One of the crazy things that you have to believe when you are a liberal is that you can correctly predict which technologies are in need of regulation by the federal government. You will frequently get this wrong in a somewhat inoffensive fashion–see seatbelts, which are potentially idiotic; and airbags, which came along a few years later and are brilliant–causing little more than annoyance and higher prices for companies and consumers. (Remember, when you make things like cars unnecessarily more expensive and proportionately drastically more unaffordable for poor families, it is both racist and elitist–unless a. part of an overarching social policy goal; and b. sponsored by Democrats. That is the law.)
Thus, for example, until recently we had Democratic legislation from the 1930s controlling the entire U.S. raisin market, making raisin farming drastically penurious because it established and maintained the National Raisin Reserve, authorized to purchase all of your raisins, peasant farmer, for almost nothing. Were raisins once a critical part of our national security? Probably not. Certainly not today, when we have magnificent medjool dates being flown in daily from Morocco.
But plus ca change, the more things stay the same, viz., worse, because of leftist legislation authored by people who are very bad at thinking about innovation. The Democrats who wrote the 1937 Agricultural Marketing Agreement Act received their payout in the form of votes back in the Thirties. (Indeed the Democrats had a supermajority in both houses of Congress when the raisin edicts were enacted.)
People with a genuine claim to having a live, beating heart in 2013, meanwhile, are hurting because of the price fixing. (This particular raisin issue is now over, thanks for the work of my friend and professor Michael McConnell.) This sort of dread outcome is not an occasional accident of well-meaning price fixing legislation: it is the essential nature of well-meaning price fixing legislation; terrible pain for ordinary people years down the line is the sine qua non of price fixing legislation.
Which brings me to this excellent piece in today’s Wall Street Journal, “The Myth of America’s Inferior Broadband.” In it, Ev Ehrlich, undersecretary of commerce under the Clinton administration, reports that the U.S. actually has better, faster internet than Western Europe, despite our national hand-wringing about “infrastructure.”
The facts are startling. The Internet company Akamai, which produces international speed rankings, has the U.S. currently at No. 9, up from No. 22 in 2009—faster than in France, Germany and Britain. A recent report by the Information Technology and Innovation Foundation notes that the U.S. has the second-lowest entry-level broadband prices (behind Israel) in the Organization for Economic Cooperation and Development, despite ranking No. 27 among OECD countries in population density, a key driver of cost. […]
In the U.S., 85% of households have access to wired broadband networks capable of speeds of 100 megabits per second. By contrast, just half of Europeans get service that meets or exceeds 30 Mbps.
Why the disparity? Because the U.S. is one of two nations on the planet—the other is South Korea—that has three different and fully deployed broadband technologies: telephone (both newer fiber and DSL), cable modems and mobile LTE. These technologies compete to deliver broadband connections to nearly every American (plus satellite for some). Nearly 90% of Americans can choose from two wired providers and from four wireless broadband providers. Mobile 4G LTE, which can deliver downloads of 20 Mbps or more, reaches 94% of Americans, but only about a quarter of Europeans.
So the U.S. was behind in high-speed internet, and then we caught up. What happened? It turns out that what happened was that our laggardly growth was the result of the Telecommunications Act of 1996, which made the local telephone companies common carriers. That meant that they had to “provide their competitors access to their systems at low, government-mandated prices.” As a result of that, you had ISPs providing mediocre DSL service because they could not improve the infrastructure, and phone companies who simply sat on an asset and took a stream of payments from all comers. Happily, copper/coaxial was not covered by the Act of 1996, so, lo, cable modems came unto us. Then in 2004 the FCC and the courts ended the mandatory phone-line leasing regime, and the U.S. because a free market for internet service again.
Meanwhile in the old world:
…Internet service providers lease aging wires from incumbent, often state-sanctioned telephone companies. This may have created instant infrastructure for Europe, but because the ISPs do not own the underlying infrastructure, they have no incentive to invest in it. The incumbent phone companies, in turn, are often directly or indirectly subsidized heavily by taxpayers.
So the 1996 Telecommunications Act wanted to do the nice boon of making internet better for everyone by making phone companies price takers, but instead it impeded innovation for a decade and made the internet more expensive and slower than it needed to be. The more we insist that our friends think deeply about economics, the more we will be able to show them that what is described above is not an unfortunate aberrance of liberal legislation, but is instead in its very genetics.