But Wait, Wasn't Muni-Fiber Supposed To Take Away Incentive For Private Fiber?

from the caught-in-a-lie dept

Over the past few years, there have been numerous lawsuits by telcos against various municipalities that have decided to launch municipal fiber broadband projects. Most of these lawsuits have failed -- but the main argument from the telcos is that it's unfair to have to compete against the government, and it would take away incentives for the telcos to actually invest in infrastructure to provide for those towns. Of course, that doesn't make much sense. That would mean that any competition would decrease incentives to invest. One of the nastier legal battles took place in Monticello, Minnesota, where the local telco TDS fought hard (and lost) its battle to stop muni-fiber from showing up. But, now, suddenly TDS is announcing its own fiber broadband, giving people 50 Mbps service for $50/month. What's the likelihood that TDS would have done this if it didn't have competition from muni-fiber? The reason municipalities look to muni-fiber is because there isn't enough competition and the telcos aren't investing in infrastructure (or really serving customer needs). So the end result here is that by introducing more competition, consumers and citizens are better served. So what's the problem with it again?


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  1.  
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    Brendan (profile), Oct 30th, 2009 @ 3:22pm

    It's perfectly fair, they just don't want to

    It's not "unfair" to introduce new competition, but of course the incumbents want to maintain their death grip. If people get a taste of real broadband (not this garbage we get sold here in most of Canada and the US) then the telco will be forced to invest a chunk of change to stay in the game. They'd rather not, of course, so they trump up these lies about unfair government competition. It's pretty rich, considering how many of these companies achieved their current monopoly by the privatization of a state-built and state-owned network.

    Personally I love muni-fiber, and think its a great way for cities fed up with the majors to change the rules of the game.

     

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  2.  
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    ChurchHatesTucker (profile), Oct 30th, 2009 @ 4:22pm

    So we could call this

    a 'public option?'

     

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  3.  
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    Anonymous Coward, Oct 30th, 2009 @ 4:41pm

    "But, now, suddenly TDS is announcing its own fiber broadband, giving people 50 Mbps service for $50/month."

    But I thought there is a bandwidth shortage and that this sort of thing is impossible due to some obscure economic model of bandwidth (never mind that the model seems not to exist in other countries).

    Face it, whenever some corporations try to justify high prices (ie: pharmaceutical corporations with their alleged high R&D costs) it's mostly just lies.

     

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  4.  
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    John, Oct 30th, 2009 @ 5:10pm

    It's great to finally hear a story where someone twisted the arm of the big telco to actually upgrade/expand their infrastructure.

    I live in Ottawa, Canada (Canada's Capital) and both DSL and Cable have been available 2km away from me for over 4 years, and yet I still don't have those available to me.

    It is obvious that the big telco companies do not wish to invest in their infrastructure and even expand it. They would rather sit on their profits, go play golf with one another, and brag about who has the most money.

     

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  5.  
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    Anonymous Coward, Oct 30th, 2009 @ 5:28pm

    Re:

    a lot of work still needs to be done, bandwidth in the U.S. (and probably in Canada, who knows) is still way overpriced.

    and by work I don't mean handing over taxdollars to rich telco/cableco companies to do nothing with it. I mean opening up the infrastructure to competition.

     

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  6.  
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    Steve R. (profile), Oct 30th, 2009 @ 5:39pm

    Government is Part of the Competative Landscape

    I get a kick out of the so-called capitalists who whine about "free" products, community forums such as Wikipedia, and government providing certain services like cable. Competition is competition, if you can't compete too bad.

    Furthermore, there is nothing wrong with the taxpayers authorizing the government to provide services such as cable to its citizens.

    An often overlooked aspect of this whole debate is that the government is still buying equipment from private companies (such as Cisco) and is employing people. So what is the difference, in terms of the economy, if the cable staff works for you local municipality or Time-Warner. None really.

     

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  7.  
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    bob, Oct 30th, 2009 @ 5:47pm

    cool

    50Mbps, to bad Minn is so cold.

     

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  8.  
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    Fred McTaker (profile), Oct 30th, 2009 @ 6:51pm

    Re: So we could call this

    I think Democratic government has a responsibility to provide some form of competition in all "needs" markets (food, water, shelter, health, energy, transportation, and communications) where none exists, due to natural Monopolies/Trusts, or necessary regulations that lead to the same. We have FedEx and UPS now, but I doubt they would stay as affordable if the USPS disappeared. The public should have more options in all these areas.

     

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  9.  
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    Phil, Oct 30th, 2009 @ 6:59pm

    Re: Government is Part of the Competative Landscape

    Steve R. has hit the nail on the head with the term "Competative Landscape". In discussing the strength and ability of capitalism to deliver goods and services, much is made of the essential motivating factor: the right to private ownership and profit. Capitalism however, has 2 great pillars, not one.
    Capitalism will only truly thrive with the other essential factor-- Competition.
    Lacking competition there will be minimal incentive to produce, no incentive for efficiency, and no incentive for improvement. Competition is the driver that makes all of us better, even though we would often like to be able to take the easy path.
    If allowing a government agency to provide a service increases competition in a marketplace, then that service may indeed become available at a less expensive price. However, government agencies need competition from private enterprise as well. This is why communism didn't work and socialist systems are usually inefficient. The government employees in such systems do not feel the pressure of competition. Neither unrestrained government nor unregulated business can be allowed to enjoy the lazy path of monopoly.
    I am small business owner and I know that competition motivates me to provide better service, (even though I am pleased when a competitor leaves town). So when I hear a business or corporation complaining about government performing a service that private enterprise "should" be doing, I view that as simply the whining of someone who doesn't want to make the effort to compete and excel.
    I believe the underlying reason the US economy has been so dynamic over the past 150 years has been that our system has tended (at least until recently) to maintain a very healthy competitive environment in most markets.

     

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  10.  
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    Phil, Oct 30th, 2009 @ 6:59pm

    Re: Government is Part of the Competative Landscape

    Steve R. has hit the nail on the head with the term "Competative Landscape". In discussing the strength and ability of capitalism to deliver goods and services, much is made of the essential motivating factor: the right to private ownership and profit. Capitalism however, has 2 great pillars, not one.
    Capitalism will only truly thrive with the other essential factor-- Competition.
    Lacking competition there will be minimal incentive to produce, no incentive for efficiency, and no incentive for improvement. Competition is the driver that makes all of us better, even though we would often like to be able to take the easy path.
    If allowing a government agency to provide a service increases competition in a marketplace, then that service may indeed become available at a less expensive price. However, government agencies need competition from private enterprise as well. This is why communism didn't work and socialist systems are usually inefficient. The government employees in such systems do not feel the pressure of competition. Neither unrestrained government nor unregulated business can be allowed to enjoy the lazy path of monopoly.
    I am small business owner and I know that competition motivates me to provide better service, (even though I am pleased when a competitor leaves town). So when I hear a business or corporation complaining about government performing a service that private enterprise "should" be doing, I view that as simply the whining of someone who doesn't want to make the effort to compete and excel.
    I believe the underlying reason the US economy has been so dynamic over the past 150 years has been that our system has tended (at least until recently) to maintain a very healthy competitive environment in most markets.

     

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  11.  
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    Anonymous Coward, Oct 30th, 2009 @ 8:02pm

    I'm not at all at easy with government owned enterprise, because I feel that once you have interests and you are responsible to regulate those things it will generally lead to bad places. But I do feel that community owned infra-structure is a way to go, it doesn't need to be the municipality they should regulate and keep an eye on things.

    Still, competition is good and Monticello just proved that. It is too bad that we hear so little about those types of things.

    ps: If you had a company and was in charge of making the rules would you let other in? That is the peril with state sponsored initiatives it may not happen but the potential to abuse is there, that is why people in the past made rules about competition from the government. But if the players in the field are not up to the task and people cannot do it because laws don't allow common people to organize then the government should do something :)

     

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  12.  
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    CP, Oct 31st, 2009 @ 1:04am

    I'm done

    The problem with this type of "competition" is that it is not really competition when one of the competitors is subsidized. Why not promote looking for ways to create an environment that fosters real competition instead of promoting a tax payer funded entity that can only get worse in the future, as they will eventually have NO competitors?

    As a side note, I've enjoyed this blog for a long time but have seen it's views slowly deteriorate into a clone of Karl Bode's BroadbandReports.com, where somehow the only worthy companies are government entities. Time to unsubscribe.

     

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  13.  
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    Pierre Guillery, Oct 31st, 2009 @ 1:51am

    Telcos need a nudge, dont they? See what happened in France

    What has happened in the USA in Chattanooga, Lafayette, Dalton, and again in Minnesota, is exactly what happened in France (this socialist country Americains love to hate!) since 2004. Between 2001 and 2003, we asked politely the incumbent (France Telecom) to do something about ADSL. They lied, lobbied, threatened, stalled... Then in 2004 a law was passed that allows municipalities to build their own networks when private carriers won't. Guess what happened since? France Telecom (and a few others) compete with muni-owned networks, and 98% of the poupulation has access to a minimum of 1.5Gb for 30 euros a month. Now that the 2004 law is firmly in place, the same is about to happen with fiber. Everywhere around the world, telcos need a nudge...

    Another thing: something as important to our country's competitiveness and growth and to our fellow citizens' education and well-being, shouldn't be left solely to "competitive forces". Because it is real clear by now private firms work for their shareholders, not for the public good - meaning they won't invest where it doesnt make economic sense to do so. We shouldn't hold it against them, that's the nature of the system. But let's stop fooling ourselves: fiber development is "regional development planning," and can't be left to market forces, because RDP is not what markets do.

    Shouldn't it be clear to all of us by now that private forces left to themselves will sometimes create serious trouble?

     

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  14.  
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    Pierre Guillery, Oct 31st, 2009 @ 1:58am

    Re: I'm done

    Telcos will NOT invest if they can keep their local monopolies in place. That's what economists know. That's why govt-subsidized competition works. It's dead simple, and by now it's no longer just a "theory": it's being demonstrated everywhere in the world. It's about time that die-hard free-market advocates acknowledge the fact that market players love monopolies...

     

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  15.  
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    huh, Oct 31st, 2009 @ 6:28am

    huh

    I would suggest to first deregulate heavily regulated telco industry and then assess the situation. Poor results are to be expected from the regulated market, no surprises here.

     

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  16.  
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    mic, Oct 31st, 2009 @ 7:05am

    not so simple as presented

    IMHO As long as a municipal project can live without subsidies and charge less for the product (i.e. is more efficient than a private company) no free market proponent would oppose this.

    But if municipal project is alive only thanks to subsidies we have to look at the total cost of providing the subsidized product. And make sure that subsidies are lower than benefits of this competition (is it even economically possible?).

     

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  17.  
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    mic, Oct 31st, 2009 @ 7:33am

    Re: I'm done

    I agree with CP on this.

    I follow this site for great IP related articles which are based on thorough and deep analysis of the matter, as demonstrated by lengthy series about economics of free.

    But some articles outside the IP field strike me as not nearly as well thought-out and rather ad hoc without first thinking about fundamentals. Maybe if there would be some series about economics of monopolies on techdirt ...

    CP would you care to suggest some sites worth checking?

     

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  18.  
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    Anonymous Coward, Oct 31st, 2009 @ 9:04am

    Re:

    Do you really live in Ottawa, or outside of the city?

     

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  19.  
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    DS, Oct 31st, 2009 @ 10:17am

    Re: It's perfectly fair, they just don't want to

    It's unfair in the way that you are competing against someone who is also in charge of all the rules, rules that it does not have to.

    So yes, in that way, it is unfair.

     

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  20.  
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    Anonymous Coward, Oct 31st, 2009 @ 1:25pm

    Re:

    We have this issue in many areas of the US today... my parent's home is only 8 miles from areas covered by both DSL and cable offerings, and neither is available to their home. What we have their is a broadband wireless option which frankly is better than the DSL and cable would be anyway (2.5Mbps symmetric) for just a few bucks more a month.

    Anyway, you are right on the mark... telcos are not interested in expanding their network capabilities, only their network subscriber areas.

     

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  21.  
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    Anonymous Coward, Oct 31st, 2009 @ 1:29pm

    In the end if the competition is coming from the government or not is still competition. Telcos took out the private owned infra structure in the U.S. and this is hurting the development of the internet in that country.

    It is possible to have the latest in fiber. But without competition in the market the usual players don't feel the need to upgrade anyone.

    It is dangerous to let the government be a player because they can create the rules that they need to vanguish the competitors, but to do that they would have to bypass the public opinion and would need to be squeaky clean otherwise the telcos would surely tell the world what is happening :)

     

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  22.  
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    Anonymous Coward, Oct 31st, 2009 @ 1:34pm

    Re: Government is Part of the Competative Landscape

    "Furthermore, there is nothing wrong with the taxpayers authorizing the government to provide services such as cable to its citizens."

    In the U.S. it's not the taxpayers or the voters that authorize anything, it's the industry lobbyists. They have to authorize the government to allow competition on the infrastructure before they allow anyone to compete. Until that happens the government keeps things as they are.

     

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  23.  
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    Anonymous Coward, Oct 31st, 2009 @ 1:40pm

    Re: Re: It's perfectly fair, they just don't want to

    "It's unfair in the way that you are competing against someone who is also in charge of all the rules, rules that it does not have to."

    What? Rules that it does not have to what?

     

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  24.  
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    Phil, Oct 31st, 2009 @ 3:05pm

    Re: I'm done

    Certainly subsidy is not competition, nor should a government entity that is ostensibly "competing" be allowed to regulate its own competition.
    That said, competition is competition. Everyone needs it. Monopoly cannot be allowed or condoned merely because it is private.

     

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  25.  
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    ChadBroChill (profile), Nov 1st, 2009 @ 1:19am

    Re:

    Are you high? 90% of this was incoherent babble.

     

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  26.  
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    John, Nov 1st, 2009 @ 9:14pm

    Re: I'm done

    Agreed CP. If you have to resort to taking peoples money without their consent (read government) it is not competition, it is closer to theft.
    The nature of all government programs is to move towards bloat and waste. Resulting in a massive wasteful bureaucracy that the public pays for but has no clue what it actually costs.
    Furthermore, the public loses the advantages of downward market forces on the whole industry by providing a false bottom to the market.
    We've seen the resulting skyrocketing costs in other industries that suffer from intervention.

     

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  27.  
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    Mike Masnick (profile), Nov 1st, 2009 @ 10:32pm

    Re: I'm done

    As a side note, I've enjoyed this blog for a long time but have seen it's views slowly deteriorate into a clone of Karl Bode's BroadbandReports.com, where somehow the only worthy companies are government entities. Time to unsubscribe.

    Really? When have I ever suggested such a thing? I'm a pretty strong free market believer. I believe you have misread what I wrote.

     

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  28.  
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    Cowardly Coward, Nov 2nd, 2009 @ 6:12am

    Something that many people fail to understand is that when you heavily regulate and subsidize a company, then you can no longer say that it obeys the laws of the free market or that it has the same incentives to compete as an unregulated, unsubsidized company.
    In the particular case of the telcos, they have been provided government money, and saddled with government regulation, which actually hampers other firms from moving in and providing competition.
    Folks will blame the free market and say that it's defective, and not providing enough competition, but that is a farce. The free market is merely people seeking what they want (in this case faster, better internet). When the incumbent, who is subsidized, and therefore more invested in looking out for the people subsidizing it (so say the people that justify subsidizing the incumbent in the first place), fails to provide what the free market (people) want, the people find another way to get what they want. Because of regulations placed on the industry, no new provider can step in and provide these services, so the only recourse is government provided service. This is inherently inefficient. The optimal solution would be to make it easier for others companies to move into the area and provide the desired service (via removal of incentives given to the incumbent, and removal of government created barriers to entry).

     

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  29.  
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    John Fenderson (profile), Nov 2nd, 2009 @ 7:38am

    Re:

    There is a balance to be had.

    As even Adam Smith mentioned, an unregulated free market is unsustainable: it will eventually devolve into a monopoly. The only way that a "free market" can exist at all is through regulation. In this sense, there is no such thing as a "free market" at all. It's not a question of "too much" or "too little," it's a question of "appropriate".

     

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  30.  
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    Brett Glass, Nov 2nd, 2009 @ 8:30am

    "Public options" are a bad idea

    Private enterprise should not face subsidized competition from government. As in the case of health care, we should do one of two things: create real, private competition or simply have a "single payer" system. While a "single payer" system might well be desirable in health care, it doesn't make sense in telecomm, so the proper thing to do is to stimulate private competition.

     

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  31.  
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    Jon, Nov 2nd, 2009 @ 11:00am

    "Public Option"

    As much as I hate our government for wasting $$$ on so many stupid things. Then wasting money on good things with poor management, the private sector is in it to make money. They are not in it to give less dense areas service. They don't want an install bleeding the company forever. That said, i'm not sure a government option may be the best way to improve our infrastructure, but it is the only way until someone comes up with a better idea. I can GUARANTEE that the cable/telco companies will not do it without a substantial push.

     

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  32.  
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    tmc (profile), Nov 3rd, 2009 @ 5:31am

    TDS should move itself up to Boston, MA... apparently Verizon doesn't want the millions of potential customers and wants to leech off the copper network at the same or higher prices that FIOS customers pay for next generation services. The precondition for Verizon to compete in their most competitive region (NY Metro) was that no other company can do line sharing the way it was on DSL. Fine, they got their concession, but in return what did consumers get? They got higher prices and anti-competitive moves and lack of innovation. Cherry picking and deployment commitments full of loopholes in exchange for video franchises. The time is now for these smaller carriers to cherry pick the best of what Verizon is casting off to the likes of fairpoint which WILL FILE BANKRUPTCY very soon and wipe billions of Verizon debt from it's books. Then once the best of MA is cherry picked, move onto Connecticut, Pennsylvania, Vermont, New Hampshire, Washington DC, etc.

     

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  33.  
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    fishbane, Nov 3rd, 2009 @ 7:38am

    Re: Re: It's perfectly fair, they just don't want to

    We actually have an empiric test of the theory here. If this were so completely unfair, then one would expect TDS to make an economically correct assessment and choose not to compete in that market. (Isn't that what we usually hear - that government will crowd out private investment?)

    It turns out that this did not happen.

    I think it is useful to remember that, especially at a local level, "teh government" is made of people. Telcos, more so than many other industries, are rather good at recognizing that and creating rules under which they thrive. Bitching about it and then essentially shooting their own argument in the head is absolutely their right, but I can't summon up much sympathy.

     

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