Why We Care About Broadband Policy, Not Competition.

I've argued that things like Network Neutrality are right as a matter of economics (that is, they promote a better economic outcomes for everyone: see economists make this argument here and here), that it is critical as a matter of First Amendment freedom and to prevent "virtual redlining." Below I add an additional argument, one which seeks to approach this as a question of the proper role of government in the first place.

In the last few decades, we have seen the idea of the role of government shift.  In the late 19th century, culminating in Roosevelt's New Deal eras that government serves to level the playing field between citizens and corporate interests -- providing basic rules of the road  and ensuring some level of fundamental fairness for everyone -- with a University of Chicago/Free Market approach that maintains that government has no role except, perhaps, in the case of "market failure." The "market failure" argument usually reduces down to a question of competition. In this theory, if we have "competition," that solves our problems because if there is competition then it must be that whatever the "competitive market" produces is what "the market wants" and therefore is the best possible policy.

There are many things wrong with this line of reasoning. But for this post, I will try to move back to a more basic idea about why we care about services like broadband. When we have a service offered to the public, when members of the public depend on accessing this service reliably, and when a failure to have reliable access can have dire consequences, these services are "affected with the public interest." For these services, we need some basic safeguards to ensure fundamental fairness and, to the extent possible, prevent disasters before they occur - whether that disaster is limited to a subscriber or small business cut off from a vital service or a failure to serve rural areas or a massive failure on order of a BP or Katrina-type disaster.

For this reason, as the D.C. Circuit pointed out in the NARUC case which remains the authoritative case on what is a "telecommunications service," whether a service is competitive or not doesn't matter to whether it's a telecommunications service. Competition informs what kind of rules we need. When choosing between a basic monitoring and "safety net" function or something more intrusive depends a lot on the presence or absence of competition and how we think companies will behave in a complicated world. Like the "free market" view, the progressive view absolutely considers the potential cost of regulation. But unlike the UofC/free market view, the progressive era view also considers the cost of not acting. The telecommunications services approach recognizes that, as with the financial meltdown, a failure to act in a networked world can have a rapid, system-wide impact that after the fact remedies don't address. It recognizes that certain decisions, such as not serving rural areas, makes complete economic sense but have dire consequences for those not served. This view also recognizes the limits of University of Chicago-style economics for the individual without perfect market information and subject to real world constraints even when choosing among competitors. I may have my choice of cabs to get from a convention center to an airport, but once I get in a cab and on the freeway, my leverage to negotiate rates and terms drops precipitously. I may have a choice of broadband providers, but if my uploads get blocked or delayed I may suffer harm no ability to switch later can fix.

Similarly, the assurance of free market enthusiasts that providers will avoid pissing off customers does little to help those customers caught up in a provider's "learning experience." The fact that "the market" has resolved interconnectivity disputes like Cogent-Sprint in 2008, or sudden shut downs like Northpoint's in 2001, will not help when a crisis comes up that the market cannot solve. Those who argued BP had every economic incentive to avoid a catastrophic oil spill were absolutely right. The argument that this eliminated the need for things like basic safety regulations, inspections, and accountability turned out to be wrong. From a University of Chicago/free market perspective, BP is being properly punished with expenses and liability and we should expect BP and other companies to take proper precautions in the future. For those living in the Gulf, that doesn't help much. 

To conclude, we do not ask government to set rules of the road for vital services like broadband (or roads) because government magically makes things better, but because government is the only entity able to keep things from going horribly wrong. Broadband access has become what the railroads were in the 19th Century and electricity and telecom were in the 20th -- the basis for our economic growth and critical to our standard of living and daily affairs. Critics ridicule the framework of the public interest as "old fashioned" and out of date with the times. This confuses the specific regulation with basic oversight authority. Everyone recognizes broadband is not a railroad, or an electric grid, or even a telephone network. But the same basic principles of fundamental fairness, recognition of an imbalance of negotiating power/information asymetry, and a need to prevent potentially catastrophic impacts if something goes wrong, apply.

We once took pride in having an electric grid and a telephone network that were the envy of the world because they reached everyone, worked reliably, and treated everyone fairly. We should want the same for our broadband networks in the 21st Century.  Those who ignore the quiet role of government in ensuring basic principles of fundamental fairness and standards or reliability in making these previous networks the envy of the world leave us at the mercy of the market. But the market cannot protect either fundamental fairness or impose basic standards of reliability. Without these two principles, our broadband network will not flourish, and we will all pay the price.

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