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The Almighty Buck

Rhythms Flatlines 196

daveT sent us a notice that Rhythms couldn't find a way out of bankruptcy and thus is shutting down its network.
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Rhythms Flatlines

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  • Hey! I'm gonna get you too...
    Another one bites the dust!

    I know, I'm heartless...but haven't ANY of these clowns heard of a thing called a business plan??? The infrastructure needed to engage in this type of business is expensive (duh!) and guess what... you'll be going head-to-head with a phone company that has had it's network in place many years? Didn't think of that did you? I hear Anne Robinson has something to say to you...

  • I am not surprised that they went out of business. Covad just recently went our of business as well. The larger internet companies are creating a monopoly. Entry to this market is almost impossible.
  • by the_rev_matt ( 239420 ) <> on Friday August 10, 2001 @12:05PM (#2112072) Homepage
    I seem to have a curse. Two of my last three employers are no longer (and the third is in critical condition).

    Seriously tho', Rhythms was incredibly disorganized internally (at least in May-Nov 1999 they were). Poor communication, lack of clear goals, the usual internal politics etc. The development group was mostly overpriced/underskilled consultants who really did a lot of damage. About June of 99 they decided to hire the decent consultants (yours truly included) and drop-kick the rest, and that was certainly a good first step. Their Director of Development (Jamie Horgan) after about Nov of 99 was awesome but I don't think he could single handedly save the company from what ultimately killed them: Incumbent telcos. Going head to head with those monstrosities is begging to go out of business. You think MSFT is bad? Try dealing with Qworst, and it was only that much harder for Rhythms because the CEO defected from Qworst (it took a LONG time for Rhythms to be able to offer DSL service in their own town, because Qworst kept dragging their feet as punishment for her leaving to compete). I consider myself extremely lucky that I'm moving to a state that does not have Qworst.

    • I seem to have a curse. Two of my last three employers are no longer (and the third is in critical condition).

      Have you applied for a job at microsoft yet? From the people I know that work with them it doesn't seem to be that hard.

      Do us all a favor and visit

  • by FrostyWheaton ( 263146 ) <mark.frost@gma i l . c om> on Friday August 10, 2001 @11:49AM (#2113090) Homepage
    It appears that most DSL providers are victims of the same business model that sunk so many .com's: "Sell at a loss, and make it up in volume." Now there is a chance that DSL could be provided for $39.99 a month, but the customer base would have to be huge in order to keep the price that low. They unfourtunately ran out of money before they could build up a large enough customer base to make the business profitable.

    Personally, I'm somewhat saddened to see so many DSL providers dying an early death, but that's the free market economy for you.
    • It is not free market. Once company was given a monopoly and now smaller companies are trying to compete and are being beaten to death by thugs who buy off the state legislators and the PUC's so they don't have to pay fines or play fair. A free market would mean everyone has an equal opportunity, definitely NOT the case here.
      • sorry, nix the free market crack.

        I still think the DSL providers had it coming to them. Now be honest, who ever thought the Baby Bells, or other TelCo's were really going to play fair? Who expected them to act any differently than they did?

        Now you may be able to sell better lemonade than the bully down the street. Or give better odds than the bookie at the bar, but you are also wise enough to know that you can't survive playing that game, and you are definately not going to win.

        Everyone knows TelCo's suck, and they don't play fair, and they cheat whaa whaa whaa!!! But that's the current business climate unfortunately, and it definately needs a massive overhaul. But anyone that thought that some well intentioned third party people, and some deregulation talk from state capitals was going to change things really shouldn't be empowered to make major business descisions
      • Agreed. Mod down grand parent, and mod up parent, if you're gonna mod at all.
    • I don't think Rhythms and northpoint were in the consumer aDSL market as much as they were into the business SDSL market.

      They had plans above and beyond small $40/month circuits.

      It would seem to me that they should have been able to charge anything shfot of the price of a T1 and make money because it was the only "low-cost" high speed business internet connection available to my knowledge.
  • If I'm not mistaken, this leaves only ONE major DSL carrier: Covad. Given that there are tens thousands of businesses with money in hand for DSL, it hardly seems like an unsustainable market. Compare to all these dot-coms that have no revenue stream whatsoever; DSL companies have revenues of several million dollars (or more) per month. And they can't stay alive? What's the deal?
  • I find it ironic that there is still a big graphic on their web site that says, "I want DSL now!"

    Shouldn't they like, you know, take that off their page? Hmmmm....

  • First Northpoint, now Rythyms. Are there any other national DSL providers using Copper Mountain frame-relay technology left?
  • I'd think with sites out there like f* already doing this, you'd have better things to do than keep reporting on dying companies and services out there...
  • Eventually it will come to this folks :
    1)AOL/Time Warner/ATT/Comcast/(insert another mega corporation, maybe Microsoft) Cable modems. (Then it will be un cool to have a cable modem through AOL cause AOL sucks(which is true) ).
    2) Verizon/Name your Regional Telco will be the only DSL provider, it's there backbone anyway, it's only a matter of time).
    3) MCI/Verizon/Sprint/Cable will be the only players left providing the Tier 1 back bones.
    4)Satelitte, again controled by mega corp!
    5) Dialup again. Verizon/AOL/Earthlink/Juno, I see Earthlink and Juno merger, then AOL buying them then it will be AOL/VERIZON.
    6) Wirless, now even though with the recent Security flaw with wirless 802.11 WEP, This is the only viable solution I would like to see take off.
    Let me Explain
    We need to start a completely free net based on wireless where companies have no control. It would be for free information much like old BBS's. With wireless we dont need any Mega Merger greedy companies in the mix. Wirless net would be much easier to setup for the common folks, who has the money to run wire anyway. It would save millions of tree's from being cut down(telephone poles), easier to fix after a natural disaster, just set up a few replacment access points, it would be accessable from anywhere, and it would not be owned by anyone. Sounds like a dream .....
    It's a sad day when the Corporations have more control and influence then the government.
    • Why would AOL cable modem service suck? You don't *have* to use the AOL client. AOL's network backbone is fscking amazing. You can get from just about any point on it to any other point in less than 3ms. I've yet to see a DSL provider with a backbone that can even come close to this.
    • For the "undernets" - this will be no problem - we are already seeing the beginning of them in many major cities - I am certain there are more in other cities, just unannounced at this point, for whatever reason.

      For the "common man", though - highly unlikely, simply because they take more "technical" knowledge than the "common man" is willing to ante up to learning about.

      Think of the cable companies - now, really - how hard would it be to set up a cheap, multi-channel, cable system in a neighborhood - a few cheap satellite dishes, some descramblers (heck, make 'em legal even), distribution amps, coax, etc - and a lot of labor, but it could be done. In fact, that is how cable companies originally got started - a bunch of neighbors got together to install a large antenna so they could all share it (instead of having individual, and less receptive, antennas on their roofs). Eventually, some of these "co-ops" got bought out, and the ball started rolling.

      However, this was all at a time when people cared about "do-it-yourself" - the vast majority today would love an ass-wiping machine, if one existed - the lazy fucks.

      Finally - insofar as wireless networking is concerned - the use of 802.11 is flawed. Sure, the frequency spectrum right now is unregulated, but it probably won't stay that way. Once the corps get wind that these undernets are either a) eating into profits (unlikely) or b) causeing other economic, social, or political problems - they will lobby to have the frequencies licensed, or in some way severely regulated.

      These homebrew systems should be looking into some alternative form - light, or something else (because I wouldn't doubt that "they" will try to regulate light as a communications medium) - and move away from radio systems...
  • Or maybe I am just the kiss of death. I have idsl from Megapath and this will be the second time I am switched. The first company I was with, Northpoint, was constantly going down and not resyncing when the line would come back up, thus forcing me to reset the router every time. Sometiems this would happen once a day, sometimes 10 times a day. I will not miss northpoint!

    Megapath switched me to Rhythms and I couldn't have been happier. Not one problem with my dsl (same router) many months. I did get a couple wierd disconnects recently but the router re-synced...and for the love of god, didn't make me reset it. Praise the DSL gods!

    If for one will sorely miss Rhythms unless somehow Covad steps up to the plate (but I hear Covad is more like Northpoint). Either way I am sure the marriage won't be long as Covad is going bankrupt as well. What happens then? =(
  • Northpoint - Puked and dead.

    Covad - Just Coughed up a death hairball.

    Rhythms - Going down like the Titanic.

    Verizon - Only had to pay 1.5 million dollars to put the competiton out of business.

    Jeeze. Verizon sure got East Coast DSL domination cheep.
  • I found it funny that on their homepage (, they still have "GET DSL NOW!!!" in big bold letters, they have links to click on to see if you can get DSL in your area, A link to see their fake demo of how much better DSL is than a 9600Baud modem, and right below, there is a tiny link about "chaper 11 update".

    Think they are hedging, hoping for a buy-out or extra funding? That's my guess.
  • by Anonymous Coward
    I wish more slashdot stories were like this. Micheal please help educate Katz on this style.
  • All these providers shutting down, and I can't get any high speed connection outside of StarBand. Why is this happening? Too much regulation or just stupid business decisions?
    • Re:This sucks! (Score:4, Insightful)

      by Skapare ( 16644 ) on Friday August 10, 2001 @12:03PM (#2111699) Homepage

      Some of these DSL providers, including Rhythms and North Point, had positioned their business plans in the direction of becoming a full CLEC and offering not only DSL, but everything else that a CLEC would offer, including voice and other data circuits. What they found is first there were too many of them fighting over the small market that would abandon the ILEC. Their DSL sales may have been going OK, but sales in other business plans were just not bearing fruit, yet they had invested lots of money overbuilding that structure. While DSL sales were happening, because of cut throat market posturing, profits from it were very small at best, and most likely negative anyway.

      If a business plans to achieve 40% market share, can't be profitable with less than 25% share, and faces 9 competitors with the same plans, something's got to break. The smarter ones can live through it.

      • What they found is first there were too many of them fighting over the small market that would abandon the ILEC.

        I don't understand that. Are the masses really that happy with their local phone service? I've hated Verizon since it was Bell Atlantic. I'd be first in line if there were a practical alternative.

        Please, please, please, let Covad not have to follow Rhythms into oblivion and leave me with Verizon as my only DSL alternative...

    • Yes, with the collapse of Covad, Ricochet, and now Rhythms, I wouldn't be surprised if the average bandwidth/user on the internet is going DOWN for the first time in the internet's history.

      Well, the first time outside the Melissa virus and when AOHell changed over to unlimited monthly anyway.

  • I wonder how much of this is tied into the comtnuing fine that AT&T has been paying, and will continue to pay, for screwing up its lesser competitors.
  • ...who used to have Rhythms as their provider? Jeesh I hope not... :-/ Scott
  • by Necron69 ( 35644 ) <.jscott.farrow. .at.> on Friday August 10, 2001 @12:05PM (#2121857)
    I would just like to say thank you to the employees of Rhythms (including my now unemployed sister-in-law), who worked hard to make a decent company out of that mess. I've had my SDSL line for a year, and although I had four different ISPs in that time, my line was Rhythms all the way with very few problems.

    Fuck Rhythms management, who made off with millions while the employees and customers get screwed.

    I guess my only choice now is Qwest.

    - Necron69
    • I got Rhythms service through UUNET when Covad was unable to get a connection working for more than 24 consecutive hours without some kind of failure.

      Rhythms has provided me with excellent service - so good as to be entirely invisible. I have a call in to UUNET to see where they can put me next; I'm scared to go with Covad again.

      I may have to try a cable modem, but I really like being able to run a server at home. Anyone got ideas?

    • "...Rhythms management, who made off with millions..."

      From an article [] on The Register a couple of days ago--

      "Execs at Rhythms NetConnections in the US awarded themselves $4 million in bonuses just three days before seeking bankruptcy."

      Probably snuck their Aeron chairs out the back door while no onw was looking as well.

  • DSL (which I use at home) seems like a really good service, especially given that my cable company doesn't offer cable modem yet. But, of course, I'm a geek and I love having plenty of bandwidth and high transfer speeds. The average Joe still doesn't base his life around his PC, so selling Joe on a high-speed connection is still incredibly difficult. Throw in competition from established names like all of the "Baby Bells" and it becomes evident that each and every independent DSL provider is fighting what appears to be a losing battle.

    Wireless almost seems like it's going to be the same way. For the most part, it seems, wireless networking and 'net access is too expensive for the mid-to-small businesses and not useful enough to justify the cost for large businesses.

    But, back to the plight of the DSL companies...can these companies ever formulate a business plan that actually works and makes money? Are there independent (non-phone company) DSL providers that are making a profit?

    • DSL (which I use at home) seems like a really good service, especially given that my cable company doesn't offer cable modem yet. But, of course, I'm a geek and I love having plenty of bandwidth and high transfer speeds. The average Joe still doesn't base his life around his PC, so selling Joe on a high-speed connection is still incredibly difficult.

      This is a good point. My experience is, once someone tries it (if they're at all net-addicted, even if it's AOL), they're hooked. Thus, all the "free modem! first month free!" business. Once you try it, you can't go back.

      Perhaps instead of a War on Drugs, we should have a War on Broadband, instead? It's equally addictive, and more expensive than most drug habits.

    • But, back to the plight of the DSL companies...can these companies ever formulate a business plan that actually works and makes money? Are there independent (non-phone company) DSL providers that are making a profit?

      Sure they can - the same day the telcos are actually forced to open up their networks and preform the requested work on tim einstead of delaying orders for months while they try to grab all DSL customers for themselves. I mean charging a DSL ISP $30 just for the freaking line is a juoke when you cna get DSL in many places for $35-$50.

      So, alas - we're still where we were in the 70's Stuck with one company providing a communication service with no hope of competitors keeping prices low.

      Cable you say? Maybe - but only for residential average users. I expect that most residential users will go to cable modems and telcos will jack up prices on DSL to the point only businesses can afford it - But businesses will pay the sky high DSL prices cause its more reliable and offers higher upstream bandwidth (without congestion slowdowns) than cable modems.

      I consider myself very lucky to have a small Mom & Pop telco with DSL capability who have excellent service and charge a decent rate. I've been nothing but happy with my DSL and wish the technology wouldn't be driven into the ground by greedy telcos (can we say ISDN anyone?) It Still Does Nothing since telcos keep saying I See Dollars Now :)

      • by Shivetya ( 243324 ) on Friday August 10, 2001 @01:35PM (#2130593) Homepage Journal
        Bellsouth charges Earthlink 33.00 dollars per DSL line in Atlanta, and EL charges me 49.95. I submitted a story about an idea to break up the baby bells (but alas it was rejected) tag=tp_pr

        Your going to see more and more of these resellers fail simply because when the bell's do open their networks they jack the prices so high that they don't ever have to fear that their own services unit (read ISP+) will have a problem selling overpriced product.

        I wonder how long before they justify raising the rates they charge to Earthlink (Bellsouth raising rates) because of needs to improve the network.

  • by Reckless Visionary ( 323969 ) on Friday August 10, 2001 @11:41AM (#2122448)
    The Company is also reducing its workforce today by approximately 700 employees, or approximately 75 percent of its total workforce. Approximately 85 percent of the affected employees are in Colorado.

    There are approximately zero copywriters now employed at Rythms.

    • "There are approximately zero copywriters now employed at Rythms." Man, if yoo're gonna make fun of bad copy, at leest spel "Rhythms" corectly!
    • First, I don't really think the prospect of 700 people losing their jobs is particularly funny. That's a lot of families and children involved.

      Second, I don't think it's very funny that DSL providers are being forced into bankruptcy by the Baby Bells (see this [] and this [] and this [] and do your own searches if you need more).

      Laugh if you will, but in the long run, you're going to only have AOL-Time Warner cable (after they swallow most of the cable providers) vs. DSL from your local Baby Bell to choose from for broadband service. And like Coke and Pepsi, AOL and the Baby Bell aren't going to compete on price or quality.

      • That's right. The RBOCS seems to be the only companies lft who can still set whatever price they like on their product, and still keep their customers. I don't know about you, but close to $30 for dial tone per month, just to have your dial tone is extortion. The Bells still have huge margins, which is proof that competition is non-existing.

        As bandwidth gets cheaper at an impressive rate, I can garantee, that the RBOC DSL provider will keep raising prices for residential DSL access by $10 a year at least.

        • actualy, everything I have seen says that the Baby Bells *lose* money on residental service. The amount of money they can charge for it is highly regulated by the FCC, and does not cover the cost of maintanence nessecary (think all those lines of cooper infrastructure). That is why all the local's are trying to get into the Long Distance and Business markets to make money. If they could only do Residental, they would not be doing that well.
      • Well, at lease AOL-Time Warner cable seems to have their act together. Which is more than I can say for MediaOne, err, AT&T Broadband, err, AT&T@Home, ummm...whatever...who has the other side of the Minneapolis Metro. And good luck getting a DSL line from Qwest in a timely manner, but that won't stop them from ramming "DSL is great!" down your throat every chance they get.

        Anyway, AOL-Time Warner's RoadRunner service routes better for AT&T (excelent pings to my co-lo box on TW, just OK from AT&T), lets me grab up to 5ips (AT&T limits you to 1 unless you pay $10 more a month for 3 ips.), and it's just been a good experience overall.

        Of all the offerings in Minneapolis, AOLTW does seem to be the one that got it right. AT&T changes their routing and name every other mounth, and Qwest still has the US West legacy. AOLTW just merged and took RoadRunner away from AT&T.
    • Reading a lost art (Score:1, Informative)

      by Anonymous Coward
      This says that 85% of the 700 employees laid off, are in Colorado. This means that about 595 employees in Colorado are to be terminated. The 75% refers to their total workforce, which is not all in Colorado, you idiot. So that means that the company had about 930-950 employees.
    • There are approximately zero copywriters now employed at Rythms.
      Possibly more than have ever been employed by /. Oh, and I just noticed that according to how slashdot capsules the articles they link to, an infinate number of monkeys punching randomly at calculators would not only approximate pi, they'd get it right on the nose if the decimal place they were starting from was not arbitrary. It's also cute to read threads about the digits 1337 occur at position 199932, therefore an effective compression algorithm would be to tokenize something like 1337 with "position 199932 of pi." That's like saying putting a s p a c e b e t w e e n e v e r y l e t t e r y o u type is more effiecient than not because compression algorithms are very effective on text files with lots of whitespace.
      viva la brain donors
  • Where internet connections are moving! (TM) :)
  • Is there a compo for the smallest news item?
  • sad but true...thought we'd have 30 days to scramble!
    • I feel your pain. (Score:3, Informative)

      Northpoint shut down in St. Louis not too long ago.

      I highly recommend Savvis. They have some products that are more expensive but have superior quality and their network delay guarantees are the fastest in the world.

      They have awesome uptime guarantees also. You dial the tech support number and you get a live person who usually isn't a tech support clown and actually has some knowledge about what is going on in this world.

      I ended up going with a T1 from them. Had local loop fees from swbell been cheaper ($550) it would have been the cheapest T1 in existence ($995 full T1)

      Disclaimer: Yes, I am a stockholder (ouch!), yes I am affiliated with the company as a customer, plus I used to work for Bridge before I went out on my own doing web development and hosting. However, in my honest opinion, I still think they have a superior service and pricing for what you get.
  • They're almost like Disney's "It's A Small World" song...
  • Proof... (Score:5, Funny)

    by kirkb ( 158552 ) on Friday August 10, 2001 @11:44AM (#2123806) Homepage
    that the rhythm method does not work.
  • Is this Slashdot, or FuckedCompany []? An obscene amount of Page 1 news on /. is YADILB - Yet Another ISP Bankruptcy.

    This is getting old, and with all the great, obscure stuff relegated to other Sections, and therefore never getting nearly the exposure they deserve, stuff is getting overlooked in favor of this type of pedantic shit.

    Surprise, surprise, ISPs are going bankrupt. This isn't a matter which has a whole lot of avenues for discussion. We can talk and talk about the Shoulda, Woulda, Coulda game all day, but in the end, it's same old, same old.

    A year ago, Taco finally began posting stories when the shit hit the fan for all the Linux businesses, but only did so after bitching that /. Wasn't a Financial News Site, so HERE IT IS, QUIT BITCHING. Now we're on the opposite end of this.

  • ...we may go through it all again if some baby bells are broken up. l? tag=tp_pr

    Rest assured that your government is working on it (shudder).
  • No worries, one less company --> more customers for the surviving companies, and more chances of them becoming and remaining solvent. If this was the *last* dsl/cable company to fall, then maybe we'd have a problem.. anyone know roughly home many survivors there are?

    (Cheerfully ignoring concepts like monopoly and trust in my definition of problem)
  • won't attract the worms.

    Now we're all safe from Code Red!

    (sorry...double-obscure OT...)
  • by ( 114827 ) <> on Friday August 10, 2001 @12:10PM (#2131099) Homepage
    Their bankruptcy problems undoubtedly trace back to their free sodas and fruit [].


  • by Giant Hairy Spider ( 467310 ) on Friday August 10, 2001 @11:36AM (#2135131)
    Really now, how hard would it be to refer to them as "Rhythyms, a DSL connection provider," instead of forcing you to read the story to figure out whether it's something you care about.
    • it clearly wasnt of note last week:
      2001-08-02 18:18:20 Rhythms CH 11 (articles,news) (rejected),
      even though it was pretty well clear
      they would be shutting it all down. For those
      of us who actually use SDSL for work, it sucks
      large. I was on NP, now Rhtyms, and there is
      no COVAD here. And people who have COVAD are
      kidding themself if they think their 'reorg' plan
      is gonna do anymore than get them thru next March.
      They claim if the bond holders swap for some equity they wont need money until then, and just
      another $200 mio. Yeah right. I can just see
      the VC's beating down their doors.
    • Perhaps he was a Rhythyms customer and had to post it quickly?
    • He's too busy censoring websites, give the guy a break.
    • Yes, and from now on people, please refer to "Intel, a microprocessor maunfacturer"; "Microsoft a software procucts company"; and "Cisco, a data networking concern".
      • Yes, and from now on people, please refer to "Intel, a microprocessor maunfacturer"; "Microsoft a software procucts company"; and "Cisco, a data networking concern"

        Not enough buzzwords, you're missing important parts such as "largest", "leading". Here's how they descrieb themselves a tthe end of press releases:

        "Intel, the world's largest chip maker, is also a leading manufacturer of computer, networking and communications products. "

        "Founded in 1975, Microsoft is the worldwide leader in software, services and Internet technologies for personal and business computing. The company offers a wide range of products and services designed to empower people through great software -- any time, any place and on any device."

        "Cisco Systems, Inc. is the worldwide leader in networking for the Internet"

        But it seems, the smaller the company is, more verbiage is needed. For example Ariba:

        "Ariba, Inc. is the leading business-to-business (B2B) eCommerce solutions provider. Ariba's open, end-to-end, interoperable software solutions and hosted Web-based commerce services enable efficient online trade, integration and collaboration between B2B marketplaces, buyers, suppliers and commerce service providers. The global reach and best-of-breed functionality of Ariba B2B eCommerce solutions create Internet-driven economies of scale and process efficiencies for leading companies around the world. "

      • Shouldn't that be "Intel, a microprocessor manufacturer"; "Microsquish, a crashware products company"; ...
      • A regional DSL provider is just a TAD less "known" than the Global presence that the industry leaders you've mentioned.

  • Fucked company?

    Really, could have given us a little more info....
  • ... is that my ISP is on top of it. I just gave them a call because I know that I'm on Rhythms, and the last time my CLEC shut down (NorthPoint) my old ISP ( simply dropped all their customers, and I was without a decent internet
    connection for a month.

    Anyway, I gave my current ISP ( a call because of the Rhythms news, and they have already started transitioning customers over to other providers. They said that they expected minimal, if any, downtime, and that I would be contacted shortly to make an appointment for a new router installation. Apparently they have dealt with this situation before from when HarvardNet closed down, and they are well prepared. The tech said that it was likely that I would be switched over sometime next week. Amazing!

    I've lived in and around Boston for most of my life and have had accounts with almost every ISP in the area since ISP's existed. I've never seen such great technical support and customer service as with They've been on top of the code red problems, the cisco router vulnerabilities, and now the Rhythms shutdown. When I call for support I get right through to an actual technician. They are a great alternative to Verizon/Time Warner if anyone's looking for one.

    No, I am not affiliated with them in any way, just pleasantly surprised by the service.

  • by fobbman ( 131816 ) on Friday August 10, 2001 @01:09PM (#2153135) Homepage

    White guys have been without rhythm for generations.

  • by FreeUser ( 11483 ) on Friday August 10, 2001 @01:37PM (#2153180)
    A colleague of mine and I were discussing this just this morning (he is a Ritym's subscriber).

    Many of the DSL failures are a result, at least in part, of being jerked around by the provisioner of the last mile of wire. Here in Chicago that monopolist would be Ameritech -- notorious for deliberately delaying and mucking with the installation of competitor's DSL lines, despite a plethora of FCC regulations designed to prevent this sort of unfairness. I had personal experience with this, as did my colleague, when our DSL lines (from different providors) were provisioned.

    When breaking up so-called "natural" monopolies with the intent of creating competition a very obvious oversight has been made, at least here in the United States, quite probably as a result of the rather radical anti-anything-that-remotely-smells-like-it-could-m aybe-be-considered-socialistic-by-anyone-to-the-ri ght-of-Gengis-Khan political atmosphere that has imbued the country since the early Reagan days. To whit, why do "natural monopolies" exist, what makes them a "natural monopoly," and why shouldn't the factor, or commonality, be treated as a public works project the way we do other "natural monopolies" such as roads and highways?

    Take electricity, water, and telecommunications as examples. What made the electric company a natural monopoly? Not power generation, but delivery to your home ... i.e. the physical wire. What made telecommunications a natural monopoly? Once again, not the intervening network and its services so much as the last mile of wire to your house. Water? Not, in most places, the water acquisition (it can come from rivers, aquafers, lakes, even the air if you can figure out how to do that economically) but rather the physical pipe to your faucet.

    Instead of even considering nationalizing the infrastructure (there's another word which has fallen victim to the anti-communism hysteria of the early 80's and has remained taboo since) we have chosen instead to impliment an absurdly byzantine set of regulations prohibiting this, requireing that, and hopefully resulting in a level playing field. An approach far more favorable to error or outright corruption, and far less conducive to a level playing field and the competition such would engender than simply treating the wire like a public road, with equal access to all, would have.

    I would submit that bottlenecks which create so-called natural monopolies, such as highways, the last mile(s) of telephone wire, and perhaps even the entire power grid, should be treated the same as highways, paid for and administered by government via taxes or access fees and provided to all of the competing service providors under the same terms.

    The disadvantes would be the same ones we have with highways: a certain amount of government bloat, a certain amount of corruption in contracting and subcontracting, and a certain amount of government ineffeciency.

    Just as with highways the advantages would far outweigh this, however: a level playing field for all competing businesses, an elimination of byzantine FCC regulations designed (and failing) to counter the monopolistic advantages under the current, wholely private, approach, an administration that is open to public scruitiny and nominally accountable to the public via our democratic process, and quite possibly economies of scale that might well offset the added overhead inherent in government administration of any project.

    Monopolies are ineffecient, whether they are government or private. Where they must exist, as with roads, it makes far more sense that they be in public hands, a part of the public commons, rather than in the hands of some private Robber Barron a la' the Rhein River of two centuries ago.

    Finally, I would argue that a free, competetive market cannot exist when the underlying infrastructure for that market resides in the hands of a private monopoly. Indeed, it appears that a competetive market on top of such an infrastructure is difficult, perhaps impossible, to maintain even if it is highly regulated. However, as we've seen with the success of our transportation companies, airlines can compete very well with public airports and automobile companies as well as trucking companies compete very well on public highways.

    Perhaps it is time we reevaluated our love affair with private ownership of nearly all our basic infrastructures and put aside our aversion to nationalization and consider the question from the point of view of how to we structure things to eliminate private monopolies and maximize competetive free markets while at the same time minimizing the need for intrusive government regulation.
    • To whit, why do "natural monopolies" exist, what makes them a "natural monopoly,"

      "Natural Monopolies" exist because of local governments granting monopoly franchises. Period.

      Areas with competiting telecom providers (such as multiple cable companies) generally have lower prices.

      The whole "natural monopoly" BS happened in the early part of the century as power companies and the Bell System got monopoly franchises through their political influence.
    • IMHO, this is one of the more intelligent comments I've read on the Internet for a while.

      I do think it's worth defining a "natural monopoly" here. A "natural monopoly" is any situation where, for all practical purposes, only a single solution may be implemented. For example, it would be impractical for every local phone carrier to install copper wire from the local switching box to my house--we have at least a dozen phone companies; a dozen separate wire pairs, one for each phone company would be rediculous. Or take the freeways--it would be nearly insane to have 10 private freeway toll companies build 10 parallel freeways along each freeway corridor--we would have to effectively pave the planet to allow each toll company to compete.

      In situations where a common resource exists because of this sort of a "natural monopoly" is created, in my opinion it is best to place this "common resource" into the public trust--that is, to have the government run this public resource. That's because competition is impractical--the 10 freeways per freeway corridor, or the 12 cables per house makes head-to-head competition impractical.

      In my opinion these common public resources must be placed in the hands of the government or, at least, in the hands of a not-for-profit organization heavily administered by the government (as the U.S. Post Office is, for all practical purposes). That's because any natural monopoly forming around a public resource which is motivated by profit, as the Bell companies are or the California Electrical companies are--this leads to corruption. It leads to corruption because the monopolies (such as the Bells), in an effort to increase profit, can only increase it by affecting the regulatory process. (And in the case of the Baby Bells or the California Electrical companies, "affecting the regulatory process" == "bribing local officials to turn the other way.") And sometimes (as in the case of the California Electrical companies) this sort of "regulatory lobbying" can lead to disasterous results.

      I'm not a socialist. I'm a died-in-the-wool capitalist. But in natural monopoly situations where competition is impractical (such as the last mile of copper to the house, or in building freeways), "Capitalism" doesn't exist. Effective capitalism can only exist when competition exists, and when new players can enter the playing field and compete.
      • While w3woody makes some good points, I believe that he/she looks at the problem of natural monopoly only from a current technology perspective.

        To take the telephone (Baby Bell) case; yes, only the RBOC (in my case, Qwest) has copper to my house. And if you restrict your view to "who owns the copper to my house", then Qwest does have a natural monopoly in telephony. If, however, you consider other modes of delivery (cellphone, voice over ip, etc.) then Qwest does not have a monopoly. In my case, I use my cellphone almost exclusively for personal comms, relegating the normal phone to 911 calls and telemarketers.

        Similarly, there's only one cable wire coming to my house, which gives the cable company a monopoly on cable TV. But, I can erect a satellite dish, and go around the cable company.

        I heartily agree that regulatory agencies seem to exist to protect and benefit the regulated. But for those limited cases (e.g., the one road on the optimal path from point A to B) where a natural monopoly exists (until we all have personal aircraft), then maybe a regulatory agency is the best of the available bad solutions.

        Absent government interference in the market, a monopoly (natural or otherwise) can only exist in the short term. As w3woody pointed out, a monopoly is by definition inefficient, which makes it vulnerable to disruptive technology, which can destroy the chokehold held by the monopoly.

1 1 was a race-horse, 2 2 was 1 2. When 1 1 1 1 race, 2 2 1 1 2.