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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?"
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.
"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?
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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).
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
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.
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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!