
What bandwidth addiction will cost - nickb
http://seattlepi.nwsource.com/opinion/372888_bandwidth31.html
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swombat
Interesting comparison.

Considering that the US hasn't managed to resolve its oil addiction yet,
though, I think it's unlikely that this comparison is helpful - except in
making people feel helpless.

Could you resolve this without government assistance? Perhaps. Maybe a company
could sell a device that can be tuned to use whatever spectrum block is
desired, and let people pick which bit of the unused spectrum they want to
use. The government can't control what everyone does if everyone is doing it.

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mdasen
Terrible, terrible metaphor.

First, power is limited by the laws of nature. A low-efficiency power
generator can convert a third of the chemical energy in something like coal
into electricity. The best one can possibly do is 100% efficiency meaning we
could (should we develop a 100% efficient way to convert energy between forms)
triple efficiency, but not more. Bandwidth, on the other hand, keeps seeing
increases as things become more efficient.

Second, chemical energy cannot be produced. If I wanted to, I could lay new
fiber which increases the amount of bandwidth in the world. So, as demand for
bandwidth increases, the amount of bandwidth in the world can also increase.
As demand for energy increases, energy cannot increase. In fact, this is the
largest problem we're facing with oil. Demand is rising, but at a certain
point, supply can't rise - there's only so much oil. Sure, there's only so
much fiber RIGHT NOW, but more can be made and laid.

Third, new entrants can enter the bandwidth arena without displacing old hats.
This builds nicely off the second. If one can produce new bandwidth, you can
enter without taking/diminishing the bandwidth of another competitor. If all
the oil in the world is owned, the only way you can enter is to buy or steal
the oil from its previous owner. The fact that there aren't a lot of
competitors in the arena is more a matter of the huge amount of capital
required. However, we already see a ton of people who have laid fiber - One
Summer Street in Boston (a data center) has over 40 different providers
connecting through it.

The reason that most of our home connections are a monopoly/duopoly is that
home connections form a market known as a "natural monopoly". Take water as an
example. It doesn't cost much to provide a marginal unit of water to someone's
home. It costs a TON to run water pipes to everyone's home. Likewise,
providing bandwidth to people isn't the problem - it's running wiring
everywhere in a city. It is actually wasteful to have multiple carriers in the
economic sense. I mean, let's say that Comcast and Verizon makes a 50% profit
when they're the only games in town gouging customers. Their costs are $1bn
for the network and 1cent/GB for usage. OK, so two more companies enter the
market and face the same costs. Now each carrier has 25% of the market and no
one is making any money because they don't have enough customers to cover the
cost of the network rollout/maintenance. There's a reason why it's a duopoly,
but it's nothing like oil.

Ideally, someday, municipalities would take over the job of running the
cabling to our home like they do with water and then people could just buy
bandwidth from the central office to the internet from any number of providers
- taking advantage of the economics of both natural monopolies (not building
multiple infrastructures) and competition (having bandwidth providers compete
on price for my business).

The comparison is simply inaccurate. Energy is a supply-side constricted
commodity which means that supply doesn't change relative to demand. Bandwidth
increases as demand for it increases - except in one place, wireless. Of
course, there's still a lot of airwaves that can be auctioned in the future
and wireless carriers have a lot further they can go in efficiency than what
we can do with energy.

This story does have one value - it's a great, "you're scared about oil
prices, I bet you'll read something I write to make you scared about all your
other bills even if I'm full of it" story.

