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Companies, Government and Community Fiber Rollouts
hype7 writes "Wired is running an interesting article about a number of communities which are dissatisfied with the present communications infrastructure that they are being offered, and are deciding to do something about it. However, many of the corporates who had previously been offering services to these communities have resisted this, with Pennsylvania going so far as to draft law to prevent competition for the communications providers. What is most interesting is that in the communities where the roll outs have taken place, the incumbent providers have "dropped prices to be more competitive ... while not changing rates in areas where it continues to have a monopoly". What I don't understand is why can't a public utilities company provide a public utility if their rate payers want it? What's wrong with additional competition? And why should legislative bodies protect telecommunications monopolies?"
Thats like asking the RIAA to allow us to continue to have Fair Use of our CDs and such.
It just wont happen, businesses do not care about anything other then profit, and stock price. What we think does not matter.
for granting Congress the power to legislate trade between the States. That little crack has widened to an enormous breach, to the point where these days, in America, the Soviet Russia jokes troll you. As the Oracle said in the Matrix "What do all men with power want? More power." As long as State and Federal legislatures exist, they will continue to pass laws. They're never "done". So of course they'll step up and slap down communities for doing this, its legally their perogative, and this is what they DO, they make laws. Not to mention the fact that they're probably all in the pockets of the telecom companies (Valenti, anyone?)
I want to delete my account but Slashdot doesn't allow it.
Excellent! I think the only way we are going to get decent, scalable telecomms to our door is by paying for it ourselves. Can't rely on the government to roll out this infrastructure. It's the same as traffic problems, it costs a heap of money to fix, and won't usually be fixed in the 4 years a politician is in office, and they won't see any return from it, therefore it's not even worth them doing it. Unless we do it ourselves, we'll never get it.
"What's wrong with additional competition? And why should legislative bodies protect telecommunications monopolies?" Because additional competition means less profit for the existing monopolies. Because telecommunication monopolies protect legislative bodies when it comes to election funds. It may sound like paranoi, but it's also the real world.
There's nothing wrong with additional competition. It's good for the economy, and it's good for you and me. It's just bad for telecom giants who are used to lobbying for (and in many cases) getting their way.
Americans have become so used to looking first to giant corporations that we've in many ways lost the ability to come up with our own local solutions. The fact that more and more localities are bucking this trend is a good thing indeed, but at the state and federal level telecom giants hold much more power.
Whether you're a Democrat or a Republican, giving breaks to big players and shutting out small players seems anti-competitive, doesn't it?
Read the EFF's Fair Use FAQ
That's absolutely right, and yet the conclusion you draw from it is off in every possible way. Agreed, they care about our money and nothing but, but that's not necessarily reason for us to have to it ourselves, so to speak:
Have you never heard the phrase "To vote with your feet"? Moving from one, crappy, ISP to a slightly better forced one to imitate the other and, hopefully, to go one better, and so on, until their respective services are worth the money you pay for them. Best part is: you're always getting the better deal, if you keep up with the philosophy.
--- Egads, I glow in the dark!
They care about the consumer. As long as the consumer is willing to put money into their pockets they can continue to provide the lowest denominator of service.
People are willing to pay Comcast $100+/mo for Internet and Cable (and sometimes telephone). It's probably not worth that much but people say "hey, look, it's a good deal." completely unaware that there could/should be better offers available.
Monopolies and how we are affected by them go unnoticed by most of the public. Look at ClearChannel. They are fucking everywhere. Billboards, radio, football... Do people know? No. You know why? Because they don't care.
Until people start caring things won't change much. I have a feel people will never start caring (as monopolies control the medium in which we get informed).
TelCos and Cable operators don't move into these communities because they can't make a profit on running the cable there because they would charge unreasonable rates. So when a community forms a group that doesn't have to worry about profits, the TelCos and cable companies get mad because they can't compete against someone who doesn't have to make a profit, or waste that profit giving money to shareholders and executives with multi-million-dollar salaries.
I'm in the hole of the broadband donut.
Clearly The best solution is to have a public utility and a private company offering the same services for a community. This way you force them to compete and since they are different animals they will be very unlikely to make some kind of alliance to hike prices.
I've got answers:
"why can't a public utilities company provide a public utility if their rate payers want it?"
"What's wrong with additional competition? And why should legislative bodies protect telecommunications monopolies?"
Because governmental entities do not give money to political causes. Also, government businesss do not raise taxes.
Accordingly, if a legislature is faced with helping and protecting a private business versus a government business, the legislature will ALWAYS support the private business.
If someone says he and his monkey have nothing to hide, they almost certainly do.
You don't want 50 seperate startup companies all laying their own custom fiber or coax networks through your city redundantly, when you know that when it all shakes out, at best 3 will survive. Because physical infrastructure is involved, typically communities award a contract to a single player, who will provide said infrastructure - and they tend to keep that contract going because of the infrastructure (there would be financial issues switching to a new provider and possibly having to pay for them to buy the old infrastructure from the previous company).
The government's answer to these competitive problems to date in the electric and telecomm markets is to enforce a really stupid form of competition, and require incumbent telcos and power providers to share their physical network with startups (where "share" means basically resell). So now You can choose Traditional Company A, or one of A's 50 crappy resellers who have no physical infrastructure of their own.
The Right Thing, IMHO, is that municipalities (or states, or whatever) should be putting out bids and taking contracts to build physical cabling infrastructure of various types for the area, and also contracts (perhaps from the same provider, but not neccesarily) to maintain said cabling infrastructure. The cabling infrastructure is then owned by the municipality itself, and it terminates at certain wire-centers where competitive providers can hook in with their own real equipment (much like internet NAPs in some ways - a shared facility where people co-loc edge equipment).
11*43+456^2
This is the one thing I can never really understand about America, and the reason I submitted the story.
Why on earth don't you guys change the laws? Corporations and their incessant drive for money can be a positive force, if they're funneled in the right direction. It's the reason you have the anti-monopoly laws and so on. But somewhere in the past twenty years, it's all been forgotten, as if to say that corporations making money in and of itself is the goal.
Because it's not the only - it should be about maximising social benefit - not just bottom line dollars, but also communities, people, and the environment. I don't want to come across as a left-leaning hippie, but what on earth is the point of these corporations if everyone suffers at the hands of them?
This story is the perfect example. Why should a corporation dictate to a community that it can't be competed with? Where is the benefit in that? And that this "loophole" in capitalism has been identified, where is all the righteous indignation at allowing a corporation to exploit the law to maintain an obvious monopoly over these poor people who just want broadband?
I'm living in a city where we're benefitting from a public utility's decision to roll out cable to us. Most all the other cable companies had passed us by, but what if the satellite providers and ADSL providers had decided to try to legally stall the roll out? The outcry here would be enormous! We have a governmental agency designed to promote competition, and they would have come down on any similar attempts like a tonne of bricks.
I guess all this boils down to a single question - why do you guys let these corporations get away with blue murder without doing anything?
-- james
To answer the OP's question about why the government allows these monopolies to exist:
Economically, the incumbent firm would not sink the cash required to build the initial infrastructure unless it was guaranteed years and years of profit to recoup the cost. It's not the efficient solution, but it was common decades ago to do this. Regulation prohibited competition so that the incumbent could recoup its costs and profit from its venture. It's unfortunate that legislators still believe the telecommunications giants still need this sort of protection, though. The efficient solution is to allow competition, because lets face it, the incumbents have made their money back and then a lot more.
I just wanted to shed some light on why this happens in the first place. Why it's still happening is that old habits die hard, especially with the lobbying dollars that the telecom firms have!
I totally agree, but if you'd read the (very good) article you'd see that these people don't have the option of voting with their feet. There's a monopoly provider, and when the community utility company tried to compete, the monopoly lodged some kind of protest and now the whole thing is stalled.
The people can't vote with their feet, because the law is preventing them. This isn't capitalism, this is closer to a state-enforced monopoly, which is reminiscent of a country that America used to joke about for the very same reason.
-- james
Local governments shouldn't be allowed to compete for local telecom services because they have an unfair advantage in the ability to acquire capital. They just tax you! Cities that claim that they can provide services cheaper than a nationwide telecom are playing a shell game with their funding.
They most often have no clue what it really takes to provide services. They are sold on an idea, they implement it, they realize it is going to cost more than they thought, they subsidize the project, you get the service a rock bottom price, and later your taxes go up because the city is running short on cash.
What has this accomplished? You raised taxes for everyone, even those that don't what the service, you put a legitimate company out of business in you area, and as technology progresses you are left behind because no one will want to serve your area after you the way your city treated the last competitor.
You also mention that the local telecom providers lower rates once a community telecom comes in. You have to understand that the incumbent provider has spent millions and millions of dollars to provide service in the area. They are forced to lower prices to levels that are below the cost of providing service just to survive. Local telecoms are regulated; they have to provide service to anyone who wants it. They can't just pack up there bags and leave. So, its either sell service at below cost or be left with a multimillion dollar network that no on is using.
You all forget one simple fact: the law in some 48 states requires corporations (publicly-held ones, at least) to act solely in the interests of the Company and the Shareholder. Even if an unusually-enlightened CEO were to end up in charge of a major corporation, he would soon be removed from office when his sense of responsibility and duty to the community lowered the profit margin a fraction of a percent.
Consequently, until a whole bunch of laws get changed so that corporate leaders can behave responsibly and not be penalized for it, don't expect anything to change. Not soon, anyway. And keep this in mind: it is the shareholders that collectively determine the public ethics of a corporation. The laws were meant to allow shareholders to act as the final check upon the behavior of errant CEO's and Boards, but the problem is that the shareholders themselves have become just as focused on money as those who sit in the big fancy boardrooms. Anyone or anything that reduces those dividend checks, even if it is something to the public good, will likely not be tolerated.
The higher the technology, the sharper that two-edged sword.
Your point about those in power wanting more power is all well and good, but history is replete with cases of federal and state governments relinquishing power when forced to do so by the electorate (or even against the wishes of the electorate). The deregulation enacted by the Reagan Administration in the 1980s is a good example of this, while Margaret Thatcher had to ram de-socialization down the throats of skeptical Brits.
But the point is that government won't inevitably continue to grow and grow and grow. It is only inevitable if the electorate lets it be.
Read the EFF's Fair Use FAQ
Wireless should change this - because the provider does not have to make an investment in hardware (even if just wiring) to each destination location, it will be easier for players to enter and exit the market. Until then, you can't use the word capitalism with a straight face when describing the telco markets.
What's wrong with additional competition? And why should legislative bodies protect telecommunications monopolies?
Do you have any idea what the profit margin is on $50/month internet access? A non-profit can provide this service for less than half the cost.
Legislative bodies do whatever their corporate masters (read: big donors) tell them to do. The public good is never a concern. Welcome to the wonderful world of representative "democracy".
I agree with the comments in spirit - here's the argument that kind-of makes sense against allowing non-telecoms to compete in telecommunications. Telecommunications are basically socialized in the US, with subscribers in urban areas subsidizing subscribers in rural areas. People in Hawaii and Alaska don't pay anywhere near what their service costs, while people in the suburbs get soaked. If you let the communities pay only what it actually costs to serve them, then the economics change. Official telecommunications companies have regulations that can make them provide service that would otherwise be against their interest.
This is the same problem that the Postal Service has with UPS and FedEx - they have charges that are related to actual costs, and tend to get used more for people in urban areas than rural areas because of that. In doing so, they take away the customers that the Postal Service counts on to subsidize the rural routes. The result is that they lose money.
Is this trade-off worth the loss of competition that it brings, in exchange for allowing people in Montana to have phones? I'll leave that to the combined wisdom of Slashdot.
Law is whatever is boldly asserted and plausibly maintained. -- Aaron Burr
But there are still places of the country (rural, appalachia, etc) that it's not cost-effective to run basic phone lines. Will private companies do that without some kind of government protection on their lost costs? I highly doubt it. Yes, the big telcos have a monopoly (disclosure: i work for one) - but the "competition" that has come up, at least seen from our end, is not competition. It's companies that get to use the big Telco lines and fiber for much less than it costs to maintain them. If it was true competition, they should be laying their own lines, fiber, poles, and letting up their own services (911, etc) and not using ours. How is getting a cheap ride on someone else's assets competition?
My point isn't that deregulation per se solves the problem of unchecked government growth. It was merely a broad example, and it is questionable whether the S&L scandal was caused by intent or by execution.
Deregulation of trucking and oil began under Carter.
True, but it was the Reagan Administration that made deregulation a cornerstone of its economic policy. I'm not arguing that as an economic policy the Reagan approach was all good, partially good, or even good at all. I was really more interested in this as an example of elected officials relinquishing government control.
Read the EFF's Fair Use FAQ
While the idea of public broadband has always been an attractive one for slashdotters, the incursion into this arena by Grant County PUD in central Washington State stands as an example of why we don't want bureaucrats meddling in business.
In this state the PUDs are treated as municipalities under the law and are given a set of rules under which they can operate. Broadband and electrical power are different services so it took an act of the Legislature to allow them to enter the market. The legislature, under some pressure from the big telecoms who were afraid that the PUDs would "cherry pick" the larger communities and leave the rural people to fend for themselves, allowed the PUDs to be "wholesale" only. The first thing Grant County PUD did was ignore that law.
Grant County PUD had first partnered up with two local ISPs which charged $20 to $25 per month for the broadband servoces back at the inception of the project in 1999. But at the same time the Manager of that PUD was trying to attract an outside competitor, also a utility provider, to enter the market in this county at a subsidized rate of $8 per month.
The PUD did attract that utility but only by entering into secret (and illegal) agreements to subsidize the program at cost plus 10%. So the new provider would risk nothing and could make 10% on the rate-payer's money even if they gave away their services for free. Then the PUD employees threw as many of the new customers to this new competitor as possible while their managers used their position as investors to pressure prices to a point where the commercial ISPs could no longer compete profitably.
It was only after the PUD had spent several million dollars propping up this outside provider that the story became known. Meanwhile, the PUD had raised the electrical rates to cover the $100 Million cost of fibering only 1/3 of the County but lied when asked about it. The Commissioners and Managers claimed that the rate increases were due to other factors. However their own emails, obtained under the State's public disclosure act, showed this to be untrue.
Agricultural interests were incensed because they use a lot of that electrical power. A large farm might have a $500k yearly power bill for their irrigation pumps. While 4% isn't much for my house, it's a chunk of money on a half-million dollars.
It took almost a year after the discovery of the secret contracts and a State Auditor's report which also found illegal and improper actions, to rid ourselves of the management team that led us into this debacle. The largest ISPs in the area, including the first two to partner up with the PUD, went out of business and were gobbled up by another outside competitor; costing jobs and an economic drain on the communities' resources. The Commissioners who were supposed to keep a rein on the PUD managers are now up for re-election and facing some tough questions.
The problem with bureaucrats going into business is that, essentially, they don't understand profit and loss. It's all other people's money and if they make a mistake they just raise the rates to cover it. We could have fibered this County up for the money they spent, had they spent that money wisely. Instead they created a NOC they thought they could make profitable (not at $3 million a year to operate they couldn't), they installed fiber to the areas where their managers lived regardless of population density (it turns out the telecoms fears of "cherry picking" were well-founded, but the managers weren't smart enough to do it that way), and they drove jobs and money out of the area.
Had they simply created the infrastructure for the product instead of getting involved in creating subsidies for favored businesses we would have been ok. But that's the problem. Bureaucrats don't make good business people.
So if you don't want to see jobs go away, money disappear and your power rates rise, treat the entrance of government into business with caution. These things are run by politicians, not business people. And it's not their money.
No one ever had to evacuate a city because the solar panels broke!
Hell. No. Infrastructure is what allows business to thrive, and the Internet is part of that infrastructure. If a community is dying, and the only way to save it is for the local government to create a fiber-to-the-home network, they should be able to. Why should a community sit back and wait for Verizon or Comcast or Service Electric or AT&T to decide they're worth saving?
And if you RTFB, you'll see that infrastructure is *part* of the things they're allowed to do. They specifically omit internet access from things the government is allowed to provide. Should the Information Superhighway be Private?
I'm in the hole of the broadband donut.
What I don't understand is why can't a public utilities company provide a public utility if their rate payers want it?
Why? Its my opinion that McCarthyism has so cripled American Public Discourse that the very THOUGHT of community owned co-operative behaviour is tanamount to treason.
McCarthyism did such a fine job of identifying those nasty 'co-operators' (communists) as UnAmerican that today, even the rabble will reflexively defend the 'rights' of their plutocracy to rule.
American People will not consider -- wont even discuss it without flaming liberal/socalist/communist-label throwing -- that maybe, just MAYBE a non-profit, community owned utility can deliver a service better, more cheaply and more uniformly than a for-profit.
Even such public goods utilities, like HEALTH CARE is a for profit venture in the USA. This is UNHEARD of outside the USA. Universal Public Healthcare is the norm in almost all the rest of the worlds' wealthy nations (canada, europe, aus., nz, ?,?,?). Hell, 45million USofAmericans dont have health insurance. In any nation, let alone the self-declared 'most wealthy' this would be a national scandal and shame. In the USA, the discussion isnt even entertained -- why would the for-proift media care to question the for-profit health-industry? They sit on one-another's boards. They are co-invested, and cross-linked. Maybe the Publicly-funded, independant national broadcaster would like to discuss the matter -- oh, dont have one of those either (see cbc.ca; bbc.co.uk; abc.net.au).
If the community considers telecommunications is a universal public good, why dont they mandate the creation of a utility? Instead, in USofAmerica, the plutocracy will use McCarthy's specter to assure that all that effort runs through their private, for-profit structures. Private banks. Private accounting. Private Advertising. Private Broadcasting. These for-profit sectors collude to assure their is no chance of cooperation amoungst citizens.
The person is a Consumer First, never an empowered citizen. That is why, the public need is not being met. If you are a rich consumer, you might be able to convince the for-profits there is enough meat in the market to give you what they want, but forget organizing your community to provide for the community's need... what are you? Some kind of communist?
Want to make political change? Forget it, you cant even get on the ballot... sorry. Ask Mr. Nader.
"...why do you guys let these corporations get away with blue murder without doing anything?"
We don't. History is replete with corporations destroyed by their overreaching, when their customers got fed up. But it takes time to tear down a giant.
And destruction is not the only option. Sometimes the monopolist just has his market redefined for him. ATT doesn't own the telecom business anymore, but they're still a power to be reckoned with -- just not the power that, many years ago, they thought they'd be today. Ratepayers wanted a more flexible, diverse basket of options and they got it.
The thing is cyclical. You get what you want, you stop shouting. The market consolidates, ossifies, and one day you realize you can't get what you want anymore, so you do something about it again.
I mean, why don't they just put all the bad guys in jail, and then there'd never be crime again? If you cleaned your refrigerator, how come it's dirty now? Grunge builds up, on appliances and in society, until it goes over the limit and the cleanup commences. I think someone is about to reach for the scrub-brush and begin cleaning up local telecom policy.
The government shouldn't be rolling out our new communications lines unless they're going to be free (as in roads)
a better example would be your water service..which isn't free. But it is regulated, fixed in cost, and not trying to make a profit which is the biggest problem with regulating 'FOR PROFIT' companies to do utility work (Cable/Phone).
Some things are by their definition monopolies and can't be done 'right' by a for profit company; their motives (profit) are in opposition to their stated requirements (cheap reliable service). Now Broadband internet access doesn't fit perfectly into this category but it's close enough most of us could accept it.
People in cars cause accidents....accidents in cars cause people
----
This concludes our transmission to Oceania.
Wasn't that part of the plan? weren't the regulated monopolies granted because they were supposed to supply their service to not only densely populated area that are profitable, but parsely populated areas that aren't profitable.
When a cable company rolls out broadband service like they did in my area only two years ago, they run their lines along poles owned by the utilities or underground on public right-of-ways, in return for that boon, we expect a certain level of service, and we expect that either rates will go down or service will go up as the company pays off it's infrastucture investment. If they don't expand into less profitable areas, decrease rates or add services as time go by, they become vulnerable to competion and I have little pity for them when a muncipality plays by the same rules that let them get fat and lazy.
Apocalypse Cancelled, Sorry, No Ticket Refunds
Nonsense! Last time I checked (~10 years ago) Target gave 5% of their profit back to the communities where their stores are. Costco pays its workers a living wage (min is $10/hr I hear) when they could probably get by paying $5.15 to the lowest rungs.
Corporations, like people, get to decide what posture they want to take in the world. WalMart may decide to screw everybody in sight for that last nickle. But I get to decide what kind of companies I deal with. I shop at Target and Costco, but not WalMart.
Make your own choices. They shape the world.
Darn, why did I have to blow mod points on garbage last Friday when I could have used them here?
Parent poster has nailed this concept perfectly. It is impossible to have a pure, free market on services delivered to our homes via cable. Why? Because we limit the number of cables that can be pulled to the home. Even if a second company can pull cable, would you want your street torn up for the 3rd? The 4th? The 10th? No, if we let every company that wants to provide a home cable service the opportunity to pull their own wires, then the public would scream for regulation.
Instead, the cables going into the home have to be limited. This can be done by a private company, who might then open the lines to others. (Aka the electric grid in Texas after deregulation.) Or, it can be done by the community, if it feels that this is a necessary infrastructure for public funds.
The only problems occur when the community tries to provide services over the lines. Then, competition can be stifled. But if the lines are pulled and maintained by the city, and any company can offer services over those lines (paying the city for use of the lines, which covers the cost of maintenance and nothing more) then the best, realistic free market services are available.
It doesn't hurt to be nice.