From: Norm Jacknis (firstname.lastname@example.org)
Date: Sun Dec 08 2002 - 20:08:13 EST
I'm not sure his prognostication is correct, but this was a thought-
provoking op-ed column in Friday's NY Times.
Enjoy the holidays,
Digital Robber Barons?
December 6, 2002
By PAUL KRUGMAN
Bad metaphors make bad policy. Everyone talks about the
"information highway." But in economic terms the
telecommunications network resembles not a highway but the
railroad industry of the robber-baron era - that is, before
it faced effective competition from trucking. And railroads
eventually faced tough regulation, for good reason: they
had a lot of market power, and often abused it.
Yet the people making choices today about the future of the
Internet - above all Michael Powell, chairman of the
Federal Communications Commission - seem unaware of this
history. They are full of enthusiasm for the wonders of
deregulation, dismissive of concerns about market power.
And meanwhile tomorrow's robber barons are fortifying their
Until recently, the Internet seemed the very embodiment of
the free-market ideal - a place where thousands of service
providers competed, where anyone could visit any site. And
the tech sector was a fertile breeding ground for
libertarian ideology, with many techies asserting that they
needed neither help nor regulation from Washington.
But the wide-open, competitive world of the dial-up
Internet depended on the very government regulation so many
Internet enthusiasts decried. Local phone service is a
natural monopoly, and in an unregulated world local phone
monopolies would probably insist that you use their dial-up
service. The reason you have a choice is that they are
required to act as common carriers, allowing independent
service providers to use their lines.
A few years ago everyone expected the same story to unfold
in broadband. The Telecommunications Act of 1996 was
supposed to create a highly competitive broadband industry.
But it was a botched job; the promised competition never
For example, I personally have no choice at all: if I want
broadband, the Internet service provided by my local cable
company is it. I'm like a 19th-century farmer who had to
ship his grain on the Union Pacific, or not at all. If I
lived closer to a telephone exchange, or had a clear view
of the Southern sky, I might have some alternatives. But
there are only a few places in the U.S. where there is
effective broadband competition.
And that's probably the way it will stay. The political
will to fix the 1996 act, to create in broadband the kind
of freewheeling environment that many Internet users still
take for granted, has evaporated.
Last March the F.C.C. used linguistic trickery - defining
cable Internet access as an "information service" rather
than as telecommunications - to exempt cable companies from
the requirement to act as common carriers. The commission
will probably make a similar ruling on DSL service, which
runs over lines owned by your local phone company. The
result will be a system in which most families and
businesses will have no more choice about how to reach
cyberspace than a typical 19th-century farmer had about
which railroad would carry his grain.
There were and are alternatives. We could have restored
competition by breaking up the broadband industry,
restricting local phone and cable companies to the business
of selling space on their lines to independent Internet
service providers. Or we could have accepted limited
competition, and regulated Internet providers the way we
used to regulate AT&T. But right now we seem to be heading
for a system without either effective competition or
Worse yet, the F.C.C. has been steadily lifting
restrictions on cross-ownership of media and communications
companies. The day when a single conglomerate could own
your local newspaper, several of your local TV channels,
your cable company and your phone company - and offer your
only route to the Internet - may not be far off.
The result of all this will probably be exorbitant access
charges, but that's the least of it. Broadband providers
that face neither effective competition nor regulation may
well make it difficult for their customers to get access to
sites outside their proprietary domain - ending the
Internet as we know it. And there's a political dimension
too. What happens when a few media conglomerates control
not only what you can watch, but what you can download?
There's still time to rethink; a fair number of
Congressmen, from both parties, have misgivings about Mr.
Powell's current direction. But time is running out.
Copyright 2002 The New York Times Company
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