From: bhayden@teal.csn.org (Bruce Hayden)
Subject: Re: EFF and its growing pains...
Organization: Colorado SuperNet, Inc.
Date: Tue, 26 Jan 1993 10:56:21 GMT

strnlght@netcom.com (David Sternlight) writes:

>In article <1993Jan26.002006.13035@clarinet.com> brad@clarinet.com (Brad Templeton) writes:
>>In article <1993Jan25.181210.7552@netcom.com> strnlght@netcom.com (David Sternlight) writes:

>But AT&T, via Bell Labs, pushed technology. Thus we could have expected at
>least as advanced technology (probably more because all the wasteful stuff
>to make other carriers compatible would have been unnecessary) from an
>unsplit AT&T. In other words, if the advanced techology paid for the
>duplication in the presence of breakup, in the absence of breakup it would
>have led to even lower rates. Q.E.D.

Sure - but when would we have seen any of that technology implemented.
What you seem to be forgetting is that the rate of technology change
in the telephone industry was glacial before the breakup, in order
to protect the AT&T investment (written off over decades) in obsolete
equipment.

Do you seriously believe that we would have had anywhere near as quick
an introduction of fiber across the country, if Sprint had not been
pushing AT& In today's environment, AT&T had to implement fiber, 
and fast, because Sprint was advertising its fiber. The incentives
were just the opposite before the breakup - to protect AT&T's multi-
billion dollar investment in copper.

Maybe the reason that costs have gone up (if they have - which I think
is not clear) is that much more money is going into technological 
upgrades - because the market is demanding the investment.

Finally, you are glorifying the Bell Labs technology for technology's
sake mind set. Sure we got the transister, and lasers, etc. But how
much of that helped the phone company? Bell Labs was notorious for
inventing things that had no immediate use by the phone company.
The question is then whether it is in the public good to fund
random scientific research through high long distance rates?
I don't think that it was a good way to fund research, since there
was traditionally little relationship between the social cost of 
high long distance rates and the research being done. 

>If you have to pay more for "competitive service" than for a regulated
>monopoly, then  by definition you've proven it's not competitive. In fact,
>what we have now is even worse than a regulated monopoly--it is an
>unregulated oligopoly and we see from the various carriers' pricing that
>they are colluding in all but name.

First, if you believe that it is an oligopoly - then you haven't be 
deluged by these alternative providers - claiming to grossly undercut
the big three. 

Secondly, if you can actually show that long distance rates have gone up,
(which I doubt), your point still fails because you would be comparing
apples to oranges. The long distance carriers have invested quite heavily
in physical plant - and hence some, if not much of the cost increase -
physical plant that would not have been invested in if we still had the
Bell monopoly.

Have you ever been refused phone service because there weren't lines
into the area? I have. Also been refused a second, third line (for data)
for the reason that lines were limited. The local phone provider could
delay additional lines for a year or two because it wasn't cost effective
to provide such to me yet. This doesn't work for the long distance carriers.
If I can't get through on AT&T, I try Sprint. If Sprint works when AT&T
doesn't, I use Sprint first next time. How often on a holiday do you get
a long distance busy signal? Not very often anymore.
 
>>The only real natural monopoly is the cable right of way going down the
>>street.  I admit you can't just have everybody digging up the road and
>>stringing wires on the poles.  So regulate that by having the city put
>>cable conduits in and lease the right to run cables through them.  But
>>that's about it.

>You should read some texts on this subject if you think this. This isn't the
>place for a public utility theory course.

Invariably written by people biased to believe in natural monopolies.
The problem with their theories is that they don't work.

We all know (but may not admit out of personal bias) that invariably
due to the very nature of a regulated monopoly, that they very quickly
cease the be the low cost provider (despite your alleged phone company
example) and become bloated and inefficient, making resource allocation
decisions on a political basis, instead of an economic basis. 
One just has to look at the power monopolies, or the recent cable
TV monopolies to see this in action. 

The problem with your repeated phone company example is that the old
phone company invested based on a multi-decade depreciation schedule.
This meant that it could not economically replace its installed
plant very quickly (since the PUC or whoever wouldn't approve of
the replacement - since the old plant was not fully depreciated).
This means that sure their costs were lower before - they weren't
replacing their physical plant as quickly. I think that you would
be naive to believe that we would have near as much fiber installed
in this country if AT&T had not been broken up.
 
>Finally (and please don't take this personally), since you work for
>Clarinet, which is a commercial user of the net, I need to ask if you are
>special pleading on this issue. To forestall an equally fair question of me,
>I have no economic or job interest in any commercial or government provider
>or wannabe provider on the net.

Oh - winning arguments by attacking motives.

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