Chief cable lobbyist: data caps were never about network congestion, always about profit

[bwv812]

@Dave_Baxter

I suspect that if you downloaded the report that appears in his byline you would find it supports for what he says.

No, it doesn’t, I already covered this in the paragraph that began with: “Even Googling the big study that the NTY op ed writer was part of…”

OK. I looked at [the report][1] and it discusses profits extensively, including where he got his information from. I don’t know why I’m the only one providing sources here, but on page 56 we can read:

In reality, the last year’s average net profit margins of U.S. broadband providers were 1.9 percent, compared to rates of above 10 percent for eight OECD nations. (Table 6) Only three other nations had profit rates lower than the United States. The average margins for EU-15 providers were over four times higher than for U.S. providers. (Figures 31 and 32, and Table 6) Using a similar measure, return on equity (ROE), shows similar results. ROE is significantly lower for providers in the United States than it is for the average provider in the EU-15 and Korea and Japan. (Figures 33 and 34)

[1]: http://www2.itif.org/2013-whole-picture-america-broadband-networks.pdf[quote=“Dave_Baxter, post:39, topic:17112”]
My understanding of economics is just fine. Some economists claim that subsidies lead to artificially low prices. I understand the argument, but I contest it with additional economic understanding, which is that if subsidies are being put in place to bring prices down to affordability, that’s a market failure to match the actual non-artificial price which must be in line with consumer demand at any given time.
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If your understanding of economics is fine, then why do you appear to essentially ignore the shape of both the supply and demand curves? Why is there this apparent assumption that things in the market are sold at their natural cost? What is the specific market failure in the situation you are describing above?

@Dave_Baxter

If a seller cut prices to gain a user base at the expense of all profit (or even negative profit) for a certain amount of time, that would be an artificially low price.

Hey, according to your theory of demand-derived natural pricing, any time a good or service is priced below its natural price, this is artificially low. It doesn’t matter that one part of the supply chain (such as the government) is taking a loss while another (such as a telco) is still making a profit: the price of the good as a whole is artificially low. Just because something is a loss leader for the government and not for the retailer doesn’t mean it isn’t priced artificially low.

@Dave_Baxter

Yeah, but his methodology counts all the tax payer funded infrastructure costs as negative profitability for the telecos, which is b.s. That’s virtually the crux of his argument, and it’s misleading, incomplete, and mostly point blank wrong.

That’s clearly an assumption on your part, and one you haven’t supported. You’ve assumed that all telecom infrastructure investments have been fully offset by government tax breaks and subsidies without providing any data to support your position.