Chris Johnson <chris@com2serv.c2s.mn.org> (01/31/90)
>[Moderator's Note: I think the 'one hour holding time' could be >explained thus: many of us sit on line to do our work. For example, I >am connected to a local dialup here for two hours each day minimum >while working on the Digest. And what of the numerous people who spend >their entire lives on Compuserve CB (or it would seem like it! :) )... >Data is data is data.....and there are far more casual BBS users and >modem chatters out there than you realize, staying on line for an hour >or more at a time. What I can communicate vocally in fifteen seconds >takes a minute or more of interactive chat to type, transmit and read >does it not? PT] Then the obvious thing to do is to charge by actual usage of equipment. Ho! What an idea! If hold times longer than XX minutes tend to put a bigger demand on the equipment, then charge more for them. I wouldn't object to a flat rate for as many calls as I like as long as they are less than 30 minutes or something, and then pay an incremental fee for longer periods. Or maybe just a larger flat rate to have unlimited connect/hold times, or pay a lower monthly phone rate to have my calls limited to 15 minutes, after which they automatically disconnect me. Or based on time of day. As someone mentioned, there is hardly a lack of facilities between 0000 and 0600, which is when most modem usage probably takes place. Even Compuserve CB is probably busier then than it is earlier in the day. It does not make any sense nor is it fair to charge more to modem users just because some/many of them have long holding times. Have you ever seen one end of a couple of pining separated lovers make a phone call? Hours. I even knew one woman in college who would call her boyfriend when she went to bed, talk for an hour, then fall asleep, having a "holding time" of all night. Like 8 hours. Hell, when I call home and talk to my family, it's usually over an hour and sometimes my brother and I can go on for a couple hours. Maybe we should charge higher rates to people who call their parents? It makes about as much sense as classing all modem users together. This sounds like the kind of assinine intelligence the insurance industry uses. And this doesn't say a thing about the good arguments for reducing telephone rates, since most telephone companies are making obscene profits. As a regulated utility which should make profits adequate to insure continued investor support to the extent that such is necessary for expansion and rennovation of their facitilities, they need not be the record profit-making enterprises that other companies are. But in the "upper Midwest", the region consisting of Minnesota, Wisconsin, Iowa, North and South Dakota, guess which companies are in the Top 10 most profitable corporation list, year after year? Uh huh -- all of the regulated utilties: Northwestern Bell, Northern States Power, etc. Something is definitely fishy with that situation. Chris Johnson DOMAIN: chris@c2s.mn.org Com Squared Systems, Inc. ATT: +1 612 452 9522 Mendota Heights, MN USA FAX: +1 612 452 3607
ms6b+@andrew.cmu.edu (Marvin Sirbu) (02/01/90)
Chris Johnson <chris@com2serv.c2s.mn.org> writes: > And this doesn't say a thing about the good arguments for reducing > telephone rates, since most telephone companies are making obscene > profits. As a regulated utility which should make profits adequate to > insure continued investor support to the extent that such is necessary > for expansion and rennovation of their facitilities, they need not be > the record profit-making enterprises that other companies are. But in > the "upper Midwest", the region consisting of Minnesota, Wisconsin, > Iowa, North and South Dakota, guess which companies are in the Top 10 > most profitable corporation list, year after year? Uh huh -- all of > the regulated utilties: Northwestern Bell, Northern States Power, etc. > Something is definitely fishy with that situation. If you put $100 million on deposit in a bank and only earned $ 1 million per year in interest, you would think that was a lousy deal. After all, you should get more than 1% interest on your money. Yet someone else might say "a million dollars a year is plenty of income for anyone -- you don't 'deserve' to earn any more." U.S. West -- which serves the "upper Midwest" -- has at least $20 billion of invested capital in telephone plant. If you want investors to continue to put up money, you have to "pay" them at least what they can earn in comparable investments, or about $2 - 2.5 billion per year. The total amount of profits is not the right measure of whether the phone companies are earning too much: it's the rate of return on the invested capital which you want to look at. I don't know what U.S. West's rate of return is, and I won't defend it, but it's absurd to say any company is earning "too much" money simply by looking at their total profits. You can't tell whether it's too much until you look at how much the investors had to put up in order to earn those profits. Typical utility profits are 12 - 14% return on equity. Microsoft makes at least twice that, and IBM traditionally has earned 19-20%. Marvin Sirbu Carnegie Mellon University internet: ms6b+@andrew.cmu.edu bitnet: ms6b+%andrew@CMCCVB
John Higdon <john@bovine.ati.com> (02/02/90)
Marvin Sirbu <ms6b+@andrew.cmu.edu> writes: > Typical utility profits are 12 - 14% return on equity. Microsoft > makes at least twice that, and IBM traditionally has earned 19-20%. But don't overlook that that humble 12-14% is guaranteed. No matter what happens, the company will make that return on equity. And, of course, this doesn't take into account some of the creative paperwork the accounting departments at the various utilities (see previous posts) can generate. Microsoft, on the other hand, could lose its (investors') shirt tomorrow, and not one PUC would step in to save it. To some people, that security is worth many points of return. John Higdon | P. O. Box 7648 | +1 408 723 1395 john@bovine.ati.com | San Jose, CA 95150 | M o o !
chris@com2serv.c2s.mn.org (Chris Johnson) (02/06/90)
In article <3437@accuvax.nwu.edu> ms6b+@andrew.cmu.edu (Marvin Sirbu) writes: >X-Telecom-Digest: Volume 10, Issue 69, message 3 of 10 > _I_ <chris@com2serv.c2s.mn.org> write: >> And this doesn't say a thing about the good arguments for reducing >> telephone rates, since most telephone companies are making obscene >> profits. As a regulated utility which should make profits adequate to >> insure continued investor support to the extent that such is necessary >> for expansion and rennovation of their facitilities, they need not be >> the record profit-making enterprises that other companies are. But in >> the "upper Midwest", the region consisting of Minnesota, Wisconsin, >> Iowa, North and South Dakota, guess which companies are in the Top 10 >> most profitable corporation list, year after year? Uh huh -- all of >> the regulated utilties: Northwestern Bell, Northern States Power, etc. >> Something is definitely fishy with that situation. >for anyone -- you don't 'deserve' to earn any more." U.S. West -- which >serves the "upper Midwest" -- has at least $20 billion of invested >capital in telephone plant. If you want investors to continue to put >up money, you have to "pay" them at least what they can earn in >comparable investments, or about $2 - 2.5 billion per year. The total >amount of profits is not the right measure of whether the phone >companies are earning too much: it's the rate of return on the >invested capital which you want to look at. I don't know what U.S. >West's rate of return is, and I won't defend it, but it's absurd to >say any company is earning "too much" money simply by looking at their >total profits. You can't tell whether it's too much until you look at >how much the investors had to put up in order to earn those profits. Well, I could, I suppose, be generous and assume your comments were meant for other readers who you might suspect as being financially naive when it comes to the corporate world. But I'm in a rather nasty mood, so I'll point out that not only was I well aware of what return on investment is and its importance, but that the people who did the ranking for the Upper Midwest companies were even more aware of it. After all, that's their exact business. It ought to have been obvious, although I suppose I could have stated it more clearly by assuming their were people who might not know better, that the ranking was not by pure dollars of profit. That would make it pretty hard for any but the largest companies to ever make the list. No, as is typical for such lists, the ranking was determined by both profit returned per share of stock, and by percentage of gross revenues. Now, it's true that neither is an exact correlation to return on capital equipment, but that's irrelevant to the investors who bought the stock, since all they care about is the return on the money they spent on that stock. And the first measure I mentioned does that quite nicely. Furthermore, getting into the return on capital equipment argument is just opening a whole 'nother can of worms: many investor-owned regulated utilities engage in a practive of over-building, of over-investing in capital equipment purely for the reason of forcing the regulating body for the state to allow them to raise their rates. Now, I rather doubt that Northern States Power has gotten away with much of this, since their rates are among the lowest in the nation, although they do have a pair of very expensive nuclear power plants. But I know for a fact that an Illinois power company just recently spent some time (in court, perhaps) defending itself against such charges. They've built way over needed capacity. To say nothing of cost over-runs on actual needed capacity that just about any utility could probably get away with. I really don't know the specifics of Northwestern Bell nee U.S. West with regards to how much capital equipment they own and how much they really need. But, they have been involved in a lot of accusations of bribery and conflict of interest lobbying with the Public Utilities Comission. Furthermore, the State Attorney General of Minnesota just won a class action suit against them for excessive rates, and they now have to pay the consumers back something on the order of $30 million. Obviously, and it damn well ought to be obvious, if a U.S. West unit was guilty of that size of fraud, they are not as pure as the driven snow. And it's been pretty obvious to me as a consumer: when I moved here in 1979, my basic monthly rate was something like $7.97 a month. Within a month or two, it changed to $9.xx a month. There after, every year or two, it went up another $2.5x+, until my basic rate, even though I live in a cheaper zone (one tier closer to downtown), is presently about $21.xx a month. Inflation has not been double-digit the last 10 years, by any means! Meanwhile, friends and family in other US West areas, like Mountain Bell, continued to have much lower rates. It's hard for me to generate much sympathy for regulated monopolies. If the businesses don't like the restraints on their trade, rates, profits, whatever, then they can get the hell out of the regulated monopoly and into a "free" market. They are regulated precisely because society has decided that those services are critical necessities in our culture to which everyone is entitled at as low a cost as is feasible. Investor owned utilities are only one way of providing that service, but through their power, money and lobbying, they've gotten most people convinced that they are the only way and thus have been also able to get away with making large fortunes at it. Having once been a member of a consumer owned utility (often called coops), I know it does not have to be that way. Do a little reading on the Rural Electrification Act. Read about Lyndon Johnson and the Sad Irons to get an idea what rural life was like before they were allowed to have electricity like the city-folk. Uh huh, those investor owned utilities did not want to run their lines out into the country, were the number of customers per mile of wire made it a lot less lucrative. The point is, I don't think it's wise for the consumer public to trust their regulated utilities any further than they have to. They need to ride herd on them all the time, question all their investments, plans, rates and other financials. We've seen ample evidence in this newsgroup alone of lots of underhanded schemes designed to bilk the consumers of money to gain large profits. I'm not saying they are all corrupt to the core, nor am I saying they are all doing a lousy job. But to be complacent is to be stupid. Chris Johnson DOMAIN: chris@c2s.mn.org Com Squared Systems, Inc. ATT: +1 612 452 9522 Mendota Heights, MN USA FAX: +1 612 452 3607