Monday, February 28, 2005

In fight against fiber, does Bell wear black hat?

In the Daily Advertiser we find this in a column:
If the fight over the Lafayette Utilities System's fiber telecom plan were 'Lord of the Rings,' Cox Communications would be the hacking, slashing orcs. The real dark force, the flaming orange eyeball in the evil tower, would be BellSouth.
And it starts out so well.....

Of course for Decker, our daily's online editor, this is only the florid lead-in to another of his pieces in which he exhibits a profound ignorance of basic economics and political science wherever LUS and the city's fiber optic initiative is concerned. Decker is currently the "online editor;" when his first screed was published he was also listed as business editor but they seem to have given that job to someone more qualified. He really wasn't qualified for that position, as his attempts at economic analysis here show.

I've tried in the past to acknowledge Decker's growth (1,2) but this is some pretty serious backsliding; it is a return to the days immediately following the city's announcement that it wanted to study providing fiber, during which Decker said, and I quote: “What’s next? A five-year plan? A hall of socialist labor heroes?” This article is a reversion to the days when Decker couldn't distinguish between a popularly elected local government and a Stalinist Soviet Union.

My quarrel with this essay? It's ignorant.

Decker writes as if he actually believes the sort of spew that calls correctly labeling public utilities as "publicly owned" "Orwellian legalese." This is sheerest nonsense. Of course public utilities are publicly owned. That is a simple fact. What he is trying to do is point away from that simple fact and to the sort of stuff you hear these days from the ultra far right: the implication that government is always and in all ways an imposition on the people. That's just crazy. Your local public water utility is no communist, Orwellian nightmare. It is, simply, a public utility. Decker lives in a world in which the mere existence of public utilities is prima facie evidence of some some socialist plot, and indeed evidence that our little city government is a socialist one. That this is a fantasy world of fear and resentment without much grounding in the world the rest of us live in is evident.

Decker then spends some time torturously trying to establish something I have never seen anyone dispute: that LUS is a legal component of the local government. He does, glancingly, notice that it is insulated from the rest of city government and that the money it takes in can't be raided by politicians at their discretion. But the real point is to "tar" LUS with the title of government.

Allow me to quote the most egregious of all resentment-fueled ignorance:
As conceived, the LUS fiber proposal could mean advanced service at low prices, a bridge over the digital divide and a promising lure for new employers looking for a tech-savvy place to call home. But it also would be a tax increase under the guise of a fee for services, and without voter approval.
You can feel him straining for balance in this statement. And I am grateful for the effort. But Decker's ideologically-fueled ignorance of the actual political and economic structures we all live in distorts his view here.

He is calling fees for service a tax, apparently because any money a government takes in must be called a tax and it must always be "bad." But he is wrong on a common-sense basis and even on the basis of his own ideology.

A fee-for-service is a fee charged for a service. Seem simple? It is. We send water to your home and you pay for the quantity of service you use. Same for electricity. Or to rent a public hall like the one at the Clifton Chenier center, or to use one of the cabins at the state park, or to enter a national park.

You will notice that it is the opposite of a tax. A tax is used to charge everyone for basic public services that, generally, everyone benefits from equally or nearly equally. To prevent freeloading, the charge is mandatory. A fee, on the other hand, is charged only to those who use it; there is no "coercion" involved.

Why is it important to Decker and other opponents of the fiber plan to nonsensically insist that fees are somehow taxes? Because they lose their basis for moral outrage if they admit the simple truth: you don't want it, it you don't pay for it. If you don't want to use the cabins at a state park, or the telecom services that are provided by LUS, you don't have to. No tax is being imposed on anyone and the service will be funded by fees willingly provided by the people who value it.

What is disconcerting about the ploy of claiming that fees are taxes is its intellectual dishonesty. It is a core "conservative" position to prefer to reserve taxes for only those most basic of all public services and to charge for everything that can be construed to benefit any smaller group more than the public at large. It was one of Ronald Regean's favorite strategies. Fees are not secret taxes. They are simply a charge for those that use a valuable service for that service, and not charging the general taxpayer to benefit the few.

21 comments:

GumboFilé said...

So Decker is ignorant because you disagree with him? What qualifies you as an economic expert? You don't appear to know any more about economics than I do. You just happen to adhere to a different school of thought.

John said...

gumbofile,

I do not say Decker is ignorant because I disagree with him. I say it because, for instance, he confuses fee-for-service with taxes. This is not a matter of differing schools of thought as if the facts of the matter were amenable to some change due to what school of thought one belongs to.

Who pays is radically different in the cases of taxes and fee for service and the rationale for charging either is completely different. People left, right, and center agree they are different and public policy consistently distinguishes the two. (And, as I said, the biggest recent proponent of the fee-for-service model was Ronald Reagan.) A person who can't recognize that difference is ignorant. I don't mean that as harshly as it sounds. In truth there is a possibility that Decker does know the difference and is ignoring it because its inconvient for the cause he wishes to pursue.

As to my expertise: I have taken graduate courses in Economics in the pursuit of my doctorate. I do not believe that that fact alone should convince anyone and do not expect it to. But I am not just blowing smoke. I have set down and subjected myself to the displine of graduate study with professors who would be quick to distinguish between a fundamental conceptual mistake and differences in schools of economics.

Decker and I do disagree, but its not about school of economics.

baycock said...

As Ronald Reagan said, “There you go again.” When they don’t agree with you, they must ignorant and wrong. Could you be more arrogant and self-serving? Your ability to turn a phrase is very well developed and I am glad to see that you are making good use for the thesaurus that your grandmother gave you for Christmas.

Half way into your soliloquy (see, I have a thesaurus too) you settle on debating yourself over “service fee” or “tax”. SEMANTICS! You fail to mention to your readers that if the fiber project does not reach the projected goals (market share, revenues) the shortfall to satisfy the debt will be made up with revenues from other LUS earnings. In other words, if it don’t pay for itself, our utility bills go up to pay the difference (no thesaurus). Now the people that are not customers of LUS fiber will be paying for a service they are not using. Service Fee? Tax?

You are a strong advocate for your cause. I don’t understand why you do not offer your views to the local media for publication. Bring the debate into the wider public forum. I fear that we are mostly preaching to the quire.

GumboFilé said...

I think what Decker is pointing out is that our fees for services could increase in order to pay off these bonds. That would be a de-facto tax increase. Regardless, there is too much information out here and too little time for me to read it all so if I overlook details, I apologize.

John said...

Baycock,

I don't call everyone ignorant who disagrees with me. Only those that are :-). Seriously, I'm only trying to make a limited point and call to task those who overreach.It's not semantics to point out that who pays is radically different between taxes and fees. It is a fundamental difference that effects public policy.

---
Gumbofile,

I still maintain that there is a huge difference between fees for service--at what ever price. Decker is confusing things that really should be kept separate. The effect is to make people think that LUS (in all its guises) is somehow taxing people. He says " it also would be a tax increase under the guise of a fee for services" He should not be doing that, it isn't some sort of sneaky name for a tax. It is something fundamentally different.

--and I have a lot of sympathy for your trying to keep up with all this. Me too.

baycock said...

BOTTOMLINE…. Will you concede the point that if the fiber project does not reach the revenue levels required to service the debt, LUS will, by law, have to use monies from other earnings?

LUS only has three other sources of revenue, electricity, water, and sewer. Ultimately, rate increases. Your argument does not ring true.

FOI (for our info) What qualifies you to judge who may or may not be ignorant. Is there an under-grad program available? Which schools offer post-grad study? Which school is your certification from? Inquiring minds want to know!

Please do me a favor and get your editorials published, I would appreciate your assistance.

John said...

Baycock,

Now you're either getting snippy or you're not reading the posts. My guess is that you really aren't asking where my degree is from or who I studied under nor any relvant question at all: you are only trying to assert that no amount of background would convince you that I know what I'm talking about.

Fine, your priviledge. I've already exposed my background. I made a simple and accurate distinction between fees and taxes that Decker doesn't seem to udnerstand.

What would you call his characterization? Astute?

baycock said...

Guilty as charged, I was being snippy when I questioned your credentials.
Will you admit to being judgmental with your assertion that Bill Decker is ignorant because his assessment of the issues differs from yours?

Since you choose not to respond to questions that do not substantiate your hypothesis you won’t mind me asking again. Will you concede the point that if the fiber project does not reach the revenue levels required to service the debt, LUS will, by law, have to use monies from other earnings? If that question is too difficult, I’ll try to rephrase it. If the fiber project does not make enough money to pay its own way, where do you propose the money comes from?

My characterization of Decker’s work would be “opinion”. That is the title of the page on which his piece was published. One must always remember that opinions are like assholes, everybody has one, even you. (see, I answer your questions)

GumboFilé said...

John, I don't expect you to agree with me on this but I think I can help you understand why I think the way I do on this one point. If LUS is the only source for the necessities of water and electricity, and that's all I'm buying from them, then if my rates go up in order to pay off the bonds on fiber, which is not a necessity and which I'm not buying, then as far as I'm concerned, it's a tax.
If it quacks like a duck...

Neal Breakfield said...

John:

I just love it when you say that Decker "exhibits a profound ignorance of basic economics and political science wherever LUS and the city's fiber optic initiative is concerned."

LMAO!! Then I remember that you make no "apologies" about your preference for "public ownership of public goods."

It seems that your preference for Economists would be sharply different than mine. While my economic ideaologies lie somewhere near Smith and Friedman, your economic views are definitely to the left of Keynes and a little to the right of Marx.

On the Politcal end, it seems that in interpreting a familiar concept, you prefer the Hobbsian view to my preference for Locke and Rousseau.

John said...

Baycock, gumbofile,

I am perfectly happy to answer questions answered civilly. Gumbofile actually does so. And since Baycock is asking the same question underneath all his guff he gets one for free.

Gumbofile, Thanks, I think I do understand your point here. But please notice that your point is different from the one that Decker made. He claimed the plan could mean all the good things its proponents argue for. "But _also_ be a tax increase under the guise of fee for services." Not, “might become” or “in the unlikely event of a telecom collapse it might look to some like” a tax. He said it would “also be a tax.” Even if it was all the good things too--of course if it was all the good things the project would have succeeded and only those who want the services would pay for them. Somewhere in the middle of all that Decker is simply wrong. He has to be.

Can you concede that? I honestly can't see where he says anything different.

Your point that in the event of failure it would feel like a tax to those who payed it is reasonable enough. But even that is not the same as actually being a tax. You’d still receive a tangible service for your money.

What we have at that point is an empirical argument: How likely is failure and how big could it be? That is an argument worth having. But it isn’t the same as trying to insist that fees are taxes.

(Notice that BellSouth and Cox by their actions, and Oliver by his own admission to the Advocate board attest to the likelihood of the plan's success. It biggest endorsement is in its opposition. If BellSouth an Cox thought LUS wasn’t serious competition they’d grin like the fat cats they are, stand back and wait to scoop up all that infrastructure at fire sale prices. But they aren’t doing that.)

Neal Breakfield said...

John:

To answer your question about tax directly, Decker says it directly: "These wounded feelings justify the $17 million the consolidated government takes from LUS each year."

That _IS_ the "in lieu of tax" payment that LUS makes to LCG every year. Look at the budget posted on the city of lafayette web site:

http://www.lafayettela.gov/PDF/Finance/2005AdoptedBudget.pdf

It is on PAGE 46 under the "LUS Pro Forma Statement"

LUS trumpets it highly on their web site as additional revenues to LCG!

IT IS A TAX! The phrasing "in lieu of tax" is _PURELY_ semantics. IT IS A TAX!

Could LUS operate just as well without it?

Yes.

Is it money that the rate payers pay that goes directly into the general fund of LCG to fund whatever services that LCG sees fit.

Yes.

Would utility rates be lower without it?

Yes.

Then it is a tax.

I am not saying that taxes (or this tax) are bad or good, I am merely stating the fact that it is a tax. Can you agree with that?

John said...

Neal,

No need to yell.

To be precise: you're not responding to the question that I asked gumbofile. It's actually worth dealing with.

The problem is that you aren't dealing with the actual and fundamental differences: You get something you actively, currently want as an individual when you pay a fee. And you don't have to take any service. The law will not come after you if you choose to do without it.

A tax is different: You are paying for a common good, one from which you benefit. (Say defense) You pay whether or not you want to spend your money that way. The law will come after you. The rationale is that all benefit more or less equally and that freeloaders are not allowed.

I'd like some acknowledgement that these are actually different things.

Where you are going, I think, is that you'd like prices to be lower. Me too. From LUS, sure, I'd always like that. But especially from Cox whose profit levels are huge. My desire or yours to pay less does not make the money turned back over to city-parish a tax. It only means you don't like it. From LUS' point of view it is a cost of doing business exactly like the fees and taxes that Cox pays. If you don't like it then you really have an effective remedy: politic to get them lowered. This will be a whole lot easier than to ever convince Cox.

But expect to lose your allies should you ever whisper that this is what you want. What your buddies want is higher fees of this kind. In fact they had it written into the law that they tried to pass to stop LUS. When forced to compromise they MANDATED a floor beneath which LUS would not be allowed to go. LUS, as a direct consequence of BellSouth's desire to make sure that a competitor could not return more than a minimum amount of its "profits" directly to its owners in the form of lower prices had the state obligate LUS to charge higher prices. By state law. At the demand of BellSouth.

Chew on that for awhile. I ask you directly: 1) Do you agree with BellSouth that this is right? 2) Are you as willing to denounce BellSouth as you are LUS for this "sin?" After all LUS fought the requirement and BellSouth demanded it.

If LUS is not returning all its "profit" to its owners in the form of lower prices has you chapped be aware that you and Decker have BellSouth to thank.

Anonymous said...

Excellent points, John!!

I think that the actions of BS not only speak to the feasability of the LUS plan, but to the intent of the incumbents to continue to compete in the Lafayette market-in spite of the dreaded competition. They know that they will still be able to turn a profit in Lafayette, albeit a lower one, even with LUS in the market. That is why they had the legislature set a floor to what LUS can charge.

GumboFilé said...

I agree that we're talking past each other and are not all really talking about the same thing. The new question you pose is a little more complicated for me. I agree with BellSouth that it's unfair for an existing taxpaying business to be forced to compete with a utility that is an agency of a tax collecting civil government. I think you are aware of most of my arguments. I do oppose anyone using the coercive power of civil government for their own profit but I don't know what good choice is available when the playing field has been unjustly made unlevel in favor of the public utility. I can't fault them for doing what they think they have to do to survive.

John said...

gumbofile,

You are right that we are talking past each other to some extent. (Though not entirely--that's where the good stuff is at.)

I'd actually be interested in understanding where we differ. On some points our differences may make us unreconcileable. But on others we may be able to convince each other--or at least gain a better understanding.

From what the post above and by extrapolation from what I've heard others say my guess is that one place we differ is in what degree we distrust government and the relative distrust we have for government and corporations.

For my part I cheerfully admit to looking askance at all bureaucratic organizations. But I don't distrust all equally. Bigger is badder--not in any absolute since but because the more layers you get the more organizations (public or private) tend to get self-absorbed and more interested in their own internal workings than in offering their proper service to those outside.

I also count what I guess you could call "natural motive:" If an organization is organized and directly responsible to those it serves it is better. In part this is a function of size. But in part it is a function of ownership—and responsiveness to its ownership. Organizations that others own have a natural and understandable tendency to extract the maximum amount from me. Organizations that I and the others that are served own have no motive to extract more from me than is necessary to offer the service.

Also, organizations with a clear path to control that I and people I know and trust can actually effect are also better, all things considered.

I imagine you can see where I am going with this. On some relatively abstract level I think small is better than big, customer-owned is better (for me) than outside investors, and that government with its (relatively) clear lines of control and regular voting procedures are better than corporations of the same size.

So I trust Guidry’s hardware over Home Depot and try and shop there. When a clerk at Guidry’s tells me something I know that he is probably right--simply because he’s worked there forever and knows that if he’s wrong I’ll be right back in to talk to him (not whoever I can find at a service desk) about the issue.

Similarly, it is no problem for me to trust LUS over Cox or BellSouth. Size? No contest. Ownership? LUS. They’ve got much less motive to overcharge me--what would be the point for them? Local ability to influence? LUS again. Fiber411 no doubt gives Terry Huval heartburn. I imagine myself joining him in thinking 90% of the critique of his organization either just wrong or unfairly framed. But I bet he worries about the other 10%. Duane Ackerman of BellSouth doesn’t have a clue who I am or who the profiber folks in Lafayette are. He’ll never bother to find out and there is no reason for him to be concerned. In my book that’s unhealthy. I think (prejudice, no doubt) that considerably more than 10% of my critiques are dead on. (I think, for instance, that BellSouth is abusing the economic power I send to Atlanta each month when it hires a phalanx of lawyers and lobbyists to come back to Louisiana and fight for rules that prevent LUS from lowering the prices it (Not BS) gives me.)

[That last I can’t see any way around and am not sure how you can. BellSouth is not, repeat, is not, in ANY danger of having its survival remotely threatened by what we might decide to do here in Lafayette. No one believes that. It is only trying to maintain its current profit level here through preventing effective competition. Dignifying it as a survival motive is inaccurate.]

So that is where I stand.

My supposition about you, based on entirely too little, is that you tend to distrust government without distinction as to size or available avenues of control. And that you tend to, all other things being equal prefer corporations over governments. And that you don’t particularly believe that “ownership” is a viable category because publicly owned operations are completely subsumed under government.

Now I am willing to bet that I am wrong about at least some of my suppositions. What say you?

GumboFilé said...

John, You're right, some of our differences can't be reconciled without one of us changing our mind. That's clearly not likely.

I'm glad to know that you have a basic distrust of bureaucracies. I agree that they're not all equal. I agree that bigger is often worse (though size doesn't always matter. I live in Grand Coteau, population, 1,058. I think most folks around here know about our town government). Big corporations are better able to lobby big government for favors.

One place we differ is that I distrust all civil governments more than I distrust any corporation. I'll trust any owner with a profit incentive more than I'll trust any caretaker without. I prefer an organization that can control cost without asking permission. I prefer an organization that can change directions mid-stream or even fail without costing me money. I prefer an organization that has the ability to terminate it's CEO before the next election.

Additionally I think there are lines that civil government shouldn't cross.

Civil government should be primarily concerned with restraining evil and protecting life, liberty and property. On a philosophical level I object to allowing them to go beyond this. On a realistic level I don't concern myself with communities that vote to form public agencies to provide necessary utilities.

I draw the line if it's either, 1) not truly necessary, or, 2) there's an existing business already meeting the demand (in which case #1 also always applies). In either case, if the project fails, its unjust to those who were forced, against their will, to guarantee the project. In the second case it's unjust for a tax collecting agency to compete against a previously existing taxpaying business.

We could argue about whether or not the incumbents are meeting the demand. I will just say that, in a very real and substantial sense, if no one but LUS is attempting to enter this market, then the demand is being met.

As for motive, the profit motive is more sustainable than any other and it's the best way (the only real way) to make an organization directly responsible. If a business does a poor enough job for a long enough time, it will eventually fail. A government can do a poor job perpetually and can blame it on the people not paying enough in taxes. Do you feel the same way about the school board as you feel about the CPG?

Continuing, I disagree that we are owners of government or its agencies. We really don't have much choice in the matter, even on election day. And outside investors help make corporations work. They want performance. To get performance you have to serve your customers.

I also prefer to shop locally, for the reasons you give as well as to support my neighbors. As an aside, I have no objection to competing against the big blue and orange boxes except that they get tax advantages that are not truly available to me. My taxes, in effect, subsidize my competition. This could be the reason I get so up in arms about the LUS plan. Believe it or not, I can sympathize with what the incumbents are facing. They will be subsidizing their competition.

As for ability to influence, I'm related to Terry by marriage. Do you think I have the influence to persuade him not to do this? I've known Marc Mouton since we were kids. He's going to listen to whoever can do the most for him.

Is it unhealthy that Duane Ackerman doesn't know who I am? Is it unhealthy that Al Copeland doesn't know who I am?

Finally, I agree that the power of government shouldn't be used to favor any organization. That includes LUS as well as BS.

I didn't mean to imply that BS wouldn't survive without help from the state, but I did mean to imply that they might not survive in this market against LUS. If I'm the CEO of Cox or BS, I'm working on my exit plan.

I'd say that your suppositions about me are pretty accurate.

I'm now thirsty.

John said...

GumboFile,

First let me thank you. I've learned things I couldn't learn elsewhere, and any day that happens is a good one for me. (Yeah, I know how sappy that sounds. Can't help it. :-) )

In looking at what you say I did have a thought about something I should probably clarify, In general I don't think that government has any business in 99.9% of all markets. In a fully competitive market a good, small, nimble, privately owned business is to be preferred. History is pretty clear on that point. And in that situation you are right that pleasing the customer is to the ultimate advantage of even a distant owner. However, I do think there is such a thing as a Natural Monopoly. And that each of the various landline networks (fiber, coax, twisted pair) is a natural monopoly. For my money this is where the people and their elected representatives have a choice: they can let the monopoly run over them, they can regulate the monopoly in order to ameliorate its worst tendencies, or they can decide to own it. I believe the latter the best of these three alternatives. (Just didn't want to leave anyone with the impression that I'd prefer a small govt.-run Guidry's to the real thing. I wouldn't.) That should probably be a fourth principle. I'm still trying to puzzle this stuff out.

About thirst. Yes. Not sure what beverages you might prefer but from beer to iced tea I'd be honored to raise a glass with you sometime.

Anonymous said...

Gumbo File,

On a philosophical level, I agree with your comments. I am a Republican who fully believes in the value of free enterprise and capitalism. And I believe that that is truly what this project is all about. Increasing free enterprise and capitalism within our community. True, this project will hurt BS and Cox, but it will benefit every other business and citizen of the community. Do we work to protect the interests of two corporations to the detriment of all of the other thousands of businesses that stand to benefit from fiber? If so, I think a much stronger argument must be made than a philosophic opposition. A philosophy is meant to be a fluid set of guidelines from which to approach a subject. . .not a rigid set of rules that hinder progressive thought

Quickly to another point (work beckons): As was pointed out in both the USAToday article and the recent Advertiser editorials, its hard to sympathize with the govt vs. private argument when BS itself is subsidized by the federal government to the tune of millions of dollars in breaks. . .yet they still have not provided all of the services for which they received these incentives.

GumboFilé said...

anon, you make some good points. My philosophy might be more flexible if it weren't built on the ten commandments. Basically what you're saying is it's ok to covet and steal if you don't like the guys you're coveting and stealing from and if everybody gets a piece of the loot.

You give a better solution in your second paragraph. Take away the favors. The CPG/LUS plan is actually more of the same only different in size and form.

GumboFilé said...

John, You've made me regret calling you a (you know what I called you). I must confess you haven't acted much like a (ykwIcy) since. I forgive you for acting like a (ykwIcy). Please forgive me for calling you a (ykwIcy).

I proposed over at fiber411.com that after this is all over the winners buy a drink for the losers. We need to all remember that, though we all consider this an important issue, and we all get passionate about it, it's not a life and death issue. We need to declare our willingness to lay down our rhetorical WMD's after this is over while, at the same time acknowledging the right to keep and bear "I told you so" small arms, should a negative consequence threaten.