[US] Digital Robber Barons?

dahamsta

New York Times (registration required)

Bad metaphors make bad policy. Everyone talks about the "information highway." But in economic terms the telecommunications network resembles not a highway but the railroad industry of the robber-baron era — that is, before it faced effective competition from trucking. And railroads eventually faced tough regulation, for good reason: they had a lot of market power, and often abused it.

Yet the people making choices today about the future of the Internet — above all Michael Powell, chairman of the Federal Communications Commission — seem unaware of this history. They are full of enthusiasm for the wonders of deregulation, dismissive of concerns about market power. And meanwhile tomorrow's robber barons are fortifying their castles.

Until recently, the Internet seemed the very embodiment of the free-market ideal — a place where thousands of service providers competed, where anyone could visit any site. And the tech sector was a fertile breeding ground for libertarian ideology, with many techies asserting that they needed neither help nor regulation from Washington.

But the wide-open, competitive world of the dial-up Internet depended on the very government regulation so many Internet enthusiasts decried. Local phone service is a natural monopoly, and in an unregulated world local phone monopolies would probably insist that you use their dial-up service. The reason you have a choice is that they are required to act as common carriers, allowing independent service providers to use their lines.

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Gordon