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CA Utility Commission to Regulate DSL
mgrimes writes "According to this story on Internet.com, the California Public Utilities Commission has ruled that it has the authority to regulate DSL-based Internet services in addition to the FCC. Could be a good step in creating more competition in the broadband market... but then again given the PUC's track record, maybe we're all in for rolling DSL blackouts."
Personally I think this is great news. I live in Portland, Oregon, and keep watching my DSL provider (a local serve-to-certain-apartment-complex provider with mad bandwidth) take it up the butt by Verizon whenever they need line upgrades, since Verizon owns the actual copper. I'm all for competition, but Verizon is beating the life out of my DSL provider, and offers crap compared to these guys. Hopefully CA will do a good job with this, and it will catch on.
Maybe it's the fact that I am not atleast directly affected by this "regulation" but I dont see anything good in regulation (atleast on pricing) in matters like this.
;)
I believe, silly me, that competing market and companies ultimately provide best for the consumers.
Ofcourse there are cases in which this might be good as for people who live in a rural area, which would not be good business for a company. Or in case that some company reaches monopoly. But otherwise, why is it so good? Or does this only affect the fact that Large Bad Telecom Companies now have to lease their cables for Smaller Good Companies.
Flamebait?
...I'm not for the government getting too involved in this whole thing, I just want to see SOME type of competition going on.....At least until they start letting ANY company hang fiber on telephone poles, there needs to be sharing of the public "right of way" that is the utility distribution system.
The dark side of the past "franchise" approach that the cities have been taking so far can be seen with CATV! Absolutely NO competition in our area....only thing that's even come close to breaking the "franchise/monopoly" is Sat's like Dish Network, mind you I said "close to breaking".....
The dark side of regulation is obvious....less quality at a higher price......
What really burns me though is established giants suppressing anything/everything that even remotely resembles competition........
On this one, I'll take the Public utility commission over the giants....hands down....
If California smells money, they either want to regulate it or tax it (sometimes both!). It was less than a year ago that California "decided" that it could tax the satellites in GSO over CA. Until the Supreme Court overturned "Source Taxes", CA used to tax the retirement income of retirees WHO NO LONGER LIVED IN CA! This was because CA was the "Source" of their retirement pension. Nevermind, that they no longer live there and cannot vote in state elections (NO TAXATION WITHOUT REPRESENTATION!).
If CA sticks there paws in your cookie jar, LOOK OUT!
I would say that most of the worries of to regulate or not to regulate DSL service and CABLE(data) service will go away in the next few years.. Why you ask?
Everything is becoming a service.. IP networking, Phone Connectivity. Video(cable tv). What does this mean?
Simply you are going to see companies soon competing for the right to bring bandwith to your door. While the services you choose can be offered by anyone.
Why not have your Telephone Service offered by NuPhone(fictious) with any US based telephone number you like.
Your Cable will come from your choice of any number of Television(formerly cable companies) providers(if not stations themselves).
Why is this? Simple... Soon not only will we have DSL everywhere and CABLE lines.. but also we'll 3g and someday 4g wireless networks which can provide all the bandwith for every service we need.
Now granted local phone companies will definitely fight for thier right to be compensated for local calls, but you have to understand there is nothing stopping a new VoIP company from offering service now or in a few years to customers and providing them with a phone # that can be reached by anyone and it never need touch the their local telco CO. Everything is turning into service to be run over the bandwith providers.. thats the future.. theres no changing it..
Lastly picture this.. you have a 3G phone provided by say... cingular(just an example).. they give you a number(202-456-5000). That number would be your Personal Contact Identafier.. Someone dials that number and they can reach you where ever you are based on what you set.. Is your phone on? calls route to your cellular.. is it off? are you at home? calls route via landline bandwith pipes to your house and runs through your old POTS lines to your house phones.. or are ya not around? calls get routed to a Voice Mail system that u can of course access from your house phones, your mobile phones or your PC via the web.
think about it.. its coming.. sooner than you think...
My friend extremely versed in the Telco-land, tells me a little while back, SWBell had the neat idea of extending the fiber running to the DSLAM for DSL service into the homes directly terminated w/an OC3 connection. Then they could provide cable like visual services--movies, ads, etc... at much higher speeds/resolutions.
:^(
He said recently, they stopped this idea, because as soon as they release it as a telco-service, the FCC says everyone else gets to offer the same thing, and SWBell has to give them (competitors) discounted rates so they can profit.
I'm all for the competition, and a free-market society, but the competition doesn't "own" the lines, so they can't do R&D -- nor do they have half the $$$ that the "Big Dogs" do. What really ends up happening, is the consumers get the shaft because the "Big Dogs" are too greedy to share their precious R&D toys.
Don't really see a solution to this one anytime soon.
Look at the economic realities of the situation. The Feds took many billions of dollars for 3rd Gen licenses just a few years ago. Until five years ago, virtually everything these Telcos did from the rates they charged to the scheduling of service calls to the dollar amount of profit was controlled by the government. Some have existed for close to 100 years in this quasi-state owned condition. Now look at the bond ratings of these companies today with all that debt hanging over them. A very large chunk of that debt is the money given to the Feds. Remember, these are Blue Chip stocks owned by millions of grandparents and teachers and firemen. It is damned easy to make a political case for extortion of these companies by the US Government. Not a legal case, a Political case which is far far worse for politicians. Remember Condit who to this day has not been accused of anything legally.
There is no ethical way out of extortion for either party once the money has been handed over. Now add into the mix the Enron scandal. The only way these Telcoms survice now is by massive creative accounting. The only way they will survive the next few years without going bankrupt is if they can somehow generate a massive profit in a hurry. Avoiding bankruptcy is also the only way the politicians can avoid a massive political scandal far worse than Enron. They must give these companies some way to make a lot of money until the debt is paid off.
Long distance service is rapidly becoming of near zero value. The Net has built and uses a LOT of bandwidth. Digital Subscriber Line is dedicated to the proposition that it is more profitable to provide a flat rate, unmetered, always on connection for communications than to attempt to measure the usage of the communications. This is rapidly become the clear economic basis of the communications industry in the US for at least the near future.
The FCC has a clear and urgent political need to make damn sure the Telco's survive. The Telco's also have a desperate need to survive, they are surviving by accounting gimicks right now. The economic and political powers will conspire to give the telco's those garanteed profits. One of the best hopes for doing that quietly is to give them a monopoly on the only profitable service: DSL.
I Belive this to be a fair reading of the political tea leaves. The kicker is the California PUC. When deregulation came in, they lost the political power to regulate the profits of Telcos. Meanwhile, they also had a disasterous deregulation of the power industry foisted on them by the CA Legislature. The PUC is gambling that everybody is right about DSL. If they are wrong, the PUC is history. Of course, if they don't regain some power pretty quick, they are also history. By reclaiming political power through economic control of the utilities, they can set things up in the largest market just like they were before deregulation. Now note well, if one state can claim that power, EVERY state can do so. This fits well with the Federal need to give a monopoly while not giving back the money or repealing deregulation. It also fits well with the corporate history and attitude of the Telco's.
My cold bottom line analysis:
The CA PUC will be able to claim the political power to regulate all aspects of the communications industry in the state. Their policies will favor the creation of one or two companies to hold monopolies. This will have the effect of returning the entire political and economic situation in telcoms back to the previous quasi-state owned status quo. The only significant change is that rates will be set by the bandwidth and not by minute. Every political and economic entity involved gets what it wants. Except of course, the consumer. But the consumer also gets a nice brite shiny toy to play with, high speed connections at about $100/month. Just about what they were paying for phone service each month on the previous pay per minute plan.
If you realized what these fools have done to the electricity industry in this state then the last thing you'd want is for them to start regulating DSL. Expect politically modivated contributions from AT&T, Verizon et.al., industry insiders negotiating the contracts for us, and hair brained deregulation schemes which cripple the industry to the point where it allows us to be gouged for billions of dollars.
Let's face facts: someone has to build a new fiber-to-the-home network. That's going to mean starting a real company raising serious capital (the old fashioned dividend-paying stock model is appropriate here), but these half-assed measures (like DSL) just don't work well.
Put one of these in the homes. They cost well under $200 in quantity. Swap in a new box (say, Gigabit Ethernet) when it's cost-effective, but for now, 100Mbps will do. You're basically building one big honking switched Ethernet.
Lots of grunt work, but it's very doable. Call it the Internet Plumbing Company. And if someone implements HDTV over IP Multicast later on and whacks the cable TV monopolies, that's good too.
CA's power troubles mostly were in over-regulation. Last fall I had microecon in school and we learned what happened: price caps. CA didnt want electrical companies charging too much for electricity. Ok, so the electric companies only provided enough power such that they would break even, but that failed to fulfill the power demand. Result: brownouts.
Turns out similar problems occured in living establishments (apts, homes, etc). CA put a cap on how much a place to live costs (was based on something like cost per sq ft.). This wound up discouraging builders from building new apartments and housing developments, or made them go with cheap ass establshments just so they could break even or barely profit. Result: more people living out of vans; which is illegal in CA.
This was all in a WSJ article titled "CA: The Free Lunch State" If i had a link i'd show it.
Basically, the lesson in the econ class was that price caps limit supply.
Some people say that deregulating the power troubles wouldn't work. But where I live, PA, we have electric competition, keeping supply/demand in balance. One local electric exec wrote a WSJ article (also from the econ class) about how deregulation helped the mid-Atlantic states prevent most brownouts and keep end consumer costs down.
The One Rule Of Chess You'll Ever Need: Don't play someone who carries a kit in their bookbag.
How do you create a competative marketplace with a service that already exists as monopoly (partly because of the nature of the resources involved)?
I'll give it a shot. It's an interesting question and not one I've thought about before, but one answer springs to mind, so I'll post it here where people can poke holes in it.
It's pretty clear that the "last mile" of telephone (and, to some degree, Internet) is a natural monopoly as long as the technology is based on a single kind of wire being run to each home (we now have three kinds of wires run to the average home, and wireless raises interesting possibilities as well, but I'll ignore that).
If we have to have a local monopoly, it seems to me that from a consumer standpoint, we'd rather have many, many tiny monopolies rather than a few large ones. Theoretically, large organizations can be more efficient because they can amortize costs over a larger installed base, but in practice large organizations tend to be worse at ultimately making the customer happy, regardless of the apparent benefits of scale. Many tiny local monopolies also makes it more reasonable for consumers to "vote with their feet", if necessary.
So, I would propose that telephone and cable infrastructure services be handled by the same entitities that currently handle other natural local monopolies, namely water and sewer. Now, most people are frequently pissed off at their cities; they don't, on average, tend to be run by the most capable of people, particularly small cities. However, the great thing about being pissed off at your city is that you, personally, can actually do something about it. It's a sufficiently small governmental unit, that your letters and phone calls carry some weight, and if you really need to you can always run for city council yourself.
In practice, few cities would actually want to employ the technical staff to maintain and operate phone lines and switches. In practice, they'd contract this out, the same way they do with garbage services (Tony Soprano is now paying close attention). The current phone companies would be very well positioned, initially, to provide those services, but I would expect a multitude of small companies to spring up overnight. The barriers to entry would be very low and competition would be stiff.
One obvious difficulty would be how to make the transition. I suppose the local communities would probably have to purchase the existing infrastructure from the telco that owns it, but the price shouldn't be that high, because the telco has already recovered their (high) costs of putting it in. The main reason it would have to be purchased is that many (most?) telcos are public companies, and the shareholders need to be compensated.
One of the downsides is the obvious risk of nepotism and cronyism in the process of contracting with operations companies, but keeping all of the information public should mitigate that risk. I mean, I really don't care if the mayor's cousin owns the telephone service company, as long as I get good service at rates similar to what everyone in other cities gets, right? Another is the possibility that service will suck. Cities are always interested in attracting and retaining people, however, and if they do a bad job, people will leave. It's not reasonable for me to move from Utah to Pennsylvania to get a better phone provider (not saying I would, either), but it would be reasonable for me to move to another town twenty miles away.
Finally, let me point out that this idea is not purely theoretical, or even mine. There's a community in Utah (Eagle Mountain) that has done this. The city provides phone, power, water, sewer, garbage, cable TV and even Internet service. All of the infrastructure is owned by the city and some of the operations are done in-house and some are contracted out. The city actually provides four different options for high-speed Internet (DSL, fixed wireless [like Sprint Broadband], 802.11b wireless [w/high gain antennas scattered everywhere] and cable), all available everywhere in the city limits.
All is not peaches and cream in Eagle Mountain, however. There were some rough periods at first, during which outages in power, phone, TV and Internet services were common, and many of the citizens got rather upset. This annoyance on the part of the citizens led to large, angry crowds at city council meetings, but eventually things got fixed. My boss lives there and he seriously considered moving for a while, but now he loves the place. Among other things, he really likes the fact that his wireless-enabled laptop has connectivity anywhere in his house, walking down the street, at church, at the park, etc.
Also interesting to note is that my boss is the main reason there are two wireless Internet options. The city had already put in the fixed wireless, but he went to the meetings and talked up 802.11b tech. That sparked interest and a local company was found that wanted to contract to operate it. The costs of installing the infrastructure were analyzed and reasonable rates set (it's around $40/month IIRC) and the system was installed. The ideas and suggestions of first one, and then a small group, of citizens ultimately lead to a great service for everyone.
I don't know if the same model would work everywhere. Eagle Mountain has the advantage that it is both a new, planned community and a fairly affluent one. But the idea is worth some serious thought.
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