
Who wants competition? Big cable tries outlawing municipal broadband in Kansas - jseliger
http://arstechnica.com/tech-policy/2014/01/who-wants-competition-big-cable-tries-outlawing-municipal-broadband-in-kansas/
======
rayiner
Ars' coverage isn't very good on this issue. There is a tremendous amount of
context Ars ignores, namely all the franchise agreements between
municipalities and cable companies whether these sorts of proposals run afoul
of those agreements. Also, consider the Kansas City example, where the city
gave a single favored company massive regulatory concessions to install fiber.
I know "Google can do no evil," but it isn't good precedent.

Cheering on the municipalities is boneheaded. The municipalities and their
franchising agreements are a major part of the reason we're in this mess to
begin with:
[http://www.cato.org/pubs/pas/pa034.html](http://www.cato.org/pubs/pas/pa034.html)
(note the article is from 1984).

~~~
jbuzbee
Yeah, I'm a bit torn on these bills. They sound awful, but there are issues
that all the tech-sites seem to ignore. I'm all for competition, competition,
competition. We need more competition! But when municipalities get into the
mix, you have at least the potential for unfair practices. A city could give
itself free access to utility right of way, condemn properties in its way and
hide the true cost of running a network by lumping some expenses in general
utility categories. And you might end up with a very poorly-run network that
every single citizen pays for via higher taxes whether they want it or not.
Since citizens have to pay the city taxes no matter what, they'll drop the
potentially superior commercial Internet offering instead of paying twice.
Likely? Maybe. Maybe not. But worth a discussion.

~~~
Zigurd
Maybe vertically integrated ISP service doesn't work as an investor-owned
enterprise. Maybe all last-mile facilities ought to be owned by the
municipality and multiple providers can be chosen for ISP services.

~~~
jbuzbee
I recall that in the late 90's there was a regulation in place that forced the
phone and cable companies to lease their coax or DSL lines to competitors who
wanted to offer service as an ISP. I recall getting mailers from various
little companies with offers. There was a difficulty in determining what the
proper lease rate would be for the little guys. And in the end it apparently
didn't work out. I don't know if the law was changed or if the cable and
telephone companies were able to set the lease rate so high that nobody else
could be profitable.

~~~
ensignavenger
I think it is still the law, but like you said, the wholesale prices are set
way to high to be competitive.

------
minimax
The title is sort of misleading. A municipality offering broadband service
isn't really an economic actor since it can use tax receipts to subsidize the
service. Offering a choice between service provided by local government and a
private business isn't really the kind of competition most people have in mind
when they think of healthy markets. The laws should incentivize competition
between multiple telcos not between telcos and government.

Also, generally speaking, running big telco networks is hard, capital
intensive, and requires a lot of expertise that municipalities don't really
have. I've never used a municipal internet service that was any good.

~~~
drewcrawford
But the nature of being an ISP is to run expensive (both in outlay and
maintenance) cable/fiber to your house, and it doesn't make economic sense to
run 2 or 3 or 4 lines to a customer that only uses 1 ISP. It follows directly
from your argument that a person should have a healthy market of water
companies serving their house, or sewer companies, or electric companies.

> running big telco networks is hard, capital intensive, and requires a lot of
> expertise that municipalities don't really have

Capital-intensive, expertise-intensive things is _exactly what municipalities
do well_. They do water, sewer, utilities, police, fire, EMS, etc. My city
spent just over $3b last year, meanwhile Time Warner Cable spent roughly $3b
on capital expenses in the entire United States.

~~~
minimax
To follow up with your water analogy: we don't expect the water company to
deliver 400x the water to our homes than we did 20 years ago, but that's
exactly what we expect of our broadband providers. It's hard to imagine a
scenario where a municipal (or monopoly) broadband service will upgrade its
network as fast as we expect. Competition is the answer.

 _My city spent just over $3b last year, meanwhile Time Warner Cable spent
roughly $3b on capital expenses in the entire United States._

This is about as apples to oranges as it gets, but if your city spent $3B just
maintaining water and sewer, and time warner spent $3B over the entire country
then TW is winning in my book.

~~~
drewcrawford
> we don't expect the water company to deliver 400x the water to our homes
> than we did 20 years ago, but that's exactly what we expect of our broadband
> providers.

It is a 400x increase when measured by the yardstick of a software developer,
but by the yardstick of "how much money does it cost to connect Joe Schmoe to
a network that meets his expectations" the business has not appreciably
changed in 20 years. What changes is the model number on the Cisco switch and
the type of cable in the ground, but "what is the maintenance cycle on this
electrical cable and power transformer" is a problem that municipalities have
been successfully solving for well over a century.

I think you are confusing the practice of actual dataspeed innovation (e.g.
what Cisco, Juniper, Alcatel-Lucent, Qualcomm etc., do) with ISPs like AT&T or
TWC who merely buy and install equipment and service cable runs. AT&T, Time
Warner, Verizon, et al do not appreciably contribute to the number of packets
it is possible to send in 10 seconds, except insofar as they buy products from
those companies that actually do. That role (of buying Cisco products) can
easily be shifted to a municipality with no downside to Cisco. In fact, from
Cisco's perspective, large nationwide ISPs operate more or less as a
consolidated union of individual markets and have a lot of bargaining power,
so a more diversified customerbase that doesn't cooperate as tightly means
Cisco can make more money, and since they are actually the ones who make the
internet fast, that seems like a positive outcome to me.

> but if your city spent $3B just maintaining water and sewer, and time warner
> spent $3B over the entire country then TW is winning in my book.

Of course not. $3b is the total budget for the whole city, which is mostly
public safety (police, fire, EMS, etc.) The capital spending on energy is only
about $200m/year, which is about 50% production and 50% distribution. If you
imagine that it is probably easier to run fiber than it is to run 110,000V
powerlines everywhere, the ongoing capital expenditure to run the actual fiber
lines themselves would be less than $100m.

~~~
minimax
If you want to make Internet service a regulated monopoly or a municipality
provided service, there will be no incentive to upgrade to new technology when
it becomes available. That is the virtue of competition. Competitors can
differentiate their offerings based on price and features. Competitors will
install faster networks in order to win market share. Competitors will find
ways to reduce costs so they can offer service at lower prices to gain market
share. You don't have any of that if the municipality owns the network.

~~~
jessaustin
You've made many predictions about what "competitors" _will_ do. Why the hell
haven't they done them already? Data service in this country is terrible, for
most business and nearly all residential customers.

~~~
georgemcbay
Yeah it is a common mistake made by free market folks:

Competition will drive down prices, increase speed and result in the best
possible customer service!

Except that in markets with expensive outlays to get started that rarely
happens because the expenses put a natural limiter on the amount of people
that can actually mount competition making that number low enough that the
competitors can essentially carve up the market, price fix and then all suck
approximately equally, indefinitely. Just like ISPs and cell phone carriers do
now (and will continue to do so until the government steps in and forces them
to fix their shit).

~~~
jessaustin
If one must generalize, I think we should say that competition _tends_ to
benefit the consumer, and fortunately competition _often_ arises
spontaneously, but there are many factors that can disrupt this virtuous
process.

~~~
trobertson
> competition tends to benefit the consumer

In regulated markets. After all, things like anti-cartel laws are regulations,
and we absolutely do need those.

~~~
jessaustin
There are better examples one could use. After all encouraging competition
isn't really the point of _cartels_.

~~~
pohl
I think the point was that cartels will form in a regulatory vacuum and
therefore the intrinsic virtues of market forces are oft overstated.

------
jbuzbee
I recall reading an article a while back about a neighborhood that had a fiber
network that was put in when the community was built as a selling point. Every
single house had fiber in place for TV, Phone and Internet. Sounds great!
Right? In theory yeah, but not so much in practice. Every house had a network
fee added as part of their homeowner's due. This fee went to an external
company that ran the network. This company didn't have much or any incentive
to properly manage, update or keep the network running. They had a captive
audience. Everybody pays every month whether they use the network or not.
Network down? They'll get to it in a bit after they take care of their
competitive neighborhoods. And though fiber sounded great, the speeds they
were getting weren't much different than other areas near-by on cable modems.
So want to forget it and go with Comcast? Sorry, they don't serve the
neighborhood as they can't be competitive when everybody in the neighborhood
is already paying for the fiber network. I recall the neighborhood association
had gone through a couple of different management companies, with pretty much
the same result. In short - beware of turning over your network to someone
without an incentive to make you happy. Of course, in many areas (like mine)
there is no real competition for high-speed Internet. It's Comcast or
nothing...

~~~
ryanhuff
I see no problem with this setup if the homeowners association own the
network, and can bid out managing the service to private ISP's. That's the
ideal setup, IMO. Consider the data pipes a utility, but let free market
forces drive service.

~~~
jbuzbee
If they were able to let multiple companies offer service over their
community-owned dumb pipes, that would indeed be ideal. But my recollection is
that were hiring a single private ISP to manage it all. Maybe they were too
small for Comcast or Cox, etc. to bother with in this unique setup? I'm afraid
the same thing would happen in small towns if the town itself owned the
network.

------
SourPatch
Maybe this is a stupid question, but why is it so bad to let people provide
for themselves? Kansans should be prevented from running their own ISP? Why?
Doesn't that idea seem contrary to self-governance? It's really depressing
that people cannot legally say "screw you" to big telco/big cable and do their
own thing. Somebody enlighten me, please.

~~~
leot
Because competition from outside the oligopoly is uncompetitive (apparently).

------
crazy1van
The government giveth and the government taketh.

They gave many of these companies near-monopolies by blocking competition from
laying cable or accessing the telephone poles.

Now the government has decided to crush the telco's industry by running their
own service at prices impossible to compete with because they are tax payer
subsidized.

Live by the sword. Die by the sword. Personally, I'd rather shrink the sword
down to around a steak knife.

------
jonaldomo
TIL that you can submit bills and not be a politician.

~~~
_delirium
I dug into it out of curiosity, and I don't believe that's technically true,
but is sort-of true in practice. Only members of the legislature may formally
introduce bills. But, Kansas, like some other states (especially those
influenced by popular-democracy principles of the progressive era), has
developed a convention where legislators often convey bills to a relevant
committee when requested to by a constituent. In that case they submit the
bill but decline to sponsor it, to indicate that they're just conveying it.

Here's the relevant section from the Kansas Handbook of Legislative Procedure
([http://www.kslegislature.org/li/m/pdf/kansas_legislative_pro...](http://www.kslegislature.org/li/m/pdf/kansas_legislative_procedure.pdf)):

 _16\. Who May Introduce a Bill._

 _Any member or any standing committee, an interim committee of either house,
and certain statutory committees may introduce a bill. Sometimes bills are
introduced by two or more members (of the same house) as joint sponsors. All
regular appropriation bills are introduced by the Appropriations /Ways and
Means Committees. Bills sometimes are introduced by a member or committee at
the request of a constituent with the notation “By Request” appearing after
the author’s name on the printed bill and in the journal. A “By Request”
designation often suggests that the member or committee who introduced the
bill is not necessarily an advocate for it._

~~~
pyrocat
It happens at the federal level too. Lobbyist groups write the bills
themselves and submit them to members of Congress in closed door meetings.
Congress can then edit the bill, but they often just introduce it as-is. We
only know this because people have leaked the Lobbyists version of bills and
compared them to the ones introduced by Congress.

~~~
_delirium
Yeah, in practice I think it's converged to a similar sort of thing, though
the Kansas version does have better-intentioned origins. Rather than having a
bill covertly written by lobbyists and then sponsored by a Congressman who
claims to be advocating it but actually had little to do with its drafting (as
happens at the federal level), the original idea of some of these state-level
practices was to open up the legislature to citizen-proposed legislation. Some
states (like California) went all the way with a robust citizen-initiative
system where citizens can directly propose legislation that has to receive a
vote. Others developed conventions more like Kansas's, where the norm was that
legislators are supposed to forward reasonable legislation for a vote even if
they don't personally advocate it, and this was done quite openly ("I'm
forwarding this bill by request of so-and-so"). So the response to a citizen
asking the legislator to sponsor a bill becomes three- rather than two-valued:
the legislator could draft and sponsor legislation in their own name to that
end; could reject it entirely and refuse to introduce anything along those
lines; or third, they could pass the citizen-written bill along for a vote as-
is, without working on or endorsing it themselves.

I doubt it really works like that in practice anymore, if it ever did (my
guess is that, if you aren't important, your chances of having a bill you send
be seriously considered are pretty small), but I can see why it was an
attractive idea.

~~~
jessaustin
_I doubt it really works like that in practice anymore..._

Yeah TFA makes pretty clear that in this case the bill was written by the
greasiest lobbyist in Kansas.

------
mgirdley
Texas already has these laws. Thank you, ATT.

~~~
mhurron
As does NC, since at least one municipality implemented municipal fiber and
provided service better than Time-Warner and Comcast.

But you know, it was for the good of the people.

------
hippiehippo
Instead of becoming an ISP, wouldn't it make more sense for the town to wire
up each house with fiber optics and then let ANY company provide services over
those cables?

The ISPs will have to pay the town a flat fee per subscriber for using the
municipal fiber optics network, or they could roll out (or keep) their own
(existing) infrastructure. This way companies will still be able to compete,
but the "last mile" will become an utility like the sewage system.

~~~
welterde
That's the way it's done in the Sweden, Norway and switzerland and their FTTH
deployment is far ahead of large portions of europe. So yup.. I would say that
open access works.

------
izzydata
Screw this. I'm only a few miles away from where Google Fiber is supposedly in
construction. I just want my fiber in a couple years or less. Is that too much
to ask?

------
eitally
Sounds like the story that transpired in Wilson, NC a couple of years ago with
their Project Greenlight, an attempt to offer municipal fiber to the home. TWC
wasn't happy and lobbied hard against it.

[http://www.fiercetelecom.com/story/att-centurylink-
face-1-gb...](http://www.fiercetelecom.com/story/att-centurylink-face-1-gbps-
challenge-wilson-nc-based-greenlight/2013-04-22)

------
VladRussian2
in the movie "Aviator" there is a scene where PanAm almost successfully gets
monopoly on international flights. Watching it i could feel only "WTF?". The
same way we'd be feeling couple decades later about monopolies that weak [in
particular to the influence of industry] governments at all levels have been
granting to telcos.

------
YZF
I'm not from the US but it seems like there's nothing stopping the big telcos
from partnering with those same municipalities and offering a sweeter deal
than Google does, is there?

If anything, their existing infrastructure, from the age of the telegraph,
gives them a huge competitive advantage over anyone coming in, with or without
municipal involvement...

IMO government's role should not be the protection of some specific business,
it should be about improving the lives of the citizens, partly through
improving infrastructure. If big company X goes broke while this happens why
should we care? So billionaire Y will make more while billionaire Z makes
less?

------
balloot
The government is so evil and incompetent that it should never be allowed to
provide broadband, because it will do so with such low rates and great service
that it will put cable companies out of business!

Did I get that right?

------
moocowduckquack
I think the argument goes something along the lines of:

Public enterprise, as we all know, is of course highly inefficient, massively
expensive and badly organised. Which is why it is absolutely vital to ban it
from entering industry as it would be unfair competition.

------
bdb
Wonder if an electric pole counts as a "facility."

