Just having government run it doesn't solve all the issues, and often adds in opportunities for corruption.
Utilities have to balance investment in infrastructure. We have good reason to move away from carbon heavy sources of electricity, but investing in those new sources and the transmission capacity doesn't just happen for free.
We also need to consider delivering electricity to rural areas, which is usually quite expensive. San Francisco is considering taking over the local utility from PG&E. That might save money for local ratepayers, but would almost certainly make things more expensive for other people in the state who were effectively being subsidized by SF.
Figuring out how to do these things efficiently and balancing multiple goals is not something governments have a great track record of. I think there's a lot of opportunity to construct better market structures to incentivize investment and competition AND keep rates low.
So, private owned is more expensive (see article) and under funds the future.
So the only “tough unsolved” part here seems to be that a lot of people have been fooled into thinking private is better.
It's only tough if your politics is Republican or libertarian, and "privatize everything"
(Tbf when they did the first of these two things, lots of housing units were unpopular and empty.)
Every state in the country has a public utilities commission and they are constantly immersed in complex policy work from implementing legislation to working through an endless docket of cases that fine tune policy to specific tasked out responsibilities like getting a "standard offer". Sure it's complicated but I can't think of any reason that defaults to "don't regulate". We regulate healthcare too, and Medicare is always cheaper than private alternatives.
The problem with leaving private actors to their own devices when they have monopolies is that every conceivable grey area of judgment calls that impacts profitability will be subject to abuses of discretion, such as building out overpriced infrastructure, and investing in cheaper, unreliable transmission infrastructure instead of building for the long term.
The general problem here is that the "natural monopoly" tends to get drawn far too broadly.
For example, people call the telephone network a natural monopoly, which was Ma Bell's argument for making it a monopoly. But which part exactly is the "natural monopoly"? They were telling you what kind of telephone you could use (and requiring you to rent it from them), and tying not just local phone service but long distance service to the use of their last mile lines etc.
Even when they got broken up, the thing that kept the AT&T name was the (solitary, still a monopoly) long distance carrier, as if that was unquestionably still a natural monopoly. Then the internet came and proved otherwise. It turns out if you want to make a connection between New York and Los Angeles, it doesn't matter very much whether it's routed through Houston or Denver or Chicago, and if you have to you can even use a route that goes through Orlando and then Seattle. So transit is a competitive market and "long distance service is a natural monopoly" is BS.
The actual natural monopoly is the trench or utility pole on the road that carries the cable. At worst the cable itself, but installing the pole or digging the trench is way more expensive than adding another cable to an existing one (in the absence of some regulatory capture or inefficient incentives making it otherwise). And it's certainly not the things at either end of it. The other end of the cable that goes to your house should be at a local peering exchange where different companies compete to patch your cable into their equipment.
It's the same for electricity. The natural monopoly is last mile distribution, not generation or even really transmission.
And then if you give a private company a monopoly on something that isn't even a natural monopoly, of course the results are stupid. The thing that causes good results in markets is competition. So what you want in order is competitive market > local government monopoly > private monopoly. But you still don't want the second for any part of the system where you could have the first.
A natural monopoly is one where a product or service is:
- Widely considered fundamental to the public good (and in most cases, has very inflexible demand, meaning that people will often pay any sum to access it)
- Whose cost overheads are either fixed or grow slower than the variable costs (meaning that the investment required to scale the service not accounting for costs that scale with individual usage benefit from economies of scale)
- Easy to be gamed for profit in the hands of a profit-driven entity (either in the form of extortionate pricing directly, or cost-cutting on things like infrastructure maintenance; a good example here is how PG&E has infamously failed to maintained their power lines in California, leading to large-scale wildfires)
In the modern day, the best example of these are public utilities: water, power, road networks, public transit.
In these cases, the latter two points are used to justify public ownership, which in turn defeats the third point.
Massive swaths of the US required government action to get telephone and electric service. In many cities/counties, the city or county owns the power utility. In other rural/suburban situations the power utility is a non-profit cooperative that was encouraged/bootstrapped through low interest loans in the 30s and 40s. Telephone universal service was achieved because AT&T agreed to it in exchange for the government allowing it to be a (natural) monopoly
In the UK, British Telecom had plans to roll out what we'd now call "Fibre To The Premises", offering digital communications at maybe as much as 256kbps, multiple telephone lines, and even Video-on-Demand, by the middle of the 1980s across the whole country starting with rural areas.
However, it was smashed up and sold off in bits by the rapacious Conservative government in 1984. Now where I live is on track to get BT fibre - or fibre of any sort really - by 2034.
Telephone was a monopoly because it doesn't make sense to have more than one company string a wire to every house and business. But, all that wire could carry until the 90s was a voice call
Likewise, in the 60s/70s/80s cable TV became a thing but it didn't make sense to have more than one TV wire to every house, because it already has all the TV you can get, and at the time all it could carry was video channels
In the 90s these networks converged: when everything is digital, a network carrying digital signals can carry any kind of data
So, in urbanized and suburban areas we largely have a competitive market in what would otherwise be a natural monopoly. The problem is, because it's competitive in like 80-90% of the country everyone's been relieved of their universal service obligations (which applied only to voice service anyway) so there's been little incentive to expand into more rural and underserved areas
Not necessarily so. In cities it is quite normal to run 2-4 optic fibers to most buildings; my building in Brooklyn has 2 different fibers and a cable link. Equally, there are 2-3 national mobile providers which cover most of the entire US.
In the suburbia this breaks, or course.
It's why at one point we had 4 satellite TV options in the US at one time (C-Band, Primestar, DirecTV, and Dish Network all existed at the same time) but in 98% of the US there was only ever one cable company (some small cable companies did try to overbuild but it was and is extremely rare) and certainly only ever one landline phone company
There's an ISP that has completed a buried fiber rollout in my neighborhood as of a few days ago. I'll get plugged into that soon-enough; I got a card in the mail that says it's time to give them a call to schedule an install.
The price has stayed ~about the same over time for broadband; I've always paid about 50 bucks per month for always-on broadband. Sometimes a bit more and sometimes a bit less, but right around 50 bucks anyway. If I were to chart it with an inflation adjustment then the price would be trending downward.
Speeds, meanwhile: They trend upward. Quality of services improves.
A quarter of a century ago, my 860/160kbps DSL used to go down every morning promptly at 0200, stay down for about 10 minutes, and then come back with a different dynamic IP, and I was frequently on the phone with them about some issue or other.
The 500/20Mbps DOCSIS I have today is solid-enough that I can't think of any aspect worthy of complaint, and I've only made one phone call about it in the past 6 years.
I've always lived in the US. Am I doing it wrong?
-
edit: The new fiber provider actually just called me. I signed up for 500/500 fiber for... 50 bucks per month, and they'll install it tomorrow afternoon. The price trend continues.
Go google "natural monopoly" please. No one is arguing that work is not happening to provide a service.
We're arguing that capitalism clearly fails to achieve good outcomes for optimizing the quality and cost of that service in the case of natural monopolies.
There's no reason we should want this for ourselves.
Oh, they don't need to buy it, they already inherited from their rich parents. The world is just a set of trading cards to them at this point.
Elon Musk's fake money could buy a new $10 million mansion every single day--every single day--for THREE CENTURIES, and he wants more!
Society is delusional. We can't even collectively agree to tax psychotic money-grubbers who cannot even enjoy the fake wealth they have their names on.
people should not take economic take from tech people
$1T = 1,000,000,000,000
$10m = 10,000,000
*365 = 3,650,000,000
*300 = 1,095,000,000,000
I'm all for multiple city bus operators.
A common "monopoly" of the physical last mile served by many providers traveling over it
There is a small angle where several ISPs can compete around customer service, data caps, equipment rental, business support, price margin, etc. While then forming larger units that put pressure on the physical provider to not stagnate the underlying infrastructure.
On the other hand I've got municipal fiber, and it just works. Great friendly local support (at least from what I understand, I don't really call them), no data caps, the price has stayed fixed for it's whole existence. I don't see any reason to want another layer on top of that, as it would only make all of those things worse.
The incumbent coax provider ("cable compay") still exists. If the municipal fiber provider stagnates on technology, then they could theoretically step up, right?. But given they had been coasting on a monopoly for decades (the other option being DSL), and that their service is still slower than the municipal gigabit (now deployed for a decade), I think that is giving them too much credit! In fact I've seen more talk about next-gen connection speeds from the municipal fiber provider.
For all the marketing about "free market competition", large corpos can be less innovative and responsive than small governments. So for the foreseeable future, I see no reason to not just voice my support for municipal fiber everywhere.
I would trust my county to deliver my fiber internet. All my government services work great. I literally marvel every time I visit our municipal dump, which is cleaner and mode efficient than my home country of Bangladesh. But I wouldn’t trust most of the other counties I’ve lived in before to do it (Baltimore, Wilmington DE, Chicago, etc.).
But when cities have the population density to support multiple competing Internet providers with decent physical layers and non-extractionary terms, then there generally doesn't seem to be much of a call for the city to provide its own services in the first place.
Furthermore cities that are incompetent about deploying infrastructure are going to be similarly incompetent at facilitating the permit process for private infrastructure - giving governmentesque incumbent providers a hold over a captive market regardless. So while this is a general problem that deserve its own exploration, it wouldn't seem to have much bearing on Internet access specifically. The real concern is municipalities that would be perfectly capable of providing Internet service (along with the rest of their municipal services), yet are being held back from even trying.
(Also I don't know what the Japan example demonstrates anything because 1. Japan and 2. that 1/3 ownership stake belies a much bigger controlling interest due to being the government)
ISPs could compete on lack of congestion on their backbone, privacy, latency, price, "value add" features (like email, website hosting, etc), and speed depending on the model of the wholesale network
Congestion/latency/data caps - I've observed no congestion, and have no traffic caps. "Competition" would create differentiation on providing less service.
Privacy - it's a municipal ISP. I'm pretty sure they're not selling my data to the surveillance industry. If it turns out they are, then I have recourse through the local democratic process rather than the standard "tough shit" response from a corpo. Given how the markets for cell service, webapps, etc work I don't have much faith that even in a competitive market, this would end up as a point of competition.
Email / website hosting / etc has nothing to do with the physical connection and therefore already has strong competition across the entire Internet. And actually this applies to the privacy point as well, with VPNs.
The model of the wholesale network is GPON. They obviously didn't string a dedicated fiber from the NOC to each house. So either speed is constrained by the gear the wholesale network buys, or the wholesale network would need to run a bunch of extra home runs so individual provider gets their own home run to light with their own gear.
I could see this last bit being a benefit in 10-20 years when gigabit isn't considered fast enough if the municipal fiber doesn't keep up. But given the municipal fiber built out the gigabit network while the coax incumbent was happy collecting rent on old infrastructure, I'm willing to give them a pass for the foreseeable future.
As to the wholesale network being GPON, there's always a point at which the network goes from a shared medium to a dedicated strand to the house. Wherever the PON splitter is, multiple splitters could be co-located, or, direct connections to be patched into for ISPs that don't want to use GPON. A dedicated connection is another place competition could exist, for example
Are they part of the regular fare structure?
Youre gonna have another company digging a second set of tunnels?
Does it make any sense whatsoever to have two?
Yes thats how it works in Tokyo. They get land, build stations, then dig the tunnels. Their profit comes from fares and rents around the stations that they own.
Britain and the US are both good examples where privatization of the rail systems has been a complete mess. The US being the worst public transit rail system of any developed nation.
For an example of the opposite, you can unfortunately look at the Canadian telcom oligopoly.
A deregulated market should provide choice, if it provides monopoly the gov should step in either by breaking up (forcing choice) or making public (forcing good).
I.e., socialize the costs and privatize the profits.
What value can private companies bring to end consumers when they're buying from the same public producer at the same base cost? This is nothing more than a disguised handout.
The rest of your point I agree, but good maintenance is not a given regardless of private ownership or government ownership. In fact I would say this is part of being a monopoly: there are no competitors and no market forces to compete on reliability.
Roads are the outliers here because governments usually have direct oversight on them. They are more infrastructure rather than utilities.
Unlike roads, everything else discussed here (electricity, water, sewage, transit), even when public, is operated by a public company, not the government. Maintenance is part of the company's operating costs and is accounted for in the price consumer pays. And while there is no competition for reliability, there's also no obligation to maximize profits for the shareholders.
Of course they all like to push off maintenance as long as possible to avoid tax increases, but they will do them. Private industry will literally choose to wait for failure rather than do maintenance because they've discovered things can last longer than expected and they save more money by waiting for a catastrophe (and they can extra more government funds as they "don't have the resources" to fix a problem. See california's PG&E [1]).
The perfect example of this is the train system in the US and the problem we have with derailments. The US has more derailments than basically anyone else and the reason for this is that the rail owners aren't doing maintenance.
[1] https://www.actionnewsnow.com/news/top-stories/is-pg-e-press...
Its not about maintenance, its about pure math and efficiency.
Natural monopolies have 0 advantage in terms of price discovery, therefore there are no market forces. And you get all the disadvantages of a monopoly without any of the advantages of capitalism.
Many purely capitalist countries still advocate for natural monopolies to be goverment run (Norway oil being public, Singapore owning all the land and housing, Spain having public healthcare) and all of those examples beat countries that have privately owned natural monopolies.
Instead it one where incumbents try very hard to convince everyone it must be a monopoly.
Having a private market does not make something not a natural monopoly. Healthcare, education, land, and energy are famously cases where market forces do not find a lowest possible price floor.
the main things that cause a natural monopoly are things like high initial cost, a lower cost per unit created and the most important one a sub-additive cost function.
If you have a single healthcare provider for example and 2 hospitals, you can have 1 IT team to handle both medical records, that is one engineering team, 1 database, 1 security team and then you have the costs that cannot be saved such as doctors nurses and staff in each hospital.
Meanwhile if you have 2 healthcare providers you need 2 engineering teams, 2 dbs, and 2 cyber teams while the cost of doctors, nurses and staff remains untouched.
That added cost makes the "competition" subadditive. You lose more than you gain by having multiple players in the market. Which is why American's spend more in healthcare than single payer systems like the ones in Europe. Just plain old boring math. And its not even a new concept. Adam Smith calls landlords "leeches" in his works
The IT teams are just very obvious redundancies in a site like HN, but the major costs come from things like bulk medicine buys. Having a single team, and a larger order means you get cheaper prices compared to every hospital negociating their own prices against Pharma companies. Its why single providers in europe get better prices than american companies in basically every single medicine category.
But you can keep going and find tons of recurring, avoidable costs that simply are non additive with competition in natural monopolies. And not only is the math easy to follow, but the empirical experiments of privatising those natural monopolies always fails meanwhile the public ownership almost always works
The natural response is to assume that corporation will be more efficient, and there the consumer will get a better end result. And, again, that was probably true for some period of time. The problem is in a corporate world you need to grow your profits by 3-5% a year (minimum) in order to be considered a "viable" investment. So what happens when your customer base isn't growing at 3-5%? Well you cut costs to improve your profits or you raise prices or both.
End result is the consumer ends up worse off, they got a one-time efficiency gain by switching from government to corporate - but then pay for that over decades.
Instead the Electricity Board got privatised with promises of lower prices. Electric prices tracked inflation and general cpi from when Queensland electrified until privitasation in 1997.
Since then prices have gone up about 75% beyond inflation.
I had though though the power is in the hands of companies, they are govt owned [1] [2] I am inclined to say thankfully the power grid up our way is not in the hands of private energy companies or fly by night riff raff - the types that make promises of cheap power but offer up confusing power plans that are actually not that cheap, especially given what I've heard from those unfortunate enough to have been caught that I've chatted to down south. Every so often some grubby fingers try to talk up moves to entice the govt to privatise the energy grid ... something which nearly happened in the 00's.
If prices have risen steeply from the 90s in Queensland, a good guess would be it's due to a need to raise capital to further extend power networks as well as repair / replace a lot of the much older original wooden poles that reached their end of their long life as well as pull out many of the newer poles sourced from where ever, which though they initial passed muster, failed relatively quick.
You have it similar in US. I bet a mayor can build sewers, collect garbage and build a lot of roads without asking the governor or president.
Or did you conflate government with public sector?
And if you underbuild it becomes a problem for the users. And if you overbuild... well, let's assume investors won't let you do that. So, once public sector guarantees demand for decades upfront, it becomes more sensible for it to just have the plant older-built and run it itself.
I don't think it applies to electricity in many cases. If there are investors in building new electrical capacity, then it likely means that the area is underserved, and the prices are naturally higher. The government apparently did not build what the market is ready to pay a premium for.
The original Edison's electric company was private, and for-profit. It started selling electricity in 1882. I wonder how soon would a government-owned company manage instead.
If I am not mistaken, government gives tax breaks or subsidies to induce private firms to enter the market and build capacity.
The only reason investors are building capacity today, is because the demand for data centers is projected to go up.
What happened at the start of electricity, is different from what happened when it was to scale. The nature of the good decides what the most efficient form of production is advisable.
At least make it easy to build powerplants for determined private enterprises to speed-up progress where governments fail.
At the end of the day it will be about tradeoffs. CA/TX and others "deregulated" electricity by splitting the public-side (transmission and distribution) as heavily regulated from the generators and consumer purchasing sides. In TX, nominally, this lowered rates, though it has been some time since I researched this space. What it also did was cause pretty bad second order effects for transmission providers since they can't exclude use of their owned networks due to the physics of grids. It also caused underinvestment in the grid, causing the major freeze-outs and near-collapse of the natural gas delivery pipelines that made the news.
There CAN be advantages to bringing in private enterprise, but, they need fairly strict oversight to not cash out/distribute the funds needed for infrastructure O&M/new build to shareholders.
The problem with public ownership is that it drives price is too low because it allows people to vote on prices. Your average age 60+ voter doesn’t care if lowering the water bill now means that the system will be in bad repair 30 or 50 years from now.
At the end of the day, there is no magic policy bullet to fix problems with the people. Public infrastructure in the US sucks whether it’s publicly owned or privately owned. But I bet if the Japanese trains were publicly owned instead of privately owned, they would still be pretty good.
The fixed service fee cost $40/month which was more than the natural gas consumed every month but Jan/Feb. They also make cancelling difficult, I was put on hold for 40 minutes without an music so I didn't know if I had been disconnected or was just on hold.
Electric is run by one company and their service fee is $15/mo. Their customer service is also much better.
(I am aware that this is a facetious statement, and the main point you are aiming to make is that there are other factors that matter.)
Separately, China has been moving more and more of its economy to the private sector for decades, ever since Deng Xiaoping visited Singapore: https://www.fairobserver.com/economics/china-and-its-mentor-....
I will disagree by stating that China's private sector isn't the same as a western or typical market economy private firm. The degree of state ownership is and central control are hard enough to make comps easy. State support in other ways other than ownership is another topic as well.
I will also say that the Chinese government is receptive to its constituents. Not to the degree that we can expect in a democracy, but its not oblivious either.
Say you have a section of urban highway that is severely congested. If roads are a profit-center, congestion is a strong market signal--demand outstrips supply! More people want to use your product, but your supply is insufficient. The obvious solution is to build more supply. Until you do, you're leaving money on the table! Quick, expand the road! Build a tunnel! Do something!
The exact opposite logic applies when roads are a public good. They become a cost-center, and any concern about meeting demand becomes subordinate to a thousand other concerns. The costs of building and maintaining roads remain real and immediate (They cost money! NIMBYs hate construction!), but the benefits of building and maintaining roads become abstract and distant (the benefits are: fewer complaints? More economic activity in the long run?) The laws of supply and demand no longer apply, and you find people saying insane things like "Why should we expand that congested highway? Expanding it will only draw more cars, and then it will still be congested!". In a free market, such nonsense is unthinkable. No business would ever say "Demand is so far in excess of supply that increasing supply is pointless!" Yet as soon as market incentives are removed, this nonsense becomes the default.
Every day on my commute, I spend ~30 minutes driving 80 MPH on private highway, and the instant I hit the public highway I am in bumper-to-bumper traffic, as one of the most congested stretches of 4-lane highway in one of the largest cities in the country is reduced to two lanes as it passes under another highway. It costs me 30 minutes of my life every day, and there are no current plans to resolve this bottleneck. The notion that public roads are saving me from evil rent-seeking capitalists is just silly. I prefer self-interested capitalists to incompetent public administrators.
This isn't to say that roads should be totally deregulated--incentives matter, and the state has a legitimate role to play in ensuring that consumers are protected from malicious actors. But the incentives associated with public ownership are so perverse that it's hard to imagine a private option resulting in worse outcomes.
> at worst they strip the infrastructure of all value without any maintenance, getting taxpayers to build it again.
The worst-case scenario for privatization is the default scenario with public ownership!