--- begin forwarded text
Delivered-To: rah@shipwright.com
Delivered-To: clips@philodox.com
Date: Thu, 4 May 2006 16:12:01 -0400
To: Philodox Clips List
From Qaddafi with Love
In the movie The Aviator, Senator Owen Brewster adamantly opposed
competition in international flights deeming that it was in the national
interest to support only one provider. This was a canard. The same argument
has been continually used in creating and protecting geographic monopolies
for a host of resources including utilities such as telecom service
providers. Vladimir Lenin called these resources the "commanding heights"
of the national economy - too important to be left to the whims of the
private sector.
Unfortunately, many proponents of net neutrality miss the forest for the
trees when promoting their nationalization of network pipelines.[8] [9] The
real recipe for reform is not yet another round of reregulation or
confiscation of private property,[10] rather it is the abolition of State
machinations involved in the telecom industry as a whole.
Many users mistakenly believe that the current radio spectrum and telecom
regime is the product of the free-market. It is not. The FCC did not create
the radio spectrum nor does it have some homesteading claim to the
near-infinitesimal ranges found within it. It is, simply, a bureaucratic
sophistry, which oddly enough believes it can distribute something it does
not own.[11]
Market intervention begets yet more market intervention: the State caused
the problem in the first place, and is now called into action to fix
it.[12] It is a history of folly that has been studiously chronicled and
its only cure is cold-turkey abstinence.
Geographic Monopolies
Throughout much of the country, individuals, families and companies have
usually only one or two choices for accessing the Internet: through the
cable company or the telephone company. Similar to utilities such as water
and electricity, the reason for this is that the State intervened and gave
certain companies a geographic monopoly for offering these services. This
is misleading and a sham for it alone has put content providers in the
bind, in between the proverbial rock and hard place.
Several pundits-cum-activist, including science-fiction author Doc
Searls advocate a net neutrality policy akin to the communal farms of
command economies. For instance, Mr. Searls recently compared Internet
access to natural resources such as rivers and seas, asking if any of these
should be private. His is a public goods argument, an argument that
conflates natural resources that have been homesteaded with endeavors that
have been created through confiscation (taxes).
One of the chronic problems plaguing public roads (i.e., road socialism) is
traffic. There is no pricing mechanism to discriminate between off-peak and
on-peak times; the roads are a clear illustration of the tragedy of the
commons.[13] Internet traffic experiences a parallel phenomenon: throughout
the work week, network traffic peaks during the day and declines at night -
a cycle also found on public streets.
Whether or not proponents of net neutrality want to acknowledge that
scarcity exists, it does. Despite continued increase in bandwidth capacity,
a router can only handle a certain amount of traffic. Just like a four-lane
highway, it can only supply a certain threshold of traffic and is therefore
inherently limited.[14]
Fluctuating Prices, Mercurial Rates
Numerous cell phone companies have created a business model that
illustrates this principle in true form, the differentiation of minutes.
Sure, the bits of information that are sent across the airwaves and through
the network backbones are essentially the same no matter the time of day,
but the amount of traffic varies. Therefore various pricing packages
include variables ranging from the daytime, evening, weekends, and even
roaming. Some even discriminate based upon whom you call (e.g., free calls
to someone using the same phone service).
This phenomenon of adapting to supply and demand is also seen in other
markets, such as sporting events. Many baseball teams now offer ticket
packages that vary according to whether a game is held at night, against a
specific team, or during a particular month.[15] Additionally, rates change
according to the type of seat (e.g., sky-boxes), location of the seat, and
group discounts.
Several commercial airline providers, most notably Northeastern-based
JetBlue, have successfully used variable pricing based upon how far in
advance you booked, the level of demand for a particular flight, weekdays
versus weekends, and so forth.
There is no shortage of empirical examples illustrating profitable business
models that embrace variable pricing. However, it is neither the job nor
obligation of the taxpayer to finance, or in any manner subsidize, any
business entity. The chief concern for both individuals and corporations
alike has been the role of the State. If either side had their druthers,
the State would intervene; it is a win-win situation for government
intervention - a role whose legitimate jurisdiction has been left
unquestioned.
In reality, both sides are at fault. If the legislative proposals lobbied
by the content providers are enacted, the FCC will ultimately be allowed to
regulate and intervene more than it currently does. It will be setting a
foreboding precedent and granting a level of authority that Leviathan has
historically been reluctant to relinquish.
Similarly, if the legal monopolies protecting service providers continue
without deregulation, then the censorship fears imagined by some could
become a reality.
It is not a matter of having regulatory oversight - checked or unchecked
the intervening State apparatus and its subterfuge obfuscate and remove
accountability that private property and contracts would otherwise resolve.
Tim Swanson is a graduate student at Texas A&M University. He would like to
thank DJC|TANSTAAFL and Andy Stedman for their comments and suggestions.
Send him mail. Comment on the blog.
Notes
[1] The research and development efforts at Stanford Research Institute and
Xerox PARC should not be understated. While SRI originally operated in part
through government financed grants, due to anti-war sentiments throughout
its organization and on campus, it later became a non-profit organization
divorced from DARPA funding. The totality of PARC was funded privately. In
addition, it was through the private commercial efforts of Apple to
incorporate many of these ideas into practical everyday computing
applications (e.g. Ethernet and the GUI). See also the "Mother of All
Demos" as well as this vintage technical documentary covering the original
ARPANET design methodology circa 1972.
[2] To the chagrin of John Dvorak, see also: Bower, JL & Christensen, CM.
"Disruptive Technologies: Catching the Wave." Harvard Business Review.
(January-February) 1995: 43-53.
[3] While numerous telecom firms have indeed begun rolling out "Triple
Play" services, in reality it would be counterproductive and inefficient
for them to build their own search engines and web applications. They
already specialize in certain areas, none of which involves this particular
division of labor. Arguably, their efforts could be as ineffective as the
joint national Franco-German affair in creating their own subsidized
imitation of Google.
[4] While some urban legends claim the original purpose for ARPANET was to
allow institutions to communicate with one another in the event of
disastrous war, this is a myth. Charles Herzfeld, who was director of ARPA
at the time, has noted that it was designed to effectively and efficiently
manage and utilize relatively scarce computing resources across the country.
[5] The hypocritical irony of the Sherman Anti-Trust Act is that the
government only applies the strong-arm tactics when it is in their best
interest - they penalize the private industry for acts they themselves
perpetuate. See also Dominick Armentano, "Antitrust: The Case for Repeal"
and "Antitrust and Monopoly."
[6] This monopoly was granted in exchange for the promise of "universal
service" (like "universal education"). It has served to subsidize rural and
residential customers at the expense of urban and business use. Arguably we
might have very different patterns of land use if this subsidy never
existed ("the seen and unseen"). And like all rights artificially concocted
by the State, it set forth the disingenuous precedent that everyone has an
invented right to service regardless of location - which was taxing enough
in the days of POTS let alone broadband.
[7] While some vary by degree, without exception, regardless as to the
political party in control of Congress or White House, FCC commissioners
are always pro-State - less government is still government intervention.
See also: "Now On The Auction Block" and "The Baptists Are The Bootleggers."
[8] Speaking of trees, in 1958, Leonard Read detailed the complex processes
of pencil construction. From chopping down the cedar trees and transporting
them to mills, to mining graphite and refining it to certain grades; to
locating and squeezing rubber into the familiar cylindrical shape, to
identifying and applying the exterior color. No one entity orchestrated the
plethora of variables involved in each meticulous step from beginning to
end; from excavating Earthen elements to placement on the store shelf.
Rather it was through the independent entrepreneurial actions of the market
that coordinated the supply and demand through prices - not a federal
commission. See: I, Pencil.
[9] While somewhat tangential, in the early 1970s Libyan Colonel Muammar
Qaddafi nationalized oilfields owned by foreign firms. The Hunt family is
historically seen as "sacrificial lambs" due to resisting theft and
extortion imposed from his brand of socialism.
[10] Some techno-pundits point to South Korea as a modern success story.
While cities such as Seoul may indeed be more wired, with larger capacity
connections, what is glossed over or ignored entirely is how this was
achieved. In a word: subsidies. The South Korean government took tax
revenues and redistributed the wealth - at least $24 billion worth - to
broadband endeavors. In their mind, the ends justified the means.
[11] With land-line Internet connections today, firms have the ability to
add near-limitless bandwidth without little FCC oversight. As Declan
McCullagh has pointed out, if net neutrality as enshrined by individuals
like Doc Searls is legislated, the FCC would gain the ability to install,
monitor and otherwise control the network. See also this collection of
op-eds and editorials from the National Journal's Policy Council.
[12] For instance, the government's anti-spam solution, enacted through
legislation has failed by nearly all objective measurements. The management
of top-level domains through ICANN, whom is granted the monopoly by the
Department of Commerce, has been criticized due to seemingly vague
governing procedures - there is a disconnect between its central mission,
to bring about more TLD space, and its relatively glacial pace in doing so
(see the cases of .xxx and .web) - and non-compete bids with Verisign.
[13] See also, Thomas DiLorenzo: Why Socialism Causes Pollution.
[14] Among other analogies, a toll-road has been used to negatively
describe the throttling mechanism the telecom companies might employ. While
this is possible and even plausible, it is risky from a PR stand point.
They would not just punish the provider who does not pay them off; they
would also alienate the end user who wants content that does not have
favored status - and those are customers too. In the end however, it is
still their network and their property to use as they wish.
[15] For a good overview see: "Case 7.1: Variable Ticket Pricing, Should
the Minnesota Twins Catch the Wave?" The Business of Sports: Text and Cases
on Strategy and Management. Stanford University Graduate School of
Business. 2001, 304-313.
Ludwig von Mises: "Nothing could by more mistaken than the now fashionable
attempt to apply the methods and concepts of the natural sciences to the
solution of social problems." - Omnipotent Government
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R. A. Hettinga