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Susan Crawford on Why U.S. Internet Access is Slow, Costly, and Unfair
March 7, 2013 6:50 AM   Subscribe

In the Internet era, a very few companies control our information destiny. In this talk, and in her new book "Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age," Susan Crawford—a professor at the Benjamin N. Cardozo School of Law and a former special assistant to President Obama for science, technology and innovation policy—demonstrates how deregulatory changes in policy have created a communications crisis in America. The consequences: Tens of millions of Americans are being left behind, people pay too much for too little Internet access, and speeds are slow. But everyday people can change this story - and what happens in the year ahead could change the game for good.
A ~40 minute lecture with questions afterward.

For a shorter simpler and more straightforward analysis see her interview with Bill Moyers

Susan Crawford, former special assistant to President Obama for science, technology and innovation, and author of Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age, joins Bill to discuss how our government has allowed a few powerful media conglomerates to put profit ahead of the public interest — rigging the rules, raising prices, and stifling competition. As a result, Crawford says, all of us are at the mercy of the biggest business monopoly since Standard Oil in the first Gilded Age a hundred years ago.
The rich are getting gouged, the poor are very often left out, and this means that we’re creating, yet again, two Americas, and deepening inequality through this communications inequality,” Crawford tells Bill. (25:38)
posted by Blasdelb (47 comments total) 26 users marked this as a favorite

 
Feb. 19, 2013 on the NY Times Bits blog: One on One with Susan P. Crawford

Susan Crawford's articles on Wired (5 articles posted in 2012, all on broadband topics)
posted by filthy light thief at 6:58 AM on March 7, 2013 [1 favorite]


So, same problem as with healthcare, banking, and a lot of other things. Powerful interests hire lobbyists, yadda yadda yadda, we all get screwed.
posted by delmoi at 7:12 AM on March 7, 2013 [9 favorites]


If you want to know where this is heading, look no further than Canada, which has it even worse.
posted by one more dead town's last parade at 7:16 AM on March 7, 2013 [6 favorites]


Could you imagine the shitstorm that would be kicked up in US politics if they went the Australian route and the US Government created its own wholesale FTTP/fixed wireless/satellite network?
posted by Talez at 7:20 AM on March 7, 2013 [3 favorites]


In many states, the telecom companies have actually gotten laws passed that make it illegal for cities to run their own networks locally. How insane is that? It's actually illegal for people to band together and create their own network through a city government.
posted by delmoi at 7:36 AM on March 7, 2013 [4 favorites]


The reason why there is no competition is because competition in providing pipes is mutually assured destruction. The only way to increase broadband penetration is for the government to either build the infrastructure itself or move the industry to rate of return regulation like energy utilities. Put the pipe in the ground and get a guaranteed rate of return. That'll work great in urban/suburban areas. For Rural America you'll need the equivalent of the Rural Electrification programs otherwise the cost of service provision will be too high.

But its not just because the FCC hasn't been aggressive enough in forcing competition (although it has not been) - its that competition cannot work in the provision of broadband pipes.

All of the countries that have super high bandwidth penetration rates had some form of explicit or implicit government subsidy. Korean also severed the ownership of at least some of the fiber from bandwidth provision.
posted by JPD at 7:36 AM on March 7, 2013 [2 favorites]


In many states, the telecom companies have actually gotten laws passed that make it illegal for cities to run their own networks locally.

It only costs $1000 a head to buy a law in South Carolina? Ok. I'm in for five guys - what do we want to get passed?
posted by JPD at 7:38 AM on March 7, 2013 [3 favorites]


The reason why there is no competition is because competition in providing pipes is mutually assured destruction.
Says the guy who said it would be a "debacle" for Google to install fiber in Kansas City and give people gigabit internet access $70 a month. (And apparently 5mbps for nothing at all except a one-time $300 installation fee)

You seem very concerned about phone companies not making enough money. The whole point of competition is that it's supposed to drive down prices to the point that some companies are driven out of business. that's how capitalism is supposed to work. Competitive companies are supposed to be mutually destroying eachother. Then other investors buy up their stuff cheap in bankruptcy liquidation sales. The circle of capitalism!
posted by delmoi at 7:56 AM on March 7, 2013 [6 favorites]


Gee, it's almost as if data is some kind of bulk commodity delivered through a network of pipes. It also seems that the market is failing to provision this in sufficient quantity to maximize public utility. If only we had any parallels to this situation from which we could apply solutions.

Oh well, I've pondered this long enough. Time to empty my bedpan out my apartment window, get some water from the local well and go buy some rotten produce brought into the city on muddy rutted cartpaths.
posted by [expletive deleted] at 8:01 AM on March 7, 2013 [32 favorites]


Yes I still think that will be a debacle unless no one else enters and google never acts like a monopolist. You will never know what the returns look like for Google. You will only know if they decide to keep rolling it out elsewhere.

No I have no problem with firms going bankrupt and distressed investors picking up that ashes. I do however think its ridiculous for people to expect public companies to intentionally make investments they will not earn a return on. It took the broadband providers about ten years to figure out the folly of competitive fixed wireline in any form.

I would benefit personally from most of the wireline telecoms in the US going bankrupt BTW.
posted by JPD at 8:01 AM on March 7, 2013


The reason why there is no competition is because competition in providing pipes is mutually assured destruction.

I'm really not clear what you mean by this. Is the argument that having, e.g., two parallel cable networks in a city (ignoring city/state laws for the moment) would lead to neither being able to make an adequate return on the investment? Because that's not at all obvious, any more than having two grocery stores in town doesn't put them both out of business.
posted by kiltedtaco at 8:19 AM on March 7, 2013


While having any monopoly is not a good thing, having Google monopolizing the pipes would be better than the phone and cable companies. The latter treat bits the way the utility company treats water, you pay for the amount of stuff running through the pipes.

Google, on the other hand, would be happy to open the floodgates on the pipes, because they make money on content and advertising. Granted, there's no guarantee they would start acting like the phone companies, but at least at present they have less miserly view about how to charge for network bandwidth.
posted by CheeseDigestsAll at 8:21 AM on March 7, 2013 [1 favorite]


The reason why there is no competition is because competition in providing pipes is mutually assured destruction. The only way to increase broadband penetration is for the government to either build the infrastructure itself or move the industry to rate of return regulation like energy utilities. Put the pipe in the ground and get a guaranteed rate of return. That'll work great in urban/suburban areas. For Rural America you'll need the equivalent of the Rural Electrification programs otherwise the cost of service provision will be too high.

You can give them higher incentives for providing service improvements to the worst served customers. That's basically the way that gas and electricity distribution is regulated in the UK, the allowed return is a base (based on the total regulatory capital) plus incentives for performance in defined output categories plus ring fenced ex-ante funding for socially or politically important projects like connecting rural customers.

You seem very concerned about phone companies not making enough money. The whole point of competition is that it's supposed to drive down prices to the point that some companies are driven out of business. that's how capitalism is supposed to work. Competitive companies are supposed to be mutually destroying each other. Then other investors buy up their stuff cheap in bankruptcy liquidation sales. The circle of capitalism!

That doesn't tend to work very well for natural monopolies like utilities. In many cases they have statutory power to dig up your garden or your street to maintain or install their infrastructure. Do you really want five different companies plowing cable trenches down your road? Not to mention that when most companies go bankrupt, their resources can be readily deployed somewhere else, that's not really the case if you massively overbuild fire optic infrastructure in one city.
posted by atrazine at 8:24 AM on March 7, 2013


I'm really not clear what you mean by this. Is the argument that having, e.g., two parallel cable networks in a city (ignoring city/state laws for the moment) would lead to neither being able to make an adequate return on the investment? Because that's not at all obvious, any more than having two grocery stores in town doesn't put them both out of business.

Yes that's precisely the argument, and there is a lot of empirical evidence that businesses with high fixed costs and virtually zero marginal costs cannot compete with one another and recover the original investment. A competitive business competes pricing down to marginal cost.

Its not like grocery stores at all. It's why we have regulated monopolies (or state owned monopolies) for the provision of water, gas, and electricity.
posted by JPD at 8:26 AM on March 7, 2013 [1 favorite]


An interesting rebuttal. However, "[the companies employing the two authors of the article] have received support from broadband providers as well as content providers." Still, it's pretty interesting.
posted by Greg_Ace at 8:29 AM on March 7, 2013


You will never know what the returns look like for Google.
What google wants is for people to switch from watching TV, and ads on cable chanels to watching videos, and ads, on youtube. If google were able to charge $10 CPM for ads, and run as many as you see on network TV (12 minutes per hour) they'd make about 24 cents per user, per hour of video content.

If people ended up watching the 4 hours per day they currently spend watching cable on YouTube that would be about $28/month. Per user, so a 3 person household Google would be making more in ads then they would on service fees.

Obviously they'd be passing a lot on to content creators, I guess. But on the other hand they also get to target the ads a lot better.

Either way, Google intrinsically makes money off every person who uses the internet (without adblock) The more time they spend online, the more they make. that's not true of cable providers, which, since they can't actually create compelling content, have been lobbying to destroy net neutrality so they can just slow down their competition.
I do however think its ridiculous for people to expect public companies to intentionally make investments they will not earn a return on.
So have governments, even local governments, do it as a public service. But that doesn't happen because of extensive lobbying from telecom companies.
Do you really want five different companies plowing cable trenches down your road?
In exchange for cheap, high-speed internet? Hell yeah I do! You don't?
posted by delmoi at 8:30 AM on March 7, 2013 [1 favorite]


a lot of empirical evidence

Interesting. If you had a reference offhand for that or somewhere to go look, I'd enjoy reading it.

I can think of some other high fixed cost businesses that seem match this to greater (airlines) or lesser (mining, railroads sorta) degrees.
posted by kiltedtaco at 8:37 AM on March 7, 2013


You can give them higher incentives for providing service improvements to the worst served customers. That's basically the way that gas and electricity distribution is regulated in the UK, the allowed return is a base (based on the total regulatory capital) plus incentives for performance in defined output categories plus ring fenced ex-ante funding for socially or politically important projects like connecting rural customers.

This already happened. The telecos and cable companies took the cash upfront and then decided not to bother with what they promised to do. They then gave a tiny portion of that incentive back to the politicians to look the other way.

There are always even bigger incentives at play.
posted by srboisvert at 8:37 AM on March 7, 2013 [3 favorites]


I'm all for governments providing the service if they aren't willing to force a regulatory regime on private capital that can provide the service more cheaply.

Google's "problem" with getting into the broadband business is figuring out how much money they can make selling anciliary businesses to subsidize the pipes. Laying the pipes is massively capital intense. If you say "This should be a natural monopoly" you are implicitly saying returns should be capped at about cost of capital for the pipes. Compare that with their current return on tangible capital in the high teens.

The question is then how much incremental revenue they generate. Well either you lock people into your network of content (which would be anticompetitive) or you open it up to other streaming services.

At the end of the day only content providers "should" be able to earn a high return on capital. Cable has always been a profoundly mediocre business. I'm not sure providing video over fiber should intrinsically be any better.

If the best place Google can put its money is in rolling out broadband then it says they are short of good investment opportunities.
posted by JPD at 8:42 AM on March 7, 2013


I'm a huge fan of rural WiMAX, even if unlicensed-but-legal 6 GHz band microwave backhauls make my life as a wind farm designer "interesting".

But yeah, USA, quit whining. I pay over $100/month for broadband in Toronto. If I were not doing something a bit clever with DNS, I would be severely restricted in what I could access due to the local cable company's monopoly licensing deal with several media companies.
posted by scruss at 8:44 AM on March 7, 2013


Interesting. If you had a reference offhand for that or somewhere to go look, I'd enjoy reading it.

I can think of some other high fixed cost businesses that seem match this to greater (airlines) or lesser (mining, railroads sorta) degrees.


An economic history of railroads, airlines, or electric utilities will talk about this. Basically nearly every single provider of those services has gone bankrupt at some point in their history. Don't forget railroads and airlines were basically regulated in the US from the Great Depression until the 70's (railroads might have been even later). Mining industry as well is historically a bad business. Same with petroleum refining. I think in aggregate that industry lost money from 1982 to 2000 or something like that.

Another great example is large commercial airplanes. From a distance you would think it should be a very good business - oligopoly with massive barriers to entry, high cost, mission critical product - and yet Returns to BCAG and Airbus through a cycle are barely CoC - why? because they love to compete on price because the marginal cost of the 2000th A320 or 737 is a fraction of the average cost of the program that the list price was based off of. Other big entrants have failed.

And don't forget the marginal cost of broadband is almost zero.
posted by JPD at 8:49 AM on March 7, 2013


Yeah, I'm not sure I'd look to air travel as an example of a healthy industry...
posted by Steely-eyed Missile Man at 8:57 AM on March 7, 2013


An interesting rebuttal. However, "[the companies employing the two authors of the article] have received support from broadband providers as well as content providers." Still, it's pretty interesting.
That "rebuttal" is actually a pretty good example of unalloyed corporate lobbyist speak:
Crawford frequently invokes FDR’s rural electrification efforts. Like electricity, she considers high-speed Internet a fundamental need—specifically, symmetrical 100+ mbps cable or fiber. But unlike electricity, consumer preferences for broadband vary remarkably, and consumers want much more from their networks than the equivalent of simply turning on a light.
Now, it's certainly true that some people don't give a crap about about broadband internet. But instead of just saying that directly the obscure their meaning and try to make it sound like a positive, "empowering" thing for some reason.
Like so many of her generation, Crawford struggles to understand computers that don’t look like desktops—and assumes that wireless devices necessarily fit in your hand.
Total nonsense. They're not actually saying anything concrete. Instead, they're taking advantage of the presumed ignorance (not knowing how wifi works compared to 3g/4g and the fact that cellular is totally unrelated to landline, while wifi uses it) to work in an insult.
But the Internet isn’t so simple. There’s a heated debate ongoing at the FCC over regulating the “IP Transition” — replacement of outdated telephone networks with all-IP infrastructure. Smartly managing such networks facilitates services and quality improvements unavailable today

Here, again, they're taking trying to play off a readers ignorance. The premise, which they don't bother to explain is that for phone calls you need traffic prioritization so that voice packets don't get delayed which would mess up the audio in a voice call. But with gigabit internet, the bandwidth of a telephone call would be a drop in the ocean. And already people use voice, and even video over IP without a problem. In fact, the voice quality on Skype is actually vastly superior to a typical cellphone.
Electric utilities deliver plain vanilla service. They’ve struggled to innovate, failing to deliver broadband over power lines and taking years to roll out smart grid technologies. The same is true for railroads. The nationwide fiber network Crawford calls for sounds like long-standing dreams of high-speed rail. But the reality would probably look a lot more like Amtrak: slow, grossly over-budget, heavily subsidized, and unable to compete with more nimble competitors.
Notice again: relying on the readers ignorance: of the fact that internet access is completely different then rail, and also the presumed ignorance of the fact that high-speed rail works perfectly fine in lots of countries, where the government actually seriously tried to do it. In fact, it's a little bit of an insult to injury thing: The fact that pro-corporate/anti-public-sector forces were able to prevent high-speed rail from working here in the US is now used as an example of why pro-corporate/anti-public-sector needs to be listened too about internet access.
And how much easier would government surveillance or censorship be if government actually ran the networks?
LOLOLOLOLOLOL
Crawford’s model is Europe, but as Europeans acknowledge, “beyond 100 Mbps supply will be very difficult and expensive. Western Europe may be forced into a second fibre build out earlier than expected, or will find themselves within the slow lane in 3-5 years time.”
Note the slight of hand. 100Mbps is what crawford wants, and they are saying that more then that is hard. But she's not asking for more then that

There are some undoubtedly cherry picked stats in there that I'm not going to bother to verify. It's quite transparently bullshit and relies on the readers lack of knowledge to confuse them.
posted by delmoi at 9:00 AM on March 7, 2013 [11 favorites]


If the best place Google can put its money is in rolling out broadband then it says they are short of good investment opportunities.
Maybe they think their investment opportunities have dried up because internet access has stagnated?

Also, their stock is up 42% since you said they were giving away their money last july.
The question is then how much incremental revenue they generate. Well either you lock people into your network of content (which would be anticompetitive) or you open it up to other streaming services.
Google already has massive market share in online video (through youtube). Google doesn't need to lock out competitors to take most of the money any more then they need to lock out competitors to make most of the money from search ads. And the economies of scale of software and networking mean that new competitors won't be able to build products as good as theirs.

Google maybe hubristic, but they think that they'll be able to take home most of the pie because their products will be better. They don't need a captive audience. Maybe in the future they'll have turned out to be wrong - and then they might try to lock down their audience.

Google already takes in a vast majority of the money in online advertizing without even needing to run the pipes.

Even if all that happens is people switching from TV to the internet in general Google will make money (for the average user)
posted by delmoi at 9:20 AM on March 7, 2013 [1 favorite]


It usually takes years for bad investment decisions like this to start to show up in the numbers. I mean they only started connecting people in November, and in the scheme of things it is a small project. Saying the stock is up 42% is proof of nothing other than the stock is up 42%.

Google already takes in a vast majority of the money in online advertizing without even needing to run the pipes.

this is an argument against making the investment while lobbying like crazy to get the government to make it happen. Maybe that's what they think their small focused plan will do? Force other providers to get off their ass? IDK?
posted by JPD at 9:36 AM on March 7, 2013


But yeah, USA, quit whining. I pay over $100/month for broadband in Toronto.

Just because it's abysmal in Canada doesn't mean it's not bad in the U.S. And some of that $100 is for TV and telephone, no doubt.
posted by one more dead town's last parade at 9:40 AM on March 7, 2013


And some of that $100 is for TV and telephone, no doubt.

I'm paying $79/month to Comcast for 25/5Mbps cable internet. No TV, no phone, just internet. $100 for slightly faster service seems plausible.
posted by xedrik at 10:43 AM on March 7, 2013 [1 favorite]


Christ.

What are they using, gold plated fibre optics?
posted by MartinWisse at 10:50 AM on March 7, 2013 [1 favorite]


Based on the quality of my connection, I'd say tin cans and twine. But hey, that's the benefit to us consumers from Comcast being the only game in town. If competition were allowed in, they might actually have to give a shit.
posted by xedrik at 10:54 AM on March 7, 2013 [1 favorite]


The reason why there is no competition is because competition in providing pipes is mutually assured destruction.

There was an interesting talk a couple years ago by Derek Slater (brother of Christian, works for Google) where he advocated municipal ownership of the last mile, treating it like any other utility. Let the broadband providers run their service to a closet and then people could choose to be hooked up to whatever service they wanted. This would open up competition by removing the biggest cost obstacle to broadband providers. It sounded pretty sensible to me.

Of course this would mean higher taxes to build out the last-mile infrastructure and maintain it, and given the climate in this country it seems pretty unlikely it will ever happen even if it wasn't illegal. People would rather be able to buy a Big Mac once a month rather than have fast broadband...
posted by CosmicRayCharles at 10:56 AM on March 7, 2013


> And some of that $100 is for TV and telephone, no doubt.

Nope. Just 25/10 DSL. Phone (landline) is an extra $50/month; ms scruss's basic cell about the same. We don't have cable television, but any package that would come close to what we wanted (you have to buy sports, which we wouldn't watch) would end up being an additional $100+ a month.
posted by scruss at 11:22 AM on March 7, 2013


Nope. Just 25/10 DSL.

50/10 DSL is $83 a month from Bell, and 25/10 is $53 from TekSavvy. And how on earth is a basic land line $50 a month? Should be about half that.
posted by one more dead town's last parade at 11:54 AM on March 7, 2013


> The only way to increase broadband penetration is for the government to either build the infrastructure itself or move the industry to rate of return regulation like energy utilities.

Actually, there is another way. It's called "line-sharing".

In 2003? the telcos convinced the FCC that there was already enough competition and it was no longer necessary.

posted by mmrtnt at 12:10 PM on March 7, 2013 [1 favorite]


That $53 is capped at 300GB. I typically use more than that, so I'm on $78/month. Add the (mandatory for 25/10) $8/month modem rental, $4/month for a static IP, and tax: $101.70/month. The phone is maybe $15/month more than it needs to be. None of our calls are local. We should probably ditch it, but getting rid of the POTS would add another $10/mo (dry loop fee) to the DSL. For some reason that both Bell and Teksavvy get all mumbly over, we can't transfer our number over to another supplier.
posted by scruss at 12:11 PM on March 7, 2013


There's also this
posted by mmrtnt at 12:17 PM on March 7, 2013


Oops now I see my "line-sharing" comment above was in reply to the wrong thing.

Anyway, forcing the telcos and cablecos to open their lines at cost to competitors would greatly increase choice and decrease prices by re-introducing competition into the system.

People who argue that the government shouldn't force private companies to "share" their facilities are ignoring the fact that these utilities benefit from a lot of government largesse in the way of right-of-way easements, tax-breaks and incentives in order to provide service.

posted by mmrtnt at 12:33 PM on March 7, 2013 [1 favorite]


The problem isn't just "line-sharing" or opening the loop - which should be done. Its that the infrastructure itself has to be built.
posted by JPD at 1:11 PM on March 7, 2013


Wait, government mandated monopolies and subsidies preclude competition, but "deregulation" is the problem?

The broadband industry in this country suffers from the same problem as the health care industry: a purely government run system would probably produce acceptable outcomes (but with some disadvantages) and a purely private, competitive system would probably produce acceptable outcomes (but with other disadvantages). But, as a country, we can't agree on one solution or the other, so we "compromise." And the compromise is messy, and complicated, and that let's the lobbyists get in, and we wind up with a system with all the wrong incentives and all of the worst features of both systems: there's no real accountability to the public, and no real competition, but there is massive regulation that supports large incumbents by driving smaller competitors out of the market.

We get the government, and the broadband, that we deserve, that's for sure.
posted by gd779 at 1:13 PM on March 7, 2013 [3 favorites]


All of this makes me feel incredibly lucky to live in Minneapolis and have access to a city-backed wireless system. After installation fees, we're paying about $24/month for 6mbps. Yeah, it's a bit slow, but it beats the $80/month we were shelling out to Comcast.
posted by mrbula at 1:24 PM on March 7, 2013 [1 favorite]


The problem with line sharing or redundant wiring infrastructure is that you get into issues of deliberate and accidental sabotage. Before the grant of regional monopoly infrastructure, companies would actually physically cut competitors' wire, and in the era of line sharing there would be the occasional "theft" of copper pairs that were already running DSL to say another apartment or suite in the same building. Sometimes within the same company, sometimes alternative providers.

Personally, I think it was a big mistake not to develop telecom/Internet/cable as municipal infrastructure, but if it had to be privatized it should've been at the lowest possible level on the OSI stack with companies being forbidden from competing at end user sales of Internet/telephony. In other words, your RBOC/ILEC would only manage the installation and maintenance of physical wiring (copper or fiber), and provide connections at the CO/back end to the various ISPs and Telecoms without competing in delivering Internet connectivity or telephone service.

It boggles my mind that they convinced the FCC that the market was competitive when not a single ILEC was competing outside of their turf.
posted by BrotherCaine at 2:04 PM on March 7, 2013 [1 favorite]


there is a lot of empirical evidence that businesses with high fixed costs and virtually zero marginal costs cannot compete with one another and recover the original investment.

This happened in Australia - the two major telecommunication companies overbuilt significant parts of their HFC network during the 90s (about an 80 per cent overlap), due to the stronger incumbent telco no wanting to forgo its competitive advantage. It led to a substantial writedown and loss for both parties on the HFC investment, and contributed to a significant delay in the provision of broadband to the rest of Australia.
posted by kithrater at 2:17 PM on March 7, 2013


it doesn't seem as if software defined radio really went anywhere; might white spaces? [previously 1,2,3]
If and when White Spaces networks become a major success story, it will be a very well-organized one. Internet-capable devices will get online by accessing the empty airwaves in unused TV channels, and they'll avoid interference with actual broadcasts by connecting to databases that keep track of all available spectrum.

Google today began a public test of a White Spaces database to help make this a reality. Google isn't the first to operate one of these databases, but it's done so with a very Google-like approach. In addition to letting white space devices identify available spectrum, Google unveiled a browser-based tool that lets anybody find out what spectrum is available nearby...

"Anyone can use the spectrum browser to see TV white spaces spectrum that is available in their specific location," Google writes. "Once the database is certified and gone through additional steps with the FCC, the database will allow registered devices to check the database automatically, identifying what spectrum is available locally and using those available bands. Our database also provides some basic information on spectrum and spectrum sharing to help people learn more about this approach."
So, same problem as with healthcare, banking, and a lot of other things. Powerful interests hire lobbyists, yadda yadda yadda, we all get screwed.

cf. The Tyranny of Political Economy - "In reality, our contemporary frameworks for political economy are replete with unstated assumptions about the system of ideas underlying the operation of political systems. Make those assumptions explicit, and the decisive role of vested interests evaporates. Policy design, political leadership, and human agency come back to life... Expand the range of feasible strategies (which is what good policy design and leadership do), and you radically change behavior and outcomes."

viz. Money-Losing Profit Makers
Not only are there things that the market is not well suited to fixing—the best thing to enable the private market to make a profit is often public services that operate at a loss. Seeing a postal worker trudging through snow with her packages might make us reflect gloomily on the illogic of public policy. The post office lost fifteen billion dollars last year (though a good part of that was due to a disastrous bookkeeping requirement imposed by Congress); eliminating Saturday mail delivery is part of its plan to "return to profitability." Almost everyone agrees that it can't sustain losses indefinitely. But are these losses really losses, or are we looking at the wrong unit of analysis? Lots of things are unprofitable if you narrowly consider outlays and income—including most of our roadways. To say that the post office runs at a loss is to say that it subsidizes a system of conveyance and communication. This in turn makes possible trillions of dollars' worth of enterprise.
also btw Future Remittances - "the Federal Reserve's purchase programs will very likely prove to have been a net plus for cumulative income and remittances to the Treasury over the period from 2008 through 2025, by which time it is assumed the balance sheet has been normalized..."*

Gee, it's almost as if data is some kind of bulk commodity delivered through a network of pipes. It also seems that the market is failing to provision this in sufficient quantity to maximize public utility. If only we had any parallels to this situation from which we could apply solutions.

yea, re: the public utility model, i've been thinking how banks are essentially just the consumer facing front of a back-end payments system (overseen by your favorite pseudo-gov't entity) -- like how the airline industry kind of relies on the 'wholesale services' of, say for example, sabre (reservation system) and the FAA -- what if you could have a direct account with the federal reserve or any other central bank?
  • An internet money protocol - "in a world where a Mobino type operator worked together with (or represented) a central bank, then transaction costs could conceivably be eliminated almost entirely. Operational costs would instead be included in the seigniorage gathered by the state, which would now reflect the difference between the face-value of the units in circulation minus the costs of running the infrastructure and servers..."
  • On negative interest rates and hoarding - "if it is to work, it will need to be associated with a cashless society, a meticulously managed taxation system or the introduction of some sort of decaying money coupon..."
so anyway, with the gov't providing a plain-vanilla option accessible to anyone and other providers offering more 'flavors' and competing on customer service (rather than screwing you over extracting rents) would you want a corporate/private or gov't/muni ISP, or some kind of community-owned/run one? in general/theory, a lot of critical infrastructure could be run this way, whether health care, banking, education, energy/mass transport, emergency/disaster services, &c.

Google, on the other hand, would be happy to open the floodgates on the pipes, because they make money on content and advertising.

VMware will hate this: Amazon slashes cloud prices up to 28 percent - "This is just the latest step in an ongoing cloud price war. Last November, Amazon and Google each provided steep price cuts to their storage services, and Microsoft's Windows Azure did the same soon afterward."

---
*B/S: "Rogoff and Reinhart have focused our attention on the debt-gdp ratio, but as a pure accounting matter the debt-wealth ratio is more important. And debt-wealth ratios rarely if ever look terrifying."
posted by kliuless at 3:45 PM on March 7, 2013 [3 favorites]


Plain and simple: American telcos are traitors to American inventiveness and progress. They fought broadband every step of the way until they could get it reulated in their favor. And now that we NEED broadband to thrive, those bastards drip it out, drop-by-expensive-drop like so much elixir.

Along with senior banking exectutives, add Cable and Telco senior executives to the list of enterprise actors that should be in jail, for the harm they cause, the lives they have constrained, and the general hard to America that they have caused.
posted by Vibrissae at 3:58 PM on March 7, 2013 [1 favorite]


CosmicRayCharles: "Of course this would mean higher taxes to build out the last-mile infrastructure and maintain it, and given the climate in this country it seems pretty unlikely it will ever happen even if it wasn't illegal. People would rather be able to buy a Big Mac once a month rather than have fast broadband..."

Why would it require higher taxes? Presumably the city would charge the ISPs some amount of money per customer or perhaps a percentage of the ISP's charge to the customer or some fee based on the ISP's peak bandwidth usage to cover the maintenance costs and a reserve fund. Once the fiber is in the ground, upgrades are relatively cheap.

I guess you could raise taxes and build out as the money comes in instead of issuing revenue bonds against the future income of the network and save some interest.

Loop sharing doesn't really help because it reduces their incentive to upgrade their existing networks relative to not being forced to share, whereas municipal broadband increases their incentive to upgrade. There's a pretty strong pattern of the incumbents upgrading areas with faster alternatives while areas where the duopoly is strong lag behind and not seeing speed increases for years.
posted by wierdo at 4:49 PM on March 8, 2013


It usually takes years for bad investment decisions like this to start to show up in the numbers. I mean they only started connecting people in November, and in the scheme of things it is a small project. Saying the stock is up 42% is proof of nothing other than the stock is up 42%.
Yes, it's a small project for them. $1billion for them is one months profit. Last june, though you said it was going to hurt their bottom line, which is why I'm pointing out that it didn't.
People would rather be able to buy a Big Mac once a month rather than have fast broadband
Given the exorbinant prices charged by local monopoly ISPs they'd most likely be able to afford many bigmacs under an open system, even if taxes were slightly higher.

It's just like government healthcare: Your taxes go up, but overall your expenses go down because you no longer have to pay for overpriced insurance.
posted by delmoi at 7:04 PM on March 8, 2013


For a shorter simpler and more straightforward analysis see her interview with Bill Moyers

Transcript.
posted by homunculus at 3:12 PM on March 12, 2013




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