Confederate Telecom Policy

I can understand why large carriers in the United States are so opposed to municipal networks that they pay off state legislatures to pass legislation banning municipal investment in networks. America is the land with the best legislation money can buy. I understand why their legions of myrmidons applaud this as the only proper course of action. What I cannot understand is why everyone else seems to think this is economically rational and socially beneficial.

Mathew Berry, chief of staff to Commissioner Ajit Pai, of the FCC, spoke recently to the National Conference of State Legislatures on this topic.

“Federal Communications Commission Chairman Tom Wheeler is going to have a fight on his hands if he tries to preempt state laws that limit the growth of municipal broadband networks.

“Matthew Berry, chief of staff to Republican Commissioner Ajit Pai, argued today that the FCC has no authority to invalidate state laws governing local broadband networks. In a speech in front of the National Conference of State Legislatures, Berry endorsed states’ rights when it comes to either banning municipal broadband networks or preventing their growth.”

His argument went thus:

“Arguing that municipal broadband networks could discourage investment by private companies, Berry said, “It’s not hard, then, to imagine a future FCC concluding that taxpayer-funded, municipal broadband projects themselves are barriers to infrastructure investment. So if the current FCC were successful in preempting state and local laws under Section 706, what would stop a future FCC from using Section 706 to forbid states and localities from constructing any future broadband projects? Nothing that I can see.”

The notion that the existence of municipal systems could discourage private investment is beside the point. It assumes that the best of all possible investments is private. That is to say, that private investment in infrastructure is ipso facto superior to public investment. On that basis states could ban municipal investment in roads, sewers, and power distribution systems. Municipally owned telephone systems have existed since the 1880s.

Moreover, in a time when IP dissociates carriage from content, there is no longer a sound technical justification for integrating the network with the applications into one company. The outside plant guys will continue with their important work in rain, snow and sun, and the applications guys can talk to the software with computers. While this picture is oversimplified, because networks are also computer-driven,  the separation of vertically integrated carriers into a network business and content business has proceeded in the United Kingdom and many parts of Europe. Why is North America (I include Canada in this delusion) stuck in a policy of exclusive vertically integrated pipes, and calling that competition?Why do we fear separating the carriers into common carriers, open to interconnection with all on a non discriminatory basis,  and content businesses that will have exclusive property or rights in content?

It is an idea that will be presented before the CRTC more often in the future. The relevant question is not whether we have more or less competition. Competition is for a purpose, and that purpose is consumer welfare. The question is, in the circumstances, what is the optimal outcome for people? We do not have competition in highway systems for a good reason.

The arguments for separating the content businesses from the carrier businesses – in short, for really large change – need to be heard.

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