Working on the assumption that the governors of Ruritania (who sign themselves J Hunt and E Vaizey, by the way) are honest but simple folks, we delve deeper into their vapourings in search of a definition of \”superfast\”. On this, they are strangely evasive, but essentially they appear to mean broadband speeds ranging from 2Mbps (megabits per second) – which is marginally better than smoke signals but will be available to even the humblest yokel in the land – to as much as perhaps 100Mbps in favoured urban locations, in which frappuccinos and other delicacies are available. If such heights can be attained by 2015, the aforementioned governors assure their readers that Ruritania will lead Europe.
Right, so building out broadband to every woodshed in Britain is going to cost some dough and our rulers are suggesting that that dough get allocated where it does the most good. If we spend, just as an example, £1,000 in an urban area then we can supply 100 Mbps to 50 hipsters. The same £1,000 spent in the sticks provides one 2Mbps connection to a yokel\’s coon cat.
Not that I say that those figures are accurate but you get the sort of picture, yes?
What should we compare and contrast this with?
Both of these US states have cities called Kansas City and in both of them Google is signing up customers for what any informed person would call real broadband, namely a connection running at 1,000Mbps. It uses fibre-optic cables to give gigabit (1,000Mbps) connection speeds to subscribers. For $70 a month on a 12-month contract, Google promises them up to 1,000Mbps upload and download speeds, plus a terabyte (1,000 gigabytes) of free online storage. Alternatively, for a one-off $300 connection fee, Google offers them 5Mbps download and 1Mbps upload free for seven years.
My, that is good. How on earth are they managing that?
Since Google is not a registered charity, you may ask why it\’s doing this. The first reason is simply that it can, because ever since the collapse of the first internet boom, Google has been acquiring, at knockdown prices, the bandwidth capacity (the \”dark fibre\”) installed by the telephone companies at the height of the bubble.
Oh. That\’s interesting. You mean that things are different when you pick up a sunk asset at a fraction of installation cost?
Why, fancy that. Using something that exists being a different financial equation than building something anew? Learn something new every day don\’t you?
The second reason for the Kansas City projects is that, under its new chief executive, Larry Page, Google appears to have acquired a new appetite for radical strategic moves. Page knows that once consumers have access to real – as opposed to Ruritanian – broadband then their behaviour changes radically. Not only do they spend more time online (which obviously benefits Google), but they also use the net for nearly everything, which also benefits Google and is why phone companies, cable TV firms, broadcasters, publishers and their captive regulators fear the internet. If Google Fiber (as they call it in the US) catches on, then a swath of powerful industries is in for a very rocky ride.
And – who knows? – one day news of these developments may reach the rulers of Ruritania. Provided that they manage to get their \”superfast\” connections up and running.
And then we get the piece of cretinism.
We\’ve just shown that Google is doing this for their own commercial reasons. Private actors think that they can make money by installing this infrastructure.
At which point therefore we must subsidise that infrastructure with public money.
What? If it\’s privately profitable then no subsidy is required.
And if it\’s not privately profitable then we probably shouldn\’t subsidise it: not unless there is some rather strong public goods argument we shouldn\’t at least.
It\’s out old friend again, ignorance away from ones\’ knowledge base. A tech guru is trying to talk about the economics of tech. And not knowing any economics (nor, it seems, finance) isn\’t getting it right.
You cannot compare the costs of building a service on orphan assets with the costs of building those assets in the first place. And if something is rivately profitable then it does not need public subsidy. Finally, the argument in favour of public subsidy is not that something might be nice to have. There has to be a reason why, some public goods argument say, why some should be taxed to provide a benefit to others.