more on Lucky warns of end-user broadband expectations

[Dave Farber <dave () farber net>]

Delivered-To: dfarber+ () ux13 sp cs cmu edu
Date: Tue, 06 Apr 2004 20:59:36 -0400
From: Russell Nelson <nelson () crynwr com>
Subject: Re: [IP] more on Lucky warns of end-user broadband expectations
To: dave () farber net
Cc: DV Henkel-Wallace <gumby () henkel-wallace org>

 > From: DV Henkel-Wallace <gumby () henkel-wallace org>
 > Subject: Re: [IP] Lucky warns of end-user broadband expectations
 >
 > the way we fund the streets: as a (literally) common carrier public
 > resource.

The trouble with this idea is that roads are paid for by gas taxes.
That is, by a user fee.  You ride the roads more, you pay more.  You
drive a lightweight car that does little damage to the roads you pay
less.  You drive a heavy truck that does most of the damage, and you
pay more.  If you walk, you pay nothing (even though you get to cross
the streets for free).  Local roads are paid for by town taxes, at
least in NY.  But that's okay, because it's mostly local users who
ride those roads and you get to vote for the highway superintendent
and his kids ride the bus to school.

 > You choose your vehicle, you choose what to put in it and you choose where
 > you drive it and by what route.  _They_ don't get built as private efforts
 > except in very rare cases.

That's not true either, at least in NY.  If you build a development,
and you build the roads to the town's requirements, then the town has
to take over maintenance of the roads at your request.

 > Packet transport has turned into a classic externality, entirely
 > appropriate for government funding and development.

Externality?  Your use of that word in that context makes no sense.
When my ISP transports this email from me to Pittsburgh, that produces
no external effects on you in Palo Alto.  Even if you mean "public
good", that's not right either.  A public good must be non-excludable.
If you provide it for one person you provide it for everyone.  And
yet, there most dialup ISPs manage to exclude non-customers who come
calling.  Cable Internet providers can keep J. Randoms from connecting
to their cable.

The trouble is that the network which provides the most value to the
end user is one with few barriers to competition.  The network being a
sunk cost, it's hard to retreat from a situation where the supply
exceeds the demand.  Prices drop through the floor, and you get
bankruptcies when the owners of the capital used to build the network
cannot be paid.  It's not that the best network is a public good, it's
that it's capital repelling.  Oh, and as you noted, it provides more
value to the customer than networks that provide a return on capital,
so they'll fight it tooth and nail.

Solutions?  I have no solutions.  There's government provision as you
suggested, but that destroys the information carried by price.  You
end up with a much worse indicator of desire, which is voting.  There
is little cost in voting, so people will vote for whatever makes them
happy regardless of what it costs in taxes.

--
--My blog is at angry-economist.russnelson.com  | Spinach ala mode -- a good
Crynwr sells support for free software  | PGPok | way to eat spinach?  Or a
521 Pleasant Valley Rd. | +1 315 268 1925 voice | bad way to eat ice cream?
Potsdam, NY 13676-3213  | FWD# 404529 via VOIP  | 

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