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Broadband left out of infrastructure goals, and how the FCC wants to fix it

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Re: Broadband left out of infrastructure goals, and how the FCC wants to fix it

#11

Post by rayiner »

theandrewbailey wrote: post #5

I'm cynical that this will bring meaningful improvement. Government has given money to telecoms before, and it's only brought us mediocre service, and brought executives huge paydays. Where's the fiber, Verizon? We (NJ and PA[0]) gave you huge tax cuts 20 years ago for universal fiber service. You and NYC agreed to provide everyone with fiber.[1] Meanwhile, AT&T keeps merging with promises that are meaningless or eve…

I think offering subsidies to spur private deployment of broadband is a terrible idea. If the market doesn't want to build it, we should think hard about whether we should build it, and if we conclude we should, the government should just build it.[2]

That said, the "huge tax cuts" are fictional. Teletruth's idea of a "tax cut" is a company being able to charge any more money than they would have under regulated rates.[1]

The "billions" in "tax breaks" are from the companies charging higher rates to their own customers, alleged cross-subsidizing between various services that were previously regulated at different rates, and accelerated depreciation of infrastructure (which came at a time when major parts of the network infrastructure were upgraded to fiber, even if the last mile remained copper).

It wasn't the government writing anyone a check, or even giving any company a special tax credit.

Also, this bit of conspiracy theorism exactly inspire confidence in the calculation methodology:

> Recently, (April 2015) a TV media company decided to not run an investigation we had worked on together about Verizon’s failure to properly upgrade the networks by 2015. After an interview with Verizon by the company, the word ‘liabilities’ entered their vocabulary and they doubted that there was a tax break that came with the Chapter 30 Pennsylvania broadband plan.

[1] That is, of course, one of the purposes of deregulation. Governments chronically set regulated rates too low. For example, environmental groups estimate that water/sewer rates nationally are about half of what they should be in order to account for the scarcity of water and the need to maintain and upgrade aging infrastructure. But no elected PUC official wants to raise grandma's water or telephone rates.

[2] And if the government does build it, we should ditch the emotional appeals for FTTH and rely heavily on sensible, cost-effect point-to-point wireless.

Re: Broadband left out of infrastructure goals, and how the FCC wants to fix it

#12

Post by baldfat »

rayiner wrote: post #11
theandrewbailey wrote: post #5

I'm cynical that this will bring meaningful improvement. Government has given money to telecoms before, and it's only brought us mediocre service, and brought executives huge paydays. Where's the fiber, Verizon? We (NJ and PA[0]) gave you huge tax cuts 20 years ago for universal fiber service. You and NYC agreed to provide everyone with fiber.[1] Meanwhile, AT&T keeps merging with promises that are meaningless or eve…

I think offering subsidies to spur private deployment of broadband is a terrible idea. If the market doesn't want to build it, we should think hard about whether we should build it, and if we conclude we should, the government should just build it.[2] That said, the "huge tax cuts" are fictional. Teletruth's idea of a "tax cut" is a company being able to charge any more money than they would have under regulated rate…

The really maddening part is that if a city or town decides to do their own network because the private companies has left them out they get sued or new laws are passed to kill the project.

A) They get money from the government

B) They sue local governments that try to do their own networks

C) Then FCC gives more money and profits with less competition and less free markets

Re: Broadband left out of infrastructure goals, and how the FCC wants to fix it

#13

Post by baldfat »

aanm1988 wrote: post #8

> Pai is proposing an ambitious program whereby the FCC could expand corporate subsidies for building networks while scaling back regulations that, he said, deter private investment All hail our corporate overlords. We give you the offer of more money (in the guise of helping consumers of course).

(sarcasm) Yeah now my paycheck isn't going to welfare and Unions. The real enemy of the middle class /sarcasm

Re: Broadband left out of infrastructure goals, and how the FCC wants to fix it

#14

Post by rayiner »

baldfat wrote: post #12
rayiner wrote: post #11

Earlier quoted context omitted.

I think offering subsidies to spur private deployment of broadband is a terrible idea. If the market doesn't want to build it, we should think hard about whether we should build it, and if we conclude we should, the government should just build it.[2] That said, the "huge tax cuts" are fictional. Teletruth's idea of a "tax cut" is a company being able to charge any more money than they would have under regulated rate…

The really maddening part is that if a city or town decides to do their own network because the private companies has left them out they get sued or new laws are passed to kill the project. A) They get money from the government B) They sue local governments that try to do their own networks C) Then FCC gives more money and profits with less competition and less free markets

I think the lawsuits attempting to shut down those networks are stupid. At the same time, municipalities are the worst possible level at which to build those sorts of networks. Here in D.C., the Metro tracks are in such dire shape that trips scheduled for 25 minutes take 40+ due to train slowdowns. Last summer, tracks were literally catching on fire.

In any case, the vast majority of people live in states where municipalities are not banned from building broadband networks. Munipalities don't do it because they have no money. Is Baltimore going to spend a billion dollars building fiber to every household when it's got a billion-dollar pension fund shortfall? Verizon spent over $3 billion to wire up half of NYC. Was New York in a position to do that itself, when it's got a $46 billion pension liability, and a $14 billion liability in the MTA?

Re: Broadband left out of infrastructure goals, and how the FCC wants to fix it

#15

Post by AnthonyMouse »

rayiner wrote: post #14
baldfat wrote: post #12

Earlier quoted context omitted.

The really maddening part is that if a city or town decides to do their own network because the private companies has left them out they get sued or new laws are passed to kill the project. A) They get money from the government B) They sue local governments that try to do their own networks C) Then FCC gives more money and profits with less competition and less free markets

I think the lawsuits attempting to shut down those networks are stupid. At the same time, municipalities are the worst possible level at which to build those sorts of networks. Here in D.C., the Metro tracks are in such dire shape that trips scheduled for 25 minutes take 40+ due to train slowdowns. Last summer, tracks were literally catching on fire. In any case, the vast majority of people live in states where munic…

> Munipalities don't do it because they have no money.

Why isn't it self-funding? Issue a bond, pay for the network, lease it wholesale to competing ISPs, use the lease money to pay back the bond over time. Zero tax dollars.

Re: Broadband left out of infrastructure goals, and how the FCC wants to fix it

#16

Post by rayiner »

AnthonyMouse wrote: post #15
rayiner wrote: post #14

Earlier quoted context omitted.

I think the lawsuits attempting to shut down those networks are stupid. At the same time, municipalities are the worst possible level at which to build those sorts of networks. Here in D.C., the Metro tracks are in such dire shape that trips scheduled for 25 minutes take 40+ due to train slowdowns. Last summer, tracks were literally catching on fire. In any case, the vast majority of people live in states where munic…

> Munipalities don't do it because they have no money. Why isn't it self-funding? Issue a bond, pay for the network, lease it wholesale to competing ISPs, use the lease money to pay back the bond over time. Zero tax dollars.

The economics, politics, and logistics are brutal. Say you build out to the whole city of Baltimore, and get 40% to subscribe at a cost of $5,0000 per subscriber.[1] You issue a bond at 4% interest. So you gotta cover $200 in interest per year per subscriber. Say you charge $70 for service, and 60% of your revenue goes out the door in maintenance and customer service.[2] After paying debt service, you have $135 per year to pay down principal. So it takes you 37 years to pay down your principal. 30-year bonds may be practical for a school building, but not so much for a telecom network where you'll need to make ongoing capital expenditures to upgrade the network.[3]

Then there is the politics. It's a political non-starter to issue city bonds to build a network you lease out to private ISPs to sell $70/month internet service that poor people and the elderly can't afford. So some sort of cross-subsidy has to be baked into the deal, and that involves charging higher-income customers more than $70/month. But that makes it harder to hit the 40% uptake rate. And if you can't hit that, you're really screwed because the uptake rate drives your per-household cost.

And then there is logistics. Who do you pay to maintain said fiber network? Cities have no experience or staff capable of doing it. So you have to create a new department, and staff it (at least in Baltimore) a relatively expensive unionized workforce (which makes it harder to hit your 40% operating margin above).

[1], [2] Roughly cribbed from the financials of EBP's network in Chattanooga.

[3] The FiOS network is only 10 years old, and Verizon is about to spend a bunch of money to upgrade from GPON to NGPON-2.

Re: Broadband left out of infrastructure goals, and how the FCC wants to fix it

#17

Post by AnthonyMouse »

rayiner wrote: post #16
AnthonyMouse wrote: post #15

Earlier quoted context omitted.

> Munipalities don't do it because they have no money. Why isn't it self-funding? Issue a bond, pay for the network, lease it wholesale to competing ISPs, use the lease money to pay back the bond over time. Zero tax dollars.

The economics, politics, and logistics are brutal. Say you build out to the whole city of Baltimore, and get 40% to subscribe at a cost of $5,0000 per subscriber.[1] You issue a bond at 4% interest. So you gotta cover $200 in interest per year per subscriber. Say you charge $70 for service, and 60% of your revenue goes out the door in maintenance and customer service.[2] After paying debt service, you have $135 per y…

It seems like the solution there is to buy out the incumbent. Then you get ~100% uptake instead of 40%, which better than doubles your total revenue and lets you start with the existing network rather than from scratch. You could even bring on some of their technical staff.

Re: Broadband left out of infrastructure goals, and how the FCC wants to fix it

#18

Post by amazon_not »

AnthonyMouse wrote: post #17
rayiner wrote: post #16

Earlier quoted context omitted.

The economics, politics, and logistics are brutal. Say you build out to the whole city of Baltimore, and get 40% to subscribe at a cost of $5,0000 per subscriber.[1] You issue a bond at 4% interest. So you gotta cover $200 in interest per year per subscriber. Say you charge $70 for service, and 60% of your revenue goes out the door in maintenance and customer service.[2] After paying debt service, you have $135 per y…

It seems like the solution there is to buy out the incumbent. Then you get ~100% uptake instead of 40%, which better than doubles your total revenue and lets you start with the existing network rather than from scratch. You could even bring on some of their technical staff.

Australia tried that. Total disaster.

Re: Broadband left out of infrastructure goals, and how the FCC wants to fix it

#19

Post by AnthonyMouse »

rayiner wrote: post #11
theandrewbailey wrote: post #5

I'm cynical that this will bring meaningful improvement. Government has given money to telecoms before, and it's only brought us mediocre service, and brought executives huge paydays. Where's the fiber, Verizon? We (NJ and PA[0]) gave you huge tax cuts 20 years ago for universal fiber service. You and NYC agreed to provide everyone with fiber.[1] Meanwhile, AT&T keeps merging with promises that are meaningless or eve…

I think offering subsidies to spur private deployment of broadband is a terrible idea. If the market doesn't want to build it, we should think hard about whether we should build it, and if we conclude we should, the government should just build it.[2] That said, the "huge tax cuts" are fictional. Teletruth's idea of a "tax cut" is a company being able to charge any more money than they would have under regulated rate…

> If the market doesn't want to build it, we should think hard about whether we should build it

There are good reasons to expect market failure here. New players very rarely enter infrastructure markets with existing incumbents because having to compete with the incumbent in a natural monopoly market is not expected to be profitable.

And the "accidental duopoly" markets aren't going to do it. Both players try as hard as possible not to compete with each other because they both know that increasing speeds or lowering prices would only provoke the same response from the other and make them both less profitable.

So you're really asking whether a monopoly incumbent would do it, which doesn't have much to do with markets at all -- it turns on whether the cost is more than the increase in monopoly rent it would allow rather than whether the cost is more than the value. And the existing monopoly rent is already high because even slow internet is much more valuable than none.

> And if the government does build it, we should ditch the emotional appeals for FTTH and rely heavily on sensible, cost-effect point-to-point wireless.

FTTH is a one-time expense. The maintenance cost of underground fiber shouldn't be any higher than wireless, and then you don't need to worry about spectrum or wireless line of sight obstructions or interference or any of the other problems with wireless.

Re: Broadband left out of infrastructure goals, and how the FCC wants to fix it

#20

Post by AnthonyMouse »

amazon_not wrote: post #18
AnthonyMouse wrote: post #17

Earlier quoted context omitted.

It seems like the solution there is to buy out the incumbent. Then you get ~100% uptake instead of 40%, which better than doubles your total revenue and lets you start with the existing network rather than from scratch. You could even bring on some of their technical staff.

Australia tried that. Total disaster.

Australia was about to try that but then a different government came in that intentionally sabotaged it to prevent their opponents from getting credit for it succeeding.
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