Friday, 8 November 2013

Digging and natural monopolies.

1. Driving through town yesterday, I noticed that a local utility seems to be wrapping up their engineering for a new district heating network. It´s been over 8 months of open pits in almost every street, in some places it has more or less closed off normal business dealings, and caused severe revenue losses. Noone knows if district heating is actually any good, as they are subsidised beyond measure, in construction as well as in operation, and there are plenty of options, including better insulation, ground-based heat exchange etc.. But anyway, new utilities are going to get built. In a few years, it might be pneumatic refuse collection, more fibre and what not. Same thing over again.

2. Digging accounts for 80% of costs in laying down fibre. In addition, there are externalised costs for utilities construction, that are not paid for by utilities, but by businesses (theoretically, landlords as well, but you know they are not going to take that hit in practice). To reduce costs, some are going for the technique of micro-trenching to lay down fibre. This sounds excellent, until you consider the long term, where there will be another layer of complication at road-repairs or laying new utilities.

When the hell are local governments going to start building utility tunnels? You have an initial once-off cost, and minimal maintenance. From then on, the limitations are only in the physical space in the tunnels. Preformed concrete tunnels, about a metre in diameter, divided by separate chambers, accessible by manholes, can carry all utilities including wastewater for normal density residential areas. For high-density urban environments, you have larger tunnels, that are large enough to fit people, even small vehicles. When it comes to telecoms, you have now eliminated any natural monopoly. The tunnel-owner, i.e. local govt., can charge the operator nominal maintenance costs for laying down fibre, as long as there is room in the fibre-section of the tunnel, and switching operators will be simple. Still some intial cost, but nowhere near the costs of separate trenches.

There is a tax that can be applied to pay for the capital costs of these tunnels which happens to fit perfectly.

The thing is, local government has changed their focus from "public goods" to the business of providing every service known to mankind, and have no time or money for such follies. In fact, in my local government, doing this stuff; local roads, water/wastewater, refuse collection, fire services, is about 5-6% of the total budget.


Mark Wadsworth said...

Multi-use tunnels (with easily removable covers at appropriate intervals) is a great idea, which lots of other people have suggested it as well.

Which is why they don't do it.

Bayard said...

One of the main problems with local government is that leaders of political groups like their fellow group members to be thick and not come up with awkward bright ideas that the leader(s) have not thought of (as pointed out by C Northcote Parkinson in one of his laws). Added to this, these leaders themselves are generally not the sharpest tool in the box in the first place. Thus the chance of them doing anything to upset the status quo, unless it involves them or their mates getting rich in the process, is pretty minimal, and even then it is fairly unlikely. Corruption usually follows well-trodden paths.

Kj said...

Bayard: even if they might be average smart, they are often inclined to "do something", which means pretty much not worry about the boring stuff like long-term planning. I notice that countries where this is the norm (in municipal networks), are the likes of Japan and Singapore, which seem to have a different public service-culture, that take a long-term view and gets shit done, at least in these areas. Granted, private developments also manage to do this, hinting to MWs post about large and small landlords.

Mark Wadsworth said...


"private developments also manage to do this"

That's a good point, we have arrived at the same conclusion in two different posts, but coming from different directions.

We know that really large landlords are economically clued up enough to pay for a lot of this stuff out of their own pockets, as the increase in rental income is greater than the cash cost. And they take a long term view, untramelled by worrying about the next election.

Plus, politically, slapping large landowners with LVT is easy, nobody cares about them :-)

Kj said...

MW: yeah, that´s the premise of Spencer Heaths philosophy, or "private Georgism" if you will; the optimal receivers of rental value are those that provide *all* public goods, i.e. really, really large landlords.
But then again, as we´ve discussed before, if we argue that the public should collect all the rental value (which we do), then the public also will have to to provide and be the large landlord. Which probably works if the elected are not idiots, the economic incentives are there, unfortunately not the long-term view.
Unless the private landlord can internalise the costs for better public goods by demanding higher rents than in the vicinity, like malls.

Mark Wadsworth said...

Kj, exactly. Said the Faux Lib hero Murray Rothbard:

The Heathian goal is to have cities and large land areas owned by single private corporations, which would own and rent out the land and housing over the area, and provide all conceivable "public services": police, fire, roads, courts, etc., out of the voluntarily-paid rent.

Heathianism is Henry Georgism stood on its head; like George, Heath and MacCallum would provide for all public services out of rent; but unlike George, the rent would be collected, and the land owned, by private corporate landlords rather than by the government, and the payment therefore voluntary rather than coercive.

Isn't ist strange how these Faux Libs say that paying rent to a private landlord is seen as "voluntary" but paying LVT to the government/community is automatically "coercive"?

It's exactly the same payment for the same thing. EIther they are both voluntary or they are both coercive.

That is how stupid these Faux Libs are. They classify payments by the status of the recipient and not what the payment is for.

Kilgore Trout said...

I've been thinking about this for a while. Great to see it explained so clearly.

How to make it actually happen, though?

Pablo said...

A £1m robot will today complete work repairing gas mains in London without having to dig a single hole in the street in a UK first that it is claimed will save thousands of hours of disruption to motorists." -Evening Standard 12 Nov. 2013

Kj said...

Kilgore: I have no idea. It´s this thing with "correct" capital investment in the public sphere, it´s unfortunately not very easy.

Pablo: very cool re link.