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.
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.