Sunday, April 05, 2015

Why legacy telcos, cablecos are incorrect in arguing government-built fiber telecom infrastructure is "unfair competition"

The primary public policy argument advanced by the legacy incumbent telephone and cable companies in support of state laws proscribing or prohibiting the public sector from building or subsidizing community owned fiber to the premise (FTTP) Internet telecommunications infrastructure is that doing so represents unfair competition against them.

It’s a fallacious argument because the incumbents and communities aren’t in the same business – a basic prerequisite for market competition.

The incumbents are in the business of packaging and selling discrete bits of Internet bandwidth. They sell it by throughput speed with speed tiered pricing for wired premise service and by volume – the gigabit -- for mobile (and inappropriately for premise) wireless services. The faster the connection and the more bandwidth consumed, the higher the price. Naturally, the incumbents segment their service territories and product offerings to generate the highest possible profit for that bandwidth. After all, they owe it to their shareholders.

State and local governments on the other hand aren’t in the bandwidth business or selling it to generate maximum profit. They are in the infrastructure business – planning, constructing and financing it to support public objectives such as economic development and enhancing the delivery of public services. In the 20th century, they did that by building roads and highways. In the 21st, they do it by building FTTP infrastructure.

1 comment:

chris said...

Spot on, but the incumbent in the UK is now marketing its inferior copper as 'fibre' broadband and the government and public is suckered into believing it. Public money is going to patch ups instead of building new fibre infrastructure. It's an absolute disgrace. The government has been conned. FTTC is a dead end technology. It is a superfarce. The monopoly will stop at nothing to protect its obsolete assets.

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