BYLINE: By PAUL KRUGMAN; E-mail:
metaphors make bad policy. Everyone talks about the "information highway." But
in economic terms the telecommunications network resembles not a highway but the
railroad industry of the robber-baron era -- that is, before it faced effective
competition from trucking. And railroads eventually faced tough regulation, for
good reason: they had a lot of market power, and often abused it.
Yet the people making choices today about the future of
the Internet -- above all Michael Powell, chairman of the Federal Communications
Commission -- seem unaware of this history. They are full of enthusiasm for the
wonders of deregulation, dismissive of concerns about market power. And
meanwhile tomorrow's robber barons are fortifying their castles.
Until recently, the Internet seemed the very embodiment of
the free-market ideal -- a place where thousands of service providers competed,
where anyone could visit any site. And the tech sector was a fertile breeding
ground for libertarian ideology, with many techies asserting that they needed
neither help nor regulation from Washington.
wide-open, competitive world of the dial-up Internet depended on the very
government regulation so many Internet enthusiasts decried. Local phone service
is a natural monopoly, and in an unregulated world local phone monopolies would
probably insist that you use their dial-up service. The reason you have a choice
is that they are required to act as common carriers, allowing independent
service providers to use their lines.
A few years ago
everyone expected the same story to unfold in broadband. The Telecommunications
Act of 1996 was supposed to create a highly competitive broadband industry. But
it was a botched job; the promised competition never materialized.
For example, I personally have no choice at all: if I want
broadband, the Internet service provided by my local cable company is it. I'm
like a 19th-century farmer who had to ship his grain on the Union Pacific, or
not at all. If I lived closer to a telephone exchange, or had a clear view of
the Southern sky, I might have some alternatives. But there are only a few
places in the U.S. where there is effective broadband competition.
And that's probably the way it will stay. The political
will to fix the 1996 act, to create in broadband the kind of freewheeling
environment that many Internet users still take for granted, has evaporated.
Last March the F.C.C. used linguistic trickery -- defining
cable Internet access as an "information service" rather than as
telecommunications -- to exempt cable companies from the requirement to act as
common carriers. The commission will probably make a similar ruling on DSL
service, which runs over lines owned by your local phone company. The result
will be a system in which most families and businesses will have no more choice
about how to reach cyberspace than a typical 19th-century farmer had about which
railroad would carry his grain.
There were and are
alternatives. We could have restored competition by breaking up the broadband
industry, restricting local phone and cable companies to the business of selling
space on their lines to independent Internet service providers. Or we could have
accepted limited competition, and regulated Internet providers the way we used
to regulate AT&T. But right now we seem to be heading for a system without
either effective competition or regulation.
the F.C.C. has been steadily lifting restrictions on cross-ownership of media and communications companies. The day
when a single conglomerate could own your local newspaper, several of your local
TV channels, your cable company and your phone company -- and offer your only
route to the Internet -- may not be far off.
of all this will probably be exorbitant access charges, but that's the least of
it. Broadband providers that face neither effective competition nor regulation
may well make it difficult for their customers to get access to sites outside
their proprietary domain -- ending the Internet as we know it. And there's a
political dimension too. What happens when a few media conglomerates control not
only what you can watch, but what you can download?
There's still time to rethink; a fair number of Congressmen, from both
parties, have misgivings about Mr. Powell's current direction. But time is