Lela Markham on Monopolies   Leave a comment

Lela Markham Davidson Ditch Corrected

Thom Stark last week made the case for a government monopoly in high-speed Internet and this week, I respond

Thom, you actually think the Senate is less dysfunctional than the House? In 2014, the House passed over 350 bills that went to the Senate and simply were never taken up. Many of these bills were not bills Democrats would have voted for, but they weren’t even allowed to come up for a vote, which leaves constituents wondering where their elected representatives stand. And it doesn’t look like the Senate is doing any better in 2015, judging by how they dealt with the TSA authorization and its entanglement with the Obama immigration edict.

Alaska does have two Senators, which is equal to any other state, but just because a Senator claims to represent a state doesn’t mean that they do. ObamaCare was overwhelmingly unpopular in Alaska – instate pollsters found upwards of 70% opposition. Lisa Murkowski was the ranking minority member on the HELP committee during the writing of this thing (which is why she lost the GOP nomination for Senator in 2010; we weren’t fooled by her “no” vote on the Senate floor)) and Mark Begich was the 60th vote for passage (which is why he lost his 2014 reelection bid). Clearly they were not representing their constituents in their actions. The problem is that we’re stuck with them for six years if they go rogue. There is no accountability for Senators for six years between elections since they are no longer selected by state legislatures. You can impeach a President, you can recall a governor, but there is no mechanism to get rid of a Senator whose constituents realize they’ve made a grave mistake. Alaska really tried to recall Begich. The petition for recall had 100,000 signatures (1/8 of the population of the state) and nowhere to go. House members are much more sensitive to the opinion of the voters who put them in office because they face election every two years. Yes, people should be smarter about voting for elected representatives and not just vote for the sock puppets the two major political parties put forth as our only choices. Changes in ballot access laws to allow more third party and independent candidates would probably help there. Again, Alaska is not the only state with this problem. Other states have similar issues and largely for the same reasons.

Now for the main issue —

Access to the Internet is important and wrapped up in concepts of freedom of speech and association, but that does not require government involvement to protect it. Steve Jobs did a great job of creating a “build it and they will come” industry with his own money or the money of willing investors. I have no objections to private individuals innovating great ideas that open people’s eyes to new ways of living and making money from it. I object to government forcing innovation by edict and expecting the taxpayer (or the ratepayer in the EPB case) to foot the bill for services they have not chosen for themselves. If I’m a EPB ratepayer who does not choose to indulge in the Gig, I should not have to subsidize the ratepayer who believes it’s necessary for him to have it. If I’m a taxpayer in Alaska, I should not have to pay for someone who lives 5000 miles away from me to have a clear Netflix picture.

I reject the whole concept of “human rights”, by the way. Words have meaning that cannot change without consequences. Human “rights” are a made-up concept using a vocabulary that obligates the productive members of society to provide for the wants of the less-productive members of society in an arbitrary system determined by the zeitgeist of the contemporary era. I espouse natural rights, which are part and parcel with being a human being because they are constant throughout time and easily discoverable, but they also do not obligate anyone to provide them for me. I have a right to take care of my own needs, to the produce of my own labor and to the property that I claim through the exercise of my own production. I think, therefore I can express an opinion; therefore, I have a right to free speech. Each and every one of us has natural rights; they are the same for each one of us and we may not infringe upon the natural rights of others in the exercise of our own natural rights. Natural rights are those areas of our lives that only belong to us as individuals. They are so personal that nobody can violate them without also violating our humanity and therefore treating us as less-than human. We don’t have rights because the government decided to grant them to us. Our rights are inherent in our nature as human beings.

So, is Internet access a basic human right? Is it somehow sub-human for a person to live without access to the Internet? I think it would be degrading to deny someone access to such a powerful information and entertainment tool, but nobody is doing that. Access to the Internet is ubiquitous in the United States, a state of affairs largely created by tech companies that wanted to make money off the desire of Americans to have access to the Internet almost everywhere we go. What we’re discussing is Internet speed and whether government needs to provide greater and greater speed. And that’s where you and I don’t agree.

Yes, Europe has higher Internet speeds because the governments of Europe mandated them and coerced money from the more productive members of their society to build the networks. But as I noted in my last post on this subject, American companies are building those networks without government funding. It’s not happening as fast as a mandated build-outmight, but it’s also funded by users and what they will pay rather than by government and what they can steal from my pocket.

I’m under no illusions about the telecom corporations and their “altruism”. In Atlas Shrugged, the companies fighting against the government are trying to keep from becoming what the American telecom companies are – crony capitalists. Remember what I said about monopolies in my last post? All monopolies are bad for the consumer, but monopolies are virtually impossible to maintain without government intervention. The monopoly of cable companies is not a natural phenomenon and it is the epitome of a government monopoly. First, I can get Internet from three channels right now – telephone wire, satellite and cable and there are five companies competing for my business. That is because of an Alaska Supreme Court case that broke a federally applied monopoly over phone and cable lines in Alaska. The FCC ruled in the 1980s that ACS could do all the phones and GCI could do all the cable and not overlap, citing a natural monopoly because of geographic isolation (common administrative ruling in Alaska, btw). When an Alaska court ruled otherwise in the early 2000s, the FCC didn’t assert that prior regulation and so now we have competition for Internet in Fairbanks and Anchorage and networks built by them rather than the government. We don’t have fiber optic, but it’s coming — not that I think I need it.

EPB, on the other hand, got a $112 million porkulus grant, but according to this Washington Times article, EPB electric customers are footing the bill for more than $390 million in bond payments to cover construction costs related to the fiber network. That’s a lot of money essentially hidden in the electric bills of people who may not have opted for the Gig. Why should they? A gig a second is about 50 times faster than the national average for Internet. The average user in a home does not currently need that sort of speed for what is largely a news and entertainment venue, so the residential customers are not going to pay for the Gig. There’s going to be handful of individuals willin to to pay for it and probably some companies (who actually may benefit from those speeds), but all the ratepayers will see their electric rates go up to subsidize the system. Worse, the City of Chattanooga owns EPB, so when EPB billed the City of Chattanooga for installing the fiber optic cable, it was actually billing itself and guess how the City of Chattanooga will pay for that build-out? Taxes. Not only are the residents of Chattanooga paying more for their electricity to subsidize the ulta-high-speed Internet of a handful of users, they will also be paying more in taxes for the same system.

It’s the rotten beauty of a government monopoly.

Thom StarkI have no problem with Google choosing to bring fiber optic cable to neighborhoods in Kansas City, etc., and to temporarily forego profits as a long-term investment. I’m willing to bet that Google already has a plan in place for making phenomenal profits from this investment within three years (which is how long the IRS will let them charge off a loss in a local market). If they don’t turn it around that quickly, I’ll be surprised, but I won’t really care, because Google is a private company making a decision for the long-haul rather than the short term. Good for them.

The City of Chattanooga and EPB (which is owned by the City) is not a private company. It has no investors willingly providing financial capital in expectation of an eventual dividend. It’s financed by the ratepayers and taxpayers of Chattanooga, who will never see a return on their stolen money. They’ll bitch about their taxes and their electric rates and may not even realize these costs are so high because the City wanted to build a luxury for the few thousand users who can afford the monthly fee.

Telecom and cable companies have, by FCC and local regulations, generally been required to blanket entire cities, offering connections to every home. There’s a 1934 law that requires nationwide “wire and radio services” to every household at a “reasonable charges”. In exchange for wiring a community, telecommunications providers were often granted a monopoly to assure they could make money. Cable television companies made similar deals with cities and the FCC in the 1960s. There’s been some liberalization (uh, deregulation) of that system since the emergence of the Internet. Cities have opted for a more selective approach because the more competitive companies like Google argued that universal coverage was too risky and the returns were too low. My understanding is that Google is building its high-speed network as it finds demand, neighborhood by neighborhood. In neighborhoods in Kansas City, they asked residents to pay $10 to preregister for a gig of service which now costs $70 a month below a certain limit. It skipped certain areas entirely because they were too thinly populated or because of construction challenges. Google conducted preregistraton in 364 neighborhoods in KC; all but 16 met Google’s threshhold for connection. The brokerage firm Bernstein Research found that the potential customer base would be very profitable for Google.

Ah, but what about the poor neighborhoods? Well, yeah, rich people can afford things poor people can’t. Trying to make high speed Internet coverage universal will only slow down development of high speed Internet. That’s already happening. Los Angeles solicited plans for universal gigabit fiber networks and Google decided not to participate. Verizon was required by cities and some state laws to offer its FiOS services universally and it stopped expanding to new cities in 2010, citing the need to recoup its cost of capital. Yes, government could force it to be done as they did with EPB, but again, I object to people being forced to pay for a service they are not using and do not want. If someone wants the Gig, they should have to pay the full costs for it, not be subsidized by someone who would rather spend his money financing his retirement or sailing the Bahamas.

For me, it’s all about the liberty to choose what to do with my own resources.

Thom Stark is the author of the American Sulla trilogy, a political thriller. Lela Markham is the author of The Willow Branch, an epic fantasy. We also have opinions about the real world and thought we would share our conversation with readers.

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