Tag Archives: broadband

In-Flight Rent-Seeking

An article in this month’s Info Tech & Telecom News quotes me about proposed stimulus funding for an in-flight broadband provider.

My take: it’s corporate welfare.

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Making Broadband Accessible: Innovation, Not Intervention

FCC regulators want to provide wider and cheaper broadband access by subsidizing it, raising taxes, and forcing network owners to share their network infrastructure with competitors.

A few things the FCC should consider:

-Subsidies don’t make broadband access any less expensive. They just change who pays for it. In this case, that would be anybody with a phone. Which probably includes you. The great economist Ludwig von Mises observed that “A government can no more determine prices than a goose can lay hen’s eggs.”*

-The tax would make owning a phone more expensive. And when something becomes more expensive, people consume less of it. With tax-exempt technologies like Skype and Google Voice now available, people can switch away from a taxed phone to something cheaper more easily than ever. The more people who do that, the less revenue the phone tax would generate, defeating its very purpose.

-If a company has to share its network infrastructure with its competitors, it loses the incentive to maintain and improve that network. Why invest millions of dollars if it will help your competition just as much as yourself? Quality suffers. So does innovation. In the long run, it is innovation, not FCC intervention, that will make broadband affordable and accessible for everyone. The long-run view is just as important as the short-run view here.

-Land-based networks are expensive to build in rural areas. The cost per customer is huge compared to denser urban areas. Fortunately, that isn’t as much of a problem for wireless technologies. The FCC seems hellbent on the land-based networks since wireless networks aren’t yet advanced enough for mass-market broadband service. But they will be soon enough. And every dollar spent on old-fashioned wired networks is a dollar unavailable for improving wireless service. An unintended consequence of FCC intervention would be slower innovation.

*Ludwig von Mises, Human Action, 4th ed., (Irvington-on-Hudson New York: Foundation for Economic Education, 1996 [1949], p. 397.

Net Neutrality and Rent-Seeking

Here is a letter I sent recently to The Wall Street Journal:

September 22, 2009

Editor, The Wall Street Journal
200 Liberty Street
New York, NY 10281

To the Editor:

Your article “Bad News for Broadband” (editorial, Sept. 22) hints at, but does not make, a key point: net neutrality proposals are driving a wedge between service providers like AT&T and content providers like Google.

Strange, is it not? Their interests are actually closely aligned. If AT&T upgrades its network, Google benefits from the increased bandwidth. If Google improves its products, AT&T benefits from increased demand for broadband.

Net neutrality proposals give companies the incentive to seek rents at each other’s expense when they could be benefiting from each other’s innovations instead. This must be music to the ears of lobbyists, but how sad for consumers.

Ryan Young
Fellow in Regulatory Studies
Competitive Enterprise Institute
Washington, D.C.