Competition Is Good

By Erick Posted in Comments (18) / Email this page » / Leave a comment »

We always talk about competition being a good thing, but we do not often have hard data to back up that statement. The theory is that competition can improve services and lower prices. When one company has no competition, it can let things coast without incentives to upgrade and improve. As telecom companies get aggressive in overing television over new fiber optic lines and cable companies respond, consumers have been placed in the position of seeing the benefits of competition.

In Long Island, as Verizon introduced FIOS, the local cable company upped its network speed without raising rates. It also introduced a premium broadband tier.

In Delaware, competing with cable companies that have begun offering voice over IP ("VOIP"), Verizon announced cheaper calling plans and packages that combine television, phone, and DSL. Rates have started coming down as cable and phone compete for business.

In Keller, TX, the first place Verizon introduced its TV over FIOS service, the local cable company slashed prices. Charter Communications had been offering a $68.99 TV package. Once FIOS hit town, the cable company began offering 240 channels and high speed net access for $50.00 a month.

In Northern Virginia, Cox Cable bumped up its internet speed to 15mbps as Verizon entered the market with a 15mbps FIOS offering. Prices did not go up along with the speed increase.

All across the nation, consumers are realizing that competition is a good thing. As Congress begins considering new telecom legislation, it should keep that in mind. Lowering the costs of market entry can increase competition an increased competition lowers prices and improves service. In an age when elected leaders have begun talking about lower the costs of broadband access for the poor, they should keep in mind that scrapping burdens like the local franchise can speed market entry, drive competition, and make net access at higher speeds more affordable than every before.


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hard by kyle8

to believe, but just one generation ago most economists and social scientists agreed that socialist "cooperation" was more efficient than competition.

 

I don't know any economist from the last generation (or any) who would agree with a blanket statement that 'cooperation is better than competition'. Economics is based on the notion that competitive markets tend to lead to more efficient equillibrium then non-competitive markets. Of course there are some instances where that is not the case (classic prisoner dillemas, problem of the commons etc.) in which case cooperation imposed form the otuside can improve overall results.

It is also absurd to link socialism with cooperation, cooperation happens in capitalist economies all the time; both by choice and imposition. I work in one of the fastest growing companies in the country (with a market cap over $3 billion) that is based on the notion that companies can share information with one another to better themselves. The success of our stock is clear indication that the market agrees, cooperation is a viable part of capitalism.

I had so much hassle with the phone company that when I moved to a different state, I vowed never to pay those behemoths another penny. I get my phone service on my cellphone, and I get my DSL via Speakeasy.

Speakeasy has a system whereby you don't have to get phone service from the local phone company in order to get DSL. There is apparently some obscure law that says they have to be able to rent the line from the phone company.

Upshot is that the phone techs have to visit your house, rewire, and then Speakeasy comes over and finishes the job. The phone techs, however, hate the system -- they think they are going to lose their jobs if Speakeasy gets too successful. In my case, the phone techs kept filing false reports; apparently, this is not news to Speakeasy, who have an insanely efficient system for "escalating" the dispute until someone sufficiently high up, and sufficiently afraid of legal action, gets it done.

I'm all set up now, and I have to say, Speakeasy is amazing. They know exactly what they are doing, their customer service is amazing (one hour turnaround for a trouble ticket at 2 am!), and they offer all that geek s*** like static IPs, sharing over Wifi, etc. etc.. (No, they aren't paying me to say this.)

Go, free market!

The Supreme Court has ruled that law unconstitutional.

apparently nobody told SBC.

Is there a specific law you are referring to?

But for one reason or another some control is needed to keep the bad apples at bay.

The down side of control is that sometimes psuedo capitalists will 'buy' control so that they can have a monopoly.  One reason that cable rates drop so much when another company enters a market that was formerly a monopoly.  

I'd be a Libertarin except for the  http://en.wikipedia.org/wiki/Prisoner's_dilemma

Greed is not always good.    

Random, profanity warning. It looks like it just slipped out - and I've used the offending term in question - but we have a zero tolerance rule for profanity here.

I'll be generous and edit your comment instead of deleting. (Which is a pain in the ... well, you know ;)

Congress is considering new telecom legislation.  Information is here.

Speakeasy has a system whereby you don't have to get phone service from the local phone company in order to get DSL. There is apparently some obscure law that says they have to be able to rent the line from the phone company.

Law requiring?  Sounds like a regulated market to me!

But good news, it's going to be a free market again soon, since the FCC just changed how all this stuff works.  No longer will the natural monopoly of SBC--er, AT&T be required to share their lines with companies like Speakeasy.

Will Speakeasy survive?  I hope so, since they offer packages no one else does, and I am a rare consumer.  (1.5in/784out).  They are a great company.  If I were SBC, I'd not let them use my lines anymore.

And then I'd triple my DSL rates for areas not serviced by cable.

You by kyle8

Obviously did not have some of the same economics professors I had. Honestly, I was stating things a little simplistically, but the gist of it is true. There were a lot of learned people who took a dim view of competition and free markets, These people still exist but there are fewer of them.

to this point. The efficiency of equillibrium in idealized markets is not a contention of economics but the presiction of the mathematics of the science. The exceptions to those efficient competitive results are also clear from the mathematics.

Now it is possible that economics professors thought that the social value of regulation overrides the efficiency cost to the market, but that is not the same as saying regulated markets are always more efficient than free ones.

but NO ONE will come way out here with anything remotely resembling high speed.  The highest I can get is dial up at 24.0 (dropping to 19.9 when everyone wakes up and starts using the phones.)  Sigh.

You're not kidding. I'm just enjoying my static IP and open-in port 80, and now you're GOING TO TAKE IT ALL AWAY.

It seems like they (Speakeasy) have a year to negotiate with the phone companies. In the long term (putting on my rose-tinted glasses here), I think the phone companies are going to lose, and lose heavily on this. They're essentially forcing companies to find a way not to use their infrastructure. Broadband over power lines, WiFi networks -- people will figure this out.

But in the short term (next five years), it's bad news for customers.

Speakeasy Unaffected by FCC Ruling:

"The majority of Speakeasy's services are secured by contracts with Competitive Local Exchange Companies (CLECs). Based on our knowledge of the FCC's meeting, we understand that the ruling is explicit in stating that it does not impact the requirement for incumbent Bell companies to offer their networks to CLECs in an unbundled fashion. Since all of Speakeasy's CLEC partners rely on unbundled network elements -- and they too have commercial wholesale relationships in place with the incumbents -- they will also be untouched by the ruling."

That's a press release from Speakeasy, so take it with a grain of salt. This is one of those IANAL moments.

What you've said sounds totally reasonable to me.

I like the concept of a free market, but the consumer definitely wins when some natural monopolies are regulated.  I certainly have been enjoying my long distance rates!  And the fact that Speakeasy allows you to do anything legal with your bandwidth (run a server, send SMTP, share with your neighbors) is so great compared to SBC/cable.  It's a different market, one that SBC doesn't care about, but Speakeasy wants the cash from.  Forcing SBC to allow Speakeasy to do this is a win for those consumers, namely you and me. :-)

I hear Google  has been looking into building a network infrastructure...  maybe we'll have a future where we can set up a wireless community network and collectively buy a fat pipe out of town from the cable company, SBC, or Google.

I've also read that in London people are getting HUGE inbound and 1.5Mb outbound for some $50/mo.  I'm paying 2x that much for half that outbound.  Argh--we need to catch up!  I think with the growing number of file sharing sites, outbound bandwidth will become a more in-demand item in the future.

I do like the part about the companies not being able to interfere with other purchased services.  That always ticked me off.  Sort of like when you pay for a pay-per-view boxing match and find out it is blacked out, that is always nice...

That's great news to hear!  Hopefully it all holds up...

 
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