old cars. Those are just two factors I will assert are far more useful in this sort of prediction.
While of course the correlation is circumstantially critical to varying degrees, many other measurements are better predictors of rich innovation environments.
No. "Common Carrier" classification under Title II of the Communications act of 1934 comes more than 30 years after the introduction of the telephone, much longer than the telegraph. More than that, it could be argued that that, along with the Kingsbury Commitment were the contributions that led to an AT&T incumbency in the first place.
It's open for discussion whether government is better at providing essential services like healthcare, water, fire, police, electricity, and internet. I assert that it is, but I respect different views.
There are other aspects such as a company can't run without a profit and proper cash flow for nearly as long as a government entity can, because the government entity is subsidized. Also a government entity is much more susceptible to political winds (budget cuts) than a private entity may be.
Private entities are far less likely to provide that on their own. And when government starts subsidizing business or giving tax cuts for behavior, then things get wonky, too. Like when the company pockets the money, and doesn't provide the service. Like what happened with broadband:
https://www.huffingtonpost.com/bruce-kushnick/the-book-of-br...
> airlines needed it
No, they didn't. Regulation of fares, routes and market entry of new airlines kept prices artificially high until airlines were deregulated in the late 70s. Quoting from Wikipedia (https://en.wikipedia.org/wiki/Airline_Deregulation_Act#Effec...): "A 1996 Government Accountability Office report found that the average fare per passenger mile was about nine percent lower in 1994 than in 1979. Between 1976 and 1990 the paid fare had declined approximately thirty percent in inflation-adjusted terms. Passenger loads have risen, partly because airlines can now transfer larger aircraft to longer, busier routes and replace them with smaller ones on shorter, lower-traffic routes."
A jet airliner's takeoff weight is over 50% fuel.
Robert Gorden inThe Rise and Fall of American Growth:
surprisingly, the period of most rapid decline in the real price of air travel occurred before the first flight of a jet plane. As shown in figure 11–10, the price of air travel relative to other goods and services declined rapidly from 1940 to 1960, declined at a slower rate from 1960 to 1980, and has experienced no decline at all in its relative price between 1980 and 2014. The growth rate of passenger miles traveled has mirrored the rate of change of the relative price except with the opposite sign, because lower prices stimulate the demand for any good or service.
The accompanying figure shows not merely a modest rise, but a sharp spike in airline pirces in 1979.
https://i.imgur.com/uykLMUa_d.jpg
Among Gordon's economic specialisations is the aviation industry.
The Bell System was built through implicit subsidy of capital expenses, by the allowance of monopoly, favorable tax treatments of convertible bonds, and a regulatory regime that locked in profit.
You could strictly regulate to fix this but eventually you end up with a funny pseudo government agency which has to fund itself. As I understand it (not American) this is what the Bell system ended up becoming.
With 5G networks I would think there is a lot less digging up streets so municipal plans are more feasible.
As for private buildouts being better than government funded infrastructure, that is only true as long as profit is your single measure of "better".
When it comes to services that we don't want any downtime for and want everyone to have access to, then government funded infrastructure has done better than capitalist forces. Water and electricity are both services we want everyone to have access to that as uninterrupted as possible. It's still not perfect as situations like Flint or industrial water usage in California pulling out water without paying enough to be sustsinable, but a capitalist system for those services would lead to many not being able to pay enough for access and going without as well as interruptions in service as companies push their systems to the bone for efficiency or go out of business
There are a myriad of reasons for the embargo on Cuba. Let's not sugar coat this fact just to use it as an example of "American imperialism".
The reason they drive classic cars has nothing to do with the embargo:
After Fidel Castro assumed power in 1959, he imposed a new law that prevented anyone without government permission from importing foreign automobiles. That turned Cuba into a car museum in the making, sealing the island off from the automotive future.
http://time.com/money/3640018/cuba-classic-cars/
You should also keep in mind it was possible to get a new car imported, but you needed government permission to do so. This meant only the rich, celebrities and professional athletes were allowed to do so, keeping the majority of the population fending for themselves to keep their old decaying cars alive and working.
If it is government-funded, then the people own it not some bloated corporation.
But the US market mostly doesn't have plenty of sellers. You really want at least 3 to get good competition, and that's very rare:
https://arstechnica.com/information-technology/2017/06/50-mi...
My first choice is strong competition, and I live in one of the few US areas that have that. It's great! I have a gigabit both ways for less than my mobile bill. But my clear second choice is locally owned municipal broadband that can be held accountable by the people.
My very last choice is a local monopoly owned by a giant national corporation, because then we get the the worst features of communism (incompetence, poor service, abysmal customer support) and the worst features of capitalism (high prices, exploitative behavior, use of profits to buy legislation).
Broadband in particular is very infrastructure-ish. It's much more like a water utility or traffic lights than a service business like on-demand personal drivers. Many governments run infrastructure quite well.
I've lived in several major cities: Baltimore, D.C., New York, Philadelphia, Atlanta, and Chicago. Out of those, I might trust Chicago to run municipal broadband. For the others, I'd pick Comcast any day of the week.
Turning toward actual data, in general, the US's water quality is good: https://en.wikipedia.org/wiki/Drinking_water_quality_in_the_...
In the US most water systems are run by local governments, and generally it works out fine.
If you're going to keep setting up straw men, could you make them more relevant? Thanks.
Like I said, I know very little about the region. While I certainly laud WMATA for upgrading the cars, I definitely agree that service quality is declining enough that if I need to be in DC for something promptly, I'll usually leave 30 minutes early, and then wonder why I didn't just drive in the first place.
That way ISPs can continue to compete for your business, but the market would be significantly less restrictive because the ISP only needs physical equipment at the data center and upstream of it.
The biggest thing stopping ISP competition today is that local markets don't want the road dug up ten times to lay different cables. So instead lay them a single time, and re-sell access.
The ISPs would pay a fee to use the government cables from the data center to the end user (and equipment). That fee would be used to expand and maintain the network.
Other countries have done this with huge success. It wouldn't even put ISPs out of business, they can use this network just like their competitors.
Edit: A colleague just mentioned to me that New Zealand doesn't have net neutrality and doesn't need it for this very reason.
Are there any single major companies that owns the backbone? And Submarine cables?
Crown Fibre Holdings owns the new fibre network (I think Chorus owns all the copper, not sure) but Chorus manages most of it (by contract); Chorus is a crown partner company, and they are regulated and forbidden from certain activities - they were split off from Telecom, a private company.
I don't know enough about the backbone to usefully comment, except that there are at least 3 fibre networks running along the major road I live near.
For a long time there was only one submarine cable with any serious bandwidth (Southern Cross Cable), but aparently according to Wikipedia a new one to AUS was rolled out in March 2017 and another one to Hawaii this month.
If you look at EPB being forced to pull out of neighboring areas and the actions of other states to prevent muni / utility Internet projects, it's pretty clear that America doesn't want to solve the last mile problem unless it involves preserving the incumbent's market position.
That would make private ISPs go away.
We have all of that in Germany already. It doesnt work, laying fiberglass or even copper outside of major cities is just not a reasonable thing to do in a market economy. Same as its not worth while to send a postmen every day, or even every week, to a small village. This is something that needs to be financed through a shared burden, otherwise you have the situation, that large part of your country dont have DSL yet. With private companies siphoning of easily provided customers, the public is stuck with a gigantic burden to provide the absolut minimum to people.
Ideally regulation would be more reactive than proactive. Rather than defining explicitly the terms and services that ISPs must provide, we'd let them compete with each other and try different products and business models. The government would only step in when they do something that turns out to be harmful. The trick would be to actually step in where needed and not just let anything go.
4G/5G/Wifi is critical to undermining the incumbent ISPs. Urban and heavy to medium suburban rollout could be rapid.
Perhaps google should buy T-Mobile to get access to cell towers as a start... take the licenses from Nextel/Sprint for ISP-level data delivery, and keep T-Mobile for regular coverage.
Of course, I haven't tracked the status of T-Mobile / Nextel / Sprint's spectrum rights in a long time.
But google or a consortium could provide turnkey solutions to doing block / neighborhood / community / village / city wireless ISP that actually works.
And provide the legal backing when the prolific army of telecom lawyers come knocking to shake down smaller operations.
Or balloons. Weren't there supposed to be balloons?
Even if there was the money for it, you wouldn't want it. Public Internet in the U.S. does not look like "fiber for everyone." Instead, it would be 25 mbps DSL for everyone. It would be that way for the same reason we build six-lane highways to far-flung exurbs while public transit in urban areas decays, and why we continue to use lead-piped water systems in order to keep water rates extremely low. Our political situation tilts things heavily toward favoring coverage over quality.
Over the last 10 years, my private-sector broadband speeds have gotten 10 times faster, even as bandwidth usage exploded. But my public-sector subway ride has gotten slower (and more jerky when they turned off automation), even as ridership went down. It seems absolutely insane to me that anyone would want to put the people responsible for the latter in charge of the former.
A minor point, but if the federal government wanted to run an ISP (inside or outside of the USPS), they don't need anything new in the constitution to do it.
If the Interstate Commerce Clause can be used as justification to create the departments of Agriculture, Education, Energy, Health/Human Services, Housing/Urban Development, Labor, and Transportation [1] as well as the FBI and just about everything else, I can see no reason why it couldn't be used to create a national ISP.
As to whether it would be a good idea, I don't have a strong opinion.
1. Some might argue the Department of Transporation is justified under article I, section 8, paragraph 7 (not paragraph 3), though I don't think either theory has ever been tested
So you're advocating a federal subsidy so Google (4x the market cap of AT&T) and Netflix don't have to deal with the problem themselves? It is like fighting corporate welfare for big companies with even bigger corporate welfare for even bigger corporations.
I've always thought that this would be well within the rubric of the USPS. The constitutional mandate for a postal service was drafted at a time when the internet could not have been conceived of. I would argue that the intent of the constitutional mandate was to establish communications and not necessarily paper mail per se. I think if the founders were alive today they would say that ISPs were the sort of thing that was intended. I.e., have the USPS start acting as an ISP, and charging for it like it would mail services.
I'm not saying that private ISPs should go away, just that I'm sick of this government handout to companies that want to have their cake and eat it too. No net neutrality? Fine. But then allow public ISPs--no, actively fund public ISP infrastructure--and allow for unfettered lawsuits against private ISPs for content going over their pipes. Also, take away right of way to private ISPs, and let citizens and municipalities charge arbitrary amounts for anything going over their property.