Who is to say we would be where we are today if these companies hadn't invested in their now obsolete hardware at the time??? It's easy to critisie this now, but would the internet have expanded so rapidly without their investment.
Would future network investment be made less attractive id this was the case. Apparently, "Moores Law" makes any investment depreciate so rapidly that all progress is futile.
So we should reward them with welfare? Retire them on full pension? Because they 'took a financial bullet for prosperity' or some such nonsense?
You realise we're talking about corporations? Businesses. Legal entities. Not humans. They're not war veterans. They deserve no special loyalty simply because they were first or paid 'too much' for their equipment. Do we celebrate and subsidize the construction companies who laid the first interstate highways? Well, maybe, but not for that reason.
The owners and employees who started the telcos and grew them and maintained them have already been amply rewarded - they were paid while they were doing it and they got to see the value of their stocks grow. If they want more money, they have plenty of other options besides being subsidized by the Federal Govt.
We should (perhaps) reward them because we're the ones who put them there.
I admit that I don't know the entire picture, but I know some of it, and the fact is that the government put the Baby Bells into this situation.
How? Well, up until 1996 the telecomm industry was heavily regulated by a mishmash of federal, state, and local laws, the local Public Service Commissions, and Judge Greene. It basically meant that any and all purchasing decisions had to be approved by the PSCs, who didn't understand technology and required the RBOC's to ammortize purchases over extremely long time periods - even when the RBOCs knew that it wasn't viable. The flip side to this is that the PSCs did, by and large, fulfill their obligation to the public by keeping costs down. Mostly.
I don't know that this is what caused the RBOCs to buy equipment with long term bonds, but if it was then damn right the government is on the hook. You can't tell someone they have to buy a long term contract, then ditch them when it doesn't work out. Or maybe you'd like to see that happen. Have a home mortgage at a low interest rate right now? Want the bank to ditch you when interest rates go back up? Didn't think so.
Do we celebrate and subsidize the construction companies who laid the first interstate highways?
Apples and oranges. The interstate highways are public throughfares. They are owned by the state governments. This is not true for the telecomm network - it's owned and operated by corporations. The government licensed them, gave them some right of ways, but did not pay in whole for the network as they did for the interstate highway system. If this had occurred then we'd pay our phone bills directly to the government - what fun that would be. We'd probably be employing the rest of the world to do operator based switching still.
I'm not arguing purely in favor of subsidizing them. What I am saying is that we don't have the full picture here. But, frankly, if you think letting the RBOCs go belly up would be a good thing then you really don't understand economics or how the telecomm system works.
"I'm not arguing purely in favor of subsidizing them. What I am saying is that we don't have the full picture here. But, frankly, if you think letting the RBOCs go belly up would be a good thing then you really don't understand economics or how the telecomm system works."
You didn't understand my point. My point was not "The Baby Bells should go away", it was "They should not be subsidized out of a sense of reward or gratefulness." If they are the only thing keeping the infrastructure available, then yes, measures should be taken to keep them going, but not because they spent a lot of money and took risks in the early days.
You missed my point as well - if the government forced them to take long term loans, then the government is responsible for the outcome of that decision.
I don't know that this is true though, but it should be checked before saying that the government isn't responsible.
I admit that I don't know the entire picture, but I know some of it, and the fact is that the government put the Baby Bells into this situation.
How? Well, up until 1996 the telecomm industry was heavily regulated by a mishmash of federal, state, and local laws, the local Public Service Commissions, and Judge Greene. It basically meant that any and all purchasing decisions had to be approved by the PSCs, who didn't understand technology and required the RBOC's to ammortize purchases over extremely long time periods - even when the RBOCs knew that it wasn't viable.
I would have a lot more sympathy with this position if it weren't for a few very inconvenient facts. First, if the debt of an RBOC was the only problem, why did RBOCs go and immediately buy out other RBOCs? In other words, if
an RBOC believed that it was going to be in trouble down the road with long-term bond debt, than why in the world did they waste more capital
to acquire...even more of the same? Now, it's true that the baby bells that were bought out first were those that made spectacularly aggressive (and probably wrong) decisions to roll out new infrastructure, but nobody was at that point forcing them to do it. For that matter, there are some very healthy small telephone companies out there; phone service in our city (Columbia, MO) was just sold by Verizon to CenturyTel. Now, nobody much has heard of CenturyTel unless you happen to have service through them, but they are doing quite a nice business in telecom by basically not doing what the big RBOCs were doing. If I saw
the smaller independents in deep trouble financially, I would wonder whether it was improper regulation that was at fault.
"Be there. Aloha."
-- Steve McGarret, _Hawaii Five-Oh_
Well, yes and no... (Score:5, Insightful)
Would future network investment be made less attractive id this was the case. Apparently, "Moores Law" makes any investment depreciate so rapidly that all progress is futile.
This so obviously is not the case.
Re:Well, yes and no... (Score:5, Insightful)
You realise we're talking about corporations? Businesses. Legal entities. Not humans. They're not war veterans. They deserve no special loyalty simply because they were first or paid 'too much' for their equipment. Do we celebrate and subsidize the construction companies who laid the first interstate highways? Well, maybe, but not for that reason.
The owners and employees who started the telcos and grew them and maintained them have already been amply rewarded - they were paid while they were doing it and they got to see the value of their stocks grow. If they want more money, they have plenty of other options besides being subsidized by the Federal Govt.
Re:Well, yes and no... (Score:3, Insightful)
I admit that I don't know the entire picture, but I know some of it, and the fact is that the government put the Baby Bells into this situation.
How? Well, up until 1996 the telecomm industry was heavily regulated by a mishmash of federal, state, and local laws, the local Public Service Commissions, and Judge Greene. It basically meant that any and all purchasing decisions had to be approved by the PSCs, who didn't understand technology and required the RBOC's to ammortize purchases over extremely long time periods - even when the RBOCs knew that it wasn't viable. The flip side to this is that the PSCs did, by and large, fulfill their obligation to the public by keeping costs down. Mostly.
I don't know that this is what caused the RBOCs to buy equipment with long term bonds, but if it was then damn right the government is on the hook. You can't tell someone they have to buy a long term contract, then ditch them when it doesn't work out. Or maybe you'd like to see that happen. Have a home mortgage at a low interest rate right now? Want the bank to ditch you when interest rates go back up? Didn't think so.
Do we celebrate and subsidize the construction companies who laid the first interstate highways?
Apples and oranges. The interstate highways are public throughfares. They are owned by the state governments. This is not true for the telecomm network - it's owned and operated by corporations. The government licensed them, gave them some right of ways, but did not pay in whole for the network as they did for the interstate highway system. If this had occurred then we'd pay our phone bills directly to the government - what fun that would be. We'd probably be employing the rest of the world to do operator based switching still.
I'm not arguing purely in favor of subsidizing them. What I am saying is that we don't have the full picture here. But, frankly, if you think letting the RBOCs go belly up would be a good thing then you really don't understand economics or how the telecomm system works.
Re:Well, yes and no... (Score:2)
You didn't understand my point. My point was not "The Baby Bells should go away", it was "They should not be subsidized out of a sense of reward or gratefulness." If they are the only thing keeping the infrastructure available, then yes, measures should be taken to keep them going, but not because they spent a lot of money and took risks in the early days.
Re:Well, yes and no... (Score:2)
I don't know that this is true though, but it should be checked before saying that the government isn't responsible.
Re:Well, yes and no... (Score:2)
Don't get me wrong, it's a valid point in its own right, but not at all germaine to what I was saying.
Re:Well, yes and no... (Score:2)
I would have a lot more sympathy with this position if it weren't for a few very inconvenient facts. First, if the debt of an RBOC was the only problem, why did RBOCs go and immediately buy out other RBOCs? In other words, if an RBOC believed that it was going to be in trouble down the road with long-term bond debt, than why in the world did they waste more capital to acquire...even more of the same? Now, it's true that the baby bells that were bought out first were those that made spectacularly aggressive (and probably wrong) decisions to roll out new infrastructure, but nobody was at that point forcing them to do it. For that matter, there are some very healthy small telephone companies out there; phone service in our city (Columbia, MO) was just sold by Verizon to CenturyTel. Now, nobody much has heard of CenturyTel unless you happen to have service through them, but they are doing quite a nice business in telecom by basically not doing what the big RBOCs were doing. If I saw the smaller independents in deep trouble financially, I would wonder whether it was improper regulation that was at fault.