A great future behind them
For years and years (back to 1998 at least), the telcos have been saying that if we only gave them enough incentives and enough freedom, they'd install fiber-optic lines in the U.S. Trusting in our Lucy-and-the-football way, we gave them concession after concession — undoing unbundling, undoing interconnection, and (finally) giving them the same regulatory treatment as traditionally proprietary cable systems.
The network neutrality battle is yet another plea for concessions by the telcos. Give us incentives! they cry. But why should we believe them this time? Why would this next step - monetizing their networks - give them them any more oomph than they've had so far? After all, with the exception of Verizon the Bells are spending less on capital investment than they're claiming as depreciation. Which means, in translation, that they're already spending less than the assumed cost of maintaining their current networks. No oomph to speak of.
Why should we trust them now? We've already given them incentive after incentive, access to rights-of-way (presumably in exchange for common-carrier behavior, as Dan Berninger points out), and the regulatory shirts off our backs.
Similarly, the cablecos often claim that they need incentives in exchange for their $100 million investment in broadband. But that investment happened years ago. Why would making them comfortable now make a difference?
The incumbents' incentives arguments are very similar to those highlighted in the copyright wars, and particularly in the Eldred battle. “Give us incentives or we won't create!” was the cry then. The economists' amicus brief in Eldred made the point that the Sonny Bono Copyright Term Extension Act would provide no significant incentive to create new works.
Same thing here: given what we've already been through with the telcos, and the extensive concessions they've already obtained, there is zero evidence that they'll magically do better with broadband penetration if they win the net neutrality fight. They're asking us to take a leap of faith and believe in their property rights argument, but we know there will be significant social costs if we give in — and we have no reason to believe that the additional incentive will make any difference.
Thanks to Dave Burstein for talking to me — he has some stories to tell about SBC that I won't reveal here, so watch for his next newsletter.
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2 Responses to “A great future behind them”
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Where common carriage means “no discrimination between destinations within a service type”, it would be reasonable to start charging telcos who don't provide this for rights of way. Rather than compaigning for network neutrality, you can then campaign for a telco tax, which should find plenty of happy takers in Congress — there's no shortage of public debt to service. In fact, reframing this around “no right-of-way subsidies to telcos” makes a lot more sense than “network neutrality”.
But discriminating between classes of application (or even specific applications) is a different think. Lumping it into “common carriage” doesn't make sense to me. And if they want to price discriminate between them, what's the big problem with sending out “Monopoly rents over here — come and get it!” price signals? Why pass laws that entrench the status quo forever by undermining the scope of possible competing business models that may rely on such application price discrimination?
And what if you assumptions on how networks are run and finances slowly become obsolete, just as the definitions of the '96 Telecom Act became? (Think of how different Skype Zones are from traditional network payment methods, for example — should this be illegal? I don't think so.)
The idea that the telcos have zero competition (where there's no cable, for example) isn't true, because there's always (at a price) the option for users to collectively revolt and built their own access network. The proposed neutrality regulations are a tonic that soothes the pain of monopoly and ensures that the level of local political outrage never reaches a critical action threshold.
Don't throw me into the neutrality patch, Mr Fox!
I'm assuming that when you say the telcos pledged to “install fiber optics” you meant to the home. The telcos have installed and do fiber optics to many businesses, and in some cases as part of the normal build-out.
I don't think in the current climate that a 'telco tax' will get much traction, either, even though its a good idea.
I think the Paradox of the Best Network describes a good way to deal with the telco problem as it relates to the Internet. Essentially, the paradox is that the best network is the one with the fewest features. The is actually true, since with the fewest features, bits move more rapidly and efficiently. I can vouce for this as accurate as someone who works in data communications configuring routers and switches for VOIP among other things. The Paradox of the Best Network referenced above also points out why the Internet is such a threat to the telcos by reducing them to simple bit-movers, something they have begun to realize is a mere commodity, after 30 some years of doing it. Also, having just watched the Internet go whirring by over 'their' wires, they now want in on the dot-com boom of years past. The paradox of the best network is a good read.
The paradox also somewhat indirectly supports the idea of 'fail fast' - never bailing out a telco, since doing so preserves investment in out-dated technology and out-dated business models. The faster they fail, the faster new investment in new technology can happen, and the faster new business models that work with new technology can take hold and spread.