23 Comments

Great article. I'd like to add that the technology that powers the internet was developed largely by taxpayers, initially for ARPANET then later NSFNET. The debt that all these companies owe to the American taxpayer has yet to be publically acknowledged.

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One of the reasons why we don't have competition is because no one ever expected cable companies to succeed. I remember reading Wall St analysis papers about high speed Internet services and all of them projected a clear plateau of cable internet before the turn of the century and then a hockey stick for DSL. DSL itself was considered a bridge tech until the RBOCs could run fiber to the home (with government guaranteed loans of course). The cable cowboys spoiled the fun by actually figuring it out and taking enough market share to change Ma Bell's sales and payback projections. Instead of building out FTTH they focused on improving DSL. While cable companies could have entered each other's territory, they didn't. I imagine the reasons why are similar to why the Bells didn't compete, build out costs+customer acquisition expense would go over the expected payback. There's probably more than a little "justified" collusion because of that extended payback, at least when you consider these sorts of large, capital demanding projects are all funded by a few big investment banks who are setting the rules for financing.

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Matt: First off, thanks for doing a great job covering the monopoly/market power issue. Please keep it up.

You may remember me from Open Left days. I'm now an advocate of publicly owned open access fiber networks (which I refer to as Community Empowerment Networks) and thought I'd share some links in which my colleagues and I explain the features & benefits of that model. I welcome your always frank feedback:

20 min. overview presentation:

https://youtu.be/z_ZRq8RQZcM

80 min. webinar including the 20 min. piece and a presentation and Q&A with EntryPoint Networks, which has developed a platform to automate open access networks. Video is currently at top of project page:

https://ced.msu.edu/programs/comprehensive-economic-recovery-initiative-ceri/21st-century-communications-infrastructure/building-broadband-better

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I've enjoyed following this newsletter the last month or so, but I would like to add a critique concerning the "cheap internet service" in Chattanooga. As with all government programs, it ignores the capital costs incurred by the taxpayers and just focuses on the lowered costs AFTER they've paid for it (or more usually are still paying for it). I'm not saying that this was a wrong decision for Chattanooga, but at least acknowledge the actual costs to the taxpayers:

Let's look at their actual case study (http://comms.nyls.edu/ACLP/ACLP-Chattanooga-Case-Study-updated-October-2015.pdf). From the "At-A-Glance" page:

City Population: 173,778

Year of Network Launch: 2010

Current Status: Built

Number of Residential Subscribers: 65,000

Number of commercial Subscribers: 5,500

Revenues: $99.9 million (2014)

Operating Expenses: $84.7 million

Total Cost of Network: ~$390+million

Debt Financing & Loans: $280+ million

Federal Grants: $111.6 million

Total EPB Debt: $429.79 million

Total City Debt: $977.64 million.

EPB stands for "Electric Power Board". So 40-45% of the city's total debt relates to this venture. That's [$430 million - $15 million (net revenue)]/ 174 thousand people = ~$2,400 per resident (not taxpayer), only 1/3 of which actually use the service. Spread out over 5 years (thus far), that's ~$40 / month per resident, which makes that "cheap internet access" not as cut and dry.

I'm not familiar with the depreciation of broadband networks, so maybe this network can be maintained for 30+ years with regular maintenance and that the $40 / month will continue to fall. I'm sure Mr. Stoller understands capital expenditures quite well, but he still seems to be falling into the trap of of the income statement bias. Looking at the balance sheet tells you a lot more when it comes to infrastructure.

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It also has to be kept in mind that even though only 1/3 of the residents are using the service, the other 2/3 are very likely benefitting from reduced costs and/or improved service due to the competition. And $40/mo for gigabit speeds in incredibly cheap (though I guess it's actually $120/mo), and I'm sure the network will last at least another ten years. Another consideration is increased draw of businesses to the area due to the better and cheaper internet, which likely helped stimulate the economy and provide more taxes, which would help offset the costs. There are always other facts and other ways of looking at things, and rarely does anyone take all the details into account.

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I agree with the indirect potential benefits and I do not dispute that telecommunication / broadband is one of the few public goods that may necessitate government intervention. My primary issue is that the upfront costs are rarely considered as "costs" to the taxpayer, only the benefit thereafter. That's how you end up with the Biden administration saying with a straight face that their $3.5 Trillion boondoggle costs $0. In their minds, that money already belongs to the government and therefore as long as it doesn't incur new debt, that it doesn't cost a thing. And for half of the country that doesn't pay taxes, I suppose they're right.

As to the other potential benefits, the study linked to (only 10 pages) is a bit more pessimistic on those benefits as it looks like there is some accounting tomfoolery between the electric utility and it's broadband subsidiary to begin with. Further, it specifically addresses that "tech" jobs had not manifested. The study was done in 2015, so there may have been more overt tech jobs created since then.

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Let's be clear that the Biden administration is not ANY more prone to boondoggle economics and tomfoolery when talking about cost and payments than other adminstrations. I will direct anyone to the Republican talking points in regards to raising the debt ceiling - which has everything to do with paying past administrations debts which certainly included repub contributions to that amazing number - and has zero to do with Biden's 3.5T package. You know, since you seem to be rightfully concerned with showing all sides of an issue.

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I think saying a $3.5T package cost $0 falls into the "more prone to boondoggle economics" bucket, along with Modern Monetary Theory in general. Unless you would like to explain this talking point as anything other than insanity.

To your other points, I'm aware that the Republican party has been a partner in our country's debt and despise them equally for it. The debt ceiling is simply a political hot potato, one which the Dems will be stuck with this go-around. It is also irrelevant to my initial post.

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I agree. I also didn't bring it up and imply it was a Biden only thing. Just clarifying for you ;-)

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At least the moneys coming in from the customers don't go into paying oversized bonuses to the executives. That's a great public good that is not so obvious from looking at just the balance sheet. As more taxpayers use the service, the lower the individual burden will be.

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‘infrastructure week’ or ‘infrastructure weak’?

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All through Trump's oilgarchy, renewable, regenerative, efficient, SMART equities SOARED (way above S&P, close to NASDAQ, as Asia recovered from COVID). Mid January, stocks & ETFs I'd been PROUD to hold ALL swooned, here in the USA. I remember lots of us accurately predicting that, fundamentally nothing would change (between DNC's Nevada and Super-Spreader Tuesday). It's like craven, servile yuppie Liberals & Creative Class™ from RussiaRussia RUSSIA through blaming their uppity essentials and death o'disparity victims for BNT162b2 wearing out keeping them sneezing, coughing & kvetching on the help, during BRUNCH. Maybe, even boomer's DOW will (insert puerile ED innuendo, here?)

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Has the "whistleblower" said or been asked if she holds FB stock and if so how much?

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CNBC just came out with a video explaining that high broadband costs and low speeds in the US are due to near monopolies in the market and that the solution is more competition through antitrust/ antimerger and also through municipal networks! I was pleasantly surprised to see this mainstream finance network preaching your gospel!

(I am not convinced they truly believe this though)

https://youtu.be/kDsttrZrrSE

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"Roosevelt’s most bitter enemies were the utility magnates, who tried to stop him from winning the Democratic nomination in 1932, *and eventually put up one of their own executives...to run against him.*"

This is just disgusting. It's bad enough that many of the candidates are "bought" by special interests, but to have one put up a candidate for president solely to further their own interests is a perfect example of what's (one of the many things) wrong with America.

As for Facebook revelations being a PR disaster with serious blowback, I'll believe it when I see it. It's not exactly the first time people have been upset with Facebook over some egregious behavior or another, yet they always simply forget or really just don't care all that much, and the politicians certainly don't, except when it affects them personally. Almost everyone I've talked with about Facebook over the past few years either doesn't care or does but uses it anyways. After Cambridge, there was big talk by lots of people about boycotting, closing their accounts, etc, yet they've only grown larger and more popular.

WRT Google's talk of fiber rollout which ultimately led to nowhere, I wonder if they ever had the intention to do much, or if it was just a big publicity stunt. After all, they got a lot of good press and public sentiment from it, yet when it didn't happen, people just forgot and moved on, still thinking of Google as a benevolent company working for the public/consumer good. Just like with Android, where it was really nothing more than a way to gain market share and make tons of money with ads and the app store. It started as a mostly open system, which encouraged developers and users to use it, and gradually became more and more closed and draconic over the years.

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founding

Great read as always!

I know it's a can of worms for a whole bunch of reasons, but I'd love to learn more about MindGeek. They're what appears to me to be a clear-cut monopoly in the porn industry (they control basically all of the top-ranking porn websites).

I'm guessing porn being porn, this one might be a bit more complicated, but I'd love to learn whatever you have to teach us about it, Matt.

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Here's a comprehensive deep dive on shipping issues: https://www.zerohedge.com/markets/deep-ship-deep-dive-supply-chain-crisis

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Good stuff, Matt, Yours is a unique voice and niche.

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To answer the question in the lede: yes.

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Wait... isn't that the whole purpose of government largesse to begin with?

Using our tax monies to gift/grift to the monopolies, ergo ensuring flows to campaign coffers and later rent-gifting job offers.

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Socialism for the rich, austerity for us peons.

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author

Thanks!

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