Telecompetition or binary bureaucracy?
By Dick Armey
Published March 26, 2006
Do we want more government control of technology, or do we want less?
That's the million-dollar question as the House Energy and Commerce Committee, chaired by Rep. Joe Barton, Texas Republican, moves to rewrite the 1996 Telecommunications Act. A lot is at stake. The committee can unleash the market's raw potential by getting government out of the way. Or it can give lawyers, politicians and bureaucrats license to dictate the evolution of technology.
Nowhere is the clash between government regulation and market innovation more evident than in what's euphemistically called "network neutrality."
Some on the committee want to regulate the ability of phone and cable companies to give priority to different kinds of Internet content. They seem to think there is unlimited bandwidth available and all content should be treated equally. But in fact bandwidth is not unlimited, and we all would prefer treating some content differently than other content. In fact, that is already the case today, as secure business networks often pay for priority handling on the Internet backbone.
Consumers who use Internet telephone service (VoIP) would also prefer those packets be given priority -- thus ensuring crystal-clear conversations. They don't particularly care if their e-mail takes an extra second to arrive, by comparison.
And as Internet services expand, imagine watching streaming television over the Internet, or having your doctor monitor your health through telemedicine. Net neutrality would kill the competitive pricing and market flexibility that these exciting innovations demand. Nothing "neutral" about that.
The net neutrality fad is based on the wrong assumption that the government knows what's better for technology than the market. Proponents of net neutrality think phone and cable companies will block off large parts of the Internet if they get the chance and leave the "have-nots" with degraded service.
But no major Internet provider has ever done this, and will ever do so, because it would be suicide for its business. If your Internet provider blocked Google or iTunes, or prevented you from using your e-mail, wouldn't you switch to another service? The market works if the government gives it a chance.
But many times, the government doesn't. When this happens, consumers get less innovation and fewer choices. Just look at the video programming market. Many people refer to this service as "cable television," but that term is misleading.
Telephone companies, through the miracle of capitalism, can now transmit TV programs over their fiber-optic lines. However, most consumers may never see this new technology due to a spider web of government red tape called local franchise laws.
Local franchise laws require a company to negotiate with, and pay taxes to, each town before it can provide TV service. With more than 33,000 franchises across the country, each taking an average of almost a year to receive, many companies cannot enter the market, and therefore some areas see little competition. The committee is considering a national franchise policy that would allow companies to bypass tedious haggling with thousands of local bureaucrats. Simplifying entry to the television market would bring more competition and innovation.
While a national video franchise policy would be a step in the right direction, it should not promote more government control.
Unfortunately, some in Congress want to raise the "franchise fee," or the tax, on television providers. Any tax-increase on video providers, of course, would simply be passed on to customers. Americans pay enough taxes as it is. They shouldn't have to pay more just for watching TV.
The committee would also be wise to avoid "rate regulations," or price controls, in its reform legislation. Without pricing flexibility, companies have less incentive to innovate or invest.
When it comes to franchise reform, the committee correctly realizes cable, phone and satellite companies give us robust competition. It should trust competition to check rates naturally, instead of artificially distorting the market with price controls. If we have learned anything in the 10 years following the 1996 Telecommunications Act, it's that the market works and government control doesn't.
Congress should be commended for finally recognizing the need for comprehensive telecommunications reform. However, merely addressing the issue is not enough.
Congress must pass clear, consistent reforms that allow the market to give us the innovations we want, while keeping government hands off the Internet and television. Our future waits for Washington to act now.
Dick Armey, House Majority Leader from 1995 to 2003, is chairman of FreedomWorks, a national grass-roots advocacy organization dedicated to lower taxes, less government and more freedom.
By Dick Armey
Published March 26, 2006
Do we want more government control of technology, or do we want less?
That's the million-dollar question as the House Energy and Commerce Committee, chaired by Rep. Joe Barton, Texas Republican, moves to rewrite the 1996 Telecommunications Act. A lot is at stake. The committee can unleash the market's raw potential by getting government out of the way. Or it can give lawyers, politicians and bureaucrats license to dictate the evolution of technology.
Nowhere is the clash between government regulation and market innovation more evident than in what's euphemistically called "network neutrality."
Some on the committee want to regulate the ability of phone and cable companies to give priority to different kinds of Internet content. They seem to think there is unlimited bandwidth available and all content should be treated equally. But in fact bandwidth is not unlimited, and we all would prefer treating some content differently than other content. In fact, that is already the case today, as secure business networks often pay for priority handling on the Internet backbone.
Consumers who use Internet telephone service (VoIP) would also prefer those packets be given priority -- thus ensuring crystal-clear conversations. They don't particularly care if their e-mail takes an extra second to arrive, by comparison.
And as Internet services expand, imagine watching streaming television over the Internet, or having your doctor monitor your health through telemedicine. Net neutrality would kill the competitive pricing and market flexibility that these exciting innovations demand. Nothing "neutral" about that.
The net neutrality fad is based on the wrong assumption that the government knows what's better for technology than the market. Proponents of net neutrality think phone and cable companies will block off large parts of the Internet if they get the chance and leave the "have-nots" with degraded service.
But no major Internet provider has ever done this, and will ever do so, because it would be suicide for its business. If your Internet provider blocked Google or iTunes, or prevented you from using your e-mail, wouldn't you switch to another service? The market works if the government gives it a chance.
But many times, the government doesn't. When this happens, consumers get less innovation and fewer choices. Just look at the video programming market. Many people refer to this service as "cable television," but that term is misleading.
Telephone companies, through the miracle of capitalism, can now transmit TV programs over their fiber-optic lines. However, most consumers may never see this new technology due to a spider web of government red tape called local franchise laws.
Local franchise laws require a company to negotiate with, and pay taxes to, each town before it can provide TV service. With more than 33,000 franchises across the country, each taking an average of almost a year to receive, many companies cannot enter the market, and therefore some areas see little competition. The committee is considering a national franchise policy that would allow companies to bypass tedious haggling with thousands of local bureaucrats. Simplifying entry to the television market would bring more competition and innovation.
While a national video franchise policy would be a step in the right direction, it should not promote more government control.
Unfortunately, some in Congress want to raise the "franchise fee," or the tax, on television providers. Any tax-increase on video providers, of course, would simply be passed on to customers. Americans pay enough taxes as it is. They shouldn't have to pay more just for watching TV.
The committee would also be wise to avoid "rate regulations," or price controls, in its reform legislation. Without pricing flexibility, companies have less incentive to innovate or invest.
When it comes to franchise reform, the committee correctly realizes cable, phone and satellite companies give us robust competition. It should trust competition to check rates naturally, instead of artificially distorting the market with price controls. If we have learned anything in the 10 years following the 1996 Telecommunications Act, it's that the market works and government control doesn't.
Congress should be commended for finally recognizing the need for comprehensive telecommunications reform. However, merely addressing the issue is not enough.
Congress must pass clear, consistent reforms that allow the market to give us the innovations we want, while keeping government hands off the Internet and television. Our future waits for Washington to act now.
Dick Armey, House Majority Leader from 1995 to 2003, is chairman of FreedomWorks, a national grass-roots advocacy organization dedicated to lower taxes, less government and more freedom.
