Expanding Broadband

by Russ Roberts on August 5, 2005

in Reality Is Not Optional, Regulation

(I am filing this post under a new category, "Reality Is Not Optional." a phrase I read first somewhere in Thomas Sowell.  The category here at Cafe Hayek will be used to critique those who expect flying pigs and other phantasmagoric events to be par for the course.)

Thomas Friedman (rr) is worried that our cell phones and internet access here in America is not keeping up with the rest of the world.  And he’s found a politician who wants to do something about it:

A new generation of politicians is waking up to this issue. For
instance, Andrew Rasiej is running in New York City’s Democratic
primary for public advocate on a platform calling for wireless (Wi-Fi)
and cellphone Internet access from every home, business and school in
the city.

Mr. Rasiej wants to see New York follow Philadelphia, which decided it
wouldn’t wait for private companies to provide connectivity to all.
Instead, Philly made it a city-led project – like sewers and
electricity. The whole city will be a "hot zone," where any resident
anywhere with a computer, cellphone or P.D.A. will have cheap
high-speed Wi-Fi access to the Internet.

Why is such public provision necessary?

Mr. Rasiej argues that we can’t trust the telecom companies to make
sure that everyone is connected because new technologies, like free
Internet telephony, threaten their business models.

Well, he’s on to something there.  It’s true you can’t trust the telecom companies to be disinterested in profits. That’s kind of their raison d’etre, their modus operandi, their goal, their lifeblood.  In a market economy, where some modicum of economic freedom remains, companies try to make profit and avoid losses.  Expecting them to act otherwise is like expecting pigs to fly.  So I’m totally with Mr. Rasiej.  I don’t trust businesses to do anything except to try and make profits and protect their business models and their niches and their competitive edges and whatever else keeps them afloat.

That’s what businesses do.

The public policy question that both Mr. Friedman and Mr. Rasiej ignore is to ask whether current regulations make it easier to hold onto to those business models and subsequent profits.  I suspect they do because I see and hear a lot of ads from different parts of the telecom industry asking Congress to let them compete for some piece of business on that old information superhighway.  When businesses spend good money on ads like that, I know that it’s Congress and the FCC that are part of the problem rather than part of the solution.

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