[11005] in Public-Access_Computer_Systems_Forum
Telecomm Cartel Part II
daemon@ATHENA.MIT.EDU (Public-Access Computer Systems For)
Mon Jan 27 20:56:29 1997
Date: Mon, 27 Jan 1997 19:11:21 -0600 (CST)
From: Public-Access Computer Systems Forum <LIBPACS@UHUPVM1.UH.EDU>
To: Multiple recipients of list PACS-L <PACS-L@UHUPVM1.UH.EDU>
Reply-To: Public-Access Computer Systems Forum <PACS-L@UHUPVM1.UH.EDU>
3 Messages Concerning "Telecomm Cartel"
260 Lines
Note: This is Part II; please see Part I of the collection on this
subject for a note from the Moderator.
*-----
From: rishab@dxm.org (Rishab Aiyer Ghosh)
James Love wrote:
> paying for thier incoming calls already. Ultimately, one has too look at
> the company revenues, and if the LECs are making money, it may be
> difficult for them to get rate increases.
There has been a lot of discussion on this on TELECOM Digest
(comp.dcom.telecom) over the past few months. It's not simply
a question of whether LECs are making money on ISP-related traffic.
It's hard to predict whether they will continue to do so; and
whether their cost per unit of infrastructure is higher (or
net income lower) for ISP vs. voice traffic. In this case,
voice users subsidise Net traffic, which is not necessarily fair.
The same goes for what ISPs charge _their_ users, as I noted earlier.
With usage-based pricing, some people may spend $50 a month instead
of $20 for their Net connection, but others will spend $5.
(Incidentally I don't know why we keep reading that local calls
are free. They're not; they're just un_metered_. It shouldn't be
hard to work out a metered rate such that "average" users pay
the same as their flat rate charges.)
Rishab
First Monday - The Peer-Reviewed Journal on the Internet
http://www.firstmonday.dk/ Munksgaard International Publishers, Copenhagen
International Editor - Rishab Aiyer Ghosh (ghosh@firstmonday.dk)
Mobile +91 11 98110 14574; Fax +91 11 2209608; Tel +91 11 2454717
A4/204 Ekta Apts., 9 Indraprastha Extn, New Delhi 110092 INDIA
*-----
From: rishab@dxm.org (Rishab Aiyer Ghosh)
On Sun, 26 Jan 1997, Jim Warren wrote:
> [If I remember my politically-correct '60s Maoist litany, it was something
> like, "Running dog lackies of the capitalist war-mongers." But of course,
[Recently finished Jung Chang's _Wild Swans_ - brilliant book - now I'm
trying hard to find a genuine copy of the Little Red Book. Such lovely
slogans! ;-]
> For starters, I *don't* DARE trust cable companies -- with their appalling
> service practices -- to provide something as crucial as phone services
Cable companies, don't forget, have been near-monopolies too...
But your opinion of cable companies' service practices simply
shows that if they _want_ to compete with RBOCs, they'll have
to match or better them somehow. Either in price, or in service
(unless you think the RBOCs quality of service is unbeatable ;-)
The same goes for the power and gas companies (or railways,
for long-distance). The existing monopolies of power companies
don't affect their competitiveness in telecom markets - except
for providing a separate cash-flow.
> Nonetheless, I understand and *like* the notion of *real* competition to
> control prices and improve alternatives available to consumers. But it
We agree there...
> needs to be *real* competition -- not "competition" where (1) there is only
> one, or very few *very* cozy, long-cooperating megacorporations "competing"
> with each other (as in the "copetitive" oil cartels),
Surely you see the difference between a monopoly and a cartel. Till
recently, the local loop in the US has been a _monopoly_. Each RBOC
had a _monopoly_ over its own market. A _cartel_ is NOT formed by
cooperation between monopolies in different markets who aren't competing
in any case (i.e. Nynex and Pac Bell). A cartel is the subversion of
a _competitive_ market, where companies supposed to compete against
one another make secret deals. AT&T, Sprint and MCI deciding to fix
international rates at $3 per minute, say.
The question of cosy cartels comes about only when there are multiple
competing operators in the first place. That hasn't happened yet
in the local loop. (And when that does, I don't think you'll find the
new operators cosying up to the local RBOC).
> and (2) most especially not when those "competitors" begin the
> "competition" by having 100% of the market, ALL of the monsterously-costly
> wired infrastructure and bay far, the most effective control over their
> supposed regulators (FCC, state PUCs, etc.).
About the FCC I'd like to note that in the only case involving a _cartel_
that it ruled on recently, it ruled against the cartel (and for callback).
About infrastructure: telecom is not like oil. Did you know that the
US has one of the lowest fibre installation rates among OECD countries
(France is the highest). And that Malaysia has a higher use of fibre?
Having all the infrastructure can be a liability too, because it
represents that much more installed capital that you have to scrap for
the sort of services that keep coming up with fast-changing technology.
It's in this context that I mentioned Britain. UK cable companies have
stolen many customers from BT, and in fact make more money on telecom
revenue than on TV - partly because they have to do better than copper
anyway.
> to shared wireless digital spectrum (What! Radio spectrum offered for just
> *anyone* to use -- with equipment-enforced equal-access algorithms?
Was that it? Or was it: what! radio spectrum offered for just *anyone*
to use -- without buying it in an expensive auction? I would suggest
that the FCC was persuaded more by potential fees than by RBOC pressure.
(BTW the Indian Supreme Court ruled that broadcasting is free speech,
so it cannot be limited by fiat or by restrictive licence fees, frequencies
permitting. A former Chief Justice of India told me this would apply
to the Internet, but probably not to telecom; but it's the sort of
precedent you need to prevent the FCC from creating spectrum scarcity whre
none exists.) Unfortunately, "capitalist competition" doesn't make
it easy to ignore money. Things can get very cheap, yes, but not
free.
> well as lost control over the cellular market that has been "competitive"
> from the outset (i.e., two unregulated providers per service area) -- got
Funny, it's two to an area in India too. Here I'd take the quotes off
"competitive" - rates have dropped by as much as 90%, to a bottom of
about 4 cents a minute. That, mind you, is digital, encrypted GSM service.
> Uh, I didn't realize that the UK now had consumer phone rates that were
> comparable to or better than those for U.S. residential users. Do they?
No. But that was not my point. My point was that the trend, _after_
competition, has been towards lower prices and better service. US
low rates (in the local loop) are not a result of competition, but
part of the cross-subsidising a monopolistic market can afford -
and a result of the economies of scale. Competition should reduce
prices and improve services in the US, as it has in the UK.
> And how many *real* "competitors" are there to Britain's "former" govt-run
> phone monopoly? That is, how many -- if any -- have, say, at least 30% of
> Britian's total telecomm market? Is there even *one* -- other than the
> "former" monopoly?
If you implied by the position of "former" in the first sentence
that the govt was soft on BT, that's not true at all. Oftel is a
much tougher regulator than the FCC - which means not imposing
red tape, but ensuring fair play. BT's market share is reducing
rapidly; in some sectors (BT had the monopoly in everything once)
the share is blow 70%. But in economic terms, market share is
not a great measure of competitiveness, least of all in the telecom
market. What matters is not whether the former monopoly hangs on
to its share, or loses it gradually, but _how_ it hangs on.
If it hangs on by doing nothing, it shows that the competition is
not working. If it hangs on by consistently improving its service
quality and pricing to match competition, then the customers are
happy - competition works. BT is definitely being kept on its toes
now, and is generally considered one of the best performing and
most competitive telcos in the world. Also, it is unable to
crush its competition, which means it is going to remain on its toes.
> O' course, part of the reason for my whine about the U.S. comm cartel is
> that I'd like to see [real] competition-driven pricing and innovation ...
> but *before* I die. Ya see, I'm already 60, and probably have only 10-25
> more years -- and I'm *real* cynical about how much *real* competition we
> will see in that "short" period.
I do share your cynicism, in general... but I think that it is possible
to have a "really" competitive market without evenly distributed market
share, as long as consistent pressure is applied by (maybe small)
competitors on the market leader. E.g. Microsoft - I have yet to
see an example of monopolistic price manipulation of the sort that
occurred in oil, say (drop prices, grab the market, than hike 'em).
However, going by the experience in telecom competition, I'd say
that your ideal of no more than 40% share per company is realistic
in the near term, because...
> retail outlets -- and it sure as hell ain't as practiced so far, by the
> U.S. telecomm cartel.
...you're not looking in the right direction. Competition sure as hell
ain't practised "really" by the US local telecom _monopoly_ because
it hasn't been practised at _all_ - not even enough to form cartels.
OTOH competition, where it _exists_, has been pretty real - in long-distance
and international traffic. That the rest of the world gravitates towards
US networks (it's cheaper for me to call Bombay from New Delhi via
a callback service in NY) is simply one example of what competition
has done. And here the market is split not just between the big three
- where it's divided evenly enough - but between dozens of others,
who keep the pressure on against cartelisation.
I see no reason why such real competition should not form in
the local loop as well - and last year's legislation is the
most important step in allowing this to happen at all. And,
looking at the pace of development in the UK (and the history of
AT&T/MCI...) real competition in the local loop could even happen
within 10 years!
Best,
Rishab
First Monday - The Peer-Reviewed Journal on the Internet
http://www.firstmonday.dk/ Munksgaard International Publishers, Copenhagen
International Editor - Rishab Aiyer Ghosh (ghosh@firstmonday.dk)
Mobile +91 11 98110 14574; Fax +91 11 2209608; Tel +91 11 2454717
A4/204 Ekta Apts., 9 Indraprastha Extn, New Delhi 110092 INDIA
*-----
From: James Love <love@tap.org>
IMHO, it is important to distinguish between what is happening on the
orginating end, and what is happending on the terminating end of a call to
the ISP. While we are among the residential consumers calling ISPs a lot,
as a group (on average), residential users don't come close to exceeding
the voice network average capacity, which is 14 percent. We know that in
part because ISPs only have capacity for 5 or 10 percent of their
customers. In private conversations, Bell Atlantic conceeds this point.
This may change in the future, but right now, residential modem users
don't exceed network capacity.
There is, however, the issue of the terminating call to the ISP. These
are busy a lot. This has nothing to do with holding periods, and
everything to do with the incentives facing the ISPs. They buy just
enough lines to meet customer needs. They receive calls, which are
unmetered, and they don't generate revenues from features or calling
(access) fees. The ISPs think these lines are underpriced. The LECs have
been trying to get per minute charges on bulletin board operators for more
than 10 years.
However, the ISPs have a right for the business tariffs, and those tariffs
are based upon average usage data. If the LECs want to change those
tariffs, they should ask for a rate increase or change in the tariffs, and
then the LECs should be willing to look at other users with similiar usage
patterns, or explain why the callers (the residential consumers) aren't
paying for thier incoming calls already. Ultimately, one has too look at
the company revenues, and if the LECs are making money, it may be
difficult for them to get rate increases.
This is about money right now. jamie
On Sun, 26 Jan 1997, Jim Warren wrote:
> At 01:37 PM 01/25/97, Rishab Aiyer Ghosh wrote:
> >In response to Jim's conspiracy theories, and at the risk of
> >being called a capitalist running dog (or was it pig?)
>
> [If I remember my politically-correct '60s Maoist litany, it was something
> like, "Running dog lackies of the capitalist war-mongers." But of course,
> now, the world's wealthiest capitalists no longer profit from peddling war
> tools ... do they? ;-) Oh ... but back to the topic ... after our mutual
> digression. :-) ]
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
James Love / love@tap.org / P.O. Box 19367, Washington, DC 20036
Voice: 202/387-8030; Fax 202/234-5176
Center for Study of Responsive Law
Consumer Project on Technology; http://www.essential.org/cpt
Taxpayer Assets Project; http://www.tap.org
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