Ars' coverage isn't very good on this issue. There is a tremendous amount of context Ars ignores, namely all the franchise agreements between municipalities and cable companies whether these sorts of proposals run afoul of those agreements. Also, consider the Kansas City example, where the city gave a single favored company massive regulatory concessions to install fiber. I know "Google can do no evil," but it isn't good precedent.
Cheering on the municipalities is boneheaded. The municipalities and their franchising agreements are a major part of the reason we're in this mess to begin with: http://www.cato.org/pubs/pas/pa034.html (note the article is from 1984).
Yeah, I'm a bit torn on these bills. They sound awful, but there are issues that all the tech-sites seem to ignore. I'm all for competition, competition, competition. We need more competition! But when municipalities get into the mix, you have at least the potential for unfair practices. A city could give itself free access to utility right of way, condemn properties in its way and hide the true cost of running a network by lumping some expenses in general utility categories. And you might end up with a very poorly-run network that every single citizen pays for via higher taxes whether they want it or not. Since citizens have to pay the city taxes no matter what, they'll drop the potentially superior commercial Internet offering instead of paying twice. Likely? Maybe. Maybe not. But worth a discussion.
Maybe vertically integrated ISP service doesn't work as an investor-owned enterprise. Maybe all last-mile facilities ought to be owned by the municipality and multiple providers can be chosen for ISP services.
I agree. I'd rather look to how deregulated electricity markets work. The last-mile infrastructure is owned by either a municipality or a regulated utility, billed at fixed utility rates, and the generation/service portion is floated on the open market.
ISPs aren't identical, but I don't see a strong reason a competitive ISP market couldn't follow the deregulated market that states like Texas use for electricity. Have the last-mile infrastructure owned by some boring regulated entity, and then let ISPs compete to provide connectivity over the pipe, like generators compete to provide electricity over the wires.
I recall that in the late 90's there was a regulation in place that forced the phone and cable companies to lease their coax or DSL lines to competitors who wanted to offer service as an ISP. I recall getting mailers from various little companies with offers. There was a difficulty in determining what the proper lease rate would be for the little guys. And in the end it apparently didn't work out. I don't know if the law was changed or if the cable and telephone companies were able to set the lease rate so high that nobody else could be profitable.
It seems many face the practical choice of lack of competition for a for-profit company with little recourse for shitty service, or a distorted market due to the government's presence. At least the latter puts gives the people some control.
This is a great quote and I can hardly believe it's from 30 year ago: As Cablevision's Charles Dolan warns, "As an industry, it is really bad for us to have an articulated view that cable can operate successfully only...in a monopoly environment. That view is an invitation to a regulatory response that would set us up as common carriers,"[7] just like telephone and utility companies.
Side note: I bet splashing out sketchy comparisons to Orwell's 1984 was a lot more fun back when it was actually 1984. On balance it was a good piece but the whole first section can be safely skipped.
Google has admitted that they're just doing deployments like Kansas City to push other ISP's into offering higher speed services, which benefits their bottom line as a content provider. If the opportunity was really worthwhile on its own merits, Google would pursue Google Fiber as an actual business. So essentially, Kansas City made a sweetheart deal with the only company that agreed to take it, and that company only took it because they had an ulterior motive. That's a recipe for abuse, and if it had been Comcast rather than Google, people would be up in arms.
The major cable companies are also content companies, too. Comcast/NBC, Time Warner/Time Warner. Nobody has clean hands. So I say it's worth giving a new player a shot at doing better, rather than conceding the market to the existing monopolies.
The title is sort of misleading. A municipality offering broadband service isn't really an economic actor since it can use tax receipts to subsidize the service. Offering a choice between service provided by local government and a private business isn't really the kind of competition most people have in mind when they think of healthy markets. The laws should incentivize competition between multiple telcos not between telcos and government.
Also, generally speaking, running big telco networks is hard, capital intensive, and requires a lot of expertise that municipalities don't really have. I've never used a municipal internet service that was any good.
But the nature of being an ISP is to run expensive (both in outlay and maintenance) cable/fiber to your house, and it doesn't make economic sense to run 2 or 3 or 4 lines to a customer that only uses 1 ISP. It follows directly from your argument that a person should have a healthy market of water companies serving their house, or sewer companies, or electric companies.
> running big telco networks is hard, capital intensive, and requires a lot of expertise that municipalities don't really have
Capital-intensive, expertise-intensive things is exactly what municipalities do well. They do water, sewer, utilities, police, fire, EMS, etc. My city spent just over $3b last year, meanwhile Time Warner Cable spent roughly $3b on capital expenses in the entire United States.
To follow up with your water analogy: we don't expect the water company to deliver 400x the water to our homes than we did 20 years ago, but that's exactly what we expect of our broadband providers. It's hard to imagine a scenario where a municipal (or monopoly) broadband service will upgrade its network as fast as we expect. Competition is the answer.
My city spent just over $3b last year, meanwhile Time Warner Cable spent roughly $3b on capital expenses in the entire United States.
This is about as apples to oranges as it gets, but if your city spent $3B just maintaining water and sewer, and time warner spent $3B over the entire country then TW is winning in my book.
> we don't expect the water company to deliver 400x the water to our homes than we did 20 years ago, but that's exactly what we expect of our broadband providers.
It is a 400x increase when measured by the yardstick of a software developer, but by the yardstick of "how much money does it cost to connect Joe Schmoe to a network that meets his expectations" the business has not appreciably changed in 20 years. What changes is the model number on the Cisco switch and the type of cable in the ground, but "what is the maintenance cycle on this electrical cable and power transformer" is a problem that municipalities have been successfully solving for well over a century.
I think you are confusing the practice of actual dataspeed innovation (e.g. what Cisco, Juniper, Alcatel-Lucent, Qualcomm etc., do) with ISPs like AT&T or TWC who merely buy and install equipment and service cable runs. AT&T, Time Warner, Verizon, et al do not appreciably contribute to the number of packets it is possible to send in 10 seconds, except insofar as they buy products from those companies that actually do. That role (of buying Cisco products) can easily be shifted to a municipality with no downside to Cisco. In fact, from Cisco's perspective, large nationwide ISPs operate more or less as a consolidated union of individual markets and have a lot of bargaining power, so a more diversified customerbase that doesn't cooperate as tightly means Cisco can make more money, and since they are actually the ones who make the internet fast, that seems like a positive outcome to me.
> but if your city spent $3B just maintaining water and sewer, and time warner spent $3B over the entire country then TW is winning in my book.
Of course not. $3b is the total budget for the whole city, which is mostly public safety (police, fire, EMS, etc.) The capital spending on energy is only about $200m/year, which is about 50% production and 50% distribution. If you imagine that it is probably easier to run fiber than it is to run 110,000V powerlines everywhere, the ongoing capital expenditure to run the actual fiber lines themselves would be less than $100m.
If you want to make Internet service a regulated monopoly or a municipality provided service, there will be no incentive to upgrade to new technology when it becomes available. That is the virtue of competition. Competitors can differentiate their offerings based on price and features. Competitors will install faster networks in order to win market share. Competitors will find ways to reduce costs so they can offer service at lower prices to gain market share. You don't have any of that if the municipality owns the network.
You've made many predictions about what "competitors" will do. Why the hell haven't they done them already? Data service in this country is terrible, for most business and nearly all residential customers.
Yeah it is a common mistake made by free market folks:
Competition will drive down prices, increase speed and result in the best possible customer service!
Except that in markets with expensive outlays to get started that rarely happens because the expenses put a natural limiter on the amount of people that can actually mount competition making that number low enough that the competitors can essentially carve up the market, price fix and then all suck approximately equally, indefinitely. Just like ISPs and cell phone carriers do now (and will continue to do so until the government steps in and forces them to fix their shit).
If one must generalize, I think we should say that competition tends to benefit the consumer, and fortunately competition often arises spontaneously, but there are many factors that can disrupt this virtuous process.
Duopoly? A large number of major cities and their suburbs only have 1 true highspeed option (cable) and slow wireless or DSL. FIOS deployment is sadly limited.
You're saying that there's no competition in municipalities? They're called elections. We hold them more than once a year.
Not to mention that municipalities compete with one another; it is actually easier in most places in the United States to move to a neighboring municipality than it is to switch to a better ISP. For example I would have to move over a hundred miles to get better internet access than the large, regional ISP that serves my area, and meanwhile I could move about five miles and "technically" live in a different city in the same metro area.
Finally, I am not advocating municipal control instead of private ISPs, I am arguing municipal offerings in addition to private ISPs. It is tautologically impossible for the introduction of new entrants into the market to itself constitute a reduction in competition.
Too bad in germany the big privately-owned ISP's (tier1 DTAG being among them) have very little interest in upgrading to new technologies, making city-owned ISPs pretty much your only option if you ever want to get FTTH or VDSL (the village even offered to pay some money to DTAG to implement it - no thanks - the next closest city's utilities company had to roll their own network to get it done).
...time warner spent $3B over the entire country then TW is winning in my book.
TW is winning, but their customers certainly aren't. If we actually had free markets in data connection, consumers would have other providers to choose, and TW would have to spend a great deal more on their aged creaky networks in order to stay in business.
Why did we defer to the judgment of local government when they wanted to shackle residents to one provider in exchange for big bribes through franchise agreements, but now that they want to encourage that same provider to get off its ass and provide decent service they're enemies of capitalism?
Wait, do you want them to upgrade there service or not? If the goal is to maintain service without upgrades then minimizing cost is great, if you want improvements then minimizing cost is a stupid way to evaluate things.
Once the fibre (if you don't buy junk) is in the ground upgrading becomes very very cheap. And given that the required access speeds aren't very high (100M-1G), they can be had rather cheaply second hand/new. So you can direct all the money from the cost savings to upgrading your backbone, where it does get rather expensive.
OK, I get it. Municipalities are very unskilled, so their services suck. Which is why they can't be allowed to compete with cablecos, because all cableco customers would immediately decide to switch to the municipalities for better prices and service.
I think we need to work a little harder on this chain of logic...
My point was that governments should incentive competition between private companies rather than trying to provide services directly. Sorry if that wasn't clear.
The latter clause was clear; the former not so much. But anyway it would be better to focus less on neoclassical theory and more on the specific factors that are observed to hurt competition in the USA data services market. Municipal services are far from the most salient of those.
The quality of private telecom services in the U.S. isn't that good. Try using your cell phone in a major city without making excuses like "everybody else was trying to hail a cab after getting out of a Pink concert" or "I was staying in a hotel that has a lot of metal in the frame".
Private companies are consistently making bad decisions as to infrastructure. For one thing, they've wasted money building high-cost fiber-to-the-node and hybrid-fiber-coax networks.
Yes, the initial cost of FTTH is more than the alternatives, but the running costs of FTTH are much less and if you consider a time span of five years or more, FTTH comes out ahead.
In places like Austin where carriers have wasted money on xDSL deployments, they find they have to go to FTTH once a competitor goes to FTTH. Why? Since the running costs of FTTH are so low, an FTTH provider is the low cost provider and will win the value segment, not just the high-end segments.
The main problem is that rich people are full of themselves and think they deserve credit card interest rates for their investments rather than the low market rates that capital markets provide (which are telling them that they've got too much money and nobody needs them.)
They know they can build expensive (to run) networks because they can make their customers pay the operating costs, rather than putting some more money up front to produce something that will produce more profits in the long term.
In places like Austin where carriers have wasted money on xDSL deployments, they find they have to go to FTTH once a competitor goes to FTTH. Why? Since the running costs of FTTH are so low, an FTTH provider is the low cost provider and will win the value segment, not just the high-end segments.
I'm not sure exactly what you're trying to say, but I think that means you agree with me that competition between telcos leads to better/cheaper product for consumers?
To your last point, that telcos don't invest in infrastructure basically because they're greedy (is that even what you're saying?), I think that fits into H. L. Mencken's idea that "for every complex problem there is an answer that is clear, simple, and wrong." I have worked at the periphery of a big telco and from what I saw there are many challenges to controlling costs. To name a few: inefficient internal bureaucracies (ugh), strong unions (not a criticism, just pointing out that union labor is more expensive than nonunion labor), and mainly the fact that the network is enormously huge (like, physically huge) and it's extremely expensive to refresh the technology every few years.
Please read the article. The bill goes further than simply outlawing municipal broadband. It actually bans municipalities from offering any infrastructure to private entities that want to offer broadband.
(So for example in a city like Seattle where we have tons of dark fiber owned by the government, the city would be prohibited from leasing that fiber out to private enterprise under this bill.)
Though I also disagree with the sentiment of your post, even if the bill were more narrow.
The telcos have been granted a monopoly on the copper (or fiber), is it really accurate to think of them as a private business competing on equal footing with other private businesses?
>> "I've never used a municipal internet service that was any good."
Naperville, Illinois, while being a loathsome, sprawling mess in many respects, has pretty snappy municipal internet. And, in fairness, a semi-charming waterfront path.
It's not precisely the same thing as regular competition, but I don't think it's necessarily a bad idea. One model I like is for the public sector to provide a baseline level of service using public funding, and then let the private sector compete to provide premium service.
> I've never used a municipal internet service that was any good.
Not sure where you're located, but I'd encourage you to make a trip & try out the fiber optic internet service (gigabit available) that is offered by Chattanooga's municipal power utility, EPB. I've never experienced anything better. I can now honestly say, after being a customer for 3+ years, that I've never used a commercial internet service that was any good.
There's a big difference between running a municipal telco network and a 'big' telco network. Focusing on delivering excellent service to a municipal area is very attainable.
Offering a choice between service provided by local government and a private business isn't really the kind of competition most people have in mind when they think of healthy markets.
Is the sort of choice that has been available in markets going back as long as governments and markets have existed though, so given there has never been a complete market that fulfils your definition of a healthy market, can we just look at whether there is some general economic benefit here rather than worrying about whether it is healthy, as if it is sick, it has managed fine so far for a good few thousand years, so it can't be too bad.
I recall reading an article a while back about a neighborhood that had a fiber network that was put in when the community was built as a selling point. Every single house had fiber in place for TV, Phone and Internet. Sounds great! Right? In theory yeah, but not so much in practice. Every house had a network fee added as part of their homeowner's due. This fee went to an external company that ran the network. This company didn't have much or any incentive to properly manage, update or keep the network running. They had a captive audience. Everybody pays every month whether they use the network or not. Network down? They'll get to it in a bit after they take care of their competitive neighborhoods. And though fiber sounded great, the speeds they were getting weren't much different than other areas near-by on cable modems. So want to forget it and go with Comcast? Sorry, they don't serve the neighborhood as they can't be competitive when everybody in the neighborhood is already paying for the fiber network. I recall the neighborhood association had gone through a couple of different management companies, with pretty much the same result. In short - beware of turning over your network to someone without an incentive to make you happy. Of course, in many areas (like mine) there is no real competition for high-speed Internet. It's Comcast or nothing...
I see no problem with this setup if the homeowners association own the network, and can bid out managing the service to private ISP's. That's the ideal setup, IMO. Consider the data pipes a utility, but let free market forces drive service.
If they were able to let multiple companies offer service over their community-owned dumb pipes, that would indeed be ideal. But my recollection is that were hiring a single private ISP to manage it all. Maybe they were too small for Comcast or Cox, etc. to bother with in this unique setup? I'm afraid the same thing would happen in small towns if the town itself owned the network.
Yeah as bad as the first part of your post sounds it really isn't much different than my reality in a "traditional" ISP market here in the US.
Technically I have two choices, Time Warner Cable or AT&T DSL. Realistically I only have one choice because Time Warner Cable has proved that they are unable to keep an internet connection between my modem and their headend working for more than 6 hours at a stretch, so I'm stuck with 6mbps AT&T DSL, which is slow and overpriced relative to speed/caps but at least mostly reliable.
Maybe this is a stupid question, but why is it so bad to let people provide for themselves? Kansans should be prevented from running their own ISP? Why? Doesn't that idea seem contrary to self-governance? It's really depressing that people cannot legally say "screw you" to big telco/big cable and do their own thing. Somebody enlighten me, please.
They gave many of these companies near-monopolies by blocking competition from laying cable or accessing the telephone poles.
Now the government has decided to crush the telco's industry by running their own service at prices impossible to compete with because they are tax payer subsidized.
Live by the sword. Die by the sword. Personally, I'd rather shrink the sword down to around a steak knife.
I dug into it out of curiosity, and I don't believe that's technically true, but is sort-of true in practice. Only members of the legislature may formally introduce bills. But, Kansas, like some other states (especially those influenced by popular-democracy principles of the progressive era), has developed a convention where legislators often convey bills to a relevant committee when requested to by a constituent. In that case they submit the bill but decline to sponsor it, to indicate that they're just conveying it.
Any member or any standing committee, an interim committee of either house, and certain statutory committees may introduce a bill. Sometimes bills are introduced by two or more members (of the same house) as joint sponsors. All regular appropriation bills are introduced by the Appropriations/Ways and Means Committees. Bills sometimes are introduced by a member or committee at the request of a constituent with the notation “By Request” appearing after the author’s name on the printed bill and in the journal. A “By Request” designation often suggests that the member or committee who introduced the bill is not necessarily an advocate for it.
It happens at the federal level too. Lobbyist groups write the bills themselves and submit them to members of Congress in closed door meetings. Congress can then edit the bill, but they often just introduce it as-is. We only know this because people have leaked the Lobbyists version of bills and compared them to the ones introduced by Congress.
Yeah, in practice I think it's converged to a similar sort of thing, though the Kansas version does have better-intentioned origins. Rather than having a bill covertly written by lobbyists and then sponsored by a Congressman who claims to be advocating it but actually had little to do with its drafting (as happens at the federal level), the original idea of some of these state-level practices was to open up the legislature to citizen-proposed legislation. Some states (like California) went all the way with a robust citizen-initiative system where citizens can directly propose legislation that has to receive a vote. Others developed conventions more like Kansas's, where the norm was that legislators are supposed to forward reasonable legislation for a vote even if they don't personally advocate it, and this was done quite openly ("I'm forwarding this bill by request of so-and-so"). So the response to a citizen asking the legislator to sponsor a bill becomes three- rather than two-valued: the legislator could draft and sponsor legislation in their own name to that end; could reject it entirely and refuse to introduce anything along those lines; or third, they could pass the citizen-written bill along for a vote as-is, without working on or endorsing it themselves.
I doubt it really works like that in practice anymore, if it ever did (my guess is that, if you aren't important, your chances of having a bill you send be seriously considered are pretty small), but I can see why it was an attractive idea.
A huge number of bills are done on the "Written by industry, submitted by sympathetic politician" model. It's pretty much ALEC's whole deal, and they're really good at it.
Instead of becoming an ISP, wouldn't it make more sense for the town to wire up each house with fiber optics and then let ANY company provide services over those cables?
The ISPs will have to pay the town a flat fee per subscriber for using the municipal fiber optics network, or they could roll out (or keep) their own (existing) infrastructure. This way companies will still be able to compete, but the "last mile" will become an utility like the sewage system.
That's the way it's done in the Sweden, Norway and switzerland and their FTTH deployment is far ahead of large portions of europe. So yup.. I would say that open access works.
Screw this. I'm only a few miles away from where Google Fiber is supposedly in construction. I just want my fiber in a couple years or less. Is that too much to ask?
Sounds like the story that transpired in Wilson, NC a couple of years ago with their Project Greenlight, an attempt to offer municipal fiber to the home. TWC wasn't happy and lobbied hard against it.
in the movie "Aviator" there is a scene where PanAm almost successfully gets monopoly on international flights. Watching it i could feel only "WTF?". The same way we'd be feeling couple decades later about monopolies that weak [in particular to the influence of industry] governments at all levels have been granting to telcos.
I'm not from the US but it seems like there's nothing stopping the big telcos from partnering with those same municipalities and offering a sweeter deal than Google does, is there?
If anything, their existing infrastructure, from the age of the telegraph, gives them a huge competitive advantage over anyone coming in, with or without municipal involvement...
IMO government's role should not be the protection of some specific business, it should be about improving the lives of the citizens, partly through improving infrastructure. If big company X goes broke while this happens why should we care? So billionaire Y will make more while billionaire Z makes less?
The government is so evil and incompetent that it should never be allowed to provide broadband, because it will do so with such low rates and great service that it will put cable companies out of business!
I think the argument goes something along the lines of:
Public enterprise, as we all know, is of course highly inefficient, massively expensive and badly organised. Which is why it is absolutely vital to ban it from entering industry as it would be unfair competition.
Cheering on the municipalities is boneheaded. The municipalities and their franchising agreements are a major part of the reason we're in this mess to begin with: http://www.cato.org/pubs/pas/pa034.html (note the article is from 1984).