TELECOM Digest OnLine - Sorted: Re: Broadband Competition Must Surely be Working

Re: Broadband Competition Must Surely be Working
23 Aug 2005 23:16:20 GMT

In article <>,
<> wrote:

> wrote:

>> That is a Straw Man argument. The phone company DSL revenue was/is
>> generated from existing infrastructure that was developed with the
>> benefit of government sponsored monopolies and subsidies. They have an
>> existing revenue and equipment base to support the expansion to
>> fiber. Also, the cable companies that you reference were deploying in
>> a new non-telecom market, also with monopoly protection. It wasn't
>> until recently that they offered Internet or telecom services (I know
>> when they did it, I had one of the first cable Internet connections in
>> the area).

> I don't agree. The "existing infrastructure" you speak of consisted
> of obsolete technology in both switching and the local loops. It
> worked fine for POTS and low speed dialup but it was no good for
> higher speed work. The phone company had to invest in new facilities
> to support broadband. This investment was done in a competitive
> marketplace.

I didn't say anything about the capability of the existing
infrastructure. What I meant was that they had an existing revenue
stream based on that infrastructure to support their expansion, as
well as buildings and network facilities.

> The cable companies had to compete against plain old rabitt ears, high
> gain rooftop antennas, and satellite TV.

Not much competition there. When the cable companies first deployed
satellite TV consisted of an 8' dish in the back yard and rabbit ears
pulled in a couple of local stations with serious ghosting.

> Obviously rollouts in different areas occured at different times. But
> generally consumer broadband service was offered on cable and phoneco
> at roughly the same time.

And in both cases used the existing infrastructure developed and
maintained under a government sponsored monopoly.

> I still maintain that the capital cost to lay fibre optic, esp when it
> can be done selectively to areas with the best customers, is not
> unsurmountable. The cellphone world was supposed to be two companies,
> but quite a few have built networks, and quite a few more sublet
> services from those networks.

There was a lot of fibre laying activity a few years ago. All of those
companies a defunct now. The problem isn't so much that as generating
revenue from it. In the case of Verizon, they're migrating their
existing telephone customer base onto the fibre as well as existing
and new Internet customers. So the cost is offset by more than just
the Internet revenue. And as they shift their income to the fibre
circuits they also shift their costs, since they're physically pulling
the copper wires whenever they connect fibre. Any new competing
company creating their own infrastructure from scratch would have to
take customers away from Verizon, which is much harder to do.

The problem is that it's extremely inefficient to have multiple
infrastructure providers. That was shown in the early days of the
power companies and the phone companies, and is why we have government
sanctioned monopolies in the first place. Even when they tried to
recreate competition in the power industry it involved the power
itself, not the infrastructure that handled local distribution of that

> I understand what you're saying -- since Verizon FIOS is deregulated,
> they can do as they please, just as any other business may require
> exclusive packages with their customers. (I don't think a nice fancy
> restaurant would appreciate it if I came in, ordered only a cup of
> coffee, and then ate a pizza I brought in with me.)

An interesting analogy. If I may extend it a bit, what you're
essentially saying is that if Verizon says,"We offer our own VOIP
product, so we're not allowing Vonage to connect over our fibre
circuits" then that's OK, because if Vonage wants to compete then they
should build their own infrastructure to run over.

You see the problem? The people who own the infrastructure shouldn't
be able to control who has access to it or what flows over it. The real
mistake was affirming that priviledge for cable, as it set a precedent.
The cable system, also built with the protection of a government
sponsored monoply, was/is the only serious infrastructure competition.

> There is nothing stopping the cable company or a new business from
> laying their own fibre or whatever network and offering their own
> service, undercutting Verizon's FIOS prices. If Verizon FIOS is
> priced so unfairly high, someone else should be able to undercut them
> (presuming there is a demand by customers to use their own ISP.)

There's nothing inherently wrong with Verizon's prices, other than
they don't seem to be going in the direction the government says the
deregulation should be moving them.

> The other alternative is to go back to regulation and control the
> prices. Then we're back to the old Bell System.

We're almost there, anyway, because of consolidation in the telephone
industry. The difference is that we'll have the monopoly back, but not
the control and regulation. :-/

A more appropriate analogy would be if the local farm coop and food
distributor (Verizon) contracted to exclusively provide product to one
restaurant (MSN). You're free to run your own competing restaurant,
all you have to do is find and buy enough tillable land to create your
own farms and establish your own food distribution network. There's
certainly nothing to prevent you from doing it.

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