
Ajit Pai tries to kill San Francisco’s attempt to spur broadband competition - JaimeThompson
https://arstechnica.com/tech-policy/2019/06/ajit-pai-tries-to-kill-san-franciscos-attempt-to-spur-broadband-competition/
======
rayiner
The article distorts what the dispute is actually about:

> The ordinance only applies when the inside wiring belongs to the property
> owner. Under the rule, property owners who have outfitted their buildings
> with Internet wiring cannot deny access to ISPs, making it harder for them
> to strike exclusive deals with Internet providers.

If you read the NPRM
([https://docs.fcc.gov/public/attachments/DOC-358068A1.pdf](https://docs.fcc.gov/public/attachments/DOC-358068A1.pdf),
starting at paragraph 11), you’ll see that you’re not necessarily talking
about scenarios, as the article implies, where the building owns the wires
because it paid to install the wires. In many scenarios, the building owner
technically owns the wiring, but the service provider made the original
investment in wiring the building and entered into a contractual arrangement
to recoup the initial investment.

Consider the Interstate 66 express lanes into DC. In that project, private
investors paid to build the new freeways, but the State owns the road. What
the investors got in return is the exclusive right to operate the toll system
for 50 years, plus a cut of the toll revenue. If you eliminate the exclusivity
provision as anti-competitive, you’ve totally overturned the original bargain.

Maybe that sort of deal was a bad idea to begin with and shouldn’t have been
allowed. But overturning those contractual arrangements after the fact creates
real problems. (And note that no government entity pays or subsidizes
companies to wire up apartment buildings in San Francisco, so that angle isn’t
relevant here.)

The solution is probably, as a matter of building codes, to require MDUs to be
wired with Ethernet.

~~~
wahern
> In many scenarios, the building owner technically owns the wiring, but the
> service provider made the original investment in wiring the building and
> entered into a contractual arrangement to recoup the initial investment.

Exactly, and that's why it's anti-competitive. Those deals permit ISPs to
effectively purchase customers from developers. The future customer-residents
have no say, and because of substantial information asymmetry in practice
customer-residents aren't in a position to judge the relative costs of renting
a building locked into a contract versus renting in another building.

It's obvious on its face the dominate reason to enter these contracts is to
extract additional profit from renters and distribute it to the developer,
landlord, and the ISP. There are situations where exclusivity might be a
necessary condition to make a service viable, but decades of evidence has
disproven this when it comes to ISPs.

As someone was quoted saying in the article, San Francisco has $40/month 1Gb/s
fiber. Sonic.net didn't demand exclusivity to provide that. Some background
facts in SF: for years AT&T's plan was to install FTTC (fiber-to-the-cabinet)
throughout the city. Sonic.net decided to do the same--also install their own
cabinets around the city using the same regulatory approval AT&T would get.
Once AT&T got wind that Sonic.net was also going to do this, they began to
drag their feet in the regulatory process and actively began to sabotage it.
Sonic got frustrated and decided to take a real _business_ risk, scrapped
their own FTTC plan, and began to plan and build-out FTTH throughout San
Francisco.

This completely caught AT&T off-guard. Within substantially less time than
AT&T spent petulantly dragging its feet to avoid facing competition, Sonic.net
had built-out fiber to a substantial fraction of the city, charging only
$40/month.[1] Eventually AT&T scrapped their own FTTC plan and started
building FTTH, except AT&T is doing it haphazardly and charges twice per month
what Sonic charges. We shouldn't be surprised that it was the pursuit of
profits in a competitive environment that spurred Sonic and then AT&T to
aggressively roll our fiber, rather than the promise of guaranteed, monopoly
profits.

(EDIT: I forgot to point out here that the SF ordinance was passed because
AT&T and Comcast were already beginning to use exclusivity agreements to
prevent Sonic.net and Monkey Brain from expanding their service offerings,
particularly among the _existing_ housing stock, not just the big, new
apartment towers in SOMA and Mission Bay. Sonic.net had to keep their FTTH
plans secret for as long as they could because those are the kinds of
strategies AT&T and Comcast use to "compete". Thankfully the SF ordinance
closed off one such avenue.)

Policymakers like Pai have claimed for years that exclusivity arrangements are
necessary and that government should refrain from prohibiting, or should even
affirmatively support exclusivity, based on a theory that it's necessary to
incentivize telecom investment. But the reason this is necessary, if at all,
is because people like Pai continue to hold out the promise of these
exclusivity arrangements. Pai and his ilk are literally manufacturing the
opportunity costs upon which their arguments are premised. The promise of
being able to achieve exclusivity is why AT&T spent years obstructing the
regulatory process in SF.

More to your point, your I-66 example is not comparable. AFAIU the SF
ordinance doesn't prohibit _existing_ exclusivity arrangements. I'm pretty
sure that would be unconstitutional as states are prohibited from interfering
with existing contractual rights. The SF ordinance was only prospective. And,
yes, as a theoretical matter such "interference" in the so-called free market
could lead to unintended, negative consequences. But it's unlikely to do that,
and much more likely to have the salutary impact intended.

In a free market nobody wants to compete; everybody is looking for a way to
_avoid_ competition. Among other ways to do this, market actors exploit
information asymmetry to capture more profits than would be possible if their
customer had full information. That has _manifestly_ been the case when it
comes to typical ISP exclusivity arrangements.

As someone else said elsethread, Pai is a fanatic--he's committed to a theory
about the way the telecom market works despite evidence to the contrary.
Municipalities do dumb things and pass a lot of dumb regulations with
unintended consequences. (Sonic loudly complained that SF wouldn't permit
microtrenching, so for now they say it's only cost effective to build out FTTH
to the parts of city using with utility poles, which fortunately is more than
half, IIRC.) But simply because that happens doesn't mean all such regulation
is bad. Such policies need to be considered on a case-by-case, sector-by-
sector basis, and reassessed as the facts play out. It's exhausting but the
only proper thing to do. There are no easy answers.

[1] To be fair $40 is the teaser rate. The long-term rate is... wait for it...
$50/year.

------
deogeo
> the Pai plan argues that ISPs "are less likely to invest in deployment" if
> they know they have to share network components with other providers.

"We know any residence is unlikely to have broadband from multiple ISPs, yet
we will continue to claim there is competition among ISPs."

------
sytelus
This guy should be the prime target for journalist under cover investigation.
Bribery is written all over his face. If you ever wanted to earn Pulitzer
Prize for great journalism, this guy is a gift for you.

~~~
cylinder
I think it's worse; he's actually an ideological fanatic.

