Google Fi et al:

Interesting week with the news that behemoth Google plans to become a Telecom with the introduction of its own brand of service for voice and data covering the entire continental USA. Even more fascinating is how they plan to achieve this in short order.

Rather than duplicate expensive infrastructure Google plans to piggyback on two existing smaller carriers  Sprint and T-Mobile in a seamless pattern that will allow for uninterrupted coverage in nearly every state in the Union. By helping second tier carriers bulk up Google may well be showing us the way of the future. In the case of Canada let’s hope so.

There is relevant historic experience so as to make the case that existing owners of transmission facilities, be they by means of cable satellite or towers, that operate at the behest of government and regulatory authorities, by way of oligopoly, should be deemed ‘Common Carriers’ in the same fashion as are the railways and certain pipelines. (Some are both common and private carriers)

A common carrier is required by law to carry goods and services of all requesting parties, excluding certain hazardous goods, at rates that are reasonable and not usurious, (my interpretation) This does NOT render them as utilities, subject to agreed upon rates of return, but it does allow for a challenge to the granting authority, in cases where rates are thought to be  injurious to a shipper.

This may sound simple but the devil, as always, is in the detail. The spectrum, another word for the highway, is granted by the grace and favor of the central government, and comes with certain conditions attached. It also comes at a very steep price, since these are but ‘a very  few of a kind’  a form of oligopoly.

Stripped of hyperbole the bidding for spectrum is a form of tax on future users. The higher the price for the spectrum, the greater the tax. On top of this users will also be levied for all kinds of other taxes and user fees. It almost like sin taxes.

Viewed in this manner it is easy to see how Google is getting a one up on its competitors. It can offer greatly reduced rates for service because it is coming late to the party by offering relief to Sprint and T-Mobile for over paying for their chunk of the highway.

The marginal costs of carrying a giga-bite of data,  should, at this juncture, be very small,  because the pipeline is not full. If as and when it is full then the carriers will have the where-with-all to bid up the price for new spectrum.  So it’s a win win situation for all. 

Small wonder governments in Europe are terrified of this innovative company.

During this same week came the news from England of the arrest of a mathematician, holed up in an insignificant row house in suburban London, for writing code for an algorithm  ( a self-contained step by step set of instructions to be performed usually by a computer) The formula in this case  allowed him to instigate a Flash Crash on the most efficient stock market in the World and make himself millions in the process.

This bloke maybe be almost as scary to regulators as Google. Mathematicians or quants, as they are sometimes called,  operate in almost a vacuum since so few understand what they are about. This is why, no doubt, they are sometimes called ‘Rogue Traders’ 

Author Michael Lewis, in his wonderful book “Flash Boys” gave us a terrifying glimpse of what can happen when  a Russian Quant is turned loose on unsuspecting  unknowing  regulators and ignorant law men. 

The trial of this young man will likely be a joke. The law know he has done wrong but they do not know how, only that they were on the receiving end of an unwelcome reminder that they are ignorant of most of what is going on in the digital world.

 

 

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