Friday, January 12, 2007

Why Telecoms Should Be Regulated

Check out this show and keep watching through the first chapter, at least. One of the people interviewed says that before telecoms were deregulated, they were required to invest all of their (considerable) profits into their infrastructure. When they were deregulated, they promised to build a fiber optic infrastructure - but they "reneged" on that promise (which he alleges are on the books). Instead they "took the money and ran." (Are they public companies? Is this money being wasted as dividends?)

He also says you can get 100 megabit speeds for 40 bucks a month in Korea or Japan. Consider that the typical broadband speed in the US is 1 megabit. Astonishing -- and disheartening...

(For you libertarians or economists, the reason that telecoms need to be regulated is that they are a natural monopoly.)

3 comments:

Anonymous said...

Let's take a gander at land masses and populations before we start getting all teary-eyed about broadband in America.

So. Land masses. America's got 3,718,695 square miles under its belt. In contrast, Japan has a footprint of 145,883 square miles, and the Korean Peninsula weighs in at 85,020 square miles. So, America's 25 times bigger than Japan and 43 times larger than the Koreas. Small wonder that America hasn't caught up in the broadband game to the rest of the world - we've got a lot of land to cover! And that, quite frankly, means a LOT of infrastructure, quite often to places that have no desire for high speed internet.

So let's take those land mass figures and apply them to population sizes. If land was all evenly distributed, every person in America (all 300,977,000 of 'em) would be responsible for about 7.9 acres of happiness. Might not seem like a lot. Well, at least until you take a gander at our other two examples. Japan's 128,085,000 residents would only get a seventh of an acre to themselves. And the 71,959,842 people living on the Korean peninsula would get three quarters of one.

You might be thinking, "Well, what does that have to do with anything? Hell, if it were divided up like that, everyone would still have a pretty nice little plot of land." But that's not what we're after. Basically, the costs of infrastructure still have to be supported by the population. And going by those figures, Americans are responsible for ten times more land with their telecom dollars.

So, I would nonetheless, per these figures, say that our typical speed should be up to ten megabits by now. But now...now we get to the social aspect of it, which is much more difficult to quantify, and the numbers certainly aren't sitting around on Wikipedia. America, as a general rule, is slow to adapt to new technologies (take a gander at mobile phone technology in Europe sometime, let alone Japan). I mean, we've still got millions out there on dialup. I would argue that, outside of urban centers, there is very little demand for broadband even at 10 megabits. And we are seeing dropping broadband prices here, which makes sense as there isn't a lot of infrastructure buildup. As a whole, America isn't ready for the 100 megabit speeds and they aren't willing to pay for the infrastructure changes necessary to see them happen.

undergroundman said...

Good points, but I don't agree with you. The infrastructure is already in place. All that's required is setting fiber optic cable on the infrastructure already in place. That's not that expensive, and even if it was expensive, it's worth it. It would revolutionize the media and business. There's no way it would cost more than the Iraq war has cost us, or likely even half of that.

I brought up this topic because there's a lot of debate over net neutrality. If we had more fiber optics, we wouldn't need net neutrality. There's also a fair amount of speculation on bandwith. Lots of people are saying that bandwith is not going to be able to keep up with the surging demand. If we'd started laying fiber optics diligently 10 years ago, we wouldn't be stuck with these problems. If it didn't extend into the rural areas, that's ok -- what we really need to do is connect the metropolitan areas.

I'm hoping to do some more research and post a detailed analysis of the issue sometime.

undergroundman said...

By the way, I don't think there's exactly a linear progression. I'm no expert, but from what I've heard, copper cable is generally around 1 megabit, and fiber optics jumps all the way to 50-100 megabits. There's nothing in between that.

Just because millions of American consumers don't want something revolutionary and beneficial (or don't realize that they want it) doesn't mean the government shouldn't encourage it.

You didn't attack the main premise of my post: that natural monopolies are gobbling up money that should be invested in R&D. I want a faster internet connection, but I can't get it -- only a couple companies are allowed to use the lines, and they're not competing like they should. There's nothing good about that.