Next-Generation Internet Not Guaranteed

by on June 23, 2006 · 4 comments

As Congress draws closer to passing significant telecommunications reforms, it’s clear that a larger issue serves as a backdrop to the hot topics of net neutrality, cable franchise reform, and municipal WiFi. That is, will the Internet be treated like telecommunications, or the other way around?

New technologies have caused a convergence in the communications sector so that the phone company can also be the cable company and vice versa. Indeed, an Internet company can also provide cable and phone services. EBay bought Skype, an Internet phone company that offers free calling, Microsoft is moving into the IPTV space, and Google offers voice services integrated with features like instant messaging.

All this activity is great news for consumers, as it increases choice and pushes down prices. There used to be a time when a long-distance call was something one had to be careful about because it was so expensive, but now most of us don’t give it a second thought. Cable is undergoing a similar change and, if things go right, prices will continue to drop for broadband even as speeds continue to increase.

Consider that prices for DSL service have lowered from an average of about US$30 to $40 just a couple of years ago to $17.95 today. But progress is not guaranteed and the hottest issues today–such as net neutrality, cable franchise reform, and muni WiFi–all come down to a key question: What is the proper role of government?

In the telecommunications space, the government traditionally assumed an enormous role–not only in arbitrating disputes, but also in setting prices, determining market entrants, and governing internal business procedures such as how many minutes are acceptable for a consumer to be on hold waiting for service. That type of micromanagement was a disaster. Yes, the telecoms still made money for a period under that regime, but the loss of flexibility impaired future investment, harming consumers and stifling innovation. The Internet is a different story.

The government did have a role in initially creating the Internet, but after its creation, regulators took a “hands off” approach. This freedom has created gigantic benefits not only for Americans, but also for individuals all over the globe. Anyone who questions this reality should consider what products from a company like Microsoft or Google would have looked like if the government had tried to micromanage the marketplace as it did in the telecom space. Instead of the desktop computer, Americans could have been saddled with Minitel-type terminals like those the French government concocted.

Read more here.

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