As the debate over FCC Chairman Wheeler’s Net neutrality proposal rages on, the Wall Street Journal asked two tech policy experts whether broadband should be regulated like a public utility. Arguing the “no” side was TechFreedom’s Berin Szoka, arguing “yes” was Columbia Law School’s Tim Wu. Read the article and both essays on WSJ.com , or see Berin’s essay below:
Public-utility regulation is a self-fulfilling prophecy: It assumes competition is impossible—and keeps it that way.
Utilities accept heavy regulation, which insulates them from competition. This quid pro quo makes sense only when technology is static and alternative infrastructure just isn’t cost-effective.
Broadband, however, isn’t a “natural monopoly” and it doesn’t require the kind of oversight originally developed for railroads. The industry is rapidly evolving and competition is thriving as never before, thanks to a regulatory light touch and despite lingering federal and local obstacles.
Competition Is Alive and Well
Telephone and cable companies have been trying to out-innovate each other since the mid-1990s. Despite talk of a cable monopoly in broadband, phone carriers are gaining ground.
AT&T’s upgraded DSL service, delivered via fiber to neighborhoods, should reach 75% of its footprint by 2016 with download speeds 10 to 15 times faster than Netflix high-definition streaming. Some 70% of Verizon households will soon have access to FiOS, the carrier’s fiber-to-the-home network, and cable firms have raised top download speeds to match Verizon’s. Google Fiber may expand its full-gigabit service to 34 more cities from the original three, giving more Americans access to a “third pipe” to the Internet.
One in 10 Americans, meanwhile, relies entirely on wireless broadband and the number is growing as those networks get faster. Opening more radio spectrum would help, but the FCC and Congress have moved slowly. Likewise, the FCC has been reluctant to let phone companies transition to Internet protocol-based networks, even though doing so would save billions of dollars that could be used to make the “second pipe” faster.
Where government has gotten out of the way, broadband competition, investment and innovation have flourished. Indeed, the regulatory light touch for broadband wisely begun by President Clinton’s FCC unleashed $1.3 trillion in private broadband investment. Yet some insist the FCC made a mistake in not subjecting broadband to public-utility rules in 2002.
Congress, including 74 Democrats, overwhelmingly opposed “reclassification” to public-utility status in 2010 and with good reason: Even if the FCC promises not to apply the most burdensome public-utility rules, the process would be slow and messy, paralyzing investment for years and discouraging new entrants.
And for what? The FCC has already claimed sweeping powers to regulate broadband just shy of a full-blown utility. The more judiciously it uses that power the better, but merely having the option makes reclassification largely unnecessary.
A Better Way
Reclassification would distract the FCC from doing what it can to facilitate broadband competition and deployment.
Some think the answer is having cities operate broadband networks. Provo, Utah, tried that, and the city wound up selling its $39 million network to Google Fiber for $1 after realizing the city just wasn’t good at running it.
Instead, municipalities should reduce the local bureaucracy that discourages new entrants like Google Fiber and even incumbents like Verizon from expanding. If cities want to spend tax dollars to improve Internet access, they should install “Dig Once” conduits under streets that any broadband provider could lease. That could make deployment 90% cheaper while adding just 1% to the cost of a road project.
Increased competition can bring down prices, making Internet access more affordable for those who still don’t have it. Subsidies also could help—but added regulatory barriers certainly won’t.
Broadband should be regulated like most other industries: through antitrust and consumer-protection laws. That’s a better model for regulation—one that doesn’t give up on competition.