Re: Level 3 blames Internet slowdowns on Technica

[Owen DeLong <owen () delong com>]

A natural monopoly exists without force of arms or regulation very easily.

Any place where the market density is insufficient to support the cost of multiple providers building out the 
infrastructure for a given service, a natural monopoly exists.

For example, if cities were to simply open up the provision of sewer services* to residential areas, you wouldn’t have 
a bunch of companies choosing to suddenly get into the sewer business. Instead, whoever has pipes already in the ground 
will continue to serve customers and no competitor is going to see enough market upside to build a second set of pipes 
out or build a pipe network on an ad-hoc basis.

So it also goes with other similar types of services, such as copper pairs (telephony/DSL), co-ax (Cable), Fiber (GPON, 
Active Ethernet, Etc).

Companies have created the illusion of competition by convincing regulators that cellular competes with cable competes 
with copper pair, but in reality, the service profiles of those media are so radically different that in most areas, 
any perceived competition is mostly imaginary.

($99 for 50Mbps/10Mbps co-ax does not, IMHO, compete with $50 for 1.5Mbps/384Kbps DSL, for example)

Very few, if any neighborhoods have copper pairs from more than one phone company. You can argue that there are 
regulations preventing a second phone company from deploying, but in reality, even if such regulations were removed, 
there wouldn’t be a second phone company laying copper in most areas. In many areas, the regulation is the result of 
the USF process attempting to get at least one phone company to do a subsidized build-out into the area because 
subscriber density was so low that it didn’t even support a natural monopoly, let alone competitive
environment.

Even if the incumbents gave up their “right-of-way”, you wouldn’t see enough of a market in any but the most densely 
populated areas to support establishment of a competitor and you likely wouldn’t even see initial build-out into most 
locations.

Instead, the part that needs to be heavily regulated, the natural monopoly, the last-mile local loop should be provided 
by an independent operator who does not have a conflict of interest with regards to serving all of the providers trying 
to provide higher layer services. An owner of the physical infrastructure that is allowed to use that physical 
infrastructure in anti-competitive ways against other higher-layer service providers will do so to the detriment of the 
customers. Prohibiting them from owning the last-mile physical infrastructure and, instead, requiring that to be 
managed by an independent system operator who provides equal footing to all comers just makes sense.

Owen

*By sewer services in this context, I mean the actual sewers themselves and the waste-removal service that they 
provide, not services such as roto-rooter/rescue-rooter/etc.


On Mar 21, 2014, at 8:45 PM, Eric Wieling <EWieling () nyigc com> wrote:

> Make the regulation and force of arms be as targeted as reasonable.   In the case of telecommunications as targeted 
> as reasonable means the "last mile" or, more correctly, the "local loop".    I advocate stringent ongoing oversight 
> and regulation of the local loop and very little regulation for the rest of the communications industry.     
>
> If the incumbent telcos want to compete on equal footing in a free market then I invite them to give up their 
> government granted right of ways to run their copper or fiber and compete on a level playing field.  They will never 
> do that and therefore the last mile can never be a free market.   
>
>
> -----Original Message-----
> From: Larry Sheldon [mailto:LarrySheldon () cox net] 
> Sent: Friday, March 21, 2014 9:54 PM
> To: nanog () nanog org
> Subject: Re: Level 3 blames Internet slowdowns on Technica
>
> *too old, failing memory and all, I'll have to go read up on "natural monopoly"--I can not think of one that does not 
> require regulation and force of arms to exist.