Posted on 06/14/2003 12:17:47 PM PDT by bruinbirdman
In What's Yours Is Mine: Open Access and the Rise of Infrastructure Socialism, authors Adam Thierer and Clyde Wayne Crews Jr. examine the hazards of mandatory "open access" -- a new trend in which hyper-regulatory bureaucrats and central planners are increasingly commanding technology companies and industry sectors to share networks, facilities, or specific technologies with rivals.
Telephone and cable companies, wireless carriers, electric utilities, AOL's Instant Messenger service, the Visa/Mastercard network, Microsoft's Windows operating system -- all these and more have been targets of demands for forced access. Although supporters claim that open access is pro-competitive, the opposite is true. Forced access policies inevitably mean price and quality controls, stagnation, increased litigation, and a crippling of innovation.
Genuine competition requires that firms have the ability to exclude rivals. Government seizure of existing networks and technologies on behalf of rivals means that next-generation technologies will not be created by those rivals or the incumbents. The recent decision by the FCC to continue such micro-management of local telecom markets illustrates this principle; regulators have opted to continue to require sharing of local telephone lines and switches despite the fact that those rules have decimated innovation and investment in the U.S. telecom market.
The key message for policymakers hoping for a high-tech renaissance: Competition in the creation of networks is as important as competition in the goods and services that get sold across those networks. Competition, innovation, and consumers will suffer if forced sharing policies are not abandoned. In today's world of increasing global communications and digital technologies, What's Yours Is Mine makes an urgently needed pro-consumer case for laissez-faire in the evolution of technology industries.
Competition in the creation of networks is as important as competition in the goods and services that get sold across those networks. Competition, innovation, and consumers will suffer if forced sharing policies are not abandoned.
Back when railroads were first being formed, there was no standard distance between the rails or "gauge". Therefore, when goods had to be shipped across the country (or countries) they had to be unloaded from one private train line and reloaded onto another, adding to costs. The people who had goods that needed to be shipped saw no reason for this, and demanded that governments regulate a common rail gauge. This was done. (Slowly, fitfully, country by country.) The railroads then merely charged each other for the use of their tracks and support infrastructure, but since there was no loading and unloading between rail lines the cost of transportation went down. This benefited everyone.
Another example is in the standard sizing of bullets, shells, and barrels for military use. It used to be that gun makers would make their barrels whatever size they felt like making them. Over time, standard barrel dimensions arose. But the military specified cannon barrol and rifle barrel sizes, as well as performance characteristics. The private manufacturers of bullets, shells, cannons and rifles did not suffer because the military specified (regulated) characteristics of those pieces of military hardware.
Telephone and cable companies, wireless carriers, electric utilities, AOL's Instant Messenger service, the Visa/Mastercard network, Microsoft's Windows operating system -- all these and more have been targets of demands for forced access. Although supporters claim that open access is pro-competitive, the opposite is true. Forced access policies inevitably mean price and quality controls, stagnation, increased litigation, and a crippling of innovation.
These claims are merely bald assertions. Do we really think the Internet would have been better off, and thus all of us better off, if instead of standardizing on TCP/IP we had a few dozen different transmission protocols? Would different transmission protocols have provided any business value whatsoever? NO!
The recent decision by the FCC to continue such micro-management of local telecom markets illustrates this principle; regulators have opted to continue to require sharing of local telephone lines and switches despite the fact that those rules have decimated innovation and investment in the U.S. telecom market.
This statement is completely nutso. We have just witnessed an insane boom of investment (some would say overinvestment, but the market will decide that) in the telecom market. So when, exactly, did all of this innovation and investment decimation occur? Lack of investment today is partially due to the fact that so many telecom companies are suffering from the massive investment cycle that ended just a couple years ago!
I haven't noticed the phone companies being particularly interested in innovation for a while. They were dragged kicking and screaming into DSL, and appear to prefer to fight their competitors in court and bribe state legislators rather than innovate and compete.
Structural separation is the way to go, and then the FCC could hands-off approach. But we don't yet have anything like a true market in last-mile telecom. This lack of market was caused by pervious intervention, so if more intervention is still required, it isn't just some Socialist crusade to persecute the wonderfully market oriented ILECs.
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