Wednesday, May 27, 2015

Competitive Markets Enable and Cause "Cherry Picking"

Since 1996, in U.S. telecom markets, it has been lawful for telecom providers to cherry pick   the areas where the service providers wanted to compete, and where they wanted to invest.

Initially, that was primarily an issue for competitive local exchange carriers serving business customers in metropolitan areas. There is, for example, no requirement to serve all potential customers in an area, or to build facilities in all areas.

Since the launch of Google Fiber, it also has become possible to build advanced facilities (gigabit networks) serving consumers, in the same way. In other words, service providers can choose neighborhoods or parts of a city to provide advanced services, without the requirement to reach 100 percent of potential customers.

Granted, that will seem like an assault on the notion of universal service. But the key concept is the difference between basic levels of service, often with universal service requirements, and advanced services not every customer wants to buy.

Those developments illustrate the fact that competitive telecom markets are different from monopoly markets in key ways. Basic services might be “universal.” Advanced services can be delivered whenever there is a business model.

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