Broadband CEOs Admit Usage Caps Are Nothing More Than A Toll On Uncompetitive Markets (techdirt.com) 167
Though giant ISPs such as AT&T and Comcast continue to impose caps on users with several of their data plans, a crop of local ISPs is no longer hesitating from admitting that there is no justification for these caps as the cost to provide broadband services has only dropped in the past years. From a TechDirt article (condensed): "The cost of increasing [broadband] capacity has declined much faster than the increase in data traffic," says Dane Jasper, CEO of Sonic, an independent ISP based in Santa Rosa, Calif. [...] Frontier Communications CEO Dan McCarthy adds, "There may be a time when usage-based pricing is the right solution for the market, but I really don't see that as a path the market is taking at this point in time." Suddenlink CEO Jerry Kent said, "I think one of the things people don't realize [relates to] the question of capital intensity and having to keep spending to keep up with capacity. Those days are basically over, and you are seeing significant free cash flow generated from the cable operators as our capital expenditures continue to come down."
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Re:caps? time to trim the fat. (Score:5, Funny)
you forget to mention that torrents can be downloaded off peak so as not to strain the infrastructure during critical business hours...
Re:caps? time to trim the fat. (Score:5, Interesting)
I know that if I had, say, a "smart bathtub" that decided to go rogue (due to no fault of my own) and waste thousands of gallons of water, I would certainly want the bathtub manufacturer to be held liable for the water usage charge. Will a similar thing end up happening with broadband?
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#1 & 2 your ISP really doesn't care about. #3 your ISP really doesn't care about either because one you hit your cap, you're either screwed and get throttled, or you get billed for more, making them money.
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TWC caps? Do you have a very low package (save $5 per month) or something?
Damn! They need to do it properly like big tobacco (Score:3)
When you're lying to people, make sure to give a wink and a nod.
Cable expenditures are going nowhere but up! *wink* The profit generation from such actions only hurts our bottom line *nod*. The only way we can remain competitive is to raise bandwidth caps to protect the precious little capacity our networks have! *wink* *nod* *wink* *nod* *wink* *nod*
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Amusing that today's headline is liars accusing other liars of being liars.
These small cable operators don't build the back-end infrastructure of the Internet. They're last-mile carriers. They're like MVNOs who only piggy back on providers, and they're talking about what it's like to build and maintain the Internet backbone as if they actually do that.
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Amusing that today's headline is liars accusing other liars of being liars.
These small cable operators don't build the back-end infrastructure of the Internet. They're last-mile carriers. They're like MVNOs who only piggy back on providers, and they're talking about what it's like to build and maintain the Internet backbone as if they actually do that.
The units of the ISPs imposing the data caps are not back-end infrastructure providers either; they internally lease the infrastructure from the other sections of the companies that do the back-end provisioning, often resulting in routes to competitors and other vendors.
Re:Damn! They need to do it properly like big toba (Score:4, Interesting)
You mean Verizon, Comcast, AT&T, Sprint, etc.?
Comcast, who built the Cable network? Comcast who got into a ridiculous legal battle with Level-3 because Level-3 wanted to peer with Comcast to route traffic to parts of the Interent which required Level-3 to cross Comcast's backbone, but Comcast tried (successfully) to make Level-3 pay for peering? Comcast, who supplies Comcast for Business, placing Internet Web sites for independent businesses *directly* on Comcast's network, which is nation-wide, run on Comcast's own equipment, across Comcast's own fiber, and addressed with public IPs, meaning many Web sites simply aren't reachable without going directly through Comcast?
Verizon, AT&T, and Sprint, who built the phone network? You know, the networks which, if they go down, break your ability to reach random Web sites even though you're on some other network, simply because their network is between your ISP and the Web host's ISP?
These are the people Amazon, Netflix, Pandora, Google, Facebook, and Akamai directly establish peering with. These are the people EC2 and Microsoft Azure hook up to so their data centers (you know, S3 and Microsoft Azure Cloud) don't go down off the entire Internet just because Comcast or Verizon or AT&T unplugged the wrong router today.
The people yammering about how much it costs to supply bandwidth are last-mile providers who lease their data lines to the Internet from Comcast, Verizon, AT&T, Sprint, Level 3, XO, CenturyLink, Cox, or others.
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You mean Verizon, Comcast, AT&T, Sprint, etc.?
Comcast, who built the Cable network? Comcast who got into a ridiculous legal battle with Level-3 because Level-3 wanted to peer with Comcast to route traffic to parts of the Interent which required Level-3 to cross Comcast's backbone, but Comcast tried (successfully) to make Level-3 pay for peering? Comcast, who supplies Comcast for Business, placing Internet Web sites for independent businesses *directly* on Comcast's network, which is nation-wide, run on Comcast's own equipment, across Comcast's own fiber, and addressed with public IPs, meaning many Web sites simply aren't reachable without going directly through Comcast?
You do realize that there are separate divisions/units/etc within Comcast, AT&T, Sprint, etc that deal with last-mile versus backbone. Yes, they may ultimately be under the same overall corporate entity, but they are internally segregated. Even internally businesses cross-charge their units; so the last-mile unit will purchase back-bone capacity from the backbone unit - even if it's just moving numbers around on paper.
The internal separation allows the company to easily migrate technologies (e.g dial
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Sorry, no. The last mile is the "expensive" part. Unless you think the ISPs that the small ISPs use for uplink are charitable organizations, you'll need to acknowledge that they pay the same uplink costs PLUS a profit to that provider. The large ISPs get it even cheaper by being their own provider.
The unit cost by transfer or rate have dropped steadily over time. The bigger you are, the cheaper it gets. As for the hardware, in 1995 Gig ether switches (dumb) cost about $1000/port. Now it's $5/port.
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You're using the argument: "Y must be more expensive than X because Y includes X + P".
What if P is much less than X, and provider of Y claims X is *exactly* the same as P, and thus X is wildly overpriced?
What if P is running the last mile, and X is the sum total of all operations a Tier-1 carries out to maintain and expand their network?
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Would you please define your terms? This reads like the Chewbacca defense.
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The last mile is very expensive. It costs a ton to maintain that infrastructure.. Yeah, so I can add a downstream DOCSIS QAM to an existing chassis for $50.. Say 8*50 = $400, it is just the beginning. Cable modem termination systems? Go buy and maintain a bunch of uBR10012s and ASR routers and tell me how cheap it is. The taps, the wiring, the amplifiers, the trouble calls cause the plant is old. Do I need additional chassis to handle, will the lasers even do it, if I split the node how far will I ne
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I *DID* say the last mile is the expensive part. However, as I said before, the smaller broadband providers have the same costs PLUS profit for their providers. I'm quite certain they're not getting all of that for free. Things get cheaper overall at scale, not more expensive.
They're not just talking out of their asses, their companies actually don't have caps and they actually are profitable.
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Wow, I take it you have no idea of how things work.
The expensive part of the internet connection is the last mile. Each endpoint has a cost to it and that's why server co-locations often have faster connections for less than you can get at home with larger data transfer allowances. I don't get how you compare that to an MVNO who rents the last mile from someone else.
They pay their upstream provider for their share of the cost of the internet backbone and here is a hint from someone who actually works fro
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The expensive part of the internet connection is the last mile. Each endpoint has a cost to it
So you're saying putting 300,000 computers on the Internet in Comcast's network requires linking exactly 300,000 endpoints? There's no additional cost per endpoint? No back-end costs, no cross-state lines connecting California to Virginia, nothing but a little line run from your house to Comcast's little shack in your cozy little neighborhood?
You're saying the cost of running a ginormous, distributed network with multiple routes to reach from any point to any other point, spanned across an entire contin
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LOL now I know you are trolling. You provided that second link with no context whatsoever as to what it is.
You were commenting on the complexity of implementing networks [wp.com]; I showed a distributed network.
the cost of the uplink was the minority
The uplink to what?
The answer: the uplink to the big, complex, EXPENSIVE, distributed back-end network run by the major Tier-1 providers.
You're trying to claim this [telepresenceoptions.com] is just an uplink, a cable you plug into somewhere. What it is is thousands of miles of fiber run between regions, into regional hubs which distribute out to other regional hubs, which talk to each other so a break in connection between Region 1
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You keep trying to imagine what I am thinking and create arguments based on what you think I am thinking but you are getting it horribly wrong.
In both cases the equipment is the cheaper side of the equation. Most of the expense is in the actual running of the cables, the cost of paying for wherever municipal fees/rental for the space the cables take in the ground, and repairing faults as they happen. The difference is that we can (with some equipment on the back end) plug multiple users into the same upl
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Comcast is an important tier 2 network, and have built their own "back-end infrastructure", perhaps not to the same scale as AT&T or Level 3, but it's there.
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Data caps are all about uploaders and have nothing what so ever to do with downloaders. The PR or course is always about people downloading but the reality is about killing off uploaders. The idea is ISPs want to become middle persons, publishers of content and want to charge a percentage for that. Hence caps target uploaders, raising up their costs, in order to cut them out of the market, unless they sign up with the ISP to be their publisher. For the end user, typical the ISP does not metre data coming f
No Alternatives in Most Areas (Score:5, Insightful)
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When...Google Fiber show[s] up to offer alternatives with not only faster speeds but no data caps, Comcast and AT&T will have to start actually competing in the free market or be put out to pasture.
We are long since past the point where AT&T can do anything to keep my business if/when Google fiber comes to my area. It won't matter what AT&T would offer. I will absolutely dump AT&T for Google. It wouldn't matter if AT&T offered 100GB/s for $1/month with no caps. It wouldn't matter if AT&T offered to pay me a billion dollars a second for staying with them. I would still pay Google whatever they wanted.
All I need is for Google to show up with the service.
Tier-1000 providers make claims about Tier-1 (Score:3)
So we have these tiny, no-name providers dangled off Verizon, Comcast, and Level 3 talking about the business internals of running Verizon, Comcast, and Level 3?
Maybe next MVNOs who use Verizon and T-Mobile's networks instead of building their own capacity can tell us how very little it costs to maintain national cell networks and admit that Verizon and T-Mobile are just overcharging.
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"Economy of Scale" is a semi-myth. In the general myth, it is observed and true that producing more than minimum quantity of a good uses an optimal amount of per-unit labor; and it is not recognized (by most) that scaling beyond a certain production level increases the amount of per-unit labor (for example: scaling food production up beyond available fertile land requires more fertilizer, pesticide, and irrigation input; increasing technology to farm more densely reduces land per unit output requirement
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So does Level3, Cogent, and every other provider. I pay $29/month for a dedicated server with unlimited bandwidth on a 100 Mbit port, and in addition to bandwidth and the machine itself, my provider is paying rent for the cage in the DC, power, UPS, staffing, and all kinds of other expenses. Providers like 100TB.com offer much better deals than that and still manage to turn a profit. Coge
Re:Tier-1000 providers make claims about Tier-1 (Score:4, Insightful)
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What if the Tier-3 providers provide the last mile at a certain cost, and imagine it costs Comcast the same or less to provide the giant back-end? I.e. for me to run the cable to your house from the CO 3 miles up the road costs what amortizes out to $12/month; but Comcast is charging $80/month! Maybe I decide Comcast's doing nothing more than what I'm doing, and is charging an assload for it, and passing the cost down to me to pass down to my customers.
What if the Tier-3 providers are positioned to pro
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I'm sure there's definitely a measure of marketing going on here on the part of the smaller folks. Any chance they have to score some points against Comcast/Tier-1 is an opportunity they'll take. However, I don't think the math supports that as the primary motivator.
Comcast, in it's wireline business has to support both ends: backhaul and last mile. The smaller providers support last mile and pay a tier 1ish provider for the backhaul. Tier 1s are going to charge the small guy for bandwidth whatever their co
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The simple answer is that the smaller players are willing to accept a lower profit margin than the large players are. Whether that rises to the level of gouging or not is a different conversation, but when the smaller players tell you that they don't worry about transit (backhaul) costs when they accept thinner margins than tier 1, it's likely the truth. Or they're lying and will be driven out of business by the backhaul costs. Time will tell.
There's also the consideration of rising utilization and future projected costs, and efforts taken to control the risk that 2020's profits will be negative because everyone is streaming HD4K to 12 TVs in their house.
There's a dialogue here with people asserting that bandwidth is *way* cheap [slashdot.org] and suggesting that Comcast, Verizon, and co are making enormous profits. Comcast's rising profit margins [ycharts.com] are up around 11% and averaging under 10.5% over the past several years, staying positive; AT&T frequently [ycharts.com]
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Caps are to Recoup Costs (Score:4, Funny)
... spent on all the equipment and staff directed to data measurement and billing that tracks usage and imposes the caps, that recoups the costs spent on... wait.
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I like the joke, but the term you're looking for is called "marginal profit". If adding the feature, or building and selling one additional unit, will bring in more revenue than it cost to make, then you'll sell the additional unit.
This became settled science over a century and a half ago.
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Well said, sir. But I respectfully point out that the key to your analysis is "if".
IF all the infrastructure for monitoring, enforcing, and monetizing data caps results in an angered, unsatisfied customer,
and IF that angered consumer has choice to go elsewhere where caps and their operating costs are absent (admittedly, in the U.S., that's a big "if"),
and IF the company finds itself abandoning this cost structure as being too unpopular with its customers,
THEN the marginal profit is never realized - instead
Well no f*cking sh*t. (Score:2)
Thanks for stating what all your customers have known for years.
Cost of bandwith caps? (Score:2)
I'm very curious what the caps cost given the need for metering, billing and support costs.
And are they set eternally at a couple hundred GB or something?
Could it be that they cost more than they save? Couldn't be, right.
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The caps also increase demand for the video services AT*T and Comcast sell.
Re:Free Market (Score:5, Insightful)
Except crony capitalism is rampant, and so it is not a truly free market.
Re:Free Market (Score:5, Insightful)
plus, a free market requires that none of the players be big enough to unilaterally move the price, which is the exact opposite of the usual monopoly situation.
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We're not using any notion of fairness here. We're saying that a market where one individual player can control the prices isn't free. In a free market, if some vendor raises prices too much, that vendor will be undercut, if necessary by new entrants into the market, and hence no individual actor can control prices in a free market.
Re:Free Market (Score:5, Insightful)
Except crony capitalism is rampant, and so it is not a truly free market.
Never was. The so-called free-market is a myth. Always was. Even the guy who coined the phrase made it plain that without regulatory influence, such a thing would never be possible.
Re:Free Market (Score:5, Insightful)
It isn't a myth, people just didn't read their Adam Smith and they have no idea what it means. When does the "free market" arise? Does it arise when you take away all the rules? No, that is the Feudal system that Capitalism was designed to fix! Capitalism means that the government is looking over everybody's shoulders, and making sure that the playing field remains level, and constantly making adjustments to stop the tricks that the entrenched businesses will be trying. Then, with the neutral third party regulating the market to ensure fairness, things are predictable and that predictability allows capital to rule; people can decide based on math if they should invest or not. The whole point of Capitalism is protecting the new entrants into a market from the established companies, who will always be in a position to use collusion and other tricks to keep out new companies.
Currently, the established companies have tricked everybody, even small businesses wanting to compete with them, even the workers, into believing that "Capitalism" means just letting the entrenched interests set the rules. No, that was the problem that Capitalism can solve...
That they trick small business is sad, but predictable when none of the major (or minor!) political parties remember what Capitalism means. Many Democrats support true Capitalism, but they don't know what the word means and they think they're supporting a mixed system, and it leaves them unprepared to educate people. Most people who support what Adam Smith advocated believe themselves to be anti-Capitalism, at least partially! It is insane.
Re:Free Market (Score:5, Interesting)
It isn't a myth, people just didn't read their Adam Smith and they have no idea what it means. When does the "free market" arise? Does it arise when you take away all the rules? No, that is the Feudal system that Capitalism was designed to fix! Capitalism means that the government is looking over everybody's shoulders, and making sure that the playing field remains level, and constantly making adjustments to stop the tricks that the entrenched businesses will be trying. Then, with the neutral third party regulating the market to ensure fairness, things are predictable and that predictability allows capital to rule; people can decide based on math if they should invest or not. The whole point of Capitalism is protecting the new entrants into a market from the established companies, who will always be in a position to use collusion and other tricks to keep out new companies.
Which is why I've been saying that what we want is a "fair market" instead of a "free market".
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It isn't a myth, people just didn't read their Adam Smith and they have no idea what it means.
You're absolutely right. Just like every Marxist, Marxist-Leninist, Maoist, Fascist, Techocrat (the political party), Islamic State warrior, Spanish Inquisitor, etc. is right. If everybody would read the book and follow the rules then the outcome would be perfect. The problem is the people who are too stupid or foolish to obey the rules who screw if up for everyone. If we could only remove them and their influence then the ends would justify the means...
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It isn't a myth, people just didn't read their Adam Smith and they have no idea what it means.
You're absolutely right. Just like every Marxist, Marxist-Leninist, Maoist, Fascist, Techocrat (the political party), Islamic State warrior, Spanish Inquisitor, etc. is right. If everybody would read the book and follow the rules then the outcome would be perfect. The problem is the people who are too stupid or foolish to obey the rules who screw if up for everyone. If we could only remove them and their influence then the ends would justify the means...
First of all, kudos to GP, who is one of the very few here on /. who understand what Smith envisioned. All those who've been drinking the "government is bad" koolaid since the Reagan years are in the "too stupid or foolish to obey the rules" group. Yes, all of them.
Re:Free Market (Score:5, Insightful)
It is not the invisible hand of the free market that is ensuring your food has accurate use-by-dates, correct ingredients listed and accurate nutritional information.
Do you think the free market would have stopped using lead in paints and asbestos in construction all by itself?
Do you think the free market would abolish insider trading all by itself or do we need a policeman called the SEC with teeth to enforce the "rules"
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I'm not so purely Libertarian that I can't appreciate the necessary regulations on certain things. My issue is with corporations and government being buddy-buddy, back-room deals and laws being drawn up to benefit only certain corporations, limiting the freedom of others to get into the market and provide whatever service they'd like at whatever price the market would allow. The ISP industry (and by extension the phone industry) is just a perfect example of how monopolies are created with fucking crony sh
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Your point is well taken. The problem is, with something like broadband, just like with roads, it is very reasonable to conclude that it would be best to have a limited number of operators, maybe even just one. The government then has a challenge to understand the "industry," without relying on the industry itself.
I conclude, based largely on a resource allocation viewpoint, that having a single provider is most efficient, if we can minimize the profiteering. An important tool in that fight is transparency.
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Broadband is similar to roads in that it requires expensive infrastructure that can't be deployed indefinitely. The last mile is a natural monopoly.
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Someone on here has a sig that says (paraphrasing) "If we built buildings the way we wrote software, the first woodpecker would destroy civilization."
Likewise:
If an ideal libertarian society were ever made to exist, the first crooked businessman would be its tyrant conqueror.
It's also funny how often the "crony capitalism" defense comes up...sounds a lot like the "true communism has never been tried" argument.
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Under capitalism, the rich become politically powerful. This is bad.
Under socialism, the politically powerful become rich. This is worse.
Under feudalism, the militarily powerful become both politically powerful and rich. This is about as bad as it gets.
Sure would be nice if we had a new idea that was better than capitalism, but we know that idea doesn't involve a powerful central authority because that's the thing that is inevitably corrupted.
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The first impulse of every commercial venture is to monopolize the market. Competition is for other markets, not mine.
Re:Free Market (Score:4, Informative)
Except crony capitalism is rampant, and so it is not a truly free market.
that's irrelevant because the concept of a "free market" requires perfect information [wikipedia.org] which is impossible.
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No economic law or theorem presumes the existence of perfect information. Supply and demand and everything works all the same, regardless of the type, informed-ness, and rationality of the actor.
In fact, it's a mathematical theorem that there were perfect information, prices could not exist (and therefore, there cannot be such a thing as perfect information).
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Could you point me to the theorem? It seems very unlikely to me.
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Indeed. The usual free-market fanatics routinely keep quite about the little problem that a corporate stranglehold can be even worse for market freedom than government control.
Re:Free Market (Score:5, Insightful)
Surely the Invisible Hand(TM) of the Free Market(C) in the only Free(tm) country in the world will solve this problem?
Libertarians don't keep their eyes open during events like this. They screw them shut and go "Oh it's still partially regulated and that's actually the problem". At face value I don't actually hate their philosophy, it's just the blanket denial of the way human beings actually operate. Which is weird because their argument against communism IS that it falls apart because human beings operate they way they do.
Sorry about my semi-off-topic rant, I'm just amazed at the things people say despite being shown stories like this.
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The US government has shoveled billions of dollars to AT&T, Time Warner, and Comcast for services which were never delivered and the government did nothing. The same government's courts also banned people from coming together and building municipal broadband services to compete with them. Yes, what a huge failure of the free market.
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The US government has shoveled billions of dollars to AT&T, Time Warner, and Comcast for services which were never delivered and the government did nothing. The same government's courts also banned people from coming together and building municipal broadband services to compete with them. Yes, what a huge failure of the free market.
Simple to make that CLEAR distinction, you'd think. Not sure why so many people miss this -- most likely regurgitating some political point heard from someone with a vested interest in making Libertarianism look bad.
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Libertarianism needs no help making itself look bad.
http://www.slate.com/articles/... [slate.com]
Perry seized the moment, basically insisting that blind 4-year-olds should be legally permitted to drive without any sort of government imprimatur
as he insisted that 5-year-old children should have the legal right to inject heroin without adult supervision.
The first of these put his cellphone on the lectern, played a song into the microphone, and stripped down to his underwear, shaking rolls of fat in some sort of demented burlesque.
When I pulled this guy aside and asked why he favored McAfee, he began, “My main concern is interstate commerce legislation,” launching a runon sentence that somehow ended, after several minutes and some really surprising detours, with an avowal that “humans will be displaced by A.I. the same way we displaced the whales and the rhinoceroses, and so it’s important to remember that bigotry is better than slavery.”
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Libertarians don't keep their eyes open during events like this. They screw them shut and go "Oh it's still partially regulated and that's actually the problem".
I'm not sure which libertarians you've been talking to, but I'd like to think that they understand that it's not a matter of "less regulation" vs "more regulation" so much as it's a matter of what specifically is being regulated. "increasing regulation" doesn't do anyone else any good if your lobbyist writes the legislation such that it regulates your competitors out of business while only making things easier for you. By the same token, "decreasing regulation" doesn't help things at all if there's a compa
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The ironic thing is that an unregulated "free market" capitalism's end game is EXACTLY the same as the Soviet-style communism idiots fear when they hear the word "socialism;" all the money and power gets distilled into the hands of a small group of self-appointed elitists and everyone else is a serf.
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Citation needed? You're comparing two different kinds of power.
To achieve socialism's alleged ends, politicians say they need "power" (i.e. violence), but socialism is impossible in the first place because it lacks a price mechanism to inform people what is productive and what is wasteful.
But in capitalism, no actor threatens violence. The kind of "power" you talk about here is merely owning money, a completely voluntary action.
Even my the financial metric, the government is still way more powerful: Last ye
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The ISP shill is back.
And just as ignorant as ever
But in capitalism, no actor threatens violence.
You should probably acquaint yourself with the history of the banana republics and other interesting bits of history where they did exactly that, or else got the government (ours and the local ones) to exert the violence for them.
There is no ignorance like the ignorance of a libertarian with an internet connection.
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> Citation needed? You're comparing two different kinds of power.
Hmm, how about most of history? You funnel all the money and power into the hands of a select few, the corporate entities continue to merge for growth and to stifle competition, offshore more and more jobs, then eventually you end up with an unemployed society who cannot afford to do anything they choose to do, banks confiscate land and other properties, and the things those serfes will be able to afford, they are offered limited choice. Ho
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Libertarians don't keep their eyes open during events like this. They screw them shut and go "Oh it's still partially regulated and that's actually the problem"
This actually shows you don't know Libertarianism too well. If you watch Milton Friedman's lectures which are on youtube you'll notice he makes the distinction between "Limited Government Libertarians" and "Anarchist Libertarians". I'm pretty sure you're referring to the latter and I'm not a big fan of them either. Milton Friedman himself proclaimed himself a "Limited Government Libertarian". Even in the Ford Pinto controversy back in 1972, when Friedman was asked about whether Ford had any obligation t
Re:Rent Seeking (Score:5, Insightful)
Is internet service not effectively also a natural monopoly?
In most areas there are at most 2 sets of wires, and it costs money to maintain both.
There is very little economic reason for a competitor to arise, because the existing monopolies can squeeze out any competitor trying to move in easily using well known tactics. The only reason there are 2 sets of wires is that originally, the cable TV wire could not be used to replace analog phones until technology developed in the 1990s.
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You just gave a textbook definition of a natural monopoly.
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You just gave a textbook definition of a natural monopoly.
Not really. It's simply the textbook response by a company to keep out new entrants. Monopolists can go one step further and raise prices in areas where there are currently no threats of entrants to cover losses in others; I believe that was one of Standard Oil's tactics under Rockerfeller. The arguement for a natural monopoly is that the costs of building and maintaining the infrastructure necessary to provide service is so high and disruptive to consumers that only one company should be allowed to provid
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In a place where it takes a large investment to set up an infrastructure, that tactic of lowering prices whenever a competitor arises - to kill them before they can collect enough profit to expand - means there will always be only one provider. This is why there is not 2 or mores sets of electric wires, sewer lines, water lines, or roads to every house. Or phone cables. The other reason this type of monopoly is natural is there is that a second or third, etc provider is hugely less efficient - there's ba
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In a place where it takes a large investment to set up an infrastructure, that tactic of lowering prices whenever a competitor arises - to kill them before they can collect enough profit to expand - means there will always be only one provider. This is why there is not 2 or mores sets of electric wires, (snip) or phone cables...
There used to be at the early stages of electrification in the US, as companies competed for customers and AC fought DC for supremacy. It was only until utilities pushed for regulation and monopoly status did that change. As for phones, many cities had competing phone companies (as they did telegraph companies). Cleveland had 2 around 1900, as well as several local only ones; and Cleveland was not the only city that had multiple phone companies, many large ones did. It wasn't until the US nationalized phon
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They call it a natural monopoly because it's a natural law. I know you seem to want to believe otherwise, but physics and engineering principles should trump faith. Your examples are very old and are from highly populated areas where running multiple cables was feasible and the main cost of running a telephone service would have been the switching stations with all those paid operators.
The physics and engineering principle is that for any cable run, there is exactly one optimal routing. Duplicate cables
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They call it a natural monopoly because it's a natural law. I know you seem to want to believe otherwise, but physics and engineering principles should trump faith. Your examples are very old and are from highly populated areas where running multiple cables was feasible and the main cost of running a telephone service would have been the switching stations with all those paid operators.
It's not faith but economics. In terms of real dollars, establishing infrastructure was expensive when the service was new and adoption rates were not well known. At first, you could only call subscribers on your network, although companies eventually allowed cross network calls. The reason one operator won out was government intervention, not some natural law of physics or engineering.
The physics and engineering principle is that for any cable run, there is exactly one optimal routing. Duplicate cables mean either the second set of cables must take a suboptimal routing, or both sets must be routed suboptimally. In established areas, it would cost a fortune to dig things up and establish a "competing" set of cables - far more than the first set cost. That's the reason.
That hasn't stopped ATT from running cables where I live for their Uverse service to compete with the existing cable compa
Re:Rent Seeking (Score:5, Insightful)
As much as I'd like to keep the government out of the operations of the Internet, the ISPs:
1) Have local monopolies on high speed Internet access.
2) Have made it clear that they see nothing wrong in abusing said monopolies to hurt video services competitors where they aren't a monopoly (by pricing Internet-only higher than Internet+TV bundles and by capping Internet usage and instituting overage fees in order to penalize people who stream videos).
In this case, your average consumer has no recourse. They can't "vote with their wallet" because there's no alternative. They can't sue the cable company (good luck fighting the cable ISP's lawyers without going bankrupt). Their only hope is for the government to step in and say "This stuff isn't allowed." The government stepping in isn't ideal, but letting the companies do whatever they want is even worse.
Re:Rent Seeking (Score:5, Informative)
For comparison, the UK has a system whereby the infrastructure is owned by a single company - in our case Openreach, which is a division of British Telecom (who used to be the nationalised public telecoms company, but are a private company for a couple of decades now). Openreach are highly regulated and must offer access to the infrastructure to any company that wants it at regulated prices.
Then, any old private company can offer internet access on this public infrastructure without having to provide their own cables, They are free to do so if they want - I think Sky and Virgin do their own infrastructure in part.
This seems to allow access enough to allow lots of competition at both a national and local level - I get my internet from a local company who operate in my city only (it's a lot more expensive, but they have better service and no caps and allow me to run servers on my DSL line) and it goes down exactly the same cables as if I bought it from Sky or BT.
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In my ideal world, the government would break up Comcast and Charter/Time Warner into separate companies. One would deal with the physical network, one would deal with Internet/TV/etc service, and a third would deal with content (NBC, etc). The Physical Network company would sell bandwidth to the Consumer Services company and others. Those companies would compete to lower prices and improve customer service. The separate content companies would ensure that neither the physical network nor customer servi
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Sounds like a reasonable way to deal with the natural monopoly problem.
I worry though that US politics being what it is, it would be hard to fully regulate the Physical Network company. To overcome the monopoly issue, it really has to sell the bandwidth at an equal deal to all buyers. If they start doing high volume deals to larger buyers, for example, or tie-ins with other services that only large companies can finance, then the natural monopoly problem is not solved.
Forgive my ignorance of US politics - i
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We have had physical network companies for a long time. One example is electrical power. The physical system in my area is run by a regulated private corporation, and I get very reliable and clean electricity for a very reasonable price.
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Thanks for the reply David. So that I understand correctly, is it also the case that you have a choice of providers to purchase your electricity from, at a range of service levels and prices?
The argument I was trying to make is that natural monopolies (such as internet provision) can be sometimes overcome by separating the infrastructure from the provision of service on that infrastructure. I'm not sure I am smart enough to see how this works for electricity provision.
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The USA had this type of setup for a while but the legacy companies played enough games with it to make it uneconomic and then were able to get the provisions requiring access to existing wires weakened to the point that they might as well not exist.
Ultimately, the problem was that the legacy companies were able to retain ownership of the last mile infrastructure and offer their own Internet and phone services using those wires.
Re:Rent Seeking (Score:5, Insightful)
Anyways, the only viable option I personally know about is regulation similar to a utility. This is both bad and good. There's a cost to the regulations - the government has to be paid and when it has to manage something, it tends to charge a lot in taxes and fees and unnecessary rules and regulations.
But on the other side of the coin, these overage fees wouldn't fly. The utility would have to document their actual cost and at the prices these fees are at, they'd be shot down. They also wouldn't be allowed to give away certain services for free, unless those services were considered a public service.
At this point, the internet is an essential service, as essential as telephone service used to be. Only slightly less important than power/water/sewage/trash pickup. All 4 of which are natural monopolies as well...
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Trash pickup is not a natural monopoly. There is no physical barrier preventing an arbitrary number of companies from offering to haul your garbage from the curb to a municipal landfill. In my city, there are six licensed garbage haulers to choose from, which is plenty of players for a competitive marketplace.
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You are literally as dumb as a rock.
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Are you saying his post is conceptually wrong or are you saying that since he didn't phrase it in the mathematically correct way, that makes him as "dumb as a rock"?
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It's possible for a city to hire private companies to perform garbage collection on a schedule.
One big problem with private contracting for garbage collection is that people will try to avoid paying to get rid of their garbage, and will fill other people's bins and deposit garbage in various inappropriate places, such as parks and roadside.
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It's a lot easier for a trash truck to stop at every house instead of having to skip houses. It essentially give an inherent cost advantage to there being just 1 trash service. I take your point, though, this cost advantage is obviously modest, or we wouldn't have both UPS and Fedex at the same time.
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Whether Internet is a monopoly is debatable, where I'm at I'd love for Comcast to drop a line to the house, or even DSL, but that's not going to happen. What I do have is Hughsnet (satellite Internet), At&T 4Glte on the phones, there is also 3G and 4G to the router, so there are multiple options.
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These are not equivalent. TLDR, the RF spectrum is limited. So inherently, wireless data is and always will be more expensive than wired data. What this has the effect of doing is limiting the monopoly abuse by putting a ceiling on how much wired ISPs can screw you by.
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Your economics term of the day is rent seeking [econlib.org].
Government regulators used to claim that there were things called "natural monopolies" to justify their stake to power, saying that competition was impossible, for things like telephone wires.
Now that 80% of the population has switched away from PSTN (many to cable providers) the regulators are looking for another hook to hang their hat on. Watch your back - the FCC is starting to dig in on regulating everything-Internet. Not because there's a need, but because they can't possibly admit that their job is obsolete.
Obviously the fact that price gouging aka "usage based pricing" exists is a perfect example of why the government regulators need to step in and regulate. The industry will not effectively regulate its-self. The fact that the government turns a blind eye to stuff like this is merely an indication that regulators (like all government types) are susceptible to corruption. Unfortunately, corruption will exist as long as people of any sort are part of the equation. I, for one, welcome our computerized gove
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Or the exact opposite: eliminate legislation that supports monopolies.
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And pass legislation that makes it inherently cheap and easy to run some sort of wire to every home and business in the city? Or do we defer to reality, and live with something of a natural monopoly?
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Having worked for multiple small ISPs that served rural areas (Wireless Broadband, Dialup, and resold carrier DSL), you are full of shit sir. Broadband Uplinks (DS3, etc) from rural towns cost at most double what they do in a big city. But the upstream bandwidth to service our customers was under 10% of our infrastructure expenditures. I'm sure larger services have better economies of scale than a small ISP with customer counts under 10k.
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