From: jim bell <jimbell@pacifier.com>
Date: Mon, 19 Aug 1996 03:39:03 +0800
To: vipul@pobox.com
Subject: Re: FCC_ups
Message-ID: <199608181544.IAA18394@mail.pacifier.com>
MIME-Version: 1.0
Content-Type: text/plain


At 03:36 AM 8/18/96 +0000, Vipul Ved Prakash wrote:

>> >First flat rates would have to go out.
>> >If Alice uses her phone for 5 hrs in month and pay _x_ dollars and Bob uses
>> >his for 100 hrs and pays _x_ dollars, then Alice is subsidising Bob, which
>> >is not really ethical. Everyone should pay for the amount of bandwith 
>> >one is using.  
>> 
>> I'm afraid you're promoting what I consider a rather old (and, now, odd) 
way 
>> to look at it.  Unlike old mechanical telephone switches, the new hardware 
>> does not "wear out" and thus a person who uses it more doesn't cost the 
>> phoneco any more bucks.  If that's the case, I don't see the logic in 
>> charging a person more for greater use.  
>> 
>Machinery 'wear and tear' is a small part of Infrastructure maintainance 
costs. There are tons of other things. Hidden costs, management, laying new 
pipes,etc. 

Well, let's consider such costs.  Most of which (maintenance, management, 
rolling stock) are unrelated to amount of telephone usage.  So there is no 
reason that these costs should be unequally attributed to a person who makes 
local calls 1 hour per day, as opposed to another who only calls 15 minutes 
per day, for example.

As for the "laying new pipes" issue:  Years ago in the the US, when 
inter-central-office trunk connections were all implemented using large 
bundles of copper pairs, it would have been _correct_ to say that higher 
telephone usage resulted in larger costs, since more trunk lines were 
necessary.  Today, on the other hand, inter-office trunks (at least the new 
ones, and I presume that even many of the old ones have been switched over) 
are implemented in fiber optics.  Extra capacity is either automatically 
available (since the capacity of a given fiber is unlikely to be fully used) 
or can be fairly simply added by converting old fiber from about 450 
megabits per second to 2.4 gigabits, or even faster rates which have become 
more recently available.


>But you miss my point, if a phoneco is not getting a penny for its long 
distanceservices (which subsidise the flat rate local calls) then the choice 
would
>be to close down. Which would be a severe attack to the local internet usage.

That's an entirely unsupported claim.  Nobody claims that telephone usage 
(term used generically) is on the way out.  "Closing down" is only going to 
happen if local phonecos cease to be able to provide a service that people 
are willing to pay for.

And as for the amount of the subsidy, let's look at it.  I've read around 
here recently that the amount of the charge is 3 cents per minute.  If we 
assume an average LD rate of 15 cents per minute, that's 20% of the  bill.  
If an average LD bill is $15 per month, that's only $3 per line, per month.  
It seems to me that those local phonecos could simply raise their local 
charges by this and totally compensate for the loss of that subsidy.  
However, an even more likely outcome is that they will make structural 
changes which they've been able to avoid after decades as a regulated, 
monopolized business:  Reduce personnel levels, especially in areas other 
than those in which they are actually providing telephone service.  Reduce 
salaries from "comfy" to "competitive."  

Before it was broken up in 1983, AT+T was a regulated monopoly and was, more 
or less, guaranteed a profit.  Extra costs, such as higher staffing levels 
and higher salaries, simply increased the rates, they didn't reduce the 
profits.  This system is still in force with the local phoneco side of the 
business.

Anther thing which could be done, from the government's side (as part of an 
industry restructuring) is to allow phonecos to greatly accelerate their tax 
write-off of existing depreciating equipment, perhaps down to as low as 5 
years or so.  The theory is, these phonecos are going to start competing 
with companies who are only buying their equipment today, and it would be 
unfair to saddle the older companies with old, inefficient equipment without 
allowing them to completely write it off quickly.  (This, of course, doesn't 
mean that they need to actually take it out of service...)


Jim Bell
jimbell@pacifier.com