On Telecommunications Policy

S. Derek Turner over at FreePress.net has compiled an interesting history of telecommunications policy in the United States, and makes an argument that we should re-regulate to promote greater competition in both the last-mile and middle-mile markets.  I agree with the sentiment that operators who have relied on public easements, public rights-of-way, and spectrum licenses to install facilities owe a duty to the public to perform as common carriers.  The corporate owners of copper, cable, and fiber plant do indeed show every sign of ignoring this obligation, in particular by discriminating against certain types of traffic (especially those that might compete with their own video offerings, or their own voice-over-IP solutions) and by threatening to extract tolls from popular websites such as Google.

However, I am not convinced that heavy-handed government regulation is the answer to this problem.  It is interesting to note that discrimination and toll-collecting can also run in the opposite direction, where content owners can refuse to serve customers of certain Internet Service Providers (ISPs) that don’t pony up a fee.  Customers are sure to complain when they can’t reach all the content they want, with the quality they want, and will put pressure on ISPs to open up.  There are sometimes good reasons to discriminate in favor of certain traffic—I definitely want my emergency call to 911 to take precedence over my neighbor’s pr0n.  And a police officer responding to a disaster should possibly get even higher priority.

Absent the declaration of an emergency, I’d prefer to see congestion pricing when resources are scarce.  An auction for bandwidth is a fair way to allocate scarce resources.  However, I wouldn’t want the ISPs to run these auctions: it would create perverse incentives for them to hold back capacity to drive up prices, ala Enron.  Also, I would want to put in place a mechanism that would ensure the collected revenues get used to increase capacity on those congested links instead of going to line the pockets of shareholders.  I think it’s possible for users to band together and create a kind of bandwidth consumers union that can make impartial decisions about who gets access to bandwidth during periods of congestion and that can disburse revenues to ISPs under terms that require expansion of capacity where it is needed.  I hope the Free Overnet Foundation can play a role here.  More details to follow in future posts.