[12685] in Commercialization & Privatization of the Internet
Re: EFF and the big bad T (tax) word [long]
daemon@ATHENA.MIT.EDU (Barry Shein)
Thu May 26 06:14:52 1994
Date: Wed, 25 May 1994 18:19:23 -0400
From: bzs@world.std.com (Barry Shein)
To: djw@eff.org
Cc: com-priv@psi.com, alt-politics-datahighway@cs.utexas.edu,
frezza@radiomail.net, don.wills@swc.com
In-Reply-To: <199405251745.NAA15467@eff.org> (djw@eff.org)
>From: djw@eff.org (Daniel J. Weitzner)
>1. Universal services in the current telephone rate structure: In the
>current telephone rate structure there are many internal funding flows from
>certain classes of users to others. For example, it costs more to provide
>telephone service to some users than to other, either because of distance
>or population densities. We implicitly support this kind of rate structure
>in the current monopoly residential phone market. We explicitly rely on
>this kind of pricing to keep single user access to the Internet, other
>information services/networks, and ISDN affordable.
Libertarianism aside...
A major cornerstone of the justification for the govt's close
involvement in telephone rate structures was the granting of monopoly
status to AT&T.
I think that's a critical distinction and to just say that they
regulated the telephone industry so why not the information industry
is, well, besides being vulnerable to the poor precedent (a granting
of monopoly status was involved) is more than a little bit
disingenuous, at least for not noting this fact.
Have we lost sight of the idea that govt still needs some very sound
reason, some huge quid pro quo or national emergency (and I think it
would be a stretch to characterize this as a national emergency when
we don't even invoke this sort of reasoning for food) before we call
for this kind of massive involvement in aspects like pricing?
The government's record of redistributing resources is not very good,
certainly not very consistent. It has its ill effects in any market
(let's not tit-for-tat on examples.)
In some cases it is absolutely justified, in my mind. But it exacts a
price, oftentimes a huge price. That price had better be worthwhile
for the hoped-for benefit.
Regulatory structures generally diminish competition in the
marketplace, other than where the motivation is to disrupt a monopoly
or oligopoly, for several reasons. They tend to be very expensive to
deal with, thus locking out any but the largest and most determined
providers. They also have a strong tendency to focus progress away
from the most productive and towards those with political talents.
You claim the goal is to make single-user access to the information
highway affordable.
Yet here at World we already have almost 10,000 active customers, and
growing at an exponential rate, accessing the net for on average less
than $20/month.
How much more affordable can it get? To access the net you still need
a PC or similar, a modem, a telephone (even if you eliminate the
telephone, typically a $15/mo item, I doubt the replacement would be
much less expensive.) If we're talking about people who would have
trouble with $20/month then I'll add that you need a home to run the
connection to and electricity, surely anyone strapped for $20/mo has
some of those concerns also?
Do you believe it's the $20/month that stands in peoples' way? Do you
believe that by legislation and regulation you can chip away at that
$20/month much further? All you can possibly save is $20/mo, even if
you could bring the price to zero.
As we used to say at a company I worked for, several years ago, whose
stock hit $2: Look on the bright side, that's a $2/share MAXIMUM
downside risk!
Nearly every major city in the US right now has access similar to what
World offers. Systems such as AOL and CompuServe are evolving to
provide a different style of access to the same basic services. And
World and others are rapidly evolving their own services.
As you mention, telephone service is just about universal. Thus,
access to these services is just about universal already. We have
people accessing our systems, as regular customers, from 15 or more
different countries around the world and at least 30 different states
in the US last time I checked.
Long-distance telephone service can be pricey, but that's a different
issue isn't it? I (we) certainly don't set telephone prices, and
that's not your target here is it?
I suppose what I am saying is, before you take up the full-auto
assault weapons of government regulation perhaps you need to convince
us all the bugaboo you're aiming at isn't already dead!
Mere internet access is cheap and has been getting cheaper at an
amazing rate.
What worries me, in my more paranoid moods, is that this is actually
what the problem is (that access is already cheap), and I fear that
someone with good intentions such as yourself doesn't become an
unwitting accomplice in exactly the opposite of what you are setting
out to accomplish.
Install heavy-handed regulation, pricing control structures, $1M/year
in required paper work, a need for Washington lobbyists in order to
survive in this industry, halls full of lawyers and regulation
specialists and, congratulations, only Fortune 100 companies will be
able to play (of which less than a dozen will even try) and all these
low-margin, low-overhead providers like myself will disappear in a
flash.
I have little doubt some of them would happily yield to $1M/yr or so
in govt regulations to wipe out all small competition forever and thus
allow them to raise market prices 5 or 10 fold.
Think hard about this!
>2. Direct subsidy to end users: EFF has supported direct goverment support
>to subsidize network access for libraries, schools, and other public
>institutions, where those institutions could not otherwise afford to be
>online.
I have no problem with this sort of thing and even applaud it.
However, take some time to understand the problems inherent. Your note
belies some misunderstandings.
I have dealt with school systems here in the Boston area.
My experience has been that they cannot take an on-line hook-up for
free!
Why?
Because the hook-up means nothing, what they need are trained,
full-time staff who understand the issues, understand how to integrate
these new tools into their curriculum, work with students and library
patrons, etc.
Internet hooks are cheap. Even for struggling school systems.
People are expensive. You can't just dump an internet hookup into your
average public school or library and say, here, somebody take care of
this. That's like building a twelve lane highway that ends out in a
cornfield.
If that's all there was to it it could be solved tomorrow, just pass
the hat. A full-blown internet connection would cost less than $5,000
startup and around $500-$1000/month. A workable internet connection
would cost a school or library about $2,500 and $250/month, probably
less.
That's not out of the reach of even a relatively poor school system or
library. You could not convince me that those costs are what are
keeping every major city's school system and public library system out
of the game (I realize some are doing this, but they're still
relatively rare.)
I could believe they won't prioritize money for that purpose and have
other things to spend their money on that they perceive as more
important. But that's a different issue. You are not going to succeed
in making this a priority, an important and valuable resource to them,
by merely lowering the price to them. It will still be worth the same
to them (not much, not w/o personnel etc), you will have only lowered
the price.
It is a common fallacy in public policy to confuse price with value
and that getting the price out of the way will resolve the value
issue, give it to them for free and suddenly what they wouldn't change
one small budget priority for becomes important and valuable. It's
simply not true.
I remember when I worked and taught at a large university some of our
biggest headaches were things someone had gotten for us free. Some
faculty member with good intentions had privately talked some company
into donating scads of equipment, here it is! Our problems are solved!
Hah! If you find it hard to understand why that was a big headache
then you're missing an important point.
There are solutions, unfortunately they're not as simple nor as direct
as you seem to pose them.
-Barry Shein
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