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There's decades of precedent on how to do utility regulation, and that is one of the models. (It's called the rate-of-return model.) It was used for telecom for a long time, but has lots of problems. On one hand, it can encourage gold plating (spending money on infrastructure that isn't helpful because there is a guaranteed return on capital investment). On the other hand, political pressure can drive the return rate below the optimal level.

Your post actually highlights the problem. What makes 10% the proper profit margin? BT OpenReach, the U.K.'s regulated infrastructure monopoly, has a profit margin of double that. That number becomes a political football, and the political result probably isn't what most people on HN would want. People are happy with 25 mbps DSL; they're not going to vote to raise Internet rates to drive returns high enough to incentivize investment in replacing everything with fiber. That's exactly what you see in other rate-regulated utilities. People don't vote to replace lead pipes that poison kids, because they would rather have cheaper water rates; they don't vote to replace sewers that leak raw sewage into rivers when it rains, because they'd rather have cheaper sewage fees.

Your pipe examples are a failure of the market to correctly capture externalities.

I'm not sure how not having cheap fibre to ge doorstep is an externality.

There is no market for sewer service—most everywhere, the government runs the service and sets rates in response to voter pressure. My point is that the same voters who vote to keep lead water pipes and overflowing sewers, because they want to minimize their water and sewer bills, will not vote to deploy cheap fiber everywhere (or not set rates high enough to continue to maintain and upgrade it). For most people, especially the older people who disproportionately vote, a 25 mbps connection is fast enough, and they’d rather have cheaper service than better service.

that's why you can't leave some things up to people. people will not act in their best interest if distracted by short term thinking.

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