The following text is copyright 1997 by Network World, permission is hearby given for reproduction, as long as attribution is given and this notice is included.

An evil empire returns?

The common enemy of the human race in the movie The President's Analyst was a organization known by the initials TPC. This sinister organization was plotting to take control of everyone on earth and implant electronics in all newborn babies. After some plot twists it turns out that TPC was The Phone Company. In 1967 when the movie was produced the idea that those "people" (rent the video to understand why the quotes) were trying to take us all over had a ring of truth to it, which made the idea even funnier. With the breakup of Ma Bell and competition creeping in for many old government monopoly PTTs much of this feeling has remained unspoken in the last few years. But the rhetoric may be starting to reemerge.

The fact that there has been no competition for local phones service in the US yet, in spite of last year's telecommunications reform act has raised the general level of annoyance. Now some people are starting to hint at global conspiracies again. One example can be found at http://www.arl.wustl.edu/~jst/TransPrice.html. Jonathan Turner makes an assumption that the average cost of fiber (including the fiber itself, rights of way and installation) is $1,000 per km, and calculates that carriers are charging between 10 and 100 times their total installation cost per year for fiber-based services such as 155 Mbps ATM. The implication is that, since all the carriers seem to be charging about the same there must be some sort of conspiracy that can only be corrected by re-regulating the telecommunications industry.

There is some reason to question an $1,000 / km average cost for fiber. For very large fiber installations such as Qwest Communications planned 13,000 mile network of 96 fiber cables the estimate can seem to be about right. Qwest is spending $1.4 billion to install about 2 million km of fiber or about $700 / km. But if you add in fudge factors for not yet sold fibers, the cost of money, and actually getting to some local site through crowded city streets the actual cost can double or triple. For most installations, which are far smaller, the costs will be far higher.

Even if the cost estimate is way off, what about the general charge that the carriers are charging far more than their cost for these services? Turner points out that the fee structure seems to be set by multiplying the fees for low speed lines by the number of lines that could fit in a high speed one. But I think he misses the point that the carriers fear wiping out their lower speed services if they sell a few high speed lines to someone who resells services or to a corporation which currently buys many lower speed lines. If they can sell a link as many separate smaller links for much more money, why not do so?

The return of TPC as evil empire reestablishes a comfortable common enemy but it over simplifies a complex problem.

disclaimer: At Harvard TPC is the Technology Products Center, the campus computer store, so the above simplification is my own.