Bust the Broadband Trusts, Obama!
America’s telecom companies provide dreadful service. Why won’t the president attack them?
Photgraph by kaili wu/Thinkstock
At various times, Barack Obama has been compared to John Kennedy or FDR or Jimmy Carter or even Abraham Lincoln. But one comparison I never heard until he made it himself in his high-profile Kansas speech this week was to Theodore Roosevelt. Arguing implicitly for his own re-election, Obama framed the choice as one about whether or not this would be a country where “everyone gets a fair shot” and argued that “this isn’t the first time America has faced this choice.” The previous time, interestingly, was said not to be the depths of the Great Depression but the height of the Gilded Age when “we had to decide: Would we settle for a country where most of the new railroads and factories were being controlled by a few giant monopolies that kept prices high and wages low?”
The correct answer, of course, was no. The Progressive movement championed by Teddy Roosevelt weakened giant corporations and vastly improved working conditions. And Obama’s quite right. Living standards rise when technology improves, but for society to genuinely prosper, deployment of new technology can’t be throttled by grasping monopolies. Which is why it’s too bad that Obama’s speech and his policy agenda essentially ignore this issue.
Obama’s speech dwelled primarily on the time-honored Obama themes of taxes, financial regulation, and education. These are worthy ideas all. But they are also exactly what Teddy Roosevelt didn’t bring to the table at a time when income taxes were unconstitutional and schools were entirely in the hands of local authorities. Instead, exactly as Obama said, Roosevelt’s idea was that we needed rules “to ensure competition is fair and open and honest” so “he busted up monopolies, forcing those companies to compete for consumers with better services and better prices.”
Today, thanks to the availability of trucks, we don’t need to worry about predatory freight-rail monopolies. But new technologies have created new problems for antitrust policy. Today’s version of the railroad barons are broadband Internet providers.
These telecoms aren’t bad guys, exactly, anymore than the railroad barons were. If they weren’t around, the world would be a worse place and Slate couldn’t possibly exist. But the benefits of the technology they provide are undermined by the reality that there’s almost no competition in the telecom sector. In my apartment, I’m able to choose between Comcast and Verizon, and two choices is about the best you can get in America. Under the circumstances, the companies compete—but only a little. Both offer slightly obsolete technology, crummy customer service, and high prices.
The obstacle to better service is not technology. Average Internet speed in many foreign countries leaves the United States in the dust. And in some select parts of the United States, Americans can get state-of-the-art fiber to the home. But it’s being rolled out at a snail’s pace. In Washington, D.C., where I live, we’re told that Verizon will bring FIOS to the entire city by 2018. They’re four years into the process and there are six more years to go. But six years is a lifetime on the Internet. Six years ago there was no Twitter, no Tumblr, no iPhone, and no Android. And it’s not like D.C. is last in line for this technology. Rollout hasn’t even begun across much of the country.
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.