The Never-Ending Telecom Debate

Adam Thierer of the CATO Institute is a thoughtful guy, but on core telecom issues he is all wet.  Take this, for instance --

That's been the same refrain for 15 years, with various failed technologies (cable telephony, IXCs, fiber-to-the-home, etc.) substituted when the last transparent rationale no longer has legs.  Fact is that the local loop is the one real market -- beyond PC operating systems -- in which scale economies and network effects continue to support strong natural monopoly characteristics.  The only real theory for local teleom deregulation is the whacked idea -- promulgated by Joe Baumol and Bobby Willig of Princeton in the early 1980s, paid by AT&T to coin new econonobabble theories in order to oppose a divestiture remedy in the government's antitrust lawsuit -- of "contestable markets."  And the "investments" Adam talks about have been paid for by many times over by PUC-guaranteed rates of return and depreciation policies that allow the Bells to operate essentially with free infrastructure supported by massive subsidies, i.e., taxes. 

I don't disagree that the Telecom Act is a regulatory vehicle at heart, that it was DOA by using a "silo" definitional structure based on old, outmoded regulatory classifications, and that the FCC is way over the top, but I think what is really beyond the pale is the use of telecom regulation to achieve social policy objectives ("digital divide," universal service, "free" broadcast television and the like) rather than structurally competitive markets. No one compains about the subversive use of regulation for social policy because universal service and broadcast television are sacred political cows like Social Security, and the poiticians are afraid to covert these massive subsidy flows into explicit taxes because they would then become visible, fail GAO scoring and let the people know how government is making us pay involuntary financial tribute to 1,000 small telcos.

More timely, however, is the pure joy of watching otherwise unified conservatives bitterly divided over telecom deregulation.  Gotta love that fact that CATO and PFF are villifying Grover Norquist and Jim Glassman.  The whole thing is so much about idealogy wrapped in pseudo-policy that it has become the epitome of boring to me.  Same issues, different acronyms.  But of course, I am a cynic at heart.

 Posted by glenn