Wu’s Many Mistaken Metaphors

by on July 30, 2008 · 16 comments

In today’s New York Times, Tim Wu writes in favor new regulation of the Internet and uses a number of bad analogies to do so. Let us count the ways.

My colleague Adam Thierer has already noted that OPEC is a group of mostly government-run oil companies whereas U.S. broadband service providers are private companies operating in an intensely competitive environment.

Wu bungles another analogy between oil and bandwidth. Wu writes, “Americans today spend almost as much on bandwidth — the capacity to move information — as we do on energy….If we aren’t careful, we’re going to repeat the history of the oil industry by creating a bandwidth cartel” — implying that bandwidth prices, for lack of competition, are about to skyrocket.

But in the last decade, the nominal price of oil has risen by a factor of 12. In the same time period, the nominal price of U.S. residential bandwidth has dropped by a factor of five or more. Mobile phone bandwidth has dropped in price even more. Thus $10 worth of oil in 1998 now costs around $120. Ten dollars of residential bandwidth in 1998 now costs about $2 or less.

Wu could not have chosen a worse metaphor.

Oil prices are mostly governed by the Fed’s monetary policy (not OPEC, yet another Wu blunder), and we don’t know which way oil prices are headed. But we know for sure bandwidth prices measured in dollars-per-bit-per-second will continue falling dramatically. The imperial forces of Moore’s Law and the equally powerful innovations of fiber-optic, memory, and hard-disk storage technology assure it.

This isn’t to say broadband networks are cheap. No, they are very expensive. They will cost hundreds of billions of dollars over the next five to 10 years. It is to say silicon and optical technologies are massively productive and will deliver ever greater services at ever lower prices. As Wu states, Americans may actually spend more and more dollars on monthly communications services overall. But per bit, they will be spending dramatically less. All this means is communications is becoming a vastly more important part of our lives.

By all means, let us explore and develop “alternative sources of bandwidth” as Wu desires. Unlike natural resources such as oil, which, while abundant, are at some point finite, bandwidth is potentially infinite. The miraculous microcosmic spectrum reuse capabilities of optical fiber and even wireless radiation improve at a rate far faster than any of our macrocosmic machines and minerals. It is far more efficient to move electrons than atoms, and yet more efficient to move photons. Left unfettered, these technologies will continue delivering bandwidth abundance.

But Wu fools no one with his slight of hand — attacking a phantom bandwidth “OPEC” — when his real goal is to establish and further empower his own cartel of scarcity-rationing bandwidth bureaucrats.

  • Tim Lee

    Bret, I’m wondering if we read the same op-ed. The only time “regulation” appears in the piece is in the sentence “The solution is to relax the overregulation of the airwaves.” Exactly which new regulations does this op-ed advocate?

  • Tim Lee

    Bret, I’m wondering if we read the same op-ed. The only time “regulation” appears in the piece is in the sentence “The solution is to relax the overregulation of the airwaves.” Exactly which new regulations does this op-ed advocate?

  • Jim Harper

    I like the care you’ve taken in this piece, Bret, though I somewhat agree with Tim that your interpretation of what Wu is getting at is overwrought.

    The one thing I really question is whether the broadband marketplace is “intensely competitive.” I would say that it’s “pretty competitive” or “kinda competitive.” There are so many ways for it to be more competitive, I don’t think, by comparison, the state of competition today could be called “intense.”

    All in all very good piece, and very well written.

  • Jim Harper

    I like the care you’ve taken in this piece, Bret, though I somewhat agree with Tim that your interpretation of what Wu is getting at is overwrought.

    The one thing I really question is whether the broadband marketplace is “intensely competitive.” I would say that it’s “pretty competitive” or “kinda competitive.” There are so many ways for it to be more competitive, I don’t think, by comparison, the state of competition today could be called “intense.”

    All in all very good piece, and very well written.

  • wirelessman

    I find your concern about “scarcity-rationing bandwidth bureaucrats” amusing in light of this post:

    http://gigaom.com/2008/07/30/frontier-sets-tiny-broadband-cap

    Frontier, a DSL provider, quietly imposed a 5 GByte/month BW cap on their users. They are just one example of many ISPs doing this. We should indeed be worried about “scarcity-rationing bandwidth bureaucrats”. However, they all appear to work for the ISPs. The US appears to one of the few countries in the world where broadband services available to consumers are regressing in both capability and price. A triumph of the free market if I ever saw one.

  • wirelessman

    I find your concern about “scarcity-rationing bandwidth bureaucrats” amusing in light of this post:

    http://gigaom.com/2008/07/30/frontier-sets-tiny

    Frontier, a DSL provider, quietly imposed a 5 GByte/month BW cap on their users. They are just one example of many ISPs doing this. We should indeed be worried about “scarcity-rationing bandwidth bureaucrats”. However, they all appear to work for the ISPs. The US appears to one of the few countries in the world where broadband services available to consumers are regressing in both capability and price. A triumph of the free market if I ever saw one.

  • Nakia J Bryden

    great article!, grats for u site :)

  • http://warezko.com czhakis

    I totally agree with you, Bret. I dont like Wu at all.

  • http://warezko.com czhakis

    I totally agree with you, Bret. I dont like Wu at all.

  • http://warezko.com czhakis

    I totally agree with you, Bret. I dont like Wu at all.

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