Why Corcoran mystifies me

Terry Corcoran is the editorial head of the Financial Post, and I have had some harsh words to say about his writings on telecommunications policy. It would be unfair to base an opinion of his whole work on this unfortunate portion.   I am mystified by the apparent contradiction between his decentralized market thinking, and his reliance on Hayek and Smith in his battles with the monstrous  lunacy of green energy policy, for example, with his support for precisely that sort of centralization of decision making that goes with Big Telco, vertically integrated carriers.

I place myself firmly in the camp Hayek and Adam Smith. Prices are information, information is conveyed from one end of the supply chain to the user by means of prices; goods and services are summoned into being by prices. I agree wholly with Hayek’s attacks on the possibility of central planning as an insoluble problem of information. The economy works in a decentralized way among a myriad decision makers to bring forth the benefits of prosperity and freedom. Sign me up.

 Accordingly, Corcoran and his colleague Larry Solomon fight against Ontario’s lunatic energy policy on the grounds that it involves central planning of the worst kind of Ontario’s economy, they do so on the basis consistent with their principles, as I see them. What I fail to see is how such a sterling defence of the market against central planning is consistent with Mr. Corcoran’s editorial positions on telecommunications.

 As I see it, the carriage business, former telco and former cable, is a gigantic techno-legal construct, founded on legal privileges. Some of those legal privileges involve the right to dig streets or cut trees on private property, some involve spectrum licences and broadcasting licences. But when you have an effective duopoly of pipes, and maybe two or three wireless carriers, frequently owned by the same entities that own the fixed cables, we are not dealing with a multi-player market of decision makers. This is not like greengrocers buying produce off the back of trucks at a real market. These are law firms with large switches attached.

In this situation, the question arises whether government is able and suited to try to control market power, or whether we are better off relying on the discretion of carriers to determine who carries what at what prices.

The central elements of non-discrimination and no unjust preference which are found in telecommunications derive from the old Railway Act. Railways were the first capital intensive network business. They were among the first to be regulated, and if the language of the Telecommunications Act copies parts of the Railway Act, it does so for good reason. Both industries show market power. Both can work against their rivals to foreclose market entry or hamper it by uncounted methods relating to the timing, quality, price, and availability of connections.

The case against “regulation”, as seen from outside the regulatorium, is compounded by the operation of two distinct statutes under one regulatory commission. One could have rational doubts about the wisdom of the CRTC allowing access to underlying facilities, but at least it is a debate about appropriate levels of constraining market power.

Not so with broadcasting regulation, which works off a statute entirely different in methods, assumptions and and level of intricacy. In broadcasting, very tightly controlled entities are supposed to earn super-normal profits so that they can turn some of that profit back into Canadian programming. It is a scheme of protection, and requires elaborate and total control to make it work. We have commented elsewhere on what the Internet is doing to broadcasting.

But back to the question of market power. Mr. Corcoran seems to oppose every measure that diminishes the market power of carriers. Set-asides of spectrum to engender a fourth wireless carrier – bad. Wholesale access by smaller parties to underlying facilities of carriers – bad. Regulation of the range of behaviours captured by the terms “net neutrality – traffic management” – superfluous. Vertical integration of carriers with broadcasting – good.

Every measured proposed to limit the market power of carriers is held to be bad, every augmentation good. That is at least consistent with the idea that we need large national players in telecommunications. That would be okay with me – even if mistaken – because it is at least an argument. But I am unable to reconcile a policy of giantism in telecommunications, and maximizing the power of incumbents, with a distrust of central planning in energy production and distribution; the ideas cannot be made compatible.

Government regulation of carriers, and attempts by governments to increase the amount of competition in carriage, are all aimed at increasing choice, decreasing prices, and preventing the foreclosure of markets to applications. These are things of which Hayek and Adam Smith would approve. Why does not Mr. Corcoran? That is what I cannot figure out, how someone so right about so much can have this gigantic ideological blind spot when it comes to carrier policy. I regret the harshness of my previous words, and hope he will see in this screed an opportunity to elucidate these contradictions, as thy seem to me.

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