[rayiner]

You're changing the goal posts. We were talking about companies using "privileges granted to them by the government (such rights to lay cable lines) as an anti-competitive tool." Comcast is a near-monopoly here in Baltimore (though, I'm one of the lucky ones who has FiOS that Verizon managed to sneak in when the city wasn't looking), but it's not because they abused their privileges.

Ars makes it seem like Comcast bamboozled the city into signing an exclusive franchise agreement, but in reality nobody else wants to build here for the same reason Google didn't want to build here. Large parts of the city are a burned-out husk, a quarter of the population is below the poverty line, and it's unacceptable in the eyes of the city for anyone to just build-out to the parts of the city that might be able to afford fiber service.

[belorn]

My goal posts is not to vilify Comcast as a company in bed with government, but to find an explanation to why there is a near-monopoly. If a company has poor service, bad quality, and high prices, there should be competitors that are willing to earn revenue by competing with better service, better quality and lower prices. This is basic theory of the market, and as it goes, only government intervention allows for a monopoly in that environment.

So what is it. No person willing to fund a company in Baltimore? No investors willing to spend the same price as Comcast, or less if a smart founder can out-perform the past production cost?

If you can explain the monopoly without invoking government intervention, I am all ears.

[rayiner]

First, you said the issue was: "companies ... use[ing] the privileges granted to them by the government (such rights to lay cable lines) as an anti-competitive tool." Now you're saying the issue is: "explain[ing] the monopoly without invoking government intervention." Do you not see how those are two different contentions?

The Ars Technica narrative is that we need to regulate the telecom companies because they abuse their privileges to keep out competitors. But what's keeping out competition is, e.g., Baltimore forcing companies to build fiber service to the 25% of the city that's below the poverty line as a pre-condition for building anywhere in the city. It's Bill de Blasio turning FiOS deployment into a civil rights issue.[1] It's not clear to me how these requirements are the result of telecom companies abusing their privileges. And it's not clear to me how the solution to a problem created by over-regulation is imposing even more regulation.

I'm not a anti-regulation type. If a telecom company is digging under roads in a way that's hazerdous to public safety or the environment, that should be regulated. But this is an issue that turns mainstream liberals into Nader-ites espousing thoroughly discredited regimes like Title II. For god's sake Kushnick thinks the government should be in the business of telling companies what prices they can charge. As someone too young to remember the 1970's, it comes across as insanity.

[1] http://www.speedmatters.org/blog/archive/new-york-mayor-bill... ("If you can’t afford to feed your family by the end of the month, you can't afford $75 a month for the broadband service. And that's what we have to fix.")

[shkkmo]

> If you can explain the monopoly without invoking government intervention, I am all ears.

>> But what's keeping out competition is, e.g., Baltimore forcing companies to build fiber service to the 25% of the city that's below the poverty line as a pre-condition for building anywhere in the city.

The original, specific contention (exclusive cable laying rights) may be untrue according to you.

Does that matter whether the government is enforcing the monopoly through excesive coverage requirement or through limiting cable laying rights? The government is still helping to enforce a monopoly.

I think the argument is that the telecom companies need to be regulated because they're a monopoly. So... government is helping to enforce a monopoly

[rayiner]

> Does that matter whether the government is enforcing the monopoly through excesive coverage requirement or through limiting cable laying rights?

The original contention was not that the government is helping to perpetuate the monopoly, it's that the cable companies were using special privileges in an anti-competitive way. There's no special privileges, and if you look at e.g. Verizon's tussle with Baltimore, they're not the ones lobbying for excessive coverage requirements.

I don't know why the solution to government policies that discourage competition isn't getting rid of those policies.

[fnordfnordfnord]

>But what's keeping out competition is, e.g., Baltimore forcing companies to build fiber service to the 25% of the city that's below the poverty line as a pre-condition for building anywhere in the city.

Why is that pre-condition supposedly preventing companies from building infrastructure? It's not as though the City has also demanded that they operate at it a loss, merely that they build out service to the entire city as opposed to building service out to the choicest bits. And, isn't that exactly what a city government ought to do?

[rayiner]

See the math here: http://bits.blogs.nytimes.com/2008/08/19/a-bear-speaks-why-v....

It costs you $1,000 just to pass a house, even if they don't subscribe, and you have to maintain that infrastructure too. If 40% of passed houses subscribe (Verizon has been struggling to hit that number for years), you pay $2,500 per house that does subscribe. This is the "uptake ratio" and a fiber provider lives and dies by that number.

Build-out requirements tank your uptake ratio, because you spend a bunch of money passing houses where people can't afford to subscribe. It increases how much you need to make on all the other houses to recoup your costs.

But your other subscribers don't give a shit about your costs. They're willing to pay, e.g., $100/month for triple play, and they don't care if your per-house cost is $2,000 or $4,000. If you raise your prices to recoup your costs, they'll just stick with the incumbent, again tanking your uptake ratio.

A small ISP may be willing to ask for a $10 million bank loan to wire up a yuppie neighborhood like Fells Point, with the prospect of seeing how it goes and building out from there. Nobody will ask for a $250 million bank loan to wire up the whole city of Baltimore.

[belorn]

I do not take it that Comcast is charity, so either they made a horrible deal and lost significant amount of investment, or the narrative is lacking some details. I personally doubt we will find a $250 million investment in Comcasts books regarding the city of Baltimore however, as I find there is simpler narratives that would match in how cities like Baltimore gets fiber into peoples homes. It would also explain why some cities has has semi-monopolies and others don't.

A city that wants fiber has the obvious choice to subsidize the investment of a large ISP, say Comcast, thus severely reducing the investment cost. The permission to build is of course non-exclusive, but the subsidizing is not. Once built, the ISP gained a government granted advantage, and thus a monopoly is born.

Alternative, a city can create a government bid for administrating and building a city fiber network. On paper, this mean that the city owns the fiber, and the ISP that builds it has to sell access on equal ground with competitors. The ISP do still get an advantage in operation knowledge, some payment for doing the administration, and first mover advantage. This tend to result in healthy, if somewhat constrained, competition.

Ars Technica narrative talk about how the cable division paid little or no construction costs. That is very different aspect than if the permission to construct, operate, repair, maintain, and reconstruct a Cable System is non-exclusive.

[rayiner]

> A city that wants fiber has the obvious choice to subsidize the investment of a large ISP, say Comcast, thus severely reducing the investment cost. The permission to build is of course non-exclusive, but the subsidizing is not. Once built, the ISP gained a government granted advantage, and thus a monopoly is born.

Cities don't subsidize cable companies. Indeed, they extract concessions from them. E.g. every time Comcast re-ups the contract in Wilmington, DE, where I used to live, they have to kick in a random couple of million to government programs.

> Ars Technica narrative talk about how the cable division paid little or no construction costs.

Who cares what division within the ISP paid the construction costs? At the end of the day, the money came from the company's paying customers, not the municipalities.

[rhino369]

The thing you are missing is that the first mover is not making a bad investment. They get 100% of the willing customers.

A second mover really only has a chance of getting 50% of the market. But it still has to build a network that services 100%.

A third mover really only has a chance of getting 33%, but has to service 100%.

The first mover doesn't get subsidies, they just get 100% of the market. The second mover likely can't be profitable. The first mover will match or beat their prices.

[tesmar2]

They can if they want to, but it seems that is would stifle startups. I guess that is why Google is insisting that cities NOT have that premise with Google Fiber.