The title is sort of misleading. A municipality offering broadband service isn't really an economic actor since it can use tax receipts to subsidize the service. Offering a choice between service provided by local government and a private business isn't really the kind of competition most people have in mind when they think of healthy markets. The laws should incentivize competition between multiple telcos not between telcos and government.
Also, generally speaking, running big telco networks is hard, capital intensive, and requires a lot of expertise that municipalities don't really have. I've never used a municipal internet service that was any good.
But the nature of being an ISP is to run expensive (both in outlay and maintenance) cable/fiber to your house, and it doesn't make economic sense to run 2 or 3 or 4 lines to a customer that only uses 1 ISP. It follows directly from your argument that a person should have a healthy market of water companies serving their house, or sewer companies, or electric companies.
> running big telco networks is hard, capital intensive, and requires a lot of expertise that municipalities don't really have
Capital-intensive, expertise-intensive things is exactly what municipalities do well. They do water, sewer, utilities, police, fire, EMS, etc. My city spent just over $3b last year, meanwhile Time Warner Cable spent roughly $3b on capital expenses in the entire United States.
To follow up with your water analogy: we don't expect the water company to deliver 400x the water to our homes than we did 20 years ago, but that's exactly what we expect of our broadband providers. It's hard to imagine a scenario where a municipal (or monopoly) broadband service will upgrade its network as fast as we expect. Competition is the answer.
My city spent just over $3b last year, meanwhile Time Warner Cable spent roughly $3b on capital expenses in the entire United States.
This is about as apples to oranges as it gets, but if your city spent $3B just maintaining water and sewer, and time warner spent $3B over the entire country then TW is winning in my book.
> we don't expect the water company to deliver 400x the water to our homes than we did 20 years ago, but that's exactly what we expect of our broadband providers.
It is a 400x increase when measured by the yardstick of a software developer, but by the yardstick of "how much money does it cost to connect Joe Schmoe to a network that meets his expectations" the business has not appreciably changed in 20 years. What changes is the model number on the Cisco switch and the type of cable in the ground, but "what is the maintenance cycle on this electrical cable and power transformer" is a problem that municipalities have been successfully solving for well over a century.
I think you are confusing the practice of actual dataspeed innovation (e.g. what Cisco, Juniper, Alcatel-Lucent, Qualcomm etc., do) with ISPs like AT&T or TWC who merely buy and install equipment and service cable runs. AT&T, Time Warner, Verizon, et al do not appreciably contribute to the number of packets it is possible to send in 10 seconds, except insofar as they buy products from those companies that actually do. That role (of buying Cisco products) can easily be shifted to a municipality with no downside to Cisco. In fact, from Cisco's perspective, large nationwide ISPs operate more or less as a consolidated union of individual markets and have a lot of bargaining power, so a more diversified customerbase that doesn't cooperate as tightly means Cisco can make more money, and since they are actually the ones who make the internet fast, that seems like a positive outcome to me.
> but if your city spent $3B just maintaining water and sewer, and time warner spent $3B over the entire country then TW is winning in my book.
Of course not. $3b is the total budget for the whole city, which is mostly public safety (police, fire, EMS, etc.) The capital spending on energy is only about $200m/year, which is about 50% production and 50% distribution. If you imagine that it is probably easier to run fiber than it is to run 110,000V powerlines everywhere, the ongoing capital expenditure to run the actual fiber lines themselves would be less than $100m.
If you want to make Internet service a regulated monopoly or a municipality provided service, there will be no incentive to upgrade to new technology when it becomes available. That is the virtue of competition. Competitors can differentiate their offerings based on price and features. Competitors will install faster networks in order to win market share. Competitors will find ways to reduce costs so they can offer service at lower prices to gain market share. You don't have any of that if the municipality owns the network.
You've made many predictions about what "competitors" will do. Why the hell haven't they done them already? Data service in this country is terrible, for most business and nearly all residential customers.
Yeah it is a common mistake made by free market folks:
Competition will drive down prices, increase speed and result in the best possible customer service!
Except that in markets with expensive outlays to get started that rarely happens because the expenses put a natural limiter on the amount of people that can actually mount competition making that number low enough that the competitors can essentially carve up the market, price fix and then all suck approximately equally, indefinitely. Just like ISPs and cell phone carriers do now (and will continue to do so until the government steps in and forces them to fix their shit).
If one must generalize, I think we should say that competition tends to benefit the consumer, and fortunately competition often arises spontaneously, but there are many factors that can disrupt this virtuous process.
Duopoly? A large number of major cities and their suburbs only have 1 true highspeed option (cable) and slow wireless or DSL. FIOS deployment is sadly limited.
You're saying that there's no competition in municipalities? They're called elections. We hold them more than once a year.
Not to mention that municipalities compete with one another; it is actually easier in most places in the United States to move to a neighboring municipality than it is to switch to a better ISP. For example I would have to move over a hundred miles to get better internet access than the large, regional ISP that serves my area, and meanwhile I could move about five miles and "technically" live in a different city in the same metro area.
Finally, I am not advocating municipal control instead of private ISPs, I am arguing municipal offerings in addition to private ISPs. It is tautologically impossible for the introduction of new entrants into the market to itself constitute a reduction in competition.
Too bad in germany the big privately-owned ISP's (tier1 DTAG being among them) have very little interest in upgrading to new technologies, making city-owned ISPs pretty much your only option if you ever want to get FTTH or VDSL (the village even offered to pay some money to DTAG to implement it - no thanks - the next closest city's utilities company had to roll their own network to get it done).
...time warner spent $3B over the entire country then TW is winning in my book.
TW is winning, but their customers certainly aren't. If we actually had free markets in data connection, consumers would have other providers to choose, and TW would have to spend a great deal more on their aged creaky networks in order to stay in business.
Why did we defer to the judgment of local government when they wanted to shackle residents to one provider in exchange for big bribes through franchise agreements, but now that they want to encourage that same provider to get off its ass and provide decent service they're enemies of capitalism?
Wait, do you want them to upgrade there service or not? If the goal is to maintain service without upgrades then minimizing cost is great, if you want improvements then minimizing cost is a stupid way to evaluate things.
Once the fibre (if you don't buy junk) is in the ground upgrading becomes very very cheap. And given that the required access speeds aren't very high (100M-1G), they can be had rather cheaply second hand/new. So you can direct all the money from the cost savings to upgrading your backbone, where it does get rather expensive.
OK, I get it. Municipalities are very unskilled, so their services suck. Which is why they can't be allowed to compete with cablecos, because all cableco customers would immediately decide to switch to the municipalities for better prices and service.
I think we need to work a little harder on this chain of logic...
My point was that governments should incentive competition between private companies rather than trying to provide services directly. Sorry if that wasn't clear.
The latter clause was clear; the former not so much. But anyway it would be better to focus less on neoclassical theory and more on the specific factors that are observed to hurt competition in the USA data services market. Municipal services are far from the most salient of those.
The quality of private telecom services in the U.S. isn't that good. Try using your cell phone in a major city without making excuses like "everybody else was trying to hail a cab after getting out of a Pink concert" or "I was staying in a hotel that has a lot of metal in the frame".
Private companies are consistently making bad decisions as to infrastructure. For one thing, they've wasted money building high-cost fiber-to-the-node and hybrid-fiber-coax networks.
Yes, the initial cost of FTTH is more than the alternatives, but the running costs of FTTH are much less and if you consider a time span of five years or more, FTTH comes out ahead.
In places like Austin where carriers have wasted money on xDSL deployments, they find they have to go to FTTH once a competitor goes to FTTH. Why? Since the running costs of FTTH are so low, an FTTH provider is the low cost provider and will win the value segment, not just the high-end segments.
The main problem is that rich people are full of themselves and think they deserve credit card interest rates for their investments rather than the low market rates that capital markets provide (which are telling them that they've got too much money and nobody needs them.)
They know they can build expensive (to run) networks because they can make their customers pay the operating costs, rather than putting some more money up front to produce something that will produce more profits in the long term.
In places like Austin where carriers have wasted money on xDSL deployments, they find they have to go to FTTH once a competitor goes to FTTH. Why? Since the running costs of FTTH are so low, an FTTH provider is the low cost provider and will win the value segment, not just the high-end segments.
I'm not sure exactly what you're trying to say, but I think that means you agree with me that competition between telcos leads to better/cheaper product for consumers?
To your last point, that telcos don't invest in infrastructure basically because they're greedy (is that even what you're saying?), I think that fits into H. L. Mencken's idea that "for every complex problem there is an answer that is clear, simple, and wrong." I have worked at the periphery of a big telco and from what I saw there are many challenges to controlling costs. To name a few: inefficient internal bureaucracies (ugh), strong unions (not a criticism, just pointing out that union labor is more expensive than nonunion labor), and mainly the fact that the network is enormously huge (like, physically huge) and it's extremely expensive to refresh the technology every few years.
Please read the article. The bill goes further than simply outlawing municipal broadband. It actually bans municipalities from offering any infrastructure to private entities that want to offer broadband.
(So for example in a city like Seattle where we have tons of dark fiber owned by the government, the city would be prohibited from leasing that fiber out to private enterprise under this bill.)
Though I also disagree with the sentiment of your post, even if the bill were more narrow.
The telcos have been granted a monopoly on the copper (or fiber), is it really accurate to think of them as a private business competing on equal footing with other private businesses?
>> "I've never used a municipal internet service that was any good."
Naperville, Illinois, while being a loathsome, sprawling mess in many respects, has pretty snappy municipal internet. And, in fairness, a semi-charming waterfront path.
It's not precisely the same thing as regular competition, but I don't think it's necessarily a bad idea. One model I like is for the public sector to provide a baseline level of service using public funding, and then let the private sector compete to provide premium service.
> I've never used a municipal internet service that was any good.
Not sure where you're located, but I'd encourage you to make a trip & try out the fiber optic internet service (gigabit available) that is offered by Chattanooga's municipal power utility, EPB. I've never experienced anything better. I can now honestly say, after being a customer for 3+ years, that I've never used a commercial internet service that was any good.
There's a big difference between running a municipal telco network and a 'big' telco network. Focusing on delivering excellent service to a municipal area is very attainable.
Offering a choice between service provided by local government and a private business isn't really the kind of competition most people have in mind when they think of healthy markets.
Is the sort of choice that has been available in markets going back as long as governments and markets have existed though, so given there has never been a complete market that fulfils your definition of a healthy market, can we just look at whether there is some general economic benefit here rather than worrying about whether it is healthy, as if it is sick, it has managed fine so far for a good few thousand years, so it can't be too bad.
Also, generally speaking, running big telco networks is hard, capital intensive, and requires a lot of expertise that municipalities don't really have. I've never used a municipal internet service that was any good.