The Cato Institute, an influential right wing think tank, has published a book that seems to explain current thinking in Washington, D.C. It says that network owners have a right to deny access, and that "forced access" is mere "infrastructure socialism."

by Alex Goldman ISP-Planet Associate Editor [September 4, 2003]

In What's Yours Is Mine: Open Access and the Rise of Infrastructure Socialism, authors Adam Thierer and Clyde Wayne Crews Jr. argue that denying access to networks is an important part of any market economy.

In a densely argued 100 pages, they examine several industries, including software, electricity generation, and cable television, but the centerpiece of their argument is a discussion of broadband and network access.

The authors say that the telephone industry is not a natural monopoly because there were many phone companies before they were all briefly nationalized during World War I. The authors further argue that monopolies are created and preserved through government regulation, but can only be broken by deregulation.

They say that "forced access" policy requires government to set a price, a process which is "extremely complex and time-consuming because of its litigious and bureaucratic nature." They further argue, "This, in turn, delays innovation and investment." Note, however, as Jim Wagner wrote in Should Telecom Regulations Be Scrapped?, that "forced access" is a politically charged term used by those who oppose line sharing; the politically charged term preferred by those who favor line sharing is "open access."

Furthermore, the authors assert that "forced access" artificially maintains monopolies by making competitors dependant upon the incumbent, and that, instead, competition should be facilities-based, free of the incumbent.

In addition, competition based on "forced access" becomes dependent on government regulators, but regulators are eventually owned by the industry they regulate. The authors trace the theory of "regulatory capture" to a 1971 article in the Bell Journal of Economics and Management Science in which economist George J. Stigler wrote, "regulation is acquired by the industry and designed and operated primarily for its benefit."

The authors also quote economist Alfred E. Kahn, who wrote in The Economics of Regulation: Principles and Institutions:

When a [regulatory] commission is responsible for the performance of an industry, it is under never completely escapable pressure to protect the health of the companies it regulates, to assure a desirable performance by relying on those monopolistic chosen instruments and its own controls rather than on the unplanned and unplannable forces of competition.

The authors further quote Kahn as saying:

Reponsible for the continued provision and improvement of service, [the regulatory commission] comes increasingly and understandably to identify the interest of the public with that of the existing companies on whom it must rely to deliver goods.

In a subtle argument, the authors argue that any regulation of the telecoms market assumes that technology is unchanging, which, in turn, makes any regulated regime hostile to technological change because such change requires rewriting the rules (consider VoIP, for example).

The authors further assert that cable franchises are government licenses for local monopolies and that the cable franchise system should be revoked.

The authors conclude:

Everybody wins if policymakers avoid and abandon inefficient open-access regulatory regimes. Network owners win because they retain rights over their systems, can charge what the market will bear rather than a regulated price, and can potentially invade the territory of rivals. Throughout and across many industries, business decisions would no longer be based on waiting for assorted jurisdictions to implement open access. Consumers win, too, in that networks develop naturally and are more robust and reliable because newcomers must demonstrate competence and because innovations become necessary, competitive features rather than regulatory ones.

This argument does seem to have currency in Washington, D.C. At the FCC, it seems that Chairman Powell believes that deregulation will spur deployment and innovation. The book approvingly quotes him arguing that line sharing actually inhibits deployment and innovation when he says, "There is no upside, in the long run, [to] being dependent on your primary competitor for your key assets, or in relying on the government to protect or subsidize your service."

The executive branch seems to believe the same for energy policy—although we're sure to learn more about energy policy in coming weeks because of a recent cascading blackout in the northeastern corner of North America.

There are four major conservative think tanks influencing government policy, each with a slightly different angle on what it means to be "Conservative."

• The Heritage Foundation emphasizes "limited government, traditional values, and a strong national defense," making it the most in favor of government intervention in "traditional values" issues and in foreign policy.
• The American Enterprise Institute emphasizes "limited government, vital cultural and political institutions, and a strong national defense," and is arguably more "pro business" than the other conservative think tanks.
• The Manhattan Institute focuses on academic endeavors, publishing studies and running discussion forums to address specific issues, claiming no overarching philosophy beyond the ideas of its fellows. Two fellows, Thomas W. Hazlett and Peter W. Huber, are often quoted in the book.
• The Cato Institute (named after an 18th century publication, Cato's Letters) emphasizes "limited government, individual liberty, and peace" making it the only website to say "peace" instead of "national defense." The website adds, "The Jeffersonian philosophy that animates Cato's work has increasingly come to be called "libertarianism" or "market liberalism." It combines an appreciation for entrepreneurship, the market process, and lower taxes with strict respect for civil liberties and skepticism about the benefits of both the welfare state and foreign military adventurism." In the book, the Cato Institute further explains its aims by saying, "Despite the achievement of the nation's Founders, today virtually no aspect of life is free from government encroachment. A pervasive intolerance for individual rights is shown by government's arbitrary intrusions into private economic transactions and its disregard for civil liberties."

These are the ideas that are current in Washington, D.C., and this book shows what telecommunications policy they lead to. Anyone participating in telecommunications law or affected by it needs to know what the conservative think tanks are saying as long as a Republican administration is in power.

— End

Go to page 2: Selected quotes >