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On the Importance of Public Infrastructure

drhead
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6/8/2013 1:09:31 PM
Posted: 3 years ago
***NOTE: This is over the character limit, and has to be put in 3 posts. Wait for me to post it all before you post, I'll give an all-clear when it's okay.

In the United States, it is fairly common (with a few exceptions) for a large portion of our infrastructure to be either owned or managed by the government. This includes our power grid, our water lines and sewers, and our roads (among other things). However, there have been many people criticizing this system, notably Libertarians, and calling for privatization of infrastructure. They cite that public roads are a forced monopoly, and argue that a free market approach to roads would result in better roads due to competition. My purpose with this post is to show the flaws with this approach, and to defend public infrastructure.

With most of the infrastructure in the US being public, it is easy to argue that we haven't given privatized infrastructure an adequate try yet, and that we can't conclude that it is bad until it is tried. This is often coupled with arguments that sectors of the economy which are less regulated tend to deliver higher-quality products. However, infrastructure is an exception to this rule, for reasons that I will extensively highlight. There is one example I have of private infrastructure in the US (and people who have been watching me may have seen me use this before): Internet service providers.

If you live in a large city, it is probable that you have several options for your ISP. If you're lucky, you might even have a few ISPs that offer fiber optic service, perhaps in excess of 100Mb/s for a reasonable price. However, the United States does not have all of its population in urban areas (although it does have a large portion of it there). Rural areas experience something very different.
Where I live, I have a few choices:

- AT&T DSL (up to 6Mbits for $46), 150GB data cap with $10 overage per additional 50GB
- AT&T U-verse (up to 24Mbits for about $66), 250GB data cap, same overage
- Other local DSL ISP that runs over AT&T's lines, offers same speed (6 up/1 down) for $61. No known data cap.
- Satellite Internet from a few providers

Now, it looks like I have a few choices here. If I don't like the price of the local ISP, I can go with AT&T. If I don't like AT&T's data cap, I can go for the local ISP. If I don't like either, I can go for the satellite ISP. Seems simple, right? It isn't. This brings me to my first point: why there are so few options here in the first place.

Causes of Underserved Rural Areas
Initial Costs causes Lack of Competition

Now, the main reason that there are very few options available in my area is not because of the government granting AT&T a monopoly (like free-market advocates seem to want to convince me), it is because of the fact that wires cost money, and when they are being deployed across a relatively sparsely populated area, there isn't much of a return on investment. For the first company to put up a network, there is guaranteed income from almost every household, so they'll get a relatively quick return on investment. The next company might get half of the return if they are lucky. People probably wouldn't give much thought to the idea of changing their ISP on a whim. If they do a good job of advertising, they would get more customers. However, there is another money sinkhole involved here: the need to upgrade networks in order to compete. There is no guarantee that the ISP will make enough money to sustain this practice, so the idea of setting up an ISP loses some appeal. The first company is not bound by this limitation unless another company comes into play - they can set up a network, and with the Internet being less of a luxury as time progresses, people will have to pay for Internet access, because they will need it. Because of this, the first company has a natural monopoly (which is a real thing), and therefore has no incentive to improve their service. Their only possibilities of competition are limited either physically or by incentive.

Cheaper Alternatives to Wires have Too Many Flaws

Now, satellite Internet seems like the natural solution to this monopoly - just put something in space and you can provide Internet service to the whole country! It seems like a very attractive offer. However, satellite Internet service faces a few physical limitations. The actual satellites used for satellite Internet service are in geosynchronous orbit with Earth, meaning they orbit at the same rate that Earth rotates. Because of this, they stay in the same part of the sky from our point of view. This is essential, otherwise users would have to constantly move their satellite dish, and they would only have Internet service available for about 10 hours a day. In order to do this, they have to be placed at the right height where the centrifugal force from orbiting at this speed counteracts gravity perfectly. This height is about 22,236 miles. These satellites communicate using light well outside the visible spectrum, and, due to there being limits to how fast light can travel, there is a significant delay on how fast these satellites can relay signals. Assuming that the path from the client's dish to the satellite and from the satellite to the receiver station on the ground is a perfect vacuum unobstructed by particles, there will be a 238.8ms delay just to move the signal to the receiver station. Now, obviously we are expecting a reply from wherever we're sending data to, and the data has to go across the Internet backbone a bit, so we'll double the time we got previously, and add about 50ms for the round trip from the station to the server. This totals to 527.6ms. This is the absolute minimum time it will take for my computer to talk to any other computer. Keep in mind that many modern applications require a minimal delay. This would include video conferencing, online games, Remote Desktop assistance, VoIP, cloud computing services, and many other things which clearly will not go away soon. For reference, my DSL connection has a 50ms delay for close-by servers. Add in the fact that satellite connections tend to work badly when there is bad weather (if you have satellite TV, you shouldn't need me to tell you this), and satellite is out as a viable option.

Here is a diagram to show my point: http://i.imgur.com...

Another possible option I could have would be wireless (cellular data) broadband. This would come with its own perks, such as being able to use my Internet connection anywhere. Ignore the fact that coverage is not always perfect (especially inside of buildings) and the high potential for packet loss (which is unacceptable in some applications), and the fact that no carrier offers an unlimited data package that allows you to use anything but a phone or a tablet (even Sprint has a 5GB cap for tethering on their "unlimited" data package), and it would be a perfect substitute. It would be thought that the fact that nobody offers unlimited tethering would be due to low demand, however, there are plenty of people who have no options besides wireless broadband internet.
Wall of Fail

"You reject religion... calling it a sickness, to what ends??? Are you a Homosexual??" - Dogknox
"For me, Evolution is a zombie theory. I mean imaginary cartoons and wishful thinking support it?" - Dragonfang
"There are no mental health benefits of atheism. It is devoid of rational thinking and mental protection." - Gabrian
drhead
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6/8/2013 1:09:54 PM
Posted: 3 years ago
Results of Low Competition in the Private Sector
Data Caps

It is the purpose of any business to make money. I'm not against this. Profit margins represent the effort that you'd have to go through to create whatever you're buying by yourself. However, I do have a problem when a company which is having dramatically lower expenses sees fit to offer much lower quality service. This is what happens with the broadband data cap, an increasing trend among ISPs.

The supposed reason for data caps are to reduce network congestion. This has flaws from the start. First, cable networks are really the only networks susceptible to congestion by their design. Second, there is no proof of an impending data crunch, and costs of moving data are lower than ever, and are only going down. Third, cable companies have openly admitted that this really isn't about congestion, it is about monetization.

Now, it is perfectly within their rights to monetize data like this. However, this happens at a cost to the public - the cost of innovation. A common cause of reaching data caps would be video streaming services like Netflix, which are capable of using a lot of bandwidth very quickly if you aren't careful. Obvious concerns are raised over cable companies limiting bandwidth in order prevent users from being able to use services like Netflix, as it is preventing users from choosing competing services. But who gave ISPs the right to hold innovation as a hostage?

http://www.infoworld.com...

There are only two ways to solve this - by heavily regulating ISPs to prevent them from pulling this kind of crap, or by allowing municipalities to start, which would be able to serve unserved and underserved areas.

Municipalities
Quality of Service from Public Industries

Another anomaly (at least anomalous relative to what free market advocates would expect) is the effect of municipal ISPs being introduced. Municipal ISPs tend to offer high speed access for much lower prices than private ISPs - sometimes for no cost besides tax dollars. This would help low-income families access the Internet more easily, possibly opening up new opportunities for them to escape poverty in the digital economy. The reasoning behind private infrastructure relies on the free market delivering better services through competition, where state-run industries would have no incentive to provide better services due to lack of competition.. However, this case has proven itself exempt from this theory. The private industry has no competition and no incentive to provide better services, and the public industry has incentive to provide better services, despite only having to compete with the dysfunctional private sector - the will of the citizens. The citizens needed better, cheaper, faster Internet services, and the public sector provided it (where it was allowed to - I know my state has banned municipal ISPs after some encouragement by AT&T, which cited concerns that a municipality, which would pay no taxes, would be difficult to compete with. Perhaps it would be easier for them to compete if they actually upgraded their infrastructure instead of just raking in income, raising their prices, and introducing new data caps and overage fees for broadband, despite the constantly decreasing costs of moving data.)

While it is relatively easy to lay cables next to each other, private roads would cause further inconvenience if you managed to somehow get competition in every area. I'm sorry, but it is just unfeasible to have multiple networks of interstate highways. It's either no competition and the purpose of the private infrastructure being entirely defeated, or competition and twice as many roads as are needed.

This principle extends to other pieces of infrastructure traditionally treated as municipalities or which are very tightly regulated. They work just fine. Do you often find yourself complaining about the quality of your water or electricity? No. Like ISPs and roads, these, too, lend themselves better to a natural monopoly kept on a tight leash than to perfect competition. And do we see any obvious problems? Are we not alerted as soon as possible if there is contamination in our water supply? Do we not have power restored as quickly as possible when there is a power outage? Of course these things are done promptly - the people in charge of these things have to do this, otherwise the people will be all over them, saying how they should be fired for their incompetence (and some will do this anyways!). This shows that the quality of services provided would at least be sustained at some level, and wouldn't get worse. Now, think about what would happen if suddenly our power grid was insufficient to power everything we have. This shows that our infrastructure would be sufficient to meet society's needs, keeping up with technological advances and the new demand resulting from it. Hell, we even see it doing this now - why do you think we are having so many municipal ISPs spring up and provide better services to people?
Wall of Fail

"You reject religion... calling it a sickness, to what ends??? Are you a Homosexual??" - Dogknox
"For me, Evolution is a zombie theory. I mean imaginary cartoons and wishful thinking support it?" - Dragonfang
"There are no mental health benefits of atheism. It is devoid of rational thinking and mental protection." - Gabrian
drhead
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6/8/2013 1:10:31 PM
Posted: 3 years ago
Possible Criticism
Protection of Rights

Now, the reason that I have focused on ISPs to such a great extent is the fact that this market is in desperate need of transformation into a public utility, since the free market has consistently failed to solve its problems. Of course, this brings up its own concerns - namely, Internet censorship. However, looking at what happened with SOPA, we can tell that the public backlash will be too great for Internet censorship legislation to ever pass. With Verizon complaining that net neutrality laws violated its First Amendment rights (a statement utterly devoid of any logic, effectively stating that their right to free speech is being restricted by their inability to restrict others' free speech), private Internet services don't exactly seem to be the best guardians of freedom. Corporate oppression is even worse than government oppression because corporations aren't obligated to protect your rights in the first place. On the contrary, a public-owned ISP would be obligated to protect freedom of speech unless the First Amendment is repealed, an action which would cause nothing short of a revolution.

Finance

Another noteworthy criticism of public infrastructure is the possibility that some people will have to pay for infrastructure that they don't use. If this is true, it is because of flaws in a specific implementation of public infrastructure. Ideally, costs of infrastructure would be covered by strategically placed taxes designed to cover only those who use said infrastructure. Roads could be paid for by levying a drivers license tax, in addition to using money from citations from traffic violations. Power grids are, quite obviously, ideally paid for when you pay your power bill. Water is paid for in the same way. Telecommunications would also be best paid for through this model. However, this method does create a problem: low-income families might not be able to afford some utilities - fixing this problem would be immensely valuable, since it would close the digital divide. There are a few ways this could be solved. One possible way would be to offer a lower rate for lower-income families, essentially paid for by others who are able to pay their bill. Or you could just pay for it with other taxes. A "free" tier would be possible in the case of Internet service. Or just ignore the problem. All of the methods that could solve these problems have their own virtues, as well as their own unique angles to be criticized from. There's no perfect policy. We just have to pick one whose negative side-effects we can deal with.

Now, I've always adhered to the philosophy that if you're going to criticize something while offering no real solutions to the problem being highlighted, that you might as well shut up, since you aren't helping. To remain consistent with this philosophy, I propose the following solutions:

- Immediately shut down all public toll roads. Constructing a toll road costs more than just a road, defeating the purpose of recouping costs from the construction and maintenance of said road. It is an inconvenience to drivers, forcing them to pay for something that was already paid for once with their tax dollars. There are more efficient ways of recouping costs for roads.

- I propose two solutions for ISPs:

1. Start funding and construction of modern fiber-to-the-home ISPs as public utilities. These would provide fast, inexpensive Internet service to all households in a state within 5 years of the start of the project. Funds could be acquired initially as a loan to be repaid over 10 years, or just through regular taxes. Construction and maintenance of said networks could be performed by hired private contractors, creating jobs. The ISPs would be self-sustaining - all expenses that are incurred by the ISP must be paid for by the ISP.

2. Begin tight regulation of existing private ISPs. Create incentives in the form of subsidies for new networks to be built in areas with no real competition, and for fiber networks to expand into rural areas. Impose a ban on broadband data caps and overages, except where it can be shown that the lack of a data cap would cause significant congestion problems that would negatively affect other users of the network. In addition, impose a ban on service contracts which include penalties for early termination of service for broadband services, which serve no purpose other than to restrict competition.

Now, advocates laissez-faire capitalism are probably thinking by this point that natural monopolies being permanent is only a theory. Let me clarify that natural monopolies are almost exclusively monopolies which form by having extremely high fixed costs coupled with a small market size. Now, Google Fiber could be cited as an example of the free market solving the problem. However, looking closely, we see two things:
1) That they are only serving large cities
2) That they are only serving two large cities so far
Now, Google is also crushing the rest of the market in these cities by offering free Internet access equal to the national average Internet speed. This I have no problem with - those ISPs really deserve it, quite frankly. They are dealing with the small market problem by looking at a large market, and taking all of it. They deal with the high fixed costs by being one of the richest companies. But what about the rural areas? Fiber optic costs a lot, and they need to guarantee that they get a return on their investment. Even if their head engineer was MacGyver who synthesized fiber optic cable for them in mass quantities using nothing but dirt, a stick of gum, and a paper clip, it would still cost money to lay the wire and to maintain it. This leads to satellite and mobile broadband being the only viable mass-deployment options available with today's technology, which I've already highlighted the problems with. In fact, even these have their own fixed costs - radio towers and satellites are expensive. Unless someone develops a means of FTL communication utilizing quantum entanglement (good luck with that, it is under debate whether or not it is even possible to do this), telecom is eternally damned with high fixed costs. And even if in 20 years Google provides inexpensive, fast internet service to every US household, what will this have cost us in the meantime? We are then stuck with how to deal with this most effectively. Currently, it seems like public infrastructure is the lesser evil.

This is the last post, you can post now.
Wall of Fail

"You reject religion... calling it a sickness, to what ends??? Are you a Homosexual??" - Dogknox
"For me, Evolution is a zombie theory. I mean imaginary cartoons and wishful thinking support it?" - Dragonfang
"There are no mental health benefits of atheism. It is devoid of rational thinking and mental protection." - Gabrian