[spruciefic399]

Another strategy to this (not exclusive of other strategies) is to encourage municipal ISPs, or even go further and roll out federal ISP infrastructure ala the federal highway system.

I've always thought that this would be well within the rubric of the USPS. The constitutional mandate for a postal service was drafted at a time when the internet could not have been conceived of. I would argue that the intent of the constitutional mandate was to establish communications and not necessarily paper mail per se. I think if the founders were alive today they would say that ISPs were the sort of thing that was intended. I.e., have the USPS start acting as an ISP, and charging for it like it would mail services.

I'm not saying that private ISPs should go away, just that I'm sick of this government handout to companies that want to have their cake and eat it too. No net neutrality? Fine. But then allow public ISPs--no, actively fund public ISP infrastructure--and allow for unfettered lawsuits against private ISPs for content going over their pipes. Also, take away right of way to private ISPs, and let citizens and municipalities charge arbitrary amounts for anything going over their property.

[snowwrestler]

The next step beyond the mail was the telegraph and then the telephone. Those were built out by private companies, but operated under a regulatory regime called "common carrier," which protected the network owner from liability so long as it charged and carried traffic from all parties equally.

These days, that concept is called "net neutrality" in the context of the Internet, and I suppose you may have heard it mentioned in the news recently once or twice. (I think it was a mistake to rename common carrier, but too late I guess.)

Personally, I think that private buildouts are a better way to go than a government-funded network infrastructure. Private industry is better at investment and product development than the government, and any enterprise that generates a profit contributes to the long-term economic sustainability of innovation. A government-run economy becomes starved for capital and innovation slows way down; that is why the Soviet Union lagged U.S. technology and why Cubans still drive 50-year-old cars.

But privately run networks need regulation to deliver the results that citizens want. Railroads needed it, telephone companies needed it, airlines needed it, and yes, ISPs need it. And if that is thwarted, then sure, let municipalities take a swing at it. My town is looking into muni fiber now, and I'm in favor of it because the local service from Comcast is so bad and so expensive and there seems to be no other way to do something about it.

[reaperducer]

>The next step beyond the mail was the telegraph and then the telephone. Those were built out by private companies

Yes, and no.

The electric and telephone companies built out the cities and big population centers, but left 50%+ of the nation without service. Much like today's ISP's would like to do.

Some places only got wired because they formed local electric co-ops and what were called "rural telephone" cooperatives.

Even then, it wasn't always enough, and the feds had to add a Universal Service Fee to every phone bill to redirect that money to the big telephone companies so they would serve the entire nation, and not only the most profitable areas.

[rayiner]

The idea that the industry should self-fund universal coverage is massively distortionary. If we want everyone to have electricity and broadband (an admirable goal), that's fine. The government should build electricity and broadband to places that don't have it (and I'd posit they should do it in a cost efficient way, e.g. with wireless).

Forcing the places that do have it to subsidize the places that don't have it, however, is incredibly destructive to competition. It prevents smaller entrants, and entrenches incumbents. Those are the only entities that can afford to both operate an infrastructure business and run a money-losing government service on the side. It is, in fact, why we're in this mess to begin with. It was municipalities that granted cable franchise monopolies (before that was made illegal), to ensure universal build-out.

[reaperducer]

>The government should build electricity and broadband to places that don't have it

Except every time a government tries to do just that, the ISPs sue to stop it. Even if they have no plans to provide the service, themselves. They don't want the precedent.

[bmelton]

On what grounds do they sue? Clearly local governments have the ability to build/own things like buses, metros, recycling centers, etc.

Do you have any citations?

[owyn]

It's not that they're suing directly, but getting laws passed which block municipal internet. You don't have to sue if you can write the laws. This has happened in 20+ states already.

There are lots of citations:

http://fortune.com/2016/08/10/municipal-internet/

"An appeals court on Wednesday sided with the telecom industry, and with North Carolina and Tennessee, in a major decision that upheld the ability of states to pass laws that restrict municipalities from offering broadband internet services."

And in Colorado:

https://www.techdirt.com/articles/20171106/09481638554/comca...

And here's an argument for why they're doing it. It's all about never allowing taxes to be collected to be spent on something that benefits, well, anyone. Basically since government is inherently bad and can't do anything right, it will cost too much money and they won't work and only private companies have the "expertise" to run "an internet":

http://thehill.com/blogs/pundits-blog/technology/339232-the-...

[jtbayly]

How exactly would the government do it without "forcing the places that do have it to subsidize the places that don't have it?"

Taxes are how the government funds those sorts of things, and taxes are collected from everybody. So the subsidization still happens.

[rayiner]

All taxing and subsidization is distortionary; but some methods are less distortionary than others. Imposing a tax on "everybody" and using it to pay for a public service dampens economic activity, but at least doesn't distort one industry relative to another. Imposing special, industry-specific taxes, however, dampens demand and investment in that industry relative to the rest of the economy.

Take tobacco taxes, for example. We put special taxes on tobacco because we don't want people to smoke, and we want to discourage people from smoking. Taxing tobacco effectively raises prices, which reduces demand. Various governments employ similar taxes to discourage things like soda, sugary foods, etc. This is a well-understood concept: you put extra taxes on things you want to discourage (relative to the rest of the economy).

Paying for rural telecom by putting a special tax on telecom service achieves exactly the same effect. It increases the price of service, reducing demand and reducing investment (relative to the rest of the economy, which does not bear that tax). But in theory, telecom infrastructure is something we want to encourage, not discourage.

It's even worse when you impose a general public obligation on individual service providers. For example, instead of paying for universal healthcare with general tax dollars, you could simply direct hospitals to treat poor people for free. Nobody does that--they pay for the broad public benefit with equally broad public taxes. But we do it for telecom--we tell companies that in order to be allowed to offer any service in a city, they must shoulder the burden of building out infrastructure even to neighborhoods where few people could afford to subscribe (i.e., neighborhoods that can only be served at a loss). That essentially makes it impossible to have a "minimally viable ISP." You can't compete with an incumbent by stealing away customers neighborhood-by-neighborhood. If the government simply let companies build infrastructure where it was profitable, and built subsidized infrastructure itself using general tax dollars where it was not, you could have that sort of competition.

[mmt]

> you could simply direct hospitals to treat poor people for free. Nobody does that

Actually, I believe that's exactly what happens in the US with emergency departments. Although it supports your point about such a practice being distortionary, it also draws attention to the fact of the sheer complexity of all this.

That's mostly what bothers me about seemingly-simple statement or analogies about economics (or, really, economic theorizing in general), that the reality is far more complex and interconnected.

[reaperducer]

>Imposing a tax on "everybody" and using it to pay for a public service dampens economic activity

Yes. That's why we have no interstate highways to move goods around, spurring commerce.

Oh, wait...

[citilife]

The way electricity works is by allowing the electrical company to charge everyone (across their whole network) such that they make a max of 10% (depends on state) above their current amortized expenditure. The idea being, if an electric company wants to make more money, it has to spend more money. And it's fixed how much money they can charge (it's based on total network cost). Think of it as a semi-non-profit, which can only make 10% profit.

So, what it does is constantly relay wires, build out to rural areas, etc. and thereby extend their network and keep it up-to-date (wires only last 30 years anyway). This I think is what we need to companies such as Comcast.

[rayiner]

There's decades of precedent on how to do utility regulation, and that is one of the models. (It's called the rate-of-return model.) It was used for telecom for a long time, but has lots of problems. On one hand, it can encourage gold plating (spending money on infrastructure that isn't helpful because there is a guaranteed return on capital investment). On the other hand, political pressure can drive the return rate below the optimal level.

Your post actually highlights the problem. What makes 10% the proper profit margin? BT OpenReach, the U.K.'s regulated infrastructure monopoly, has a profit margin of double that. That number becomes a political football, and the political result probably isn't what most people on HN would want. People are happy with 25 mbps DSL; they're not going to vote to raise Internet rates to drive returns high enough to incentivize investment in replacing everything with fiber. That's exactly what you see in other rate-regulated utilities. People don't vote to replace lead pipes that poison kids, because they would rather have cheaper water rates; they don't vote to replace sewers that leak raw sewage into rivers when it rains, because they'd rather have cheaper sewage fees.

[praneshp]

> Forcing the places that do have it to subsidize the places that don't have it, however, is incredibly destructive to competition

This is one reason why the have nots tend to vote for candidates the haves dislike, no?

[extralego]

>A government-run economy becomes starved for capital and innovation slows way down; that is why the Soviet Union lagged U.S. technology and why Cubans still drive 50-year-old-cars.

This assertion of causality is sorely lacking in accuracy. Your examples alone are sufficient for highlighting this.

Being among the most ‘government-run economy’ on earth at the time, the astounding innovation achieved within the Soviet Union is the most glaring contradiction. Cuba is just an awful case study subject, due to so many drastic incongruencies, but let’s remember technological innovation has been fairly low on Cuba’s priority list. If it weren’t their access to the world’s selection of material and media resources would have likely remained open. And this access was very obviously the reason they are driving old cars. Those are just two factors I will assert are far more useful in this sort of prediction.

While of course the correlation is circumstantially critical to varying degrees, many other measurements are better predictors of rich innovation environments.

[086421357909764]

The even shittier thing is, assuming your muni get the efforts going, it's not uncommon for comcast to all of a sudden have a competing product at a cheaper rate. Where the didn't have bandwidth they suddenly can support the increased rates due to competition. It's just nuts.

[chalkandpaste]

>Those were built out by private companies, but operated under a regulatory regime called "common carrier,"

No. "Common Carrier" classification under Title II of the Communications act of 1934 comes more than 30 years after the introduction of the telephone, much longer than the telegraph. More than that, it could be argued that that, along with the Kingsbury Commitment were the contributions that led to an AT&T incumbency in the first place.

[snowwrestler]

"Common Carrier" classification under Title II of the Communications act of 1934 is just one implementation of the legal concept of common carrier, which dates back to transportation systems in England. (warning: simplified)

[chalkandpaste]

No issue with what you're saying here. The primary point I wanted to emphasize was that our application of regulations to the telephone system is not in line with whom I was replying to said, that there was around a 30-40 year gap.

[VikingCoder]

Private industry is better at profit.

It's open for discussion whether government is better at providing essential services like healthcare, water, fire, police, electricity, and internet. I assert that it is, but I respect different views.

[Clubber]

Right. What it really boils down to is a private entity more efficient at delivering a service than the 10% or so profit margin it requires to operate. The more profit margin a company requires, the more efficient over a government implementation it needs to be; so if a company requires a 20% margin, it needs to be 20% more efficient to break even with a government run entity of the same nature.

There are other aspects such as a company can't run without a profit and proper cash flow for nearly as long as a government entity can, because the government entity is subsidized. Also a government entity is much more susceptible to political winds (budget cuts) than a private entity may be.

[VikingCoder]

There's also the aspect that a government-run program can be subsidized so that those who can't afford it can still use it.

Private entities are far less likely to provide that on their own. And when government starts subsidizing business or giving tax cuts for behavior, then things get wonky, too. Like when the company pockets the money, and doesn't provide the service. Like what happened with broadband:

https://www.huffingtonpost.com/bruce-kushnick/the-book-of-br...

[freefal]

I think your point is generally spot on, but I wanted to nitpick at this one:

> airlines needed it

No, they didn't. Regulation of fares, routes and market entry of new airlines kept prices artificially high until airlines were deregulated in the late 70s. Quoting from Wikipedia (https://en.wikipedia.org/wiki/Airline_Deregulation_Act#Effec...): "A 1996 Government Accountability Office report found that the average fare per passenger mile was about nine percent lower in 1994 than in 1979. Between 1976 and 1990 the paid fare had declined approximately thirty percent in inflation-adjusted terms. Passenger loads have risen, partly because airlines can now transfer larger aircraft to longer, busier routes and replace them with smaller ones on shorter, lower-traffic routes."

[dredmorbius]

If you push the fare comparison back to 1972, before the Arab Oil Embargo, rather than 1979, the heart of the Iranian embargo, the fare picture changes markedly.

A jet airliner's takeoff weight is over 50% fuel.

Robert Gorden inThe Rise and Fall of American Growth:

surprisingly, the period of most rapid decline in the real price of air travel occurred before the first flight of a jet plane. As shown in figure 11–10, the price of air travel relative to other goods and services declined rapidly from 1940 to 1960, declined at a slower rate from 1960 to 1980, and has experienced no decline at all in its relative price between 1980 and 2014. The growth rate of passenger miles traveled has mirrored the rate of change of the relative price except with the opposite sign, because lower prices stimulate the demand for any good or service.

The accompanying figure shows not merely a modest rise, but a sharp spike in airline pirces in 1979.

https://i.imgur.com/uykLMUa_d.jpg

Among Gordon's economic specialisations is the aviation industry.

[snowwrestler]

Airlines are common carriers to this day, despite the reduction in regulations governing fares, routes, competition, etc.

[Spooky23]

I'd disagree. Government is much more efficient at funding capital projects. Public companies are largely incapable of sustaining them at scale.

The Bell System was built through implicit subsidy of capital expenses, by the allowance of monopoly, favorable tax treatments of convertible bonds, and a regulatory regime that locked in profit.

[beojan]

When it comes to core infrastructure, government run is better than state run. The government is incentivized to provide service and pricing that maximizes the public good while a private company has to maximize its own profit.

You could strictly regulate to fix this but eventually you end up with a funny pseudo government agency which has to fund itself. As I understand it (not American) this is what the Bell system ended up becoming.

[bcheung]

I think a combination of the 2 is warranted. I'd hate to see it entirely controlled by the government because they tend to be more likely to install backdoors while private companies would push back to protect their users.

With 5G networks I would think there is a lot less digging up streets so municipal plans are more feasible.

[amazon_not]

5G networks require lots and lots of fiber. This means a lot of digging is required.

[mietek]

> that is why the Soviet Union lagged U.S. technology

https://en.wikipedia.org/wiki/NK-33

[wizu]

https://en.wikipedia.org/wiki/Apollo_11

[lovich]

Cubans drive 50 year old cars because their closest neighbor, who is also a superpower, has been enforcing sanctions on them for decades. It's disenguous to try and measure how a system works then another party is putting their foot on the scale.

As for private buildouts being better than government funded infrastructure, that is only true as long as profit is your single measure of "better".

When it comes to services that we don't want any downtime for and want everyone to have access to, then government funded infrastructure has done better than capitalist forces. Water and electricity are both services we want everyone to have access to that as uninterrupted as possible. It's still not perfect as situations like Flint or industrial water usage in California pulling out water without paying enough to be sustsinable, but a capitalist system for those services would lead to many not being able to pay enough for access and going without as well as interruptions in service as companies push their systems to the bone for efficiency or go out of business

[at-fates-hands]

>> Cubans drive 50 year old cars because their closest neighbor, who is also a superpower, has been enforcing sanctions on them for decades. It's disenguous to try and measure how a system works then another party is putting their foot on the scale.

There are a myriad of reasons for the embargo on Cuba. Let's not sugar coat this fact just to use it as an example of "American imperialism".

The reason they drive classic cars has nothing to do with the embargo:

After Fidel Castro assumed power in 1959, he imposed a new law that prevented anyone without government permission from importing foreign automobiles. That turned Cuba into a car museum in the making, sealing the island off from the automotive future.

http://time.com/money/3640018/cuba-classic-cars/

You should also keep in mind it was possible to get a new car imported, but you needed government permission to do so. This meant only the rich, celebrities and professional athletes were allowed to do so, keeping the majority of the population fending for themselves to keep their old decaying cars alive and working.

[JustSomeNobody]

> Personally, I think that private buildouts are a better way to go than a government-funded network infrastructure.

If it is government-funded, then the people own it not some bloated corporation.

[wpietri]

Yeah. I think markets are amazing when you have the right conditions such that you get plenty of sellers, plenty of buyers, and switching vendors is easy.

But the US market mostly doesn't have plenty of sellers. You really want at least 3 to get good competition, and that's very rare:

https://arstechnica.com/information-technology/2017/06/50-mi...

My first choice is strong competition, and I live in one of the few US areas that have that. It's great! I have a gigabit both ways for less than my mobile bill. But my clear second choice is locally owned municipal broadband that can be held accountable by the people.

My very last choice is a local monopoly owned by a giant national corporation, because then we get the the worst features of communism (incompetence, poor service, abysmal customer support) and the worst features of capitalism (high prices, exploitative behavior, use of profits to buy legislation).

[rayiner]

The question is not what is best, but how much competition do you need to beat a government-run service? Here in D.C., with Uber/Lyft versus Metro, that number is just two. Indeed, even a giant national monopoly is probably better than your typical government service. Even Windows 95 was better than most of the public services in D.C.

[wpietri]

Depends on the government, I suppose. And your criteria for comparison.

Broadband in particular is very infrastructure-ish. It's much more like a water utility or traffic lights than a service business like on-demand personal drivers. Many governments run infrastructure quite well.

[rayiner]

What infrastructure is broadband most like? The water utility that's poisoning people with lead: https://www.washingtonpost.com/local/dcs-decade-old-problem-.... The sewer utility that's dumping raw sewage into the local river: https://wtop.com/dc/2017/07/heavy-rain-raw-sewage-potomac-an.... Or the subway infrastructure that constantly catches fire? https://www.arlnow.com/2018/01/22/developing-track-fire-at-p....

I've lived in several major cities: Baltimore, D.C., New York, Philadelphia, Atlanta, and Chicago. Out of those, I might trust Chicago to run municipal broadband. For the others, I'd pick Comcast any day of the week.

[theandrewbailey]

It would be owned by the people in theory, but it would be just like a 'bloated' corporation owning it, except worse.

[Someone1234]

A better approach might be a government managed last mile (i.e. cable from a central data center to your home/business), but not the ISP itself.

That way ISPs can continue to compete for your business, but the market would be significantly less restrictive because the ISP only needs physical equipment at the data center and upstream of it.

The biggest thing stopping ISP competition today is that local markets don't want the road dug up ten times to lay different cables. So instead lay them a single time, and re-sell access.

The ISPs would pay a fee to use the government cables from the data center to the end user (and equipment). That fee would be used to expand and maintain the network.

Other countries have done this with huge success. It wouldn't even put ISPs out of business, they can use this network just like their competitors.

[mikedilger]

New Zealand does this. It works well. There is plenty of ISP competition - I can choose between at least 20 providers, probably a lot more.

Edit: A colleague just mentioned to me that New Zealand doesn't have net neutrality and doesn't need it for this very reason.

[ksec]

I tried reading this in Wiki and it wasn't very clear. Are the last mile fibre? Do government owns it or are they like infrastructure owned by companies like electricity and water where there are requirement for them to open up? Do ISP only manage the fibre connection from Node / Curb? Who owns this Node / Curb?

Are there any single major companies that owns the backbone? And Submarine cables?

[mikedilger]

Most of the last mile is copper, because population density is thin. But in the cities fibre is being rolled out (goal is 87% by 2022).

Crown Fibre Holdings owns the new fibre network (I think Chorus owns all the copper, not sure) but Chorus manages most of it (by contract); Chorus is a crown partner company, and they are regulated and forbidden from certain activities - they were split off from Telecom, a private company.

I don't know enough about the backbone to usefully comment, except that there are at least 3 fibre networks running along the major road I live near.

For a long time there was only one submarine cable with any serious bandwidth (Southern Cross Cable), but aparently according to Wikipedia a new one to AUS was rolled out in March 2017 and another one to Hawaii this month.

[tbyehl]

Seems the logical way to go, but Provo, UT tried that and it became so politically toxic that the city wound up giving the network away to Google and swallowing the debt.

If you look at EPB being forced to pull out of neighboring areas and the actions of other states to prevent muni / utility Internet projects, it's pretty clear that America doesn't want to solve the last mile problem unless it involves preserving the incumbent's market position.

[cwp]

> Also, take away right of way to private ISPs, and let citizens and municipalities charge arbitrary amounts for anything going over their property.

That would make private ISPs go away.

[spruciefic399]

Perhaps. I'd prefer it not to--I'd rather have an ecosystem with private and public competition, and one with net neutrality regulation. But it seems to me the discussion is generally really lopsided, with little to no acknowledgment of what ISPs get from the public. If the ISPs really want unfettered competition, then I say fine--but I think, as you say, if we really took competition seriously the consequences would be far more dire for them than I think people realize. The problem is the scope of what real competition would entail is often obscured, because what they get from the public is just sort of assumed to be a given and off the table.

[cf498]

Private public doesnt work, its even worse then a market economy. Only public providers will bring internet to people further and further away from main cities, while private companies will focus on the densest areas of the biggest cities.

We have all of that in Germany already. It doesnt work, laying fiberglass or even copper outside of major cities is just not a reasonable thing to do in a market economy. Same as its not worth while to send a postmen every day, or even every week, to a small village. This is something that needs to be financed through a shared burden, otherwise you have the situation, that large part of your country dont have DSL yet. With private companies siphoning of easily provided customers, the public is stuck with a gigantic burden to provide the absolut minimum to people.

[cwp]

Agreed, we do give a lot to private companies in order to get the benefits of their products, and they're constantly pushing for more. I just feel that the internet as a utility is still too new for us to know exactly what the right regulator regime is or the optimal role of government in actually providing internet services.

Ideally regulation would be more reactive than proactive. Rather than defining explicitly the terms and services that ISPs must provide, we'd let them compete with each other and try different products and business models. The government would only step in when they do something that turns out to be harmful. The trick would be to actually step in where needed and not just let anything go.

[AtlasBarfed]

This could be done even at a block association level with 5G/wifi or maybe even 4G.

4G/5G/Wifi is critical to undermining the incumbent ISPs. Urban and heavy to medium suburban rollout could be rapid.

Perhaps google should buy T-Mobile to get access to cell towers as a start... take the licenses from Nextel/Sprint for ISP-level data delivery, and keep T-Mobile for regular coverage.

Of course, I haven't tracked the status of T-Mobile / Nextel / Sprint's spectrum rights in a long time.

But google or a consortium could provide turnkey solutions to doing block / neighborhood / community / village / city wireless ISP that actually works.

And provide the legal backing when the prolific army of telecom lawyers come knocking to shake down smaller operations.

Or balloons. Weren't there supposed to be balloons?

[VectorLock]

I'm not sure if Google wants to get in on that game. They might now that net neutrality is a thing of the past. From what I understand their few entries into spectrum bidding were mostly to get the incumbents to up their bids.

[rayiner]

This (1) would not happen; (2) would be awful. Utilities and infrastructure are state and local issues. The states and cities that would build public broadband infrastructure are in dire financial straits and can't afford it. You invoke "government handouts," but for decades the government has been loathe to get into the business of building broadband. All the "handouts" you hear about are intra-industry transfer payments: a special tax is levied on telecom service in urban areas to subsidize telecom service in rural areas. It doesn't cost the government anything, it just moves money from mostly urban ISPs to mostly rural ISPs.

Even if there was the money for it, you wouldn't want it. Public Internet in the U.S. does not look like "fiber for everyone." Instead, it would be 25 mbps DSL for everyone. It would be that way for the same reason we build six-lane highways to far-flung exurbs while public transit in urban areas decays, and why we continue to use lead-piped water systems in order to keep water rates extremely low. Our political situation tilts things heavily toward favoring coverage over quality.

Over the last 10 years, my private-sector broadband speeds have gotten 10 times faster, even as bandwidth usage exploded. But my public-sector subway ride has gotten slower (and more jerky when they turned off automation), even as ridership went down. It seems absolutely insane to me that anyone would want to put the people responsible for the latter in charge of the former.

[jaredklewis]

> I would argue that the intent of the constitutional mandate was to establish communications and not necessarily paper mail per se.

A minor point, but if the federal government wanted to run an ISP (inside or outside of the USPS), they don't need anything new in the constitution to do it.

If the Interstate Commerce Clause can be used as justification to create the departments of Agriculture, Education, Energy, Health/Human Services, Housing/Urban Development, Labor, and Transportation [1] as well as the FBI and just about everything else, I can see no reason why it couldn't be used to create a national ISP.

As to whether it would be a good idea, I don't have a strong opinion.

1. Some might argue the Department of Transporation is justified under article I, section 8, paragraph 7 (not paragraph 3), though I don't think either theory has ever been tested

[WillPostForFood]

* I'm sick of this government handout to companies that want to have their cake and eat it too*

So you're advocating a federal subsidy so Google (4x the market cap of AT&T) and Netflix don't have to deal with the problem themselves? It is like fighting corporate welfare for big companies with even bigger corporate welfare for even bigger corporations.