St. Pete (Peter Huber, that is) Speaks! Cheers, Bob Hettinga --- begin forwarded text Date: 27 Oct 1995 14:23:50 GMT From: khh@access4.digex.net () (by way of rah@shipwright.com (Robert A. Hettinga)) To: rah@shipwright.com Subject: Technology: The Great Deregulator Organization: Express Access Online Communications, Greenbelt, MD USA Path: sundog.tiac.net!daily-planet.execpc.com!news.moneng.mei.com!uwm.edu!chi-news .cic.net!newsfeed.internetmci.com!in2.uu.net!news3.digex.net!access4.digex.n et!not-for-mail Newsgroups: alt.politics.economics Lines: 91 NNTP-Posting-Host: access4-2.digex.net X-Newsreader: TIN [UNIX 1.3 950824BETA PL0] X-Newsreader: Value-Added NewsWatcher 2.0b27.1+ Following is an article by Peter Huber. More articles by Mr. Huber can be seen at http://khht.com/huber/home.html. ----------- The sun is finally setting on a dismal century of economic commissars. Not Russia's, ours. I mean the people who, for most of this century, controlled price and output in markets for trucking, air travel, railroads, telephone service, cable TV, natural gas and electricity. Until recently, these mammoth industries, representing a sizable fraction of the U.S. economy, had about as much to do with free-market competition as the steel industry in Stalingrad. It started with the Interstate Commerce Commission. Established in 1887, the ICC was to be the federal antidote to rapacious railroad monopolies. Perhaps it was, for a while, but in the end it drove them into bankruptcy. Meanwhile, local, state and federal legislators set up baby ICCs left and right on the assumption that highways, pipelines, phone wires and power grids all required much the same handling as railway track. In track-like industries, monopolies were natural. Competition was wasteful. Commissions were smart enough to run things better. Most of the people who believed such things died years ago, but the government pyramids they built have endured. A great decommissioning of economic life in America is now under way. The job is almost finished for airlines and trucks. It's inching ahead in the communications arena. Electricity is just getting started. We'll find out in due course whether Newt Gingrich and Bob Dole can deregulate as boldly as Ted Kennedy and Jimmy Carter, who kicked off serious economic deregulation in the 1970s. As the Kennedy/Carter legacy confirms, the impetus for change isn't hatred of government. Nor can the decommissioning of America be blamed on right-wing capitulation to big business. We've just learned the hard lessons of commissariat collectivism, in much the same way as the Hungarians and the Czechs. Consumers end-run the regulators. Fed up with prices that force them to subsidize residential consumers, factories and hospitals cogenerate electricity in their heating plants. They install "private branch" telephone exchanges that displace about one-third of the phone service they'd otherwise buy from the local phone company. Landlords set up rooftop satellite dishes on apartment buildings and sell "private cable" service to tenants. When you mow your own lawn, regulators get trimmed too: There's no income tax for them to collect, no maternity leave to grant, no minimum wage to enforce. Technology outwits the regulators. Hub-and-spoke routing and yield-maximizing pricing schemes concocted on supercomputers that shattered the old Civil Aeronautics Board's point-to-point vision of how air travel should operate, and at what price. The FCC's vision of "local" broadcasting provided by a few, community-based stations collapsed when Ted Turner began bouncing his UHF station off a satellite and back down to cable systems nationwide. And billions of dollars of commission-prescribed prices will soon have to be rejiggered because smart-aleck programmers have worked out how to transmit two-way voice conversations live over the Internet. The commission's policy is to price voice connections about $ 4 an hour higher than "date," but digital technology obliterates the distinction. Regulators are cannibals. As commissions proliferate, they undercut each other. Long distance phone companies and "access providers" like Teleport expand under lenient federal control -- at the expense of local phone companies kept on a tighter leash by state commissions. Wireless phone service has been almost completely deregulated by its federal regulators, so it grows far faster than service by way of telephone pole, which remains heavily regulated under the price regulation maintained by one bureau of the FCC. Direct broadcast satellite, cable's competitor, is booming under the hands-off watch of another bureau of the same federal commission. Regulators invest badly. They direct utilities to put billions in overpriced power plants, inefficient wires and extravagant service out to the very last ranch at the end of nowhere. Cost is no object; it just gets dumped in the "rate base." Competition, when it arrives, is devastating, just as the fall of the Berlin wall was devastating to the factories that built Trabants. In these times of radical technological change, utility monopolies are as unstable as politburos. Many of the old-guard enterprises may still grow and prosper, but only if they learn to sell to a whole new class of buyers. Consumers, not commissars. -- Copyright 1995 by Peter Huber. Electronic copies of this document may be distributed freely, provided that this notice accompanies all copies. --- end forwarded text ----------------- Robert Hettinga (rah@shipwright.com) Shipwright Development Corporation, 44 Farquhar Street, Boston, MA 02131 USA (617) 323-7923 "Reality is not optional." --Thomas Sowell

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