"If you get underneath what's driving the fiber in the metropolitan markets it has been the need for increased video, increased reliability and security for customers," Seidenberg said. "The way we think about it is even though we have this great 4G mobile network, you still need to have fiber to the premises because we think your home will utilize a Gigabit of bandwidth." ... "The way we look at it is we want to get fiber to as many business premises and cover as much as the footprint as we can and we believe everyone else going to do the same thing in other parts of the country," Seidenberg said.

For years, I have heard Graham Richards, former mayor of Fort Wayne Indiana, brag about this "beg, borrow, buy, build" [pdf] philosophy as Mayor.  I am not insulting him -- his brash style is quite likable, but it is bragging.  He was somewhat of a celebrity among the broadband folks because he both understood the importance of broadband and had convinced Verizon to roll out FiOS in Fort Wayne when they had no plans to.  His philosophy is to first beg, then borrow, then buy, and finally build the network if necessary -- a similar approach of many local governments.  This is also often the path of least resistance (which, Utah Phillips reminds us, is what makes the river crooked).  

Graham is a terrific guy and a great evangelist for broadband (though he never jumped into a frozen Lake Superior) -- but we have long argued that his priorities were wrong in the long term.  Not owning the network means the network is unlikely to care about what the community needs.  Unfortunately, our philosophy has proven prescient.

When we last discussed Frontier's radical price increases for the FiOS subscribers they bought from Verizon, we failed to note that Fort Wayne was one of the transferred communities.  They begged for the network and they have no voice in how it is run.  So when Frontier jacks up its FiOS prices and glibly encourages people to drop their high quality FiOS cable for lesser quality DirectTV (with a long contract), the folks in Fort Wayne have little choice but to shrug their shoulders.

Serfs may occasion upon a good Lord of the Manor, but mostly they didn't.  Ownership of essential infrastructure offers long term benefits.

Photo used under Creative Commons, courtesy of Jenn Raynes

Frontier has been bitten by the same disadvantage many communities face when building their own networks -- little market power means having to overpay for everything. When Frontier bought millions of Verizon rural lines, it bought a few FiOS connections as well. But not enough to gain any bargaining power with channel owners. So Frontier had to raise the costs of its video services up for 46%. Lest anyone feel too sorry for Frontier, they are doing just fine. It is their customers who suffer. But it is a reminder that the issue of scale and market power are barriers to all competition, not just community networks. If we want to have real competition in this country, the Congress and the FCC need to stop ignoring the problems caused by massive players distorting the market. This unregulated market is an invitation for big players to join together and screw everyone else.

Excellent lecture.

It’s good for our economy when companies make money and hire workers. But while small businesses continue to struggle in this economy, the cable and phone companies achieved extremely healthy profit margins. If the Great Recession didn’t stop these ISPs from making big profits, how could they be hurt by sensible consumer protections to keep the net operating just like it always has?

Even J.P. Morgan couldn’t get independently-owned railroads to agree not to compete with one another in the late 19th century. Not that he didn’t try. In 1890 one of Morgan’s associates was excited by the prospect of a Western Traffic Association that would include a director from each railroad and set uniform rates: “Think of it - all the competing traffic of the roads west of Chicago and Saint Louis placed in the control of about 30 men!” But the effort fell apart because some of the independents insisted on cutting rates and invading each other’s territories.

1. Do nothing, let Comcast, et al. do as they please.
2. Regulate: Hope the FCC or other Federal Agencies can stand up to the corporate lobbyists and regulate in the public interest.
3. Provide a Public Option

Menino is right to insist that telecommunication companies pay their fair share of taxes. In Boston, the exemption shifts more than $5 million a year onto the property tax bills of homeowners, say city officials. But tensions between Verizon and the mayor can be costly in many ways. City cable providers Comcast and RCN, for example, don’t offer the speedier fiber-optic connections into customers’ homes available from Verizon in 98 Massachusetts cities and towns. The new and faster broadband speeds - both downstream and upstream - offered by Verizon to Internet customers therefore remain beyond the reach of Bostonians, as do FiOS-related incentives on products such as mini netbooks and camcorders. Cable and Internet competition is alive and well in the suburbs, but flat in Boston.

While these bills are promoted as a magic elixir that will bring competition and lower TV prices to a region, when people go back to investigate whether these bills actually helped anybody (which is amusingly rare), data indicates that TV prices increased anyway and consumers got the short end of the stick.