Wednesday, January 05, 2005

So Whaddaya Want? An Open Network? (2)

Installment (2) examining the strange contradictions that fiber's opponents get themselves wound up in.

Lately we've been hearing that it makes sense to be both an advocate of an open networks systems architecture and an opponent of LUS. Actually, nothing could make less sense.

Here is one undeniable fact:
Neither BellSouth nor Cox will ever build an open system.
BellSouth and Cox have been nothing if not consistent on this score. Nobody even bothers to ask them to build an open system.

If doubt were possible, witness the ongoing fight the telecos are winning to reestablish monopoly control of their wire into the home. (Remember when AT&T and EATEL were offering great, competitive prices on leased lines? No more.) The Bells opened their system to competition in trade for the right to enter long distance service. Once they got what they wanted they decided to change the game. BellSouth wants all that monopoly profit for itself. The tool that it is using to get it? Threatening not to build a fiber network. Again. (The recent story in USAToday touting Lafayette is a good place to start on the Bells' anti-competitive strategies.)

If doubt were possible witness the battle to the wire the cablecos have waged to maintain their monopoly status and extend it to new telecom services. The story of the Brand X case is only the most recent expression of the strange contortions that define the telecom services offered by cable companies as something, anything, else. (For a salty review of the history see "Brand X")

It's not just their history, as decisive as I find that evidence, it is also simple and pure logic: These big corporations are in business first and foremost to benefit their owners. They are not (sorry, pie-in-the-sky free enterprise hopefuls) in business to serve customers except as is serves their owner's interests. Faced with a choice between taking all the profit off their monopoly ownership of their networks and sharing it with some folks who will undercut their price or attack their business plan they will never, not ever, choose to allow competition onto their networks. And they would be offended if you would suggest that they should.

No, for reasons historical and structural the BellSouths and the Coxs of this world will never, ever, willingly open their networks to any competition and allow one scintilla of profit that they could skim to be shared with another company.

Honestly, I am not saying that they should think differently. The problem with private ownership in monopoly situations is that what works great in competitive situations--self-interested owners competing to best serve the customers--falls apart when there is no alternative provider. Self-interested monopolists charge as much as they can without bring down regulatory wrath. Really, I understand that it is only logical given the structure of their ownership. That is the game they were set up to play.

But, you know, it is not the only game in town.

There is the utility model.

Utilities grow up in natural monopoly situations as an alternative to regulation. (And the coming fiber network will a natural monopoly, make no mistake) Regulation can be problematic, as the regulators too often end up creatures of the regulated. Still it is better than allowing a monopoly totally free rein, as economic history decisively demonstrates. But arguably the utility model, the essence of which is that the owner and the customer are the same, is a much more reliable and natural way to eliminate the problems of high cost and poor service that unregulated monopolies inevitably entail. The nubbin of this argument can be stated simply: You have no motivation to monopolize yourself. You don't have a reason to overcharge yourself. You want to give yourself good service.

The private corporation exists to profit its owner. The utility exists to serve its citizens. It really is that simple.

Which brings us to another undeniable fact:

LUS might conceivably go the open network route.

It is possible to imagine that a utility might go the open network route--all that would be required would be for its owner/citizens to believe that they would benefit more by having such a utility.

In fact the history is clear: some utilities (unlike private entities) have chose to go that route either out of belief or (disturbingly often) because the incumbents have forced a business model on local government that the same incumbents would never, ever, consider for themselves. LUS has already committed itself to providing wholesale bandwidth to entrepreneurs. (It hasn't said it will allow anyone to compete with the core services it offers--anymore than BellSouth or Cox has. From a business plan/safety of the owners investment point of view it doesn't make sense.) But it has already gone further than the incumbents in allowing others offering new services onto its network. If what you want an open network for is to develop exciting new services LUS (and no one else) will sell you bandwidth. If what you want is to make a bundle off of already established and profitable business models. Sorry, LUS won't subsidize that--they've got the net to pay off, the council to satisfy, and a raft of critics who, in yet another contradiction, both want LUS to go for the safest possible business model (not recognizing that is a closed network) and to go with a business model that gives away potential profit to renters instead of its owners (an open network).

All you have to do in the future to open LUS' system to competition up and down the line is to make a case for it before the council. Make the case that the citizens would benefit more from the competition than the city would from the in lieu of tax income that it would displace. You could run on such a platform for council or mayor.

We really could, pretty easily, decide to do that. It is not only conceivable; it seems likely the issue will arise.

What is not conceivable is that we could ever convince Cox or BellSouth, should they own the monopoly fiber optic network, to ever consider opening their system just because it would benefit the citizens of Lafayette.

No, there are some things you just have to do for yourself. We used to call it self-reliance and it was considered a virtue. Now we have folks who apparently want us to believe that depending on guys in Atlanta to tell us what we should want is a virtue. I'm too old-fashioned to go for that.

You say you want an open network; one with full structural separation?

There is only one rational position to take if you believe:
  1. if you recognize that a fiber optic network will be as much a natural monopoly as the roads or any water system ever was.
  2. that Cox and Bell South will never, ever, open their network to competition.
  3. that LUS just might further open their network, if the citizens see more benefit to that route once they balance it against the costs to the city.
No, Make those hard choices; face reality: if you want an open network, and if you want the benefits you believe an open network can bring you really don't have any rational choice but LUS.

Resolve those contradictions!

1 comment:

Anonymous said...

I'd just like to see Breakfield and Leblanc actually have some snippet of a direction. Their wishy-washy thought process reminds me of a bi-polar person that I dated in college.