Re: Should we oppose the Data Superhighway/NII?

Mike Godwin sez

> In order to get to a world in which free markets can meet our demand for
> high-bandwidth connectivity, we have to dig ourselves out from the 
> market-failure position we're in now. And because government is part of
> the problem, changing government policy is part of the solution. So,
> that's one of the major thrusts of EFF's NII policy. 

As I understand it, for both telephones and cable TV, it is still common
for local governments to "grant" "franchises" to single companies for
phone and cable wires.  If there were one thing to change, that would be
it.

In other words, the "market failure" you're talking about is in a 
situation where the law forbids a market.  And the change required is 
that the government not be involved.  It would be nice if that were
how EFF stated its NII policy: Yankee Go Home.

Also, isn't the FCC is somehow involved in defining 
cable and telephone services, and what combinations of services 
companies are allowed to offer?  Or am I thinking of "information
providers" vs....something?  Here again, the limitation is merely in
what's legal.

-fnerd@smds.com
quote me
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Steve Witham writes:

> As I understand it, for both telephones and cable TV, it is still common
> for local governments to "grant" "franchises" to single companies for
> phone and cable wires.  If there were one thing to change, that would be
> it.
> 
> In other words, the "market failure" you're talking about is in a 
> situation where the law forbids a market.  And the change required is 
> that the government not be involved.  It would be nice if that were
> how EFF stated its NII policy: Yankee Go Home.

It's not that simple, unfortunately. Once monopolies have been created
with government support, removing government intervention doesn't 
automatically make competition happen.

Compare it to strip-mining: once a strip mine has dug up the landscape,
the mere decision to stop mining doesn't automatically restore the land to
the status quo ante, or even to an environment in which any kind of
ecosystem can flourish.


--Mike

> It's not that simple, unfortunately. Once monopolies have been created
> with government support, removing government intervention doesn't 
> automatically make competition happen.

True...  AT&T (and the RBOC's) have paied of most if not all of
their infrastructure.  This means that when upstarts like Wiltel
or MCI come around and think about laying their own fiber, they
have to be prepaired for the ex-monopoly to start price gauging.


brad

Mike Godwin says:
> It's not that simple, unfortunately. Once monopolies have been created
> with government support, removing government intervention doesn't 
> automatically make competition happen.
> 
> Compare it to strip-mining: once a strip mine has dug up the landscape,
> the mere decision to stop mining doesn't automatically restore the land to
> the status quo ante, or even to an environment in which any kind of
> ecosystem can flourish.

However, its not like strip mining. So long as regulations are in
place, the market is not functioning in a maximally efficient manner,
and further distortions are occuring.

Many modern economists, from Public Choice school to Austrian school,
would hold that any attempt by the government to "fix" what it has
done axiomatically are further distortions of the market, and that the
market will settle most rapidly into a properly functioning state if
government control is removed as quickly and thoroughly as possible.

Theory in fact matches practice. Observe, for example, the difference
between places like Hungary (we will be kind and not use Russia as an
example) in which gradualist government guided conversions to the
market are practiced, versus Poland, where a radical "shock therapy"
liberalization occured. Poland was the only nation in Eastern Europe
to experience economic growth following the inception of its program,
its inflation rate is down to acceptable levels, and over half the
country's workers are now in the private sector.

I understand the impulse to use metaphors like strip-mining, but
metaphors are a way of explaining theory, not a way to reason. I
could, for example, analogise the infrastructure to a car, which is
zooming along fine now but might run out of gas without fueling.
However, this metaphor is inapplicable -- it has nothing to do with the
situation.

Concretely observed, there is no obstacle to the sort of national
network we want other than the government. In spite of the belief that
"monopolists" will take over, there is no evidence that competition is
slowing down (in fact, it is speeding up as fast as the government
will allow it to) and in spite of the belief that the network will
"control programming and work only one way" the truth seems to be that
the cable companies and everyone else want to get into digital two-way
services as soon as possible and that the government is all that is
standing in the way.

Perry

Perry writes:

> However, its not like strip mining. So long as regulations are in
> place, the market is not functioning in a maximally efficient manner,
> and further distortions are occuring.
 
It's like strip mining in this sense: stopping the intervention doesn't
restore the healthy previous condition automatically. Merely ending
regulation doesn't make the distortions go away.

> I understand the impulse to use metaphors like strip-mining, but
> metaphors are a way of explaining theory, not a way to reason.

Just so. If you really believe that merely stopping regulation, *without
anything else*, would restore competition to a market that's been
dominated by a government-supported monopoly or duopoly, then we simply
must agree to disagree.

> Concretely observed, there is no obstacle to the sort of national
> network we want other than the government.

Untrue. The cable providers often are putting up obstacles of their own, as
are telco providers. The impossibility of Tim May's X-rated cable channel
illustrates this point. The market can't function--Tim and those like him
who want a certain type and variety of programming--unless there is access
to the information infrastructure. Telling every would-be X-rated cable
viewer to build his own cable system is not a solution.

According to standard free-market theory, the existence of demand
(Tim and friends) for an affordable product ought to stimulate a supplier
for that product. But that will never happen if all we do is say to the
cable and telco providers "Well, we've given you these markets and allows
you to profit enormously and to have absolute ability to use nonmarket
mechanisms to squash any hint of serious competition, and now we're going
to just dust off our hands and walk away."


--Mike

Mike Godwin says:
> > Concretely observed, there is no obstacle to the sort of national
> > network we want other than the government.
> 
> Untrue. The cable providers often are putting up obstacles of their own, as
> are telco providers. The impossibility of Tim May's X-rated cable channel
> illustrates this point. The market can't function--Tim and those like him
> who want a certain type and variety of programming--unless there is access
> to the information infrastructure. Telling every would-be X-rated cable
> viewer to build his own cable system is not a solution.

X-Rated movies are a huge business. I suspect cable companies would
love to broadcast them. However, there are government impediments to
transmitting them -- fears of lawsuits, FCC intervention, and criminal
charges being among them.

Of course, this is comparing apples and oranges -- when TV channels
per se cease to exist, which is inevitable, it will be difficult if
not impossible for bluenoses to detect when such services are in use.

> According to standard free-market theory, the existence of demand
> (Tim and friends) for an affordable product ought to stimulate a supplier
> for that product.

Of course it would, BARRING LEGAL OBSTACLES. Again, as before, the
market is not currently free -- the obstacles are government created.

Perry

Perry writes:

> X-Rated movies are a huge business. I suspect cable companies would
> love to broadcast them.

Right. And the telcos would love to carry phone-sex services. 

Your suspicion would be incorrect. Current providers tend not to want to
carry sexually explicit services because it hurts their image. For
example, the telcos didn't want to support 900-number phone-sex services,
in spite of the fact that there is a very clear market for them, because
they didn't want to do any business for and with the phone-sex companies.
See, e.g., Sable Communications v. FCC.

If your characterization were correct, the phone companies would be dying
to carry phone-sex services. In real life, however, they keep petitioning
regulatory bodies to allow them not to carry them.

> Of course it would, BARRING LEGAL OBSTACLES. Again, as before, the
> market is not currently free -- the obstacles are government created.

Thanks for the capital letters--I am getting a little nearsighted in my
old age.

But your analysis hear assumes that, given a clear and profitable market,
any rational provider would cater to it. Even in the absence of legal
sanctions, this isn't true, as Sable Communications and other cases
clearly show.


--Mike

[re: EFF NII proposal, ftp.eff.org, /pub/Eff/papers/op2.0]

> As I understand it, for both telephones and cable TV, it is still common
> for local governments to "grant" "franchises" to single companies for
> phone and cable wires.  If there were one thing to change, that would be
> it.

Why should that be the main focus?  I for one consider modelling the
coming "data highway" on an Internet-like model to be of more concern).  I
have precisely zero use for cable tv (or broadcast tv for that matter),
and very little use for the phone system except as a convenience and a way
to transport FidoNet mail.  Since FidoNet-via-Internet is soon to be a
reality in all likelihood, even that begins to fade. Over 90% of my
communicating is done on Internet or in person.  This is not to say full
privatization of the phone system would not vastly improve Internet, but
at least the net is fairly stable and works.  It's a good place to start.

The creation of a new "infrastructure" (rapidly becoming my least
favourite buzzword) that is modelled on TV rather than many-to-many
networking, would appear to me to be a much more grave danger than the
temporary perpetuation of the current telecom and cable system, which can
be the next thing to work on, once we are ensured the coming BigNet will
be worth the lines it's carried on. 

-- 
Stanton  McCandlish  mech@eff.org  1:109/1103   EFF  Online  Activist & SysOp
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> 
> [re: EFF NII proposal, ftp.eff.org, /pub/Eff/papers/op2.0]
> 
> > As I understand it, for both telephones and cable TV, it is still common
> > for local governments to "grant" "franchises" to single companies for
> > phone and cable wires.  If there were one thing to change, that would be
> > it.
> 
> Why should that be the main focus?  I for one consider modelling the
> coming "data highway" on an Internet-like model to be of more concern).  I
> have precisely zero use for cable tv (or broadcast tv for that matter),
> and very little use for the phone system except as a convenience and a way
> to transport FidoNet mail.  Since FidoNet-via-Internet is soon to be a
> reality in all likelihood, even that begins to fade. Over 90% of my
> communicating is done on Internet or in person.  This is not to say full
> privatization of the phone system would not vastly improve Internet, but
> at least the net is fairly stable and works.  It's a good place to start.
> 
I, like Tim May, also cancelled my cable-TV subscription a few months ago,
and would have long before that if my kids didn't like the Disney channel
so much.  None the less, the data highway _is_ being built, right now, by
the phone and cable companies, and digital video-on-demand and videophone
capabilities seem to be basic assumptions.  I can reference articles in
EE Times and elsewhere, and people who watch TV already know this from
things like AT&T's "you will" commercials.

> The creation of a new "infrastructure" (rapidly becoming my least
> favourite buzzword) that is modelled on TV rather than many-to-many
> networking, would appear to me to be a much more grave danger than the
> temporary perpetuation of the current telecom and cable system, which can
> be the next thing to work on, once we are ensured the coming BigNet will
> be worth the lines it's carried on. 
> 
Seems to be that a general videophone capability is the only building block
that's needed.  Seems to me the only possible roadblock is regulatory, that
is, the phone companies being prohibited from doing video and the cable
companies prevented from doing phone service.

Robert

> I, like Tim May, also cancelled my cable-TV subscription a few months ago,
> and would have long before that if my kids didn't like the Disney channel
> so much.  None the less, the data highway _is_ being built, right now, by
> the phone and cable companies, and digital video-on-demand and videophone
> capabilities seem to be basic assumptions.  I can reference articles in
> EE Times and elsewhere, and people who watch TV already know this from
> things like AT&T's "you will" commercials.
[...]
> Seems to be that a general videophone capability is the only building block
> that's needed.  Seems to me the only possible roadblock is regulatory, that
> is, the phone companies being prohibited from doing video and the cable
> companies prevented from doing phone service.

This isn't precisely what I meant.  What I mean is that, whatever the
source of or type of wires that carry this "data highway" traffic, for the
dominant use and format of it to be modelled on the tired and all but
useless one-to-many format of tv would be disastrous.  I don't care who
builds, it, only what I can do with it.

-- 
Stanton  McCandlish  mech@eff.org  1:109/1103   EFF  Online  Activist & SysOp
O P E N  P L A T F O R M   C R Y P T O P O L I C Y   O N L I N E  R I G H T S
N  E  T  W  O  R  K  I  N  G      V  I  R  T  U  A  L     C  U  L  T  U  R  E
I   N   F  O :  M   E   M   B   E   R   S   H   I   P  @  E  F  F  .  O  R  G