From: Mike Godwin <mnemonic@eff.org>
Date: Wed, 10 Nov 93 11:28:59 PST
To: pmetzger@lehman.com
Subject: Re: Should we oppose the Data Superhighway/NII?
In-Reply-To: <9311101859.AA22080@snark.lehman.com>
Message-ID: <199311101926.AA20523@eff.org>
MIME-Version: 1.0
Content-Type: text/plain


 
> Well, in NYC, the utility tunnels are municipal, so its a question of
> leasing a slot from the city.

Is that true? How many slots are there? Is access to the slot unregulated?

> In some areas it might mean
> digging new infrastructure -- modern cable laying equipment has
> dramatically reduced the cost of this, especially for buried fiber
> optics.
 
The question is less one of creating new conduits than of seeing that the
conduits already in place (invariably under a government regulatory
regime, if not an outright monopoly) get used to their fullest potential.
Perry, you think that just letting things happen alone means that
someone's going to give you purchasable video uplink. I'm glad to hear it,
but I don't share you belief. Where we do agree, of course, is that access
to the cable part of the infrastructure (whether by building new conduits
or allocating sections of existing ones) shouldn't be subsidized by
government money, except of course to the extent that the government is
buying such services for itself.

> In practice, none of this is a real problem. Many areas DO have two or
> more cable companies because there is no local prohibition on
> competition ....

I wouldn't say this is accurate. Even in multiple-cable areas, I
understand, the cable companies have government licenses and operate under
government regulation.

In the Boston area, there are multiple cable companies, but you can't
choose which one your particular home will use if you subscribe to cable.

>, and a few areas even have multiple electric companies
> because there are enlightened governments that permit such heretical
> violation of the "natural" (read, government granted) monopoly thesis.

Do those electric companies each have different wires? So that if 
I move into the house where you used to live, and you bought power from
company X, I can call up company Y and say "You're supplying power here
now"? How is this implemented.

I don't think discussion of "natural monopolies" is relevant here, because
it doesn't matter whether the monopolies that exist are natural or not.
They're here in any case.

> > The capital costs of that create an immense barrier to market entry,
> > and ease of market entry is a pre-requisite for free-market
> > competition.
> 
> Its not a real barrier. Capital costs for such structures are
> typically sunk via mortgage bonds -- its possible for most utilities
> to raise vast amounts of money in the debt markets.

I disagree that it's possible for all cable utilities to do this. If
you're the second cable system in a duopoly, maybe. But I don't know of a
debt market that will buy the bonds of the tenth cable company to lay
cable in a certain area. If you know of one, let's start it together--lots
of money to be made in cable!

> If you wish, I can
> direct you to people at the Cato Institute who can give you plenty of
> good data on why there is no legitimate reason why two or more phone,
> cable, electrical, or even gas and water companies couldn't operate in
> most areas -- I mean hard data down to the costs involved and
> potential profits and the way that competitive utilities have
> functioned in areas permitting them.

I regularly read Cato Institute publications and white papers.

> > The only reason the first cable companies even invested in laying cable is
> > that they were guaranteed a local monopoly.
> 
> Well, the fact that multiple cable companies do in fact exist in many
> places gives lie to this premise.

I overgeneralized. But the scenario I mention here is the most common
one.

> The fact that multiple phone
> companies used to operate in the early days of the century before the
> government put a legal end to that also tends to discount this thesis.

They used the same wires, Perry.

> I've heard the argument given time and again about dozens of
> industries that "The X industry requires a government monopoly to
> operate" or "The Y industry needs subsidies or we would be left
> without a Y industry" and the like.

This seems to be a digression. No one around here is arguing for
government monopolies. At least not so far as I can tell.


--Mike