[opendtv] Re: Only in the USA: ISPs get tax dollars to build weak broadband | InfoWorld
- From: Craig Birkmaier <brewmastercraig@xxxxxxxxxx>
- To: opendtv@xxxxxxxxxxxxx
- Date: Sun, 16 Apr 2017 13:19:24 -0400
Regards
Craig
On Apr 14, 2017, at 4:17 PM, Manfredi, Albert E
<albert.e.manfredi@xxxxxxxxxx> wrote:
Craig Birkmaier wrote:
Bert will like this article.
Indeed I did. Although I wouldn't agree with the idea that municipal
broadband networks would be "free." That kind of "the government grows money
on trees" thinking is also naïve beyond words.
Naive is an understatement. When public agencies compete with private sector
companies someone usually cries foul. Public utilities are the general
exception, with mixed results, both in traditional services like electricity,
water, etc. and in ISP services.
If a city like Chattanooga competes with commercial ISPs, the city assumes the
risks and rewards. But who benefits?
The city of Dunellon
The area that the State legislature is preventing Chattanooga from competing in
is not within their city limits. If they profit from operations outside the
city limits, who benefits? That depends on what the City of Chattanooga is
doing with these profits...
Here is a real world case study in what can go wrong...
Here in Alachua County the City of Gainesville operates several utilities as
Gainesville Regional Utilities (GRU); electric, water, and sewage are
monopolies within the City and many of the unincorporated areas adjacent to the
city. GRU has exclusive rights to natural gas for the entire county - we pay
significantly higher than market rates for natural gas. And GRU Net offers high
speed broadband to large commercial customers, including many private student
housing complexes.
For decades the City has been transferring millions each year from GRU to the
general fund. The transfer is now about $38 million/year. This lowers taxes for
city residents; a fair deal if you live in the city. But people who live in the
unincorporated areas around the city are ALSO helping to pay those city taxes;
to make matters worse, the county government adds a surcharge to the GRU
services. We have the highest electric and natural gas rate in Florida.
Ironically, GRU sells power to the City of Alachua, at rates that are below
cost.
We own property a few miles from our home that is serviced by the Clay Electric
Coop. Their electric is significantly cheaper than GRU. But we cannot buy
electricity from Clay Electric. Why are their rates so much lower?
The City of Gainesville and GRU entered into a 30 year multi-BILLION dollar
contract to buy electricity from a private company that built a biomass
generation facility on GRU property. Whether this facility runs or not, GRU
must pay $70 million a year under the contract. When it runs the cost of the
electricity is about 3X the cost of power from GRU's coal and natural gas
generation plants.
The company that built the biomass plant invested about $350-400 million in the
facility. They received about $180 million from the Obama administration as
part of the deal.
The plant was supposed to be able to burn all of the tree waste in our area,
which was a major selling point - after two hurricanes in 2006 there was so
much tree debris that it covered about 30 acres with 20-30 foot high piles of
trees. They had to dig huge pits to burn it all.
Soon after the biomass plant started operating they breached contracts to buy
this type of tree waste - it fouled the system and required frequent shut
downs. To deal with this issue they only accept pine and hardwood chips from
tree trunks.
The city is now trying to buy the facility (actually buying out the future
value of the contract) for $750 million, borrowing the money to finance the
purchase. It is likely they will need to spend another $100 million or more to
convert this plant to natural gas operation.
So I am stuck with the inconvenience of paying the highest electric rates in
Florida, while subsidizing the taxes for homes that are within the city limits
a few miles away.
Meanwhile, about 50 miles away, the City of Dunnellon lost more than $7 million
on a failed fiber optic ISP venture.
While it sounds great that Chattanooga has been very successful with their ISP
ventures, should they be able to indirectly tax homes in neighboring
communities by taking advantage of their reduced costs relative to commercial
enterprises?
Bottom line, Americans pay a premium for utilities compared with most of the
developed world because of the collusion between politicians and "natural
monopolies."
We have a very long history of regulated utilities that aren't government
run, and that have survived for long periods of time. No reason to reinvent
that wheel.
Why quibble with details like monopoly pricing, that have made these natural
monopolies VERY profitable. You really have to screw up to lose money, even
with the relatively high cost of paying the politicians and lobbyists.
Even then most private utilities get bail-outs when they screw up; like the
forced shutdown of the Crystal River nuclear power plant that supplied low cost
power to our region. Now we are paying millions for the shut-down.
One might quibble on the details, but there's no reason to think that
Internet broadband should NOT be considered just another such utility. Not
unless there is credible competition, everywhere.
Rather than trying to create yet another natural monopoly, shouldn't we be
focusing on the opportunity to create real competition?
What is different about the Internet than the U.S. Electric grid? Everything is
interconnected. In some many states, large industrial users can buy power from
any generation facility willing to sell them power. In some states consumers
can do this as well.
The answer is that this is a regulated natural monopoly and is thus subject to
political gerrymandering and protection from competition.
There is credible competition for ISP service today Bert, and the prospect of
significantly greater competition on the horizon. What is even more important,
is that this is a transitory problem.
Remember when it was difficult to stream audio via the Internet?
You love to bring up the role that modems played it helping to launch the
Internet. Where would we be today if the best we could do was the marginal DSL
service you just replaced? Competition from cable changed the landscape, at
least temporarily. We have evolved from kilobits per second to gigabit per
second.
Truth is, that in the near future, "Fast lanes" will be meaningless, when
everyone has more bandwidth than they can meaningfully use. At that point ISP
service will be differentiated ONLY by price, not the various infrastructures
that will be used.
Clearly there is a "problem" with our current system of government
regulated "utility" oligopolies
That's crap, and you know it. Thank goodness, we have had excellent power and
water-sewer service, Craig. The price has remained stable over the decades,
and service has been very good too. Same goes with our legacy telephone
service, for the most part. No one should have to put up with less, for
Internet broadband.
THat's crap and you know it.
We have paid far more than the real cost of service, just as we pay more today
than most developed countries for ISP service.
We have been over this ad nauseam too, Craig. Until you can explain how you
can credibly deliver multiple power distribution services, multiple
water-main services, and multiple sewer systems, maybe even multiple gas
mains for those who use gas, you won't convince anyone that such monopolistic
utilities don't need to exist.
Water and sewage services are generally not interconnected, yet even here we
still have huge issues with "water wars." Southern California lawns are more
important than Central Valley farms and smelt in the Sacramento River basin.
We are losing thousands of jobs and an entire ecosystem in the Apalachicola
River basin because Georgia is taking most of the water that once flowed
through the national forest into Apalachicola bay.
I guess that it does not matter to you whose ox is getting gored...
This sort of utility is basically inevitable, and mechanisms have existed for
decades, at least, to make sure they can sustain themselves without gouging
the consumer.
Right.
Your problem is that you won't get past your experiences with your walled in
entertainment net, an unessential service that is not regulated to the extent
of the essential ones. No need to extrapolate that all utilities behave like
you unessential TV walled garden, Craig.
Sorry Bert. Essentiality has nothing to do with this.
MVPD service is highly regulated, and highly taxed. I've provided the numbers
for you several times. But the reason that MVPD service is so expensive has
little to do with the local regulatory issues, although the cities, counties
and states that tax these services also benefit from rate inflation.
The massive rate increases are the result of collusion between the content
owners and the politicians that allow this "UNNATURAL OLIGOPOLY" to prosper.
This is NOT going to change much as MVPD service migrates to VMVPD services.
The governments that are taxing MVPD services will need to raise taxes on the
local ISP services or tax the VMVPDs, just as most states are now collecting
sales taxes from Amazon.
Regards
Craig
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