FCC says cities should be free to run decent ISPs. And Republicans can't stand it A decision by the FCC has opened up a partisan chasm by quashing US state laws that hamper the rollout of city-owned broadband. The commission declared on Thursday that laws passed in North Carolina and Tennessee were unfair barriers to broadband deployment. In so doing, it has put itself in the middle of two classic American …
I think corporations have a right to be concerned if tax revenues are being diverted from cities to run municipal ISPs. However, if these ISPs are being supported by only subsciption fees, then the corporations can shut the hell up as far as I am concerned. Let's face it, as the last round of "worst company in America" showed, Comcast (Largest U.S. ISP) and Time-Warner Cable (3rd largest) have both built pretty terrible reps for customer service.
It's not just the ISPs proper that are scared -- it's a fairly big issue for MacDonald's and Starbucks too. If you do any amount of travelling, a recognisable chain which advertises free wifi in all its outlets can be very appealing. It's certainly easier than going into an unknown local café and asking about wifi, particularly if you don't know the local language.
A knock-on effect of keeping municipal internet services fee-paying, is there can be no free municipal wifi. Municipal wifi is a great leveller, because with it, we know we can get online literally anywhere, so we don't head to the multinational chains....
I can kind of understand the municipality issue. If I had invested money in building out a network I would be upset if a local government used it's advantages to undercut me. However, I have seen first hand how these companies operate, they do the absolute minimum and charge a fortune safe in the knowledge that is too expensive for any serious competition, hell they frequently didn't actually build their own networks but buy them from companies bankrupted by building them. So frankly if these odious little thugs are upset by the challenge then all the better. Free market types are always saying that the market will always adjust to ensure the best performance, municipal ISPs ARE the adjustment. If they had invested in a quality service with periodic upgrades and realistic pricing then there would be no public desire for a solution and therefore no political will to provide one.
Free market ideology only really begins to work when there is a sensible level of competition. The idea of PUC's regulating commercial monopolies is ludicrous, the companies just buy off the PUC and do what they want. Whilst capitalism is probably one of the better ideologies out there it does need a level of effective regulation or it just descends into robbery.
Some might say that in the world we now live in, the internet is infrastructure. And who is responsible for a lot of that? Governments. It seems that allowing a local government to roll out infrastructure and then wholesale it to commercial ISPs sounds like a good plan. The local government runs the local infrastructure, various ISPs rent capacity to service their customers.
Big ISPs, little ISPs, they've all got the same chance to compete with that setup. Of course the big ISPs won't like that because the little ISPs can and will compete them out of the local markets with lower prices (through lower overheads) and quite probably better customer service.
That may be true in other parts of the world, but in the United States, much of the infrastructure that delivers electricity, natural gas, telephony, and cable, along with most rail lines and even some roads and freeways is in fact private property.
In the case of electricity and telephony, they are underpinned by generous public tax dollar support in addition to the fees paid by subscribers. And just like cable, electricity and gas comes from a single providers. In a state like my own, we have Centerpoint Energy for natural gas and Xcel Energy for electricity. They are publicly traded companies that pay dividends, just like Target or Walmart. The difference for them is that they are forced to have rate increases reviewed by a public commission, mostly because they are true monopolies. They are allowed to temporarily charge a rate increase while approval is pending, meaning they get an interest-free loan in the case of the increase being rejected or pared back and they have to send out refunds to customers.
It's all very strange here, often because of this almost allergic reaction to the idea that governments should be doing anything at all, oftentimes on the grounds that government is not responsive to market forces, wastes money, yadda yadda yadda. Never mind that a company in a monopoly position has the exact same drawbacks as cited by the opponents of government. They also have the added bonus that they don't have to worry about being thrown out of office by upset citizens through a voting process. That's why government intervention exists; short of fraud or other criminal behavior (which these days only results in a few fines that are a fraction of the illicit profits), there is no other mechanism to make a monopoly responsive to the market. Threat of citizen revolt through government action is the only thing that could possibly work, and even that is a minor threat at best.
@ Eric Olson: All mostly valid points, but lacking one significant perspective: the highly-regulated utilities that you mention keep their status because of their highly regulated nature, i.e. the regulatory state provides an insurmountable barrier to entry for any competition to exist. This is precisely the threat posed by Net Neutrality that few seem to want to address. Rather than keeping things "fair", the regulations will introduce new barriers to entry that prevent small operators from chipping away at the slow-moving, unresponsive monopolies.
Given than the regulations came well after the creation of those utilities, I don't think your point comes to play here. There are plenty of deregulated states in the US, and they have higher consumer costs. Additionally, the illusion of competition is just that; Texas is deregulated, but because the "incumbent company" built the lines and still owns them, that means other electrical providers only have to "rent" the lines, yet somehow even without the maintenance costs associated, they are providing power at a more expensive charge than others. As everyone requires power to function in today's economy, to be the "cheapest" option just means you raise your rates more slowly than the other guys. Unlike optional goods and services, you can't really price a consumer out of your product because they will always want it.
So now Texas enjoys the illusion of choice, pays higher rates than many other consumers in the country, and doesn't have any more reliable or useful of an electrical grid that a regulated state.
"Rather than keeping things "fair", the regulations will introduce new barriers to entry that prevent small operators from chipping away at the slow-moving, unresponsive monopolies."
Things are already unfair. The Telcos have almost finished reforming into AT&T and virtually all CLECs legislated out of existance.
State PUCs have systematically handed more monopoly powers to telcos in exchange for promised upgrades which didn't materialise - then repeated the cycle without asking why the last promises hadn't been kept.
When private companies are handed regional monopolies by governments, then they are effectively quasi-governmental organisations. That they have a captive market they can rape-and-pillage is no different to the days of the 19th century railway robber-barons.
"In the United States, much of the infrastructure that delivers electricity, natural gas, telephony, and cable, along with most rail lines and even some roads and freeways is in fact private property."
Private property generally allowed to be built by the govt and given monopoly govt protection from competition.
That's state control no matter how it's painted. In fact the USA is amongst the most regulated, anticompetitive environments on the planet with a total fixation on short-term profit over long-term stability The predictable result on infrastructure is starting to play out whilst the robber barons pull profits in ever tighter.
Ken Lay was far from unique or the last of his kind.
The feds do in fact regulate food, e.g. via USDA inspections. And a good thing too. Otherwise big companies like Tyson could continue poisoning its customers with impunity in their quest for profit at any cost to the rest of us. Yes, much of our power and water infrastructure is privately owned. The question is: has the public been well served by that? Tillis and those who oppose competition are betraying their constituents in service to their real masters -- commercial forces that think totalitarian China is a capitalist paradise. Sometimes I wonder, who really won the Cold War? Certainly not freedom and democracy (because monopolists cannot stand either free markets it consumer choice).
Excellent point there Gall, you're familiar with Wickard v. Filburn. Sooner or later folks who claim the free market does/doesn't work will realize that we don't have one and we likely never will.
Food is very heavily regulated at a federal level. Leaving aside the inspections and record keeping that goes along with being organic, we have to maintain comprehensive records of manure use and comply with new rules about time between use and harvest, as well as water and soil sampling throughout the year. This is on top of all the regulations governing slaughter , storage, transport etc.
Much of the regulation is requested by (paid for) by large agricultural companies to increase the overhead of smaller farms making them easier targets.
Heavily regulated... maybe. Enforced only when people get sick or die.
Also adding to the confusion/gaps is that the USDA handles most animal-sourced products, assuming they aren't processed into additional products for consumer sale while the FDA actually is responsible for most other agricultural products like crops, in addition to most of the processed food on the shelf. And yes, there are gaps. Lots of them. Did I mention that any product from overseas is supposed to be checked by the FDA, meat and everything else?
It's a mess and one of the absolute failings of the nation. Lots of laws and rules on the books; most of them are rarely enforced (USDA grading is voluntary and the organic label is something pawned off on non-profit and for-profit groups adhering to USDA rules, which can and do include items that most people would not consider organic, like many pesticides that have been around for decades).
Are you a farmer? Perhaps it varies state to state but inspections do occur without deaths.
You are right about gaps, not so much about the pesticides with organic. The rules are very strict, some larger organic operations use BT but we don't, it is allowed on organic as it is essentially an organic method of control although personally I don't like it. Various neem based sprays are all we have used, crop loss is minor so we haven't been pushed to look for anything else.
Regulation could be more effective and also less onerous for sure, but special interests will ensure that doesn't happen. There most certainly is proactive checking, especially with the new anti small farming laws.
Yep this is a move towards deregulation. ISP prices are quite higher than they should or could be, I'm all for it being a totally competitive market.
These municipalities are providing service at a profit? Well, then they are being competitive in the market, the cable and phone companies will just have to compete versus the relatively uncompetitive duopoly we have now in some locations. (Cable co and DSL co.... the cable companies don't share their cable infrastructure at all, your ISP is the cable company. Some phone companies have to allow 3rd-party DSL service on their lines... CenturyLink does not, and AT&T and Verizon don't where they've replaced the copper with fiber. )
(1) Under the telecom act of 1996, phone cos had the option to either A) open up their lines to competition, but be able to compete outside the markets they hold physical copper and fiber to provide nationwide service. or B) Maintain their monopoly but not compete outside their home markets. Qwest was the only telecom I know of who chose option B instead of option A (Qwest is now Centurylink.)
Deregulation would be a good thing, so long as it doesn't morph into protectionism, or even worse enable re-monopolization.
The AT&T breakup was a hard fought victory for consumers. Decisive action by government (the DoJ and the courts), opened up telecom in the US in ways it had never before been. You could actually go to the store and buy your own telephone handset instead of leasing a device designed in the 1930's from Ma Bell! You finally had a choice of both long distance and local phone service providers, and could play them off each other to get the best price AND service. But there were some down sides. Like when the "Baby Bells" where given a pass on antitrust law and allowed to become "Super Bells", squeezing out competition and lording it over consumers. Or where Worldcom was allowed to purchase. MCI and drive it into the ground due to ignorance, incompetence and greed. Those who don't learn from the mistakes of the past are likely to repeat them.
Allow governments to run fiber/copper, but not run the ISP. It has to be leased at a standard price to any interested third party, under the proviso that they have to offer the same pricing to everyone on their system (i.e. no charging people in town where cable also compete less than people who live outside cable's reach and have no broadband option)
Wait, what am I thinking, there's no way democrats and republicans will compromise on anything!
I'm sure if some tea partiers had their way, they'd make it illegal for cities to provide water, sewer, trash pickup, or maybe even roads free to the public. "Tax dollars shouldn't be confiscated to provide services that private businesses can provide better!"
Allow governments to run fiber/copper, but not run the ISP.
There's ice storms, tornadoes, and other things wiping out many lines at once. Private companies bring in out-of-state crews to restore service quickly. Municipalities would add it to the to-do list and prioritize.
I'm sure if some tea partiers had their way, they'd make it illegal for cities to provide water, sewer, trash pickup, or maybe even roads free to the public.
I pay for my municipal water/sewer/flood service. Nearby cities have private companies, noticeably prompt this winter fixing busted water mains.
Several private companies offer trash pickup at reasonable rates, per bag or dumpster. With courteous and quick customer service, and no labor strikes.
Roads aren't free anywhere, according to the gas taxes and vehicle fees I pay.
"Tax dollars shouldn't be confiscated to provide services that private businesses can provide better!"
Sing it, brother! Even for municipal services, private companies can do it better. And right now cellular carriers are cutting some great deals. What'd I pay if I had as many options as in the Ma Bell "public utility" days?
"Tax dollars shouldn't be confiscated to provide services that private businesses can provide better!"
Fine. But which services are those? Health? Education? Power? And what's the definition of better? Cheaper? With more profit?
It's when you start trying to define what the soundbite means that you run into trouble.
I'm all for testing this hypothesis... I don't believe local government could be much worse than the ISP duopoly around here.
Thankfully the way has been cleared to find out which of us is correct. I don't understand why the opposing side is so against letting the invisible hand of the market sort it out... Oh right, Bailout Mentality.
Even for municipal services, private companies can do it better.
And therein lies the rub: "can" is not the same thing as "will." The reason we have laws against and governing monopolies in this country is because when we have had them in the past, they have ended up being a detriment to the public. For example, the argument that business will do it better is hardly borne out in the specific case of internet access for the masses. Private companies have a duty to their shareholders, not the public. If they are not forced to provide a service to the public that is not as profitable as they would prefer (not even "not profitable" but "not as profitable"), they will cherry pick their customers and blow off the rest. To claim otherwise is to disingenuously ignore an overwhelming amount of historical evidence.
I am not saying that government will do it better. I am saying that business without government oversight and government intervention is a self-centered beast.
Not sure where you live, but intra and inter-state mutual aid is something that has been a part of disaster relief for at least a century. In fact over the last couple of weeks state crews from PA deployed to western NY state and were reportedly readying to go all the way up to MA if needed. Both NY and MA have done the same for their neighbors numerous times in the past. Sometimes they wind up going even further afield. Several years ago state crews from the Northeast went South to aid in snow removal, and the flow of public manpower and money from other states to disaster zones is almost an annual affair when it comes to tornados, hurricanes and earthquakes. Governments can do quite well under such circumstances, thank you -- so long as they're not impeded by partisan bickering and wrongheaded notions like "running government like a business" (ask a former head of FEMA how managing the Arabian Horse Owner's Association compared to providing disaster relief for those caught up in the wake of Katrina).
> Allow governments to run fiber/copper, but not run the ISP.
Why not run ISP's? What is so fundamentally wrong or unbearable with the concept of state or local governments providing a public utility service?
The only realistic way of forcing monopolistic corporate ISP's into competition is by creating competition. Since it has become perfectly clear that Time Warner Cable and Comcast have no intention of competing with each other - they want to get married - someone else has to create the competition.
> What is so fundamentally wrong or unbearable with the concept of state or local governments providing a public utility service?
The concept alone is not an issue. But the reality is that governments always punch below their weight when they try to 'do stuff' for the public. It's a stupid way for society to apportion its resources when acquiring utilities. This was proved by the Ma Bell breakup and numerous other examples.
Trouble is, govt do-gooders always assume that they (if given a chance) will do it much better this time. And every time they get the chance, we have to read about the wastage, scandals and corruption for years after.
> Trouble is, govt do-gooders always assume that they (if given a chance) will do it much better this time.
You are missing the point - intentionally or unintentionally - I do not know which.
This isn't about whether or not a state or local government is better at providing Internet Services as a public utility. It is about creating some degree of competition where none exists, currently, and has no chance of ever materializing.
Do you have any concrete examples of why, or how, a local or state government providing - or contracting - an alternative Internet Service as a public utility would be worse than what the private industry offers now - which is an inherently corrupt monopoly?
I am interested in concrete, factual examples, and not general-purpose slogans about intangibles such as "governments punch below the belt" or "stupid way of apportioning resources" or "scandals and corruption". All these intangibles - which are direct quotes from your post - apply to the private industry just as well, do they not? Are private corporations never corrupt, and are they never caught in scandals? Private corporations never waste money and resources on failed projects?
The breakup of AT&T was successful - while it lasted. It allowed for Sprint, MCI, Qwest, etc. to exist. It lowered prices on local and long-distance landline telephone calls. It also allowed everyone to buy a landline telephone at a local store, subject to price competition from different manufacturers, instead of being forced into leasing a telephone from AT&T, and paying a monthly fee for the telephone lease, with no other choice.
Maybe not in ISPs, but I'll give you two concrete examples of the state taking an industry away from the private sector: Police and Firefighting. The reason for both industries were the same: private enterprise found it more lucrative to turn them into protection rackets ("Shame what could happen to your business, eh...?")
IOW, there are somethings for which money is NOT the best angle. When it isn't, then it's a possible thing for the state to run because the state isn't as concerned about money as private enterprise. And the "overhead" we lose becomes the price we pay for, say, a guaranteed minimum level of service.
"What is so fundamentally wrong or unbearable with the concept of state or local governments providing a public utility service?"
If you lived in Detroit, would you be happy for your internet service to be on a list of priorities which included police, firefighters' pensions and schools, all funded from a dwindling tax base and represented by powerful, organised groups? On the plus side you can have the government force poor people to subsidise your Netflix habit whilst they use only email and jobserve, but on the downside you might be cut off and left with no option.
> If you lived in Detroit, would you be happy for your internet service to be on a list of priorities which included police, firefighters' pensions and schools
Police, Firefighters, Schools and Pensions are not public utilities. I.e. it's a comparison between apples and oranges. Different requirements, different technical specs, different actors.
The closest comparison between Internet Service and another public utility offered by a state or local government would be something like water, electricity or gas. Or POTS. Or maybe a highway system.
Do you know why every single town in the US of A - no matter how small - has electricity and POTS? Or why you can drive your car or truck between any two towns, no matter how small?
Do you know why railway and train infrastructure - also in the US of A - is so terrible, backwards, under-developed, in shambles and third-world-country-like, today?
"Do you know why railway and train infrastructure...is so terrible...". I'm not sure how you're using this example. But yes, they are worse off because they still don't have your tax dollars. The railroad has used state funded tax dollars for roads as a defense for many financial costs (understandably). The roads are in "better" condition, or at least in a perpetual state of up keep to generate more and more tax dollars. So in the very, very particular case of why the railways are worse off than the roads is because the roads are funded and regulated by a government entity (state typically).
But the railway might turn out to be better off. The railway can uproot track at any given time and replace it with a commercial roads. Commercial trucks are just too abundant on the roads today. Sadly, the worse case is that you're killed by a commercial truck. The best case, which seems to be the reality, is that you'll waste months of your life span waiting on them.
> I'm not sure how you're using this example.
Because railways in the US were private sector property until May 1971. Starting in the late 19th Century, and until 1971, railroads were owned and operated by private, for-profit corporations. Since 1971, Amtrak operates as a for-profit public utility coroporation. Amtrak acquired the scraps left over by the private corporations which owned the railroads, tracks, train stations, infrastructure, etc.
Perhaps you can explain why between the mid-1930's and 1971, these private railroad corporations - which owned these railroads - continuously and deliberately dis-invested in their own assets, dismantled tracks, reduced service to the point of non-existent in some areas, demolished train stations - some of which were extraordinary architectural designs - and left the entire railroad and train infrasturcture in the US in a state of disrepair.
That's the private, for-profit corporation at work for you.
Could this strategy of disinvestment possibly have something to do with the influence of Big Car, Big Oil and Big Aero?
As for the rest of your post, I found it difficult to read and somewhat incoherent. I did not understand your point.
Maybe it's because railways don't make money and aren't economic except in some bulk markets. If you "invested" billions of tax dollars in them that wouldn't change the situation regarding the economics, only you would disguise the lack of profitability by wasting tax dollars.
Quite why people have this fake nostalgia for railways puzzles me. They started as a more efficient means of transport replacing canals, and before canals there was only very limited land based (as in inland rather than coastal) transportation possible. In turn, rail has been displaced by technological improvements that enabled rubber-tyred trucks to be more economically efficient; largely because they are far more flexible and reduced transport times and handling requirements. Trains can and do dominate certain sorts of loads, primarily bulk point to point, but for smaller loads rail's advantages (fuel efficiency, ability to handle very large loads, etc) are outweighed by its deficiencies (inflexibility of timing and especially inflexibility of load and unload points).
So private enterprise undoubtedly took the correct economic decisions about rail. Publicly owned railways have been an absolute sinkhole for public funds for many decades, I just don't understand why so many seem happy to keep pouring money down that same drain. Maybe it's because, with rare exceptions, all the pro-railways people think it's other peoples money they are spending, not theirs.
"Publicly owned railways have been an absolute sinkhole for public funds for many decades, I just don't understand why so many seem happy to keep pouring money down that same drain."
The economics of urban rail is simple: It's cheaper to pay for them than it is to provide transportation infrastructure for that many cars - even if parking the things was left entirely to private interests the traffic chaos would make cities virtually unnavigable.
non-urban transport is for the most part only viable because of large-scale hidden subsidies. A single 40-ton truck generates the same amount of roadbed damage as nearly 10,000 cars at the same speed but the fees truckers pay for road use come nowhere near covering this discrepency.
"Police, Firefighters, Schools and Pensions are not public utilities. I.e. it's a comparison between apples and oranges."
It wasn't a comparison at all! When your internet is funded from the same budget as those other things, they all have to fight for the same money, which was the point. Whereas if you are allowed to buy stuff yourself then there is no risk of it being diminished for political reasons (they don't nationalise the restaurants, for good reason). There are cities which have chosen to cut back on police, road maintenance and even street lighting. If they could choose not to upgrade your internet connection the same way they could choose not to pay into firefighters' pension schemes, you'd still be on dial-up.
You missed the /sarc tag. Or are yoiu really that stunningly ignorant of what the "Tea Party" (a large and largely centreless grouping with no single set of policies BTW) really represents.
And separately, the key to this is competition. The way to provide consumers with better service and better pricing is to ensure, as far as is reasonable, that competition can occur. That may mean compulsorily separating the physical layer from the services (and maybe regulating the underlying monopoly, but with better wireless and separate cable providers this may be redundant), but certainly means that barriers to entry should be removed.
The US is unfortunately full of crony capitalism enabled through their political system. That is by no means the preserve of any one political party, it seems to be a perk of power and is widely abused. Also unfortunate is that the federal agencies like the FCC are just as crony friendly, just different cronies. As others have pointed out, the whole "net neutrality" movement is going to raise barriers to entry and will, if the telephone system is any pointer, stifle and meaningful innovation and expansion in the name of ostensibly making the service "more equitable". A means to work towards the lowest common denominator of internet access. The political divide is because the Democrats currently control the FCC (3:2 vote was along party lines) so "their" cronies can benefit the most and feed the money back to Democrats seeking electoral funding.
Changes are needed, but I don't see this crony friendly regulation as a useful move.
Indeed, when that Republican (whatever that is) says ". . . this issue goes to the core of more important principles: the foundations of the US economy and free enterprise." he appears to not be listening to himself. Leaving alone the misunderstanding of "more important principles", he sounds like he does not wish well on the US economy and free enterprise. I think those guys are just saying screwball things because they can't say what they really mean, since it would make them look bad. Now they just look bad because they look stupid - but a lot of people won't notice or care about that.
...if what is occurring is the removal of regulations...
Politicians lie. Bureaucrats lie. Governments lie.
When was the last time an unelected bureaucrat wanted less power?
There's an unreleased 300+ pg book of changes. Guaranteed there are new "watchdog" agencies to enforce "net neutrality".
Guaranteed there are more regulations coming than are "removed" on paper.
Guaranteed the government will be grabbing more power for their unaccountable apparatchiks, while telling you how government has graciously granted you some additional freedom.
Count on it.
Private companies lie as well. And big private companies often have big bureaucracies full of (wait for it) unelected bureaucrats, many of whom want and try to accumulate more power. Basically when you are trying to defend Comcast/Xfinity by pointing to problems in government you simply look ridiculous.
It never was about creating "free market" competition amongst providers. The US Telephants love the status quo - monopolistic power with no competition and no possibility of competition.
Words - such as "free market" - have different meanings depending on who's uttering them. See Lewis Carroll - Through the Looking Glass - Humpty Dumpty.
'When I use a word,' Humpty Dumpty said, in rather a scornful tone, 'it means just what I choose it to mean — neither more nor less.' [ ... ] 'The question is,' said Humpty Dumpty, 'which is to be master — that's all.'
In principle, the threat to the free market is that municipalities will operate the local ISP at a loss, subsidizing it with tax revenues and precluding or destroying competition by private sector companies. This would be an approximate equivalent to a private company running at a loss to drive out competition so as to obtain a more profitable monopoly. Whether this would happen in practice is uncertain, although provision of "free" wifi in Wilson, NC suggests it is a possibility. One of the options in parts of the Salt Lake City area is a high speed wireless service that undercuts Comcast's price and, I believe, betters Centurylink's speed in some areas.
Nonetheless, a decision by residents to tax themselves to provide a municipal communication infrastructure certainly should be allowed. Such undertakings may not succeed - the Utah UTOPIA multi-city consortium has not been a great success - but if the taxpayers want to do it they should be allowed.
The sticky point here is whether and under what conditions the federal government, whether or not through the agency of the FCC, should undertake to change or invalidate state laws that govern the municipalities. It may be worth recalling that power can be used for either good purposes or bad. In the US we don't have to go back too far in time to find examples of both.
"In principle, the threat to the free market is that municipalities will operate the local ISP at a loss, subsidizing it with tax revenues and precluding or destroying competition by private sector companies."
Can not a conglomerate or other large firm be able to perform similar chicanery by using excess revenues from captive markets to offset any losses due to predatory pricing in competitive markets? That's a big problem upstarts have against incumbents: the incumbents can leverage their size to smother the competition.
The Register 
Biting the hand that feeds IT
Copyright. All rights reserved © 1998–2024
