It doesn’t take a genius to see why. Exactly as the president said, when you have robust competition, companies offer better services and better prices to stay ahead of their rivals. When competition is weak, it doesn’t happen.
And on broadband competition, as the New America Foundation’s Sascha Meinrath says, “for all the bold rhetoric and symbolism, the Obama administration has been remarkably timid.” Nothing either in the speech or the National Broadband Plan adopted last year remotely amounts to a Fair Deal in critical 21st century infrastructure. As Slate’s Farhad Manjoo argued, the real game-changer on broadband competition would be open access rules that “would force companies that build lines to your home to sell access on those lines to competitors—so that many companies will be able to bring service to your home.”
In most cases, that kind of interference in the private market would be a bad idea. But broadband, like railroads, is inextricably bound up with the state. You can launch a software company from your bedroom, but a scrappy startup can no more tear up your street to lay fiber optic cable than it can build a train to Chicago. Without a mix of eminent domain and access to public spaces, it’s simply not possible to construct infrastructure that requires long, straight lines and the ability to cross existing property. That means barriers to entry are frightfully high and competition is inevitably muted. What’s more, trying to create competition by inserting a bunch of different wires into your house would be absurdly wasteful. We’d all benefit from having more broadband providers to choose from, but nobody actually needs more than one connection at a time. In other words, we only need one company to bring the line to your house, but lots of companies to be able to compete to serve you on that line. That’s why when telecom prices were first deregulated in the 1990s, “local loop unbundling” was the other side of the coin. Firms who owned wires into homes were made to agree to terms under which the wires could be leased by rivals who thought they had better ideas about how to manage the existing physical infrastructure. Incumbent telecoms never liked this idea, courts helped them stall implementation, and then the Bush administration scrapped the relevant rules. Obama hasn’t moved to reinstate them.
A study for the Berkman Center at Harvard Law School found that “some form of open access regulation has at this point been adopted by every country in the OECD except the United States, Mexico, and the Slovak Republic.”
Obama mentioned broadband in his speech, arguing that instead of sitting at home scanning the help-wanted ads, construction workers should be “rebuilding our roads and our bridges, laying down faster railroads and broadband, modernizing our schools.” Fine ideas all, but exactly as the president said when invoking TR at the beginning, to build the infrastructure you need, you must regulate it properly and create competitive markets. Until the government gets serious about doing that, we’re going to have to settle for a country where most of the new cables are controlled by a few giant monopolies that keep prices high and quality low.