[e2e] It's all my fault

[Vadim Antonov]

On Thu, 17 May 2007, Ted Faber wrote:

> On Wed, May 16, 2007 at 07:33:03PM -0700, Vadim Antonov wrote:
> > The real role of the government in the history of the Internet was
> > stalling, obfuscating, and supporting monopolism.  If not for the
> > government-propped monopoly of AT&T, we'd see widely available commercial
> > data networks in early 80s, not in 90s - the technology was there.
> 
> Governments do not support natural monopolies like the telecom network,
> because they have no role in those monopolies.

Now we got into the Alice's Wonderland, I guess. No role? Huh? FCC does
not regulate telcos? Since when? Can I dig in a cable into the ground
without asking various government busybodies first? What about the land
grants and easements for the cable plants? What about patents?  What about
"lawful access" requirements? What about Public Utility Comissions and
their price-fixing? NO ROLE???

> Significant economies of
> scale and high capital barriers to entry will shut other providers of
> similar services out of the market completely.  Even without aggressive
> action by the providers, this leads directly to monopoly.  That's a
> property of the market, not a government imposed attribute.

Economics 101 - natural monopoly (aka single provider) and monopoly are
not the same. By far. The "natural monopoly" cannot exploit consumers by
raising prices or by reducing services using its "monopoly" position
because doing so will create opportunity for entrance by a smaller
competitor.

Real monopolies which depend on government enforcement of its "rights" can 
deter competition and thus can exploit consumers.

In fact, scale is not an issue whatsoever. No matter how large a "naturaly
monopolistic" company is, it is always possible to borrow enough capital
to create a comparably sized company. The history of Internet fiber glut
demonstrates that pretty conclusively.

> Furthermore, all recorded cases of natural monopoly have evidenced
> aggressive action; providers in natural monopoly situations crush
> competitors and resist changes to their market.

"Aggressive" is either a) violent or b) vigorous.  

"B" means innovation, price cutting, and otherwise serving customers 
better. This is _good_. If somebody seres customers much better than 
anyone else could, then it is the best possible outcome for customers.

"A" means using actual or threatened violence to suppress competition.
Because governments have monopoly on the legal violence, the only way to
do "a" is to collude with goverment and let the lawyers to sic judicial
powers of the government (which has the guns) on the competition.

Note that "a" requires government playing a central role.

> Why would they do differently?

Yes, why would they when they can buy enough politicans to do a joe job on
potential competition instead of competing fairly.

> If US telecom were really deregulated tomorrow - no requirements to
> share infrastructure, no limits on size, no service requirements -
> there'd be one phone company in a decade at the most.

I'm sure they told exactly the same nonsense when MCI tried to break the 
long-distance market open.

> It's hard to see how you can characterize this as monopoly protection.

Monopoly protection requires actual or threatened violence. In the modern 
world only governments do that at the large scale.

> You couldn't lease a T1 before the government made AT&T lease you one -
> an action I'm surprised you don't characterize as the government
> stealing AT&T's capital.

Yep. Considering that the government made AT&T a monopoly, that sure is a 
relief. You may want to actually read the text of Kingsbury Commitment. 
Oh, and don't forget the Bell's patent on a system which other people were 
developing at the same time.

> It's a lot more difficult to build a nationwide (to say nothing of
> worldwide) data network if you have to spend the capital to run the
> lines.

Hard, not impossible. Many companies have done that.
 
> Without the government(s) acting in direct conflict with monopoly interests
> by forcing access to the infrastructure and financing the development
> of the technology there would be no commercial Internet today.  There
> might be one in decades, but it would cost more and be more constrained,
> IMHO.

Yeah, yeah. First, create a problem. Then valiantly wrestle with the 
problem (creating more problems along the way). That's the modus operandi 
of any federal agency I've seen so far.

> Now, I don't think that the government had a coordinated plan to create
> a new market, but without the (accidental) confluence of those actions,
> the Internet would be unlikely to emerge.

Governments do not create markets. They cannot. Markets are created by the
acts of voluntary exchange between people, and precede governments by tens
of thousands of years. (Heck, even apes do some trading among themselves).

What governments can do is destroy markets. Fortunately, US is not so far 
gone down that road as was good ol' USSR.

--vadim