Did taxpayers help pay for Telco infrastructure?
There was a great deal of discussion around Fred Wilson’s blog post, “Protecting Business“ this evening. In Fred’s post regarding Net Neutrality he referenced the need for government regulation in the access business to help foster competition.
Fred states, “I also believe that government should be fostering a lot of competition in the access business. That was the idea of the telcom reform act. But it hasn’t played out that way. We have an ever increasing consolidation of power in the access business. Just like we had in the banking and brokerage business. This is not good.”
I completely agree with Fred around the need for competition in the access business. This can only be accomplished by requiring through regulation the Telco’s and cable companies to provide open access to the network infrastructure. Open access helps keep network providers like AT&T, Verizon, Time Warner and Comcast honest. Competition leads to consumer choice which ultimately leads to better pricing and more importantly better service for consumers.
Whenever open access is discussed the opposing argument always includes the notion that the Telcos paid for the infrastructure why should they have to open it up to competitors. Unfortunately that argument isn’t completely true as in many cases the infrastructure costs were offset by the consumers and tax payers.
The discussion reminded me of a letter from SBC California to their clients within the greater San Diego area that I dug up and have included below. The letter states on 03/03/2005 SBC with the “endorsement” of the city of San Diego filed an application with the CPUC to add an additional monthly surcharge to their client’s bill. The surcharge would cover the cost of undergrounding the overhead telephones lines in the City of San Diego. This surcharge which is approximately 94 cents per month would be in place for the entire length of the project. They anticipate the project would start in 2006 and end in 2022. Each client that has service through SBC or a CLEC would pay approximately $200 over the 16 year period to cover the cost of SBC/AT&T moving the lines.
It is obvious that it would not be advantageous for SBC to install new copper lines as everything is moving to fiber. One can easily infer that they in fact would be installing fiber. So the question becomes, is this project truly meant to beautify the city of San Diego? Are the phone companies really paying to install their fiber networks? It is evident in this case that it is the consumers paying to have them installed and the phone companies are benefiting from it.
Many people have eluded to the notion that if the phone companies didn’t have to open up their networks that the price would be cheaper. I urge those people to look at the price of cable Internet service which is double and sometimes triple the cost for DSL service. Competition within the industry not only helps to drive cost down for consumers but forces providers to provide better customer service. As the FCC reopens discussions around open access I hope they take this into consideration.
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You ask: “Are the phone companies really paying to install their fiber networks? It is evident in this case that it is the consumers paying to have them installed and the phone companies are benefiting from it.”
Isn’t this how business is supposed to work? Consumers pay for a service, generating revenues for a business. Business uses those revenues 1.) to maintain service and 2.) to invest in improvements. So yes, consumers pay to install the fiber networks by paying for service. And then they benefit from it with their much-improved service.
Where’s the problem here?