Month: December 2003
Will the FCC regulate Internet phone calls?
Hearings start today, here is the full story. A month ago a Federal court ruled that state governments may not regulate such calls. And the FCC traditionally has left the Internet alone. Nonetheless long-distance service over the Internet costs only a fraction of most calling plans, which threatens both telecommunications companies and government revenues from long-distance calls.
The problem has arisen, in part, because of previous regulatory decisions, most specifically access fees:
Long-distance companies now pay local companies $25 billion a year in “access charges.” The fees cover the cost of connecting long-distance customers to the local network. The long-distance companies argue they should not have to pay access charges for calls that travel over the Internet.
In other words, Internet calling is cheaper in part because the calling services do not have to pay access fees to the long distance network. Over time we can expect such accees fees to fall apart, they will prove to be neither a political nor an economic equilibrium. Here is what one industry spokesman predicts:
Nortel Networks, the Canadian telecommunications equipment maker, estimates that local telephone companies could cut their costs of running a network by 30 percent by shifting to a Internet-based network. Nortel also contends that carriers can cut their capital investment costs by 50 percent. “The market is absolutely moving in the direction of the convergence of these networks,” said Martha Bejar, president of carrier solutions at Nortel.
The bottom line: Competition will become more intense, calling will continue to become cheaper, but the long-run problem of paying for the telecommunications network will become more severe.
Our growing mobility
How much territory do you move through on a typical day? Jesse Ausubel writes:
US per capita mobility has increased 2.7% per year, with walking included. Excluding walking, Americans have increased their mobility 4.6% each year since 1880. The French have increased their mobility about 4% per year since 1800.
Most of all, driving has been replacing movement on foot. Follow this link and scroll down for the illustrative graph and the exact figures. Ausubel believes that in the future people will cover hundreds of kilometers every day, on average, you can think of him as the Julian Simon on transportation economics. In his view people are often willing to travel up to 60 or 70 minutes per day, but they don’t like to go beyond this figure. Yet transportation becomes ever easier and more rapid. He is bullish on magnetic levitation trains, and much of the future improvement may come from airplanes:
During the past 50 years passenger kilometers for planes have increased by a factor of 50. Air has increased total mobility per capita 10% in Europe and 30% in the United States since 1950. A growth of 2.7% per year in passenger km and of the air share of the travel market in accord with the logistic substitution model brings roughly a 20-fold increase for planes (or their equivalents) in the next 50 years for the United States and even steeper elsewhere.
And how is this for optimism?
By the year 2100, per capita incomes in the developed countries could be very high. A 2% growth rate, certainly much less than governments, central banks, industries, and laborers aspire to achieve, would bring an average American’s annual income to $200,000.
And this?
Staying within present laws, a 2.7% per year growth means doubling of mobility in 25 years and 16 times in a century.
This is almost enough to make you forget about the irresponsible fiscal policy of the Bush Administration.
Thanks for Gregg Easterbrook’s The Progress Paradox for the pointer to Ausubel’s work.
Oddly we travel as much as we do, in part, because we love home so much. Did you know that sixty percent of all European flights involve a return flight on the same day? We can go far, but the pull of home is indeed strong.