
Comcast gets big tax break that was designed for Google Fiber - pavornyoh
http://arstechnica.com/business/2016/03/oregon-lawmakers-accidentally-gave-comcast-a-big-tax-break/
======
ikeboy
Reminds me of [http://dealbreaker.com/2013/07/electricity-market-rules-
were...](http://dealbreaker.com/2013/07/electricity-market-rules-were-not-a-
worthy-opponent-for-jpmorgans-brainpower/)

>FERC built a terrible box, and the box had some buttons that were labeled
“push here for money,” and JPMorgan pushed them and got money. You can
understand the category mistake very easily:

>FERC thought the box was for generating electricity at market prices but with
a robust backup system to ensure reliable supply, and

>JPMorgan thought the box was for dispensing money.

>It’s a perfectly understandable mistake to make if you have spent your career
building and operating boxes that dispense money, as JPMorgan global
commodities head Blythe Masters has. What else could the box be for?

~~~
shostack
That was a really interesting read, but I'm not familiar with a lot of the
terminology so it was a bit hard to follow. Any chance you might be able to
explain a bit more of what was happening there?

I get that they found a loophole that rewarded them for producing more of the
less efficient energy, but I'm a bit unclear on what the actual rules were,
the roles of the various players in this, and how the transactions were taking
place.

~~~
ikeboy
The rules say that they choose the best rate that satisfies demand, then pays
all accepted bids that rate.

But bids change over time, and you can't just buy one hour's energy: plants
take time to "boot up" which have costs. So they pay in 3 hour increments. If
your bid for time t is accepted, they pay you for t,t+1, and t+2.

JPMorgan set prices at {Good price, outrageous price, outragous price}

JPMorgan got an average of 2/3*outrageous price, which made them an obscene
amount of profit.

The stupid system didn't notice.

As I understand it the players submit bids to a central computer that decides
who to order from.

~~~
shostack
Thanks for clarifying. Just to make sure I'm following then--the system was
essentially looking at the bid price for just the first hour, and ignoring
hours two and three despite the fact that time needed to be sold in three hour
commitments due to the boot up time, which let JPMorgan jack bids two and
three up and have them automatically accepted since the bids for hours two and
three were never considered in the bid selection logic?

If so that's one major oversight for whomever built the system. I honestly
could see why JPMorgan would be going "so...you're sure these are the rules?
Really? Mmmm...ok....well, if you say so." I'm sure they didn't exactly
telegraph how they would abuse this, but I find it a bit hard to hold them
responsible for what is essentially negligence on the behalf of whomever was
in charge of designing the system logic.

~~~
ikeboy
There's also

>As set forth below, Enforcement has determined that, through the 12
strategies investigated here, JPMVEC violated the Commission’s Anti-
Manipulation Rule, 18 C.F.R. § 1c.2, by intentionally submitting bids to CAISO
and MISO that falsely appeared economic to CAISO and MISO’s market software
but that were intended to, and in almost all cases did, lead CAISO and MISO to
pay JPMVEC at rates far above market prices.

[http://ferc.gov/EventCalendar/Files/20130730080931-IN11-8-00...](http://ferc.gov/EventCalendar/Files/20130730080931-IN11-8-000.pdf)

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Cheezmeister
Lawmaker logic astounds me. If they wanted to spur fiber laying in Oregon, why
not (wait for it) incentivize _fiber laying in Oregon_. Nah, let's just
introduce a wacky indirect property tax loophole.

~~~
ocdtrekkie
Another article on this actually mentions a bit more detail about the tax
break, and the hilarity that ensued. They built the tax break specifically for
Google, so Google would build there. Problem is... the law they wrote excluded
Google.

So they had to go back and REWRITE the law, to ensure Google, the company they
made the break for, qualified for it. And then they're getting upset another
provider is trying to get the advantage they wrote for Google to use.

When tax laws are being written specifically for a company, our government has
a problem.

Sauce: [http://www.oregonlive.com/silicon-
forest/index.ssf/2016/02/o...](http://www.oregonlive.com/silicon-
forest/index.ssf/2016/02/oregon_created_a_tax_break_for.html)

~~~
toomuchtodo
> When tax laws are being written specifically for a company, our government
> has a problem.

The government could've pursued the alternative: build out municipal
broadband, and allow anyone to provide you service (competitively) at the
CO/meetup room. But that's "socialism!"

The problem is not government. The problem is apathetic, uneducated,
uninvolved knee jerk voters. And voters get what that deserve for being so.

~~~
rayiner
Voters just don't care as much about wired internet as people on where would
like to believe. My parents contemplated getting rid of their FiOS internet
and going back to cable because the latter has a better selection of indian
channels. Nobody in my building subscribes to FiOS because Verizon doesn't
have a TV license here. If you had a rock-solid 50 mbps LTE-A service here in
the U.S. that for licensing reasons couldn't access Facebook, nobody would
subscribe to it.

~~~
toomuchtodo
> Voters just don't care as much about wired internet as people on where would
> like to believe.

> Nobody in my building subscribes to FiOS because Verizon doesn't have a TV
> license here.

> for licensing reasons couldn't access Facebook, nobody would subscribe to
> it.

And that's a damn shame. Let them eat cake.

~~~
harryh
Is it really a damn shame? I can only care about so many things. When it comes
to local government I care about crime. I care about taxes. I care about
overcrowding on the subway. I care about public schools.

It's hard to care about the policy details of broadband providers. My internet
from Time Warner is pretty cheap, it almost never breaks, and it's plenty fast
enough for Netflix to work. Why should I care much beyond that?

~~~
toomuchtodo
> It's hard to care about the policy details of broadband providers. My
> internet from Time Warner is pretty cheap, it almost never breaks, and it's
> plenty fast enough for Netflix to work. Why should I care much beyond that?

"I have healthcare. Why do I care about those who don't?"

~~~
harryh
That was the "it's pretty cheap" part. The cheapest service is 15 bucks a
month. I don't see affordability as a huge problem.

~~~
toomuchtodo
Does Time Warner have a monopoly in your area? What service do you get for
$15/month?

~~~
harryh
Honestly I don't know. Goes back to that point about not caring.

$15/mo gets you 3MBPS. $30/mo gets you 10. $35/mo gets you 50.

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omarforgotpwd
Why shouldn't all service providers benefit from the tax break? Is it ethical
to give a tax break that unfairly gives one corporation a competitive
advantage against another?

~~~
bksenior
Not sure you read the article. Comcast as expected created a new tier of
service to qualify that was grossly expensive. They abused the system and the
intent to spur investment in infrastructure was sidestepped.

~~~
mikeash
I have a hard time seeing this as "abuse." If the people who wrote this law
were so completely stupid that they didn't even specify a price requirement,
well, what did they _think_ was going to happen?

What's more, $300 for 2Gbps is not bad at all. It's not super cheap like
Google's offering, but it's about what Verizon charges for 500Mbps, for
example.

I propose an alternate headline: "Oregon legislators attempt to spur
investment, fail to think through legislation, accidentally grant tax break to
incumbent."

~~~
SilasX
Right, but you can't really anticipate all the ways that people might
_technically_ comply with a law while eviscerating the purpose of it. So let's
say they specified a minimum price. And then Comcast "complies" by offering
the cheap gigabit service, but in order for it to work more than just on
Tuesday and Thursday, you have to pay a huge premium.

Okay, so you say it has to be available 24/7 to comply, but then even Google
can't meet that so you add another requirement. Or maybe you have to
anticipate legitimate cases of hyperinflation...

At some point you have to just step back and say, "stop being a dick, that's
pretty clear not what the law meant and you're just abusing it".

~~~
mikeash
You may not be able to anticipate all the ways people might abuse the law, but
you could at least _try_.

It's not hard to realize that if you say that a company can qualify for a tax
break by offering a service, and you don't say what sort of price that offer
must have, that the company might "qualify" without really offering the
service by offering it at a really high price. That doesn't require being
psychic, that just requires sitting down and thinking like the "enemy" for
five seconds.

I agree that at some point you have to step back and say "you're just abusing
this," I just think that failing to specify price requirements is way, way,
_way_ before that point. And thus I can't agree with calling Comcast's
behavior here "abuse." _Especially_ when their price is actually not all that
unreasonable.

~~~
SilasX
Fair enough, I agree with that.

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dantillberg
I'm actually quite surprised to read that Comcast's offering is symmetrical:
2Gps upstream and downstream. According to [http://www.xfinity.com/multi-gig-
offers](http://www.xfinity.com/multi-gig-offers): "Will this be a symmetrical
2 Gbps service? Yes it will be symmetrical: Up to 2 gig download and up to 2
gig upload speeds."

~~~
rconti
I'd be more than happy to pay for this if it was available in the Bay Area!
Instead I pay, what, 1/3 the cost for 1/40 the bandwidth?

~~~
shostack
Is there any good reading on why it isn't in the Bay Area yet? I think Google
and Comcast both know a large % of the population here would switch overnight.
I'm assuming there's weird laws that prevent progress like most of our other
issues out here.

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HillaryBriss
Corporation B has stolen the tax break the impartial government created
specifically for corporation A!!!

Oh God, why is this happening!? Where is the justice for this foul crime
against man and nature!?

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manav
Comcast residential Gigabit service is basically the same as their Enterprise
Metro-E product rather than GPON with Google Fiber, hence the higher
cost/install fees. Comcast gives a 10 Gbe fiber hand off at the home.

There's no reason Comcast shouldn't benefit from it.

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ck2
WTF does even Google need a tax break.

We've got to stop corporate welfare in this country, it is getting carried
away.

Google can certainly compete against a $300/mo monopoly.

~~~
skykooler
It's to encourage Google to build their gigabit service in that area first,
rather than elsewhere in the US.

~~~
ck2
If they are giving them taxpayer money, what is the savings then?

Basically everyone is funding it for the percentage of them that will actually
use it.

How about telling google, we'll guarantee X $$$ of account from low income
people that we'll fund, instead of just throwing them free money for nothing.

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jeremyt
For the life of me, and for this exact reason, I can't understand the net
neutrality movement.

It's a bunch of people arguing that we have a problem and the most likely
party to fix it is the government.

But this article is an example of exactly what the government does when you
give them power to control things. They write in loopholes, pork, or they just
flat out do a half assed job of drafting legislation. And then we see the
deluge of unintended consequences

Wake up, People! The government is not here to fix your problems.

~~~
pachydermic
>Wake up, People! The government is not here to fix your problems.

And private firms with monopoly power aren't either.

~~~
jeremyt
Private firms with monopoly power never last, unless that monopoly power is
augmented by the government.

The Comcast "monopoly" is in the process of falling apart, on one side from
Netflix, Amazon, and Hulu and on the other side from Google fiber, 5G
wireless, mesh networking, and perhaps even the Elon musk LEO satellite
Internet plan.

~~~
masklinn
> Private firms with monopoly power never last, unless that monopoly power is
> augmented by the government.

Ma Bell was a monopoly long before the government tried to reign it in.

~~~
starnixgod
The government birthed the Ma Bell monopoly with the Willis Graham Act.

~~~
masklinn
You're completely off your rocker.

The Willis Graham Act nullified the Kingsbury Commitment by which the
government had tried to stop the unfettered expansion of Ma Bell, since it
hadn't actually worked the government shifted to trying to regulate Ma Bell
itself through the ICC (and the FCC a few years later).

