Funny How Competitive Situation Impacts Fiber Deployments

from the oh,-look-at-that... dept

Mon, Aug 14th 2006 12:44pm — Mike Masnick

We've discussed repeatedly that the real issue when it comes to network neutrality has nothing to do with how neutral the network is, but how much broadband competition there really is. If there's real competition, then the telcos are suddenly much more willing to give users what they want, without trying to double charge or block certain types of usage. The telco side likes to point out that there's plenty of competition, but their numbers are usually based off of the FCC's data, which has been discredited. However, in areas where there is competition, it's funny to see how the telcos respond. Rather than hold fiber deployments hostage until the government can "guarantee" less competition, it looks like the telcos are rushing to install fiber as fast as they can, knowing that competitors are stealing away their market. That's the situation in New York City. While there is still something of a duopoly situation, multiple cable companies serve different parts of the city and compete with each other for franchises -- pushing them all to upgrade equipment and offer better services.

Now, for contrast, look at the situation in Seattle. While the city is proposing a citywide fiber network, local telco Qwest is trying to block the plans despite the fact it has no plans at all to deliver fiber itself, claiming there's just no demand. So, let's see... when there's real competition, suddenly it's a mad dash to install fiber. When there's not much competition, the mad dash is simply to slow down installation of a new network or put in place conditions that let them put up tollbooths and road blocks. So, rather than worrying about which broadband provider is going to stop you from accessing Google, the real focus should be on making sure the access business is truly competitive. Hopefully, the situation in New York City is becoming the norm -- and actual competition will drive new and improved services, rather than some government guarantee to remove competition.

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17 Comments

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Anonymous Coward, 14 Aug 2006 @ 1:47pm

By the way copper prices keep increasing, it may soon be cheaper (not to mention a hell of a lot faster) to go all fiber.
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CAo, 14 Aug 2006 @ 1:48pm

I love my fiber.
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Neal, 14 Aug 2006 @ 2:10pm

I say, let 'em crash!
Qwest should let the city build the system then offer some cheap dsl until the city can't compete then buy their fiber system. It is what is going to happen anyway.
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Sanguine Dream, 14 Aug 2006 @ 2:11pm

C.R.E.A.M.
Cash rules everything around me. Its gotta be true. Big business can just throw a wad of cash at the government and all of a sudeen a new law in place that benefits that business. If I were a big business I would like to think that money would be better spent on serving my customers right so that even when the competition moves they will like my service and stick with me anyway. The way it is now once conpetition can move in their service would have to be total ass for the telcos to still win.
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Anonymous Coward, 14 Aug 2006 @ 2:14pm

Sigh.
I'm just as hopeful as the next guy. I would love to have the next fattest pipe.

But then, I would rather have fast AND port 80. With all the talk of how ISP's wouldnt be able to get away with blocking voip and all that rot, why is that all the ISPs block port 80?

Sure, I could always get speakeasy... but its slow as hell, and expensive to boot.

Why do I have to be a "business" to want to use my damn port 80?

Anyone know if FiOS (the first fiber that will come to my area) has this stupid policy?
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Jim Harper, 14 Aug 2006 @ 2:19pm

Government Competition
Absolutely right that the real issue is competition. There are a couple of different issues at play here that make this a confusing read, though. The additional flavor in the Seattle case seems to be that the competition would come from a government provider, which would have many competitive advantages in terms of taxes, rights-of-way, etc.

Corporations are just supposed to earn profits - they aren't really meant to favor competition. But even if there were a far-sighted altruistic firm that recognized the benefits of competition to its industry over the long haul, it wouldn't support competition from government. Don'tchya think?

Other than that, your point is that competition drives companies to serve consumers, and lack of competition doesn't. Are corporations sinister for responding to incentives well?
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Joe johnston, 14 Aug 2006 @ 4:10pm

Re: I say, let 'em crash!
You don't understand how incompetent Qwest is. they are so in debt they can't compete , thus the block and hold routine.
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Mike (profile), 14 Aug 2006 @ 5:48pm

Re: Government Competition
Absolutely right that the real issue is competition. There are a couple of different issues at play here that make this a confusing read, though. The additional flavor in the Seattle case seems to be that the competition would come from a government provider, which would have many competitive advantages in terms of taxes, rights-of-way, etc.

Jim, you make this argument as if the telcos haven't also gotten the same advantages in terms of taxes and rights-of-way. That's false. They all have received similar gov't support.

In fact, most of the "muni" broadband efforts are really no different than the big telco efforts in terms of these types of things.

Corporations are just supposed to earn profits - they aren't really meant to favor competition.

Indeed, but the telcos keep claiming that there is competition and that's driving them -- but the evidence suggests that isn't always the case. In plenty of cases, the lack of competition is holding back innovation.

From a public policy perspective, isn't that relevant?

Other than that, your point is that competition drives companies to serve consumers, and lack of competition doesn't. Are corporations sinister for responding to incentives well?

Not sinister for responding to incentives. But sinister for implying there's plenty of competition to make the incentives line up properly on the policy issue of next gen broadband.
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Mike Mixer, 14 Aug 2006 @ 9:15pm

competition
The only way the consumers get want they want is if it makes money and as long as nobody offers the people what they want life is grand for the telco's. Switching to a different form of communication won't help because they will just buy up the companies that provide the service people are flockng to so they can still control the market. They are stretching themselves to the breaking point to do this and of course if they lose their shirts the government will have to bail them out for the sake of competition in the communicatons marketplace. Sounds like our balls are in a twist don't it? Well that is what we get for not paying attention when all the baby bells started buying everything that wasn't nailed down. If we had put up a fight 10 years ago this would a different world. Oh well maybe that one judge who wants to go over the old telco mergers will take a few chunks out of some asses.
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Jim Harper, 14 Aug 2006 @ 9:38pm

Re: Re: Government Competition
I guess I get it now. I was confused by the "contrast" of the two situations because they're not so much contrasting as part of a consistent story. Companies don't like to compete. When they do, they're driven to serve consumers.

I think it's more about the writing and phrasing than a substantive difference between us on those basic points. (For the sake of your blood pressure, Mike, make peace with the fact that people aren't gonna argue honestly and fairly in public policy debates!) The addition of the government competition/Muni WiFi issue just made it all the more confusing.

I'm worried about your take on the relationship between government and telcos, though. Yes, ILECs enjoy benefits from being descended from Ma Bell. But they pay through the nose too. Telecom is one of the most highly taxed industries - up there with alcohol and cigarettes. Think of it as a symbiotic relationship - the ILECs get government protection and the governments get money. But it's not telco money, of course - it's consumers' money.

Now, the "punishment" that Qwest supposedly deserves for engaging in this wickedness is to have a second government-industry partnership exist in the same location. This will hurt Qwest. OK. I guess we're mad at them.

But how good is competition going to be between two government-sponsored enterprises/public utilities? I think not good. If Muni Wifi gets too good, the government will lose its Qwest tax revenues. And it needs tax revenue to run its WiFi network! So you'll have two nominal competitors that in truth divide the market in a way that's comfortable to both. The victim of this collusion - again - will be taxpayers and consumers. Idn't it?

Truly, I think the point is not to hurt Qwest, but to help competition - even at the risk of letting Qwest out of reparations for being the spawn of a government-sponsored monopoly.
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Mike (profile), 14 Aug 2006 @ 10:31pm

Re: Re: Re: Government Competition
I guess I get it now. I was confused by the "contrast" of the two situations because they're not so much contrasting as part of a consistent story. Companies don't like to compete. When they do, they're driven to serve consumers.

Not so much. The telcos claim there's no need for anyone to worry their little heads about anything, because they'll keep on innovating away, as long as the government either (a) helps them or (b) gets out of the way.

But the story shows how that's a bunch of bull. They're lying, and it's worth pointing it out -- even if it does seem obvious that they would be dishonest in such a situation.

You may be cynical, hanging out in DC, but I still think it's worth pointing out the dishonesty and pushing for a more honest debate.

'm worried about your take on the relationship between government and telcos, though. Yes, ILECs enjoy benefits from being descended from Ma Bell.

That's a fascinatingly simplistic way of looking at it. There's a REASON the telcos have a close relationship that goes well beyond where they descended from -- and a big part of that is the natural monopoly issue -- where it's in the public's best interest not to have their streets and yards torn up by every new entrant looking to get into the market.

So, please, don't accuse me of wanting to "punish" Qwest. That's bullshit. All I'm saying is that in order to create a competitive situation -- which we seem to agree is better for consumers -- we shouldn't allow Qwest to (a) fail to live up to the obligations it had that would have increased competition or (b) stop other efforts to create competition.

As for your claim that the gov't needs tax revenue to run its muni network, that's a red herring that shows you've been listening more to the anti-muni think tankers than actually looked at how most of these deals are structured. Many of them operate free of tax dollars. All they really are is the local gov't giving rights of way to a private entity, who is then able to offer service over them. Sounds sorta like the deal that the telcos have with gov't as well. It's okay for them, but it's not okay for these new entrants?
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Jim Harper, 15 Aug 2006 @ 7:44am

Re: Re: Re: Re: Government Competition
I mean for our disagreement (whatever it is) to be civil. I apologize if anything in my tone imputed opinions to you that you don't hold. Can we talk about this in a relaxed fashion?

The TechDirt vision is so clear on so many things. I'm just struggling to get that clarity in this area, but my probes and questions seem to elicit anger instead.
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Mike Bookey, 15 Aug 2006 @ 10:04am

Different Sort of Competition
One way to look at competition is government vs. private enterprise. Another way to look at competition is open access vs. walled garden.

Seattle proposes to build an open access fiber/wireless Internet connectivity utility. Qwest on the other hand is supportive of a walled garden approach where they control the services you and I receive.

Current FCC rules give Qwest the right to operate a closed Internet service. They have complete control over the services delivered over their DSL network. They are free to cherry pick the most profitable segments of the market and ignore the rest.

The telcos have been outspoken of late about their intent to charge on the basis of service value. They have no intention of becoming a supplier of commodity connection services.

I preface the following with the admission that analogies are never perfect.

Seattle City Light delivers commodity electrons to everyone in the community. Consumers of these electrons can use them for any service application they choose -- heating water, running a clock, operating a computer, cooking, lights, etc. The price of a Seattle City Light electron is a combination of the cost to produce it and the cost to maintain a distribution system to deliver it to a premise. Its run as a non-profit for the benefit of everyone in the community.

If Qwest ran the power distribution system in the city of Seattle using the same rules it uses to supply Internet bits how would its service differ from Seattle City Light.

First Qwest is a for profit run for the benefit of its shareholders and not for the benefit of the community. Second, Qwest would charge for electrons not on the basis of production and distribution costs but instead on the value of the service to you. For example, they may charge you more for electrons to heat hot water compared to those you use to run your clock. They might also charge more for electrons used to run a business computer vs. one used for consumer purposes. They might also decide that you could only run hot water tanks supplied by them.

This is not a competition between the City of Seattle and Qwest. Its a competition over what is best for everyone who lives and works in Seattle. Does Seattle benefit more from a closed Internet service where bandwidth is kept scarce and prices are determined by value of the service it makes possible. Or, an Internet connectivity utility open to all, where commodity bandwidth is produced in abundance, innovation takes place at its endpoints, and pricing is based on cost and not value.

This is a competition between two very different visions for the future social and economic development of the City of Seattle.
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mike-ish, 15 Aug 2006 @ 12:47pm

Qwest is incompetent
Qwest's bungling of their high-speed internet attempts in my area have practically shut them out of the market permanently. They tried to push DSL here twice and it was so bad people were going back to dial-up!
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Yauch, 15 Aug 2006 @ 1:19pm

Re:
The cost in any network is not the cable, the customer units and sometimes head-end equip that is the big cost factor, and fiber is still far and above the most expensive. Any thing else is just wishfull thinking.
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Mike Bookey, 16 Aug 2006 @ 12:04pm

Re: Re:
Yauch,
The major cost in building an FTTH network is the cost fot install the fiber. The fiber itself is a few cents per foot and getting cheaper. Electronics per premise served is falling thanks to Moore's law. Installation is labor intensive and preparing the path for the fiber cable can be very expensive, i.e. digging up asphalt to install fiber duct.
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