Bad metaphors make bad policy. Everyone talks about the "information highway." But in economic terms the telecommunications network resembles not a highway but the railroad industry of the robber-baron era - that is, before it faced effective competition from trucking. And railroads eventually faced tough regulation, for good reason: they had a lot of market power, and often abused it.
Telecoms are worse than railroads. The railroads built twice as much capacity as was needed, while the robber barons cashed out, over a period of 25 years. In telecoms, 20 times as much capacity was built as was needed, and the cash-out period was 3 years. Railroads were substantially financed by business speculators in Europe. Teleco's by the US public.
Yet the people making choices today about the future of the Internet - above all Michael Powell, chairman of the [U.S.] Federal Communications Commission [and son of the Secretary of State] - seem unaware of this history. They are full of enthusiasm for the wonders of deregulation, dismissive of concerns about market power. And meanwhile tomorrow's robber barons are fortifying their castles.
Powell is simply an arbitrator for corporate interests. Cable companies who provide 85% of the Internet access that individual consumers have are completely unregulated (their rates increased 47% since 1996), both before and after their classification as 'information technology' providers. ATT Comcast the latest mega merger blessed by the FCC, is now in control of 30% of the market. Local telco's continue to lobby to change their status so they can close the access the 1996 act supposedly opened to competition. Long distance telcos - like WorldCom were lobbying for years to get their classification changed. In May 2000, Bernie Ebbers denounced classification of WorldCom as a telecom. to get around any future possibility of regulation. And he won.
But the wide-open, competitive world of the dial-up Internet depended on the very government regulation so many Internet enthusiasts decried. Local phone service is a natural monopoly, and in an unregulated world local phone monopolies would probably insist that you use their dial-up service. The reason you have a choice is that they are required to act as common carriers, allowing independent service providers to use their lines.
The whole reason emerging telcos like Global Crossing grew out of nothing was this common carrier concept - the story ended with hundreds of thousands of laid off workers and billions of dollars of excused debt in bankruptcy court.
For example, I personally have no choice at all: if I want broadband, the Internet service provided by my local cable company is it. I'm like a 19th-century farmer who had to ship his grain on the Union Pacific, or not at all. If I lived closer to a telephone exchange, or had a clear view of the Southern sky, I might have some alternatives. But there are only a few places in the U.S. where there is effective broadband competition.
Powell has and will do nothing to change this. Right now only 21% of the people who have Internet access in the country use broadband. Powell thinks this represents opportunity, he's been on Wall Street many a time to have that conversation with banks just in case the last period of build and bust didn't have enough negative repercussions. Powell has stated publicly - that broadband is the key to solving 'the economic doldrums of the country.' All of them. The danger in his 'leadership' lies beyond (but includes) deregulation - he's encouraging additional build-up on a pile of sand.
The result of all this will probably be exorbitant access charges, but that's the least of it. Broadband providers that face neither effective competition nor regulation may well make it difficult for their customers to get access to sites outside their proprietary domain - ending the Internet as we know it. And there's a political dimension too. What happens when a few media conglomerates control not only what you can watch, but what you can download?
Already happening. AOL Time Warner, saturated with fraud and debt, announced they're gonna restrict access to news sites except for their subscribers. Like HBO, but on the Internet. With ATT Comcast, the largest cable provider, in the mix - it's likely they'll do the same thing. Why not? Nothing's stopping them.
There's still time to rethink; a fair number of Congressmen, from both parties, have misgivings about Mr. Powell's current direction. But time is running out.
So is any pretense of political will, with Hollings now out of the Senate Commerce Committee driver's seat and McCain in it. The Powell power relationships run too deep. Just one of many examples: Freg Briggs, CTO of Worldcom used to work for Colin Powell in the Bush I administration, he's still on Michael Powell's FCC Technology Advisory Council pushing for continued dereg to help WorldCom and the rest of the deregulated telco / infoco's or whatever they get called.
Nomi
