The Dismal Science

By Jerry Pournelle

March 29, 2004

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Telecom, Congress, the FCC, and the Web

The new developments in wireless came just in time, because there has been a decided slowdown in completing the wired broadband access network. George Gilder tells us that South Korea has some 40 times more last-mile broadband access per capita than the United States, although all the relevant technologies were invented and developed here. You don't have to believe all of that to realize we haven't made as much progress in providing broadband access as Japan and Korea.

The reason we're lagging so far behind is government: We can't decide whether last-mile broadband access ought to be guaranteed by government (and thus provided by regulated public utilities) or simply available as the market dictates. And note that we're not talking about universal access into remote areas like mail: Studio City (and my house) still doesn't have DSL, although I do have cable modem service. No one wants to pay for upgrading copper or laying fiber here, and it's all the fault of the government.

We can debate the free competition vs. regulated public utility models for vital service without reaching any conclusion, but one thing is certain: They're hard to mix. California tried that with electric power: It privatized half of the process and socialized the other half, with the result that electric utilities had to pay market prices for products to be delivered at government-fixed sale prices. This was fine so long as fuel was cheap, but when fuel prices went up, distributors went bankrupt.

The same thing is happening in "last mile" broadband delivery. The investments and risks for construction of fiber optics or improved copper networks is privatized, but the returns are socialized. If you build a broadband delivery system, you have to give your competitors access to what you built, at prices to be set by politicians, which is to say, at prices set by competition among lobbyists.

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