In search of the regulatorium…

Ken Camp points to a Business Week story titled “The Phone Companies Still Don’t Get It”, and he links further to Bob Frankston and Martin Geddes who have a parable to tell. Bob Frankston trips happily down the sidewalk of metaphor, describing the ridiculous nature of the productized net and carefully sidestepping regulatory issues. In fact, if Bob likes anything less than monopolistic controls that push services rather than connectivity, it is “the regulatorium.”

Ken sums up an important aspect of Bob’s story thusly:

…we’ve created an environment where the FCC acts as a governmental arms of the telecommunications industry. Their role has been, regardless of what they say, to protect the telcos revenue streams and help ensure the illusion of free and open competition while guaranteeing the telcos can keep selling the same black hole to the public over and over, time and again.

Okay, gents, I’m with you up to here. But there’s something missing. Bob’s view of “the regulatorium” is totally skewed. Martin is a self professed libertarian whose perspective on the role of government is narrowed by a stupendous naivete! His naivete is dressed in a brilliantly verbal kaleidoscope of technically well-informed illusions though. Martin says,

There are so many blocking options, ways of setting aside reserved capacity, creating gateways, proxies, and private subnets. How about special peering agreements, unusual terms of service, locked-down edge devices supplied by the telco, different price policies, router queueing algorithms, topologies, hard-to-change defaults and settings, varying network symmetry and private IP address ranges. Good business for consultants like me in helping them evade the rules, but bad for the public.

To which I can only add, “Well, duhhh…”

All of us agree that the FCC generally isn’t useful in assuring (insert whatever you care about here). With the pirates in charge there’s no such thing as a free market or a fair market. States have also gone the lazy way of Judge Green. By tearing down the monopoly, we thought we could eliminate the need to regulate public services in the communications market because a free market would stimulate competition, innovation, and growth. That worked for a while. But more recently the monopoly found its way back to dominance and control, and our “regulatorium” has long since been tamed, defanged, declawed, neutered.

What we should be looking for is an answer to control of the monopoly, reassertion of a public service oriented regulatorium that will turn the tables on the greedballs. But the sexy Ayn Rand economics of the cold war has grown like a tumor on the body politic. People who should be able clearly to see the answer in policy formation, constructive regulation, and fair enforcement are looking for a roll in the sack with Dagny Taggart.

Greg Palast, a neutral and fair-minded middle of the road observer of modern culture, shared some good information on energy regulation yesterday. (Thanks to Tom for the link). Palast observes,

In the old, pre-Ken [Lay] days of regulation, my fellow economists used to complain about something called the Averch-Johnson Effect. The A-J Effect was the result of regulations which gave companies incentives to gold plate the electricity system, making it way TOO reliable. Too much cash was spent on keeping the lights on.

Well, gone are the days of the A-J effect. The gold-plating is gone — but not the gold. Under regulation, power sellers were limited by law to a profit of about 9%, what the law called a just and reasonable return. Now, the profits can be — and are — unreasonable, unjust and just out of sight.

Public infrastructure requires community focus. Whether you’re talking pavement, energy generation and distribution, communications, water supplies, or waste management, it is foolish to permit monopolistic practices to disguise themselves as free enterprise and squeeze excess profits from a degraded service environment in the name of some kind of ideological purity around the ideal form of capitalism. We have to start from the bottom up assuring adequate local and state regulation of services, through statutes that reform the Public Service Commisions, the Public Utilities Commissions, through enabling municipal code updates that mandate equal access and cap profits. We need to wrest control from the monopolies again.

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One Comment

  1. Posted July 21, 2021 at 12:31 | Permalink

    Government isn’t your friend, Frank…

    There’s some additional nuance here. My position is that government does have a role in the commission and contruction of access networks. It’s not necessarily a lead role, but a role nonetheless. “Pragmatic libertarian”, maybe.

    The 1996 didn’t deregulate the industry, it just shuffled the regulatory pieces around and preserved the key bottlenecks, just in smaller regions.

    Infrastructure doesn’t always respond to the price mechanism well, because price signals that have to pass through too many layers from diffuse demand get lost. The transaction costs mean we have to find other ways of collectively deciding to create infrastucture — or be beholden to a usurious private monopoly supplier.

    As you rise up the stack you get ever close to the realms of political speech, and government becomes less and less welcome.

    The middle ‘C’ of FCC leaves an ambiguity as to where up the stack they’re supposed to stop. So I think we’re in considerable agreement, but I don’t see salvation in the current regulatory model. Only new finance and funding approaches will work — and not enough space here to give it the depth it needs.

    The FCC has no interest in abolishing itself, only in perpetuating the status quo. If you’re dependent on political caprice to wrest control from monopolies, good luck — you’ll need it.