An anti-telco blind spot

I just posted something I wrote last night, but upon reading today's headlines on ZDNet, I just HAD to respond to what is, to my mind, incomprehensible blindness on the part of net neutrality advocates who seem intent on chopping off their nose to spite their face.

Protesters gathered in several cities across the United States to speak out against the power of large telecommunications companies. Advocacy for net neutrality is certainly one issue of contention, a stance I have opposed in the past, but another issue seems to have gotten thrown into the mix: opposition to nationwide video franchise licenses.

Quoting from today's article:

Protesters seemed most concerned about proposed federal legislation that would let AT&T and Verizon, both in the process of upgrading their networks to offer TV service, apply for a nationwide video franchise instead of negotiating individual deals with municipalities.
Opponents to this legislation say national franchises would allow phone companies to redline or serve only affluent communities while also cutting funding for public access stations for large cities, such as New York.
The New York City Council also opposes the national franchise legislation and earlier this month voted unanimously to urge Congress to maintain local control of public rights-of-way and to oppose the Communications, Opportunity, Promotion and Enhancement Act (COPE), the national franchise bill sponsored by Rep. Joe Barton, R-Texas, and Rep. Bobby Rush, D-Ill.

First, New York City's opposition to national franchise legislation shouldn't surprise anyone, because the power to dictate such terms generates localities a lot of "freebies." These include access to free broadcasting channels for city uses and taxes on service.  Asking whether New York City favors a national video franchise license is like asking a farmer whether he favors a reduction in farm subsidies.

Second, opposition to a national video franchise is particularly counter-productive given that the negotiation requirement is the reason cable companies are often de facto monopolies. It takes YEARS for companies to negotiate broadcasting rights with each municipality, a fact which adds considerably to the cost of a network rollout and helps to ensure that cable companies can charge consumers high prices.

Verizon and AT&T want to bypass these rules so they can quickly roll out video broadcasting services that compete with existing cable companies. Holding them back are government rules which protect the incumbent using high cost barriers to entry. Quoting Dominick Armentano, an economist at the University of Hartford whom I quoted in my last post:

But we must understand the true source and causes of monopolies — governmental barriers to free and open competition. The solution to the monopoly problem, then, lies not in antitrust laws (which should be repealed) but in the repeal of all governmental barriers to free and open trade. "

I can't think of a better demonstration of that principle than the requirement that video broadcasters negotiate with each municipality in order to roll out a competing service.

Another issue furrowing the brow of protesters - and deservedly so - was evidence that phone companies helped the NSA compile a database of American phone records. The phone companies currently deny this. Ignoring for the moment whether or not the denial is true, let's assume for the moment that the telcos did cooperate.

Cooperating with government by providing phone records on customers gains phone companies nothing while creating risks in the form of bad press should the cooperation be discovered.  Why, therefore, would companies choose to cooperate in a policy that so clearly works counter to their business interests?  It all depends on what the consequences of failure to cooperate are.

Microsoft had a practically non-existent lobbying budget when the DOJ first filed antitrust charges in the late 1990s. That isn't the case anymore, and now Microsoft has one of the largest lobbying budgets among computer companies.

If government gives itself the arbitrary ability to do things that can completely undermine your business, then it behooves companies to cultivate close ties with government. Large lobbying budgets are a result of intrusive government policy. If you want to put a stop to governments doing things like handing over your personal phone records, provide companies more protection from the overarching power of government.

Since we aren't willing to do that - for instance, by creating less wide-open antitrust rules (not necessarily abolishment, as I'll discuss...eventually), or by shying from true telecommunications deregulation that grants network owners normal property rights - we are going to have companies, particularly LARGE companies, that jump when government says jump.

It's a problem that WE control. Unfortunately, ideology interferes with our ability to see the solution.