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Why regulations are important

I'm making a trip to Europe next week, landing in Shannon Airport (near Limerick Ireland) Sunday morning then moving on to London that following Tuesday. In a way, it's like returning home, as I used to live in Limerick and know the Shannon airport and Limerick areas very well.
Written by John Carroll, Contributor

I'm making a trip to Europe next week, landing in Shannon Airport (near Limerick Ireland) Sunday morning then moving on to London that following Tuesday. In a way, it's like returning home, as I used to live in Limerick and know the Shannon airport and Limerick areas very well. In fact, going through my box of unused stuff in my closet, I have my old European GSM phone (brings back fond memories, like playing Tetris in the immigration waiting area at Dublin airport after confusion over my residency stamp almost got me deported back to Switzerland), chargers that have the weird British plug standard that would fit well in a mad scientist's lab, attachments to make my laptop work on the power grid over there, etc. I'm amazingly well-prepared for a last minute trip to Europe.

My plan is to try to recharge my old Irish SIM and use that while in Ireland. I thought I would have to buy a UK SIM if I hoped to avoid the draconian roaming charges European phone companies used to impose on wireless customers. That was a real problem when I lived in Geneva. Geneva is bounded on three sides by France, which means it was close enough for my phone to accidentally hook into a French network (mine was Orange Switzerland). That would quickly run down my prepay credits.

While searching on the Internet, however, I discovered that Vodafone has abolished roaming charges between the UK and Ireland, which means I may be able to use my Irish SIM for the duration of my trip (NOTE: I'm not yet sure whether Vodafone's policy only applies to postpay / subscription plans; I'm hoping it doesn't).

Vodafone's policy change appeared to be a pre-emptive move in anticipation of new European Commission (EC) policies that would cap roaming charges throughout the union. Telcos predictably screamed, saying it would undermine service as they derive so much revenue from the practice. Anti-regulation types might argue that this is an unecessary imposition on the market, essentially fixing what European telcos are allowed to charge.

Contrary to popular belief, I am not an anti-regulation type (I'll explain why later). For a point of comparison, imagine if roaming charges were imposed every time you crossed an interstate border in the United States. Technically, it is possible. Some mobile networks might not have coverage in certain areas. Most of the majors, however, have nationwide networks, so that is less of a problem these days. Most people don't face roaming charges anywhere in the continental United States (crossing an imaginary 2000-mile line in the sand to the north and south of the country is a separate issue...I think they call them "borders").

Europe has Europe-wide telecommunications companies, like Vodafone, Orange and T-Mobile. Even so, these companies still charge the same roaming fees as everyone else, mostly because there is so much money in it due to the necessity of crossing borders in such a tightly-packed region (again, imagine if Americans paid roaming charges every time they crossed interstate borders). Europe is trying to create a common market throughout the EU area, and its hard to do that when companies essentially collude to maintain high roaming charges.

Bringing roaming charges under control is not just good civic policy within a region hoping to bring disparate cultures within a common (if somewhat loose) superstructure, but also from a common sense standpoint. This is SENSIBLE regulation, which attacks a specific instance of abuse that, left on its own, is not a sufficiently large nuisance to consumers that it creates large competitive advantages to companies who break ranks and compete on lower roaming charges.

Of course, SENSIBLE is hardly a firm basis upon which to impose regulations, which is the essential problem with regulations. Give regulators the power to regulate, and they might just start thinking that they are too smart. They might try to build skyscrapers out of pinecones, or reanimate dead things using car batteries and lengths of coaxial cable. I have absolutely no idea why those examples sprung to mind (I have better examples a few paragraphs down).

Common sense is a slippery concept, and contrary to popular belief (well, belief among some economists), economics is not a science in the sense that chemistry or physics are sciences.

Clearly, regulations are essential. If not, Somalia with its absence of a central government would be an economic paradise. There is something fundamental about well-working economic systems that relates to structure, whether those structures are legal or regulatory. Since angels haven't descended with gold tablets written by Saint Adam Smith outlining the shape of the perfect market economy, imperfect human beings have to define that structure.

There is no alternative to unleashing relatively smart people to craft rules that make sense for something as complex as an economy composed of billions of individual buyers and sellers. They might do boneheaded things, like break the British rail system into a thousand tiny pieces, create rules that make it hard for challengers to enter cable broadcasting markets, or create housing-related tax policies the net effect of which is to regularly inflate housing bubbles every twenty-or-so years.

Governments do very stupid things. That doesn't mean that governments shouldn't be in the business of making rules.  Governments are incredibly important to the functioning of the economy.

Net neutrality keeps popping up as an issue for debate, most recently because of some of the actions of Comcast took in order to slow down excessive users of their network (George Ou made, in my opinion, a good argument as to why this was necessary, given the limitations of the DOCSIS 1.1 standard). I'm not against the principle of the FCC regulating networks in this way (unfortunately, as it would be so much easier to stand on the moral principle soapbox and thunder against the dangers of government interference). I'm just worried that there are hidden side effects every bit as insidious as local franchise rules the net effect of which was to protect cable companies from competition (which clearly was not the intent).

Anyway, I think if the goal is to create a common market as large as the European Union, having hidden toll booths that trip you up as you accidentally walk across an imaginary line need to stop. Roaming charge price caps make sense, and are examples of what I consider to be "sensible" regulation.

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