Lela on Monopolies   1 comment

Lela Markham Davidson Ditch CorrectedI am not completely opposed to government providing services, Thom. I’m on record supporting the State of Alaska building and owning (then leasing to a private company) a large-diameter natural gas pipeline from the North Slope to tidewater for export to the Asian market. Although government not interfering in the private market is my default position, I support the gas line being built by the State of Alaska for a variety of reasons.

The State of Alaska is an odd duck among state governments.  In many ways, Alaska is more a resource corporation than a government. Governor Walker is the CEO, the Legislature is the board of directors, and the people are the shareholders. The people currently pay no income or statewide sales tax and we receive a dividend on the state’s long-term investment account. The state government is funded by the sale of our resources by the permit holders – Conoco-Phillips, British Petroleum, etc. Our cut of the proceeds is substantial. In this, we are more like Saudi Arabia than Ohio.

For almost 60 years, the energy companies have promised they would build a gas pipeline, but somehow they never get around to it. Alaska neeeds to diversify our economy and Interior residents desperately need energy relief (home heating diesel was between $2.60 and $3.80 a gallon this last year; it takes approximately 1500 gallons to heat an average sized home for six months of winter; electricity is 24 cents a kilowatt hour — that’s what I mean by DESPERATE). If the State of Alaska were truly a resource corporation, building a pipeline would be an investment strategy that would pay huge dividends in the future, but because we think of it as a State government, we’ve just waited and waited until we’ve finally recognized that private industry has no real interest in building the gas line until it completely benefits them. This speaks to the colonial nature of Alaska, a subject for later. While I would oppose the State using my tax dollars to build the thing, I support it taking the money the oil companies pay for our resources, leveraging credit against our existing resources, and building the gas line ourselves, with the goal of diversifying our economy and ending dependence upon the federal government.  Chattanooga’s situation is entirely different.

The City of Chattanooga is a taxpayer subsidized entity and government exists to meet public needs by providing infrastructure and services when there are no other ways to provide them. You could argue, as the City of Chattanooga claims, that EPB is building needed infrastructure that the private sector isn’t interested in, but I don’t think that’s accurate. The Internet certainly makes my work and play easier, but studies have shown that more than half of Internet usage is entertainment – You-Tube, Netflix, iTunes, Hulu, and Amazon Instant Video. Branching into rural areas is expensive for an ISP, which is why Comcast and ATT were delaying, waiting for technological improvements, but also citing a low level of interest from users. Chattanooga already had broadband, just not fiber optic. Unlike the Alaska gas line, ulta high-speed Internet hasn’t been decades in the making. City of Chattanooga started talking about it in 2008 and applied for stimulus funds in 2009. It really was a “need” created by the $7.2 billion for broadband investment in the American Recovery and Reinvestment Act of 2009 (what we call the stimulus). According to this study by the Public Policy Institute of California broadband Internet has so far not resulted in more jobs and does not appear to increase telecommuting or other home-based work. Non-fiber optic broadband is widely avaialble – about 85% of US households had it in 2006. Some rural and suburban areas are still waiting, but it’s not necessary for government to provide it. Here in Alaska, many communities still don’t have regular cable, let alone fiber optics. When the Palin administration decided not to participate in stimulus-funded broadband, a group of Alaska Native corporations along with Arctic Slope Telephone Cooperative partnered with Quintillion to bring fiber optic under the Arctic Ocean to villages that currently only have satellite access. It’s coming down the Dalton Highway and will be accessible by other Alaskan communities by 2016.  And I will oppose my City government spending the money to build onto it and instead ask our local Internet providers to do it. Of course, Fairbanks already has broadband and there’s a lot of question whether anyone would notice the difference between traditional broadband and fiber optics. Programmers at Apple might. Ordinary humans … probably not. Speaking of Apple, Seattle is getting fiber optic broadband provided by a private company  which is also expanding in Denver, Portland, Minneapolis-St. Paul, Orlando, Phoenix, Tucson, Albuquerque, and Spokane. Rates are comparable to what EPB is charging, which also is counter to your assertion that government can do it cheaper. If government didn’t do it, Century Link, AT&T or Comcast would have done it and probably at a lower cost to the consumers.

The reasons I see private enterprise as generally preferrable to government-provided  services are several. Private enterprise allows customers to make choices. When my phone provider was providing lousy Internet service several years ago, I switched to a cable provider and got better service for a smaller monthly rate. I didn’t need a government official to tell me that I could get better service for less at a competitor. I researched that myself and made my own decision. Government monopolies tend to be very zealous of their customers. I can’t opt out of the City-provided weekly trash service at my home, even though there is a private provider nearby that could do the exact same pickup for $20 cheaper a month. I also like that private provider because I know that he is providing the service for a fair rate, not subsidizing the cost of my garbage pick up with my taxes.

Which is the problem I see with Chattanooga’s EPB. The money to build it came from the paychecks of American taxpayers across the country – from people who may never know fiber optic cable and probably won’t miss it. That’s money down the drain as far as they are concerned – money that could have been used to fund their retirements, or pay down their mortgages, or send their kids to college. Instead, it’s providing a good clear Netflix picture for someone in Tennessee.

EPB admits that expanding into rural areas will require that Chattanooga electric ratepayers subsidize fiber optic to those new areas, which has got the local taxpayers as well as the ratepayers up in arms. Yeah, sure they won’t need to pay shareholders – otherwise known as investors – but EPB also submitted a bill to City of Chatanooga and two other nearby towns for nearly $2 million. Where will that money come from? Taxes! According to that same article, subscriptions for the new cable service are only 2/3s of what was projected, suggesting the public wasn’t all that interested in one gig in the first place. Apparently, a couple of start-up tech firms relocated to Chattanooga for the Gig, but they can relocate to several other cities for a gig within the next year, so Chattanooga’s tech-hub dreams may not come to fruition, but the higher rates and taxes will be with residents for a good long while, as will the federal debt that ballooned to fund programs like this.

To me, all monopolies are bad, regardless if they are private or governmental. Natural monopolies do occur sometimes in utilities. It’s difficult for more than one company to distribute water to a neighborhood, for example, although historically electricity and gas were provided competitively in several US cities before the era of government-created monopolies began in the 1880s. The fact that I can get Internet from three different networks at my house – phone, cable and satellite – suggests that there is no natural monopoly for Internet . Monopolies can set their own rates without fear of customer reprisal. If my electric company gouges me (24 cents kwh), there’s not a lot I can do about it except go to the ratepayers’ annual meeting and whine along with my fellow abused ratepayers which (trust me) does nothing to lower the cost of electricity to my home.  Going to the State Public Utilities Board doesn’t lower rates either because they cite natural monopoly and the impossibility of properly evaluating rates in geographic isolation. Our electric cooperative, by the way, is a not-for-profit entity, supposedly owned by the ratepayers. Bottom line is – monopolies usually work against the consumer.

I’d love to discuss regulation sometime, but I want to say one last thing about states rights and federalization.

The Civil War is dead history, Thom, but states rights will continue to be an issue for as long as the federal government does not recognize the rights of states to govern within their own borders and the rights of individuals to choose what sort of state they want to live in. Federalism was always at the heart of the Constitution, but like many a good idea, it’s been subverted by a lack of understanding of our history and the growing power of government.

Where were Alaska’s Congressional delegation on Positive Train Control? We could argue that our two senators are essentially useless shills for big oil companies and don’t actually work for the State of Alaska. Alas, that is the unintended consequence of the 19th Amendment. We elect senators for six years during which time they have absolutely no accountability to the citizens who elected them or the states those citizens live in until their next election. Lisa Murkowski just started running for reelection in 2016 and it’s amazing to watch how pro-Alaskan she is now that she has to face the voters again. Begich and Murkowski claimed they argued on our behalf, but they voted for the bill that authorized PTC nationwide, so ….  I don’t think either offered any amendments to exempt rail lines that aren’t actually at risk of a head-on collision. Don Young did resist it and claims he is resisting it. He did vote against it.

The bigger issue however is that Alaska (and most Western states) are poorly represented in Congress. Don Young is one voice in 465. Larger population states do not understand the challenges of smaller population states and, therefore, enact laws that often do not makes sense for states with lots of land and few people because these laws are predicated on the idea of limited land and large populations that exist in the more urban large population states. Here’s a visual. Crunch Alaska’s landmass down and we fit into the states east of the Mississippi. We have three votes in Congress. The states east of the Mississippi have 350 votes in Congress. With that ratio, you might as well shout into a hurricane and expect to be heard.

Thom StarkAlaska is not the only state in that predicament. Small population states have no effective voice in Congress against large population states. The anti-federalists foresaw this problem, by the way. With the exception of Texas and Arizona, the states that complain the loudest about federal overreach are the states that have the least representation in Congress.  They’re also the ones that many of these mandates don’t make sense for because they lack the population to support unfunded mandates. Many of these states struggle economically because almost all of the land and therefore most of the resources belongs to the federal government, which doesn’t want to develop its resources, but would rather suck the taxpayers dry. Small population states suffer from a triple whammy of an artificial land shortage, illogically applied laws and regulations combined with inadequate Congressional representation. Faced with the intransigence of the federal administrative state, the affected states apply to their Congressional delegations, but those elected officials can’t be heard over the clamor of large-population states patting themselves on the back for solving a problem that the small-population states saw no evidence for. When a small-pop state goes to Congress with a real problem that requires a solution different than would be available in a large-pop state, we’re told our way can’t be used because it wouldn’t work in New York or California and all laws must be applied evenly, so we apply once more to our congressional delegations who have no real power in Congress … which leaves us laying out $161 million for a train monitoring program to prevent a problem that doesn’t exist in Alaska outside of a John Voigt movie.

We’ll come back to this subject, I think.

One response to “Lela on Monopolies

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  1. Pingback: Broadband & States Rights with Thom Stark | aurorawatcherak

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