Actually perhaps the word "natural" is confusing people. Technically the existing telephone network is a natural monopoly because it is prohibitively expensive for companies to compete with Telstra. The monopoly was created by the government when Telstra was government owned, because everyone had a home phone and Telstra owned all the infrastructure.
Next they brought in Optus to compete, but they can't just go into an existing market and dig a whole lot of trenches next to Telstra and bury more cable. It can't happen. Optus had to be given opportunities to enter the market in a profitable and large scale way, which is why they targeted business first. When Optus came in, people were so patriotic about Telstra that they even managed to successfully stop the rollout of Optus cable via overhead power lines, and Telstra owned all the existing trenches and wouldn't hire them out. The ACCC had to step in and Telstra was ordered to sell its services to other carriers as they were still too powerful. They still are, as evidenced by their ongoing attempts to prevent competition from hooking into their exchanges, citing "no space in the exchange". There is simply not enough money in it for companies to just install in new estates. These end up fringe players, not real competitors. The real competitors have to pay Telstra a tax to reuse the copper wires into buildings: Naked connections. Next, to put things in perspective, I researched the capacity of Fibre. The current world record for data transmission over fibre optic cable is 1.05 Petabits/s over a distance of 54 kms via 12 core fibre optic cable. 1 petabit is 1024 Terabits. 1 Terabit is 1024 Gigabits. The record for bandwidth on a single core was 101 Tbit/sec (370 channels at 273 Gbit/sec each) in 2011. So freaking massive amounts of data can be transferred over fibre optic cables provided you have the right technological endpoints. The endpoints wear out but can be upgraded as very high speed technology becomes cost effective to replace, and it's essentially replacing circuit boards at each end of the wire. There was also this comment in the research: "Since 2000, the prices for fiber-optic communications have dropped considerably. The price for rolling out fiber to the home has currently become more cost-effective than that of rolling out a copper based network." - probably because copper is a commodity that has become prohibitively expensive, so much so that organised crime gangs have been known to steal sections of large scale networks such as copper power lines and copper train lines. But you need to have the end points in place. So forget any reference to copper or coaxial cable, they just aren't going to cut it in future. If the world goes Terabit internet all of a sudden, we won't have the capacity to move, but other countries that already have this infrastructure will: Singapore, United States, Japan, South Korea, China all have it now. If we're not going to be a manufacturing economy, we need to be an Information economy, and the only way we can do that and keep up is with an exceptional internet. As for the cost, I simply don't agree. Wholesale and retail infrastructure has to be cost effective or people will bypass it. That's where the market comes in. If the costs were prohibitively expensive, we'd all end up dropping our connections and overloading the secondary infrastructure that does exist. NBN and government certainly don't want that and have to be market aware. If they aren't as market aware as they need to be, they will learn that soon enough. And as for Australia being able to afford it, don't believe the hype - the is the 21st year of economic growth in Australia (last 6 years with Labor, actually), and Australia now has a AAA credit rating from 3 ratings agencies. We can afford it, and if we have to replace the infrastructure anyway, we may as well do it properly and take advantage of all the opportunities that arise. So rather than the Coalition blowing $20 Billion of tax payers money, how about do it right instead - they're already spending 2/3 of the Labor budget already on 1/4 the speed, so how about spend the other 1/3 and do it properly. Finally, the research also said: " The main benefits of fiber are its exceptionally low loss (allowing long distances between amplifiers/repeaters), its absence of ground currents and other parasite signal and power issues common to long parallel electric conductor runs (due to its reliance on light rather than electricity for transmission, and the dielectric nature of fiber optic), and its inherently high data-carrying capacity. Thousands of electrical links would be required to replace a single high bandwidth fiber cable. Another benefit of fibers is that even when run alongside each other for long distances, fiber cables experience effectively no crosstalk, in contrast to some types of electrical transmission lines. Fiber can be installed in areas with high electromagnetic interference (EMI), such as alongside utility lines, power lines, and railroad tracks. Nonmetallic all-dielectric cables are also ideal for areas of high lightning-strike incidence. For comparison, while single-line, voice-grade copper systems longer than a couple of kilometers require in-line signal repeaters for satisfactory performance; it is not unusual for optical systems to go over 100 kilometers (62 mi), with no active or passive processing. Single-mode fiber cables are commonly available in 12 km lengths, minimizing the number of splices required over a long cable run. Multi-mode fiber is available in lengths up to 4 km, although industrial standards only mandate 2 km unbroken runs." -----Original Message----- From: [email protected] [mailto:[email protected]] On Behalf Of Les Hughes Sent: Sunday, 14 April 2013 11:17 AM To: ozDotNet Subject: Re: Office365 ? Ken Schaefer wrote: > > > > > > *From:* [email protected] > [mailto:[email protected]] *On Behalf Of *David Connors > *Sent:* Sunday, 14 April 2013 8:21 AM > *To:* ozDotNet > *Subject:* Re: Office365 ? > > > > On Sat, Apr 13, 2013 at 9:13 PM, Ken Schaefer <[email protected] > <mailto:[email protected]>> wrote: > > Currently the NBN charges are regulated by the ACCC, and they’ve > already signed a consent agreement around charges rising by less > than the inflation rate (i.e. requiring internal efficiencies). > > The problem as you no doubt are aware is that NBN Co isn't *currently* > charging RSPs what it intends to. Specifically, there are no CVC > charges being levied. You are aware of that right? You do know that > NBN Co is going to charge CVC pricing that is within pissing distance > of what I can buy *domestic and international IP transit for* right? > They're waiving it during network build but you and the rest of > Australia are in for a lot of sticker shock. > > > > I’m unsure how this addresses the point above. The price isn’t > something that the NBN just makes up, but something that needs to be > agreed with the competition regulator. > > > > From what the ACCC has published, initial pricing should allow a > “smooth transfer from existing telecommunications networks”, and the > pricing increases will be CPI-1.5% > > > > If you’re so opposed to these types of monopolies, perhaps you > should be agitated for privately provided sewerage pipes and water > mains? There’s good economic reasons that certain industries > (typically that require physical distribution channels) are called > “natural monopolies” – the potential market can’t grow bigger, but > adding more suppliers just divides the existing market between > them in ever smaller amounts. Most economists would agree (if not > all economists) that natural monopolies should be run by the > government, or regulated by the government. They aren’t free markets. > > Let me do your homework for you Ken, then you can tell me about the > benefits you'll be enjoying after NBN Co adopts its commercial pricing > structure: > > > > <lots of snippage> > > This is all implementation detail as far as I can tell. You don’t know > for a certainty that this is how it’ll play out for 20 years, and you > should know, from your own examples of what has happened over the past > 20 years, that it’s very **unlikely** to be the end-state. > > PS Your pitch is 1/3 good. Most NBN "arguments from analogy" I've been > given involve roads and the F/35 + Colin's Class sub, not water and > sewerage. > > I studied economics at Uni – natural monopoly and the problems arising > are well known: http://en.wikipedia.org/wiki/Natural_monopoly > > The issue is: “What to do about it?” and as I said, most natural > monopolies are either run by the government, or regulated industries. > Otherwise competition simply doesn’t arise, except in small pockets > where secondary competitor can “cherry pick” profitable customers > (leaving the vast mass of customers to the mercy of the monopolist) > e.g. like being able to buy fibre in the Brisbane CBD that you > mentioned in your post – certainly there isn’t any running anywhere > near my house in inner city Sydney. > > Obviously you feel, based on implementation details, that we’re not > getting a good deal. > > I have a different opinion, that natural monopolies like roads and > transmission networks either need to be built by the government, or > built in a regulated environment (e.g. public/private partnerships > etc. that you see). And certain things, like local roads, fire > stations etc. have a too uncertain pay off for private enterprise to > build – it’s simply better for the local council to build those roads > and fund it through general levies. > > Based on what I’ve seen happen to the economy through cheaper and > ubiquitous internet access over the past 20 years, I’m willing to bet > that providing universal, and upgradeable, fast internet access will > make the next 20 years even more of an economic tectonic shift. You > seem to be more concerned about what format your bill will arrive in. > > Cheers > Ken > Ken, Internet is *not* something that is a natural monopoly, not by a long shot. Any small provider could run their own network in an area, and barriers to entry are mostly artificial. I can see why someone could make this argument, but it's not one that really suites at all, and even history in this country has shown it isn't. An example is that both Telstra and Optus ran other own coax, Internode, iiNet, etc have rolled their own DSL hardware, and different providers were running fibre in new estates. If you look at the mobile phone network, there is competition there as well. Since wireless is also competition and is getting faster and faster, people who do not want to pay for fibre have another option if only one provider runs past their house. You are right about cherry-picking the profitable, and there is nothing wrong with that. Are you going to claim that McDonalds are a monopoly because they have a high barrier to entry (millions for fitout/land/etc) and that they only cherry-pick places which are profitable? Let's say one provider moves to an area and gouges, are there other options? Certainly! Wireless, the copper network, Telstra & Optus Coax (which are capable of 100Mbit, even 300Mbit), satellite, and if someone for some reason can gouge, it would make it attractive for someone else to move in on that territory. To step back again where you talk about what is profitable, as you did study economics, you would understand what installing unprofitable infrastructure means that the investment is a poor use of utility, and if that the utility is there for a network capable of 10,000+ mbit, the market will be more than willing. Am I saying the government has no role? No. But what I am saying is that this isn't a natural monopoly, and to claim because it is going to be one, we should then have a monopoly seems also like a silly idea. Even if there was only one provider per suburb, at least via a comparative pricing mechanism there would be de-facto competition, and also a measuring stick for what a fair price may be. And I don't mean to strawman, but before anyone tries to argue that utility doesn't matter because fast internet is a right, I'd go and spend a semester or two in a first year philosophy class. Cheers, -- Les Hughes [email protected]
