Monday, January 31, 2005

"Power struggle pits utility, BellSouth"

The Picayune notices something is going on across basin. The story is generic and, for an initial overview, not bad.

Some parts they get right in Power struggle pits utility, BellSouth:
"The skirmish in Lafayette is part of a larger battle being waged nationwide between the nation's biggest phone and cable companies that traditionally have dominated the telecommunications market and power utilities."
Other parts they get not so right. But those are the sorts of things most reporters new to the story gets wrong.

The reporter apparently mistakenly understands deregulation--which has been the real project of the last 10 years--as a way of "breaking down the barriers that for decades prevented power, telephone and cable monopolies from competing against each other." That may have been the intent of some but it didn't happen. Competition has just barely begun with Verizon's FIOS and has little to do, unfortunately, with deregulation and everything to do with the cable and telephone monopolies converging on a single digital network architecture centered on fiber optics. The author further misunderstands "breaking down of barriers" as being the same as 'Dismantling monopolies" In truth not all of the deregulation has lead to increased competition (Ask Eatel or ATT). Much of the FCC decisions have, in fact, strengthened the monopolies' ability to prevent competition over their own ever more secure monopoly networks in the vain hope that each move to return monopoly control of their networks would finally lead to enough confidence to induce competition.

No, the convergence on a single network model doesn't change the monopoly nature of either of their network enterprises. It just means that as they converge the battle over which will die and which will live on as a single monopoly has to begin. And at the end the competition which was structurally inevitable as a result of convergence will vanish and this time we'll be left with only one natural monopoly instead of two. But with no remaining effective regulation.

Technology cannot save us from elementary economics, as Powell at the FCC (and certain local dullards) so fervently hope. Even Business Week has begun to understand that in natural monopoly situations regulation is necessary.

Or public ownership. The LUS model. There will be a few communities that won't end up at the mercy of whichever private telecom survives the battle to come. And those will be places that own their own infrastructure. That's where the real story is.

2 comments:

Joe said...

Check out "The Ind's" section on Acadiana's leading economic indicators. Lafayette, despite having some of the highest consumer prices for housing and transportation, has some of the lowest for utilities (in the cities provided by the Ind for comparison). I'd love to see more on how consumer owned utility prices compare to their corporate competitors in comparitable markets. But I think LUS's prices are one of the reasons why the people of Lafayette have supported the fiber to the home plan. That and the fact that everyone who deals with Cox comes to hate them.

Mike Stagg said...

Joe,

One of the ideas John and I have discussed is a way to quantify the economic impact municipal ownership of Lafayette's electric, water and waste water system has had on the city. That is, what is the impact of retaining those profits in the community rather than shipping the bulk of those dollars out of our community to some distant place like, say, Atlanta.

It was thinking about this topic of earnings being retained in the community that led to the concept of the Bandwidth Tax that consumers and businesses here pay because Cox and BellSouth treat bandwidth as if its scarce (although, it is on their systems).

Think about how much money has been retained in the Lafayette market over the past century because LUS is municipally owned. Think about how much more money will be retained in our community as a result of LUS owning the fiber network.

The LUS fiber project is fundamentally sound economics for the community as a whole for the fundamental reason that more of our dollars will stay in our community every day and the presence of those dollars here will amplify the positive benefits of this world-class information infrastructure.