Freeman

ARTICLE

One Information Superhighway: Take It or Leave it?

Citizens Should Resist the Idea of a Single Superhighway

AUGUST 01, 1994 by ERIC BANFIELD

Filed Under : Regulation, Taxation, Competition

Mr. Banfield is owner of Banfield Analytical Services in Westmont, Illinois, specializing in writing, speaking, and analysis of financial, economic, and public-policy issues.

A key question about the “information superhighway” remains unanswered: Why only one? Americans have been led to expect the information revolution would bring us not one, but possibly hundreds of competing information networks. Now the future of telecommunications and cable will be dominated by a single system created under U.S. government jurisdiction and subject to U.S. government oversight.

Until just recently, the evidence suggested that the free market, without central government direction, would be allowed to establish information networks according to the needs of consumers. Technology, advancing rapidly, had been driving costs down at a rate that promised increased affordability of multimedia services over time. The sheer economics precluded any possible” need” for government assistance. The market process, without central direction, would develop not one “infrastructure” but instead many networks from which consumers could choose. In that free market, if a consumer disliked the level of performance or security offered on one service, he or she would be free to use a different one. Firms that did not satisfy consumers would have to adapt or fold, at their own expense.

But now the U.S. government asserts control over this evolution. It has worked out an arrangement with the large cable and telecommunications firms: The government will let these firms merge and will loosen a few other restrictions. In exchange, the firms will develop a single, centralized, fiber-optic cable information superhighway, called the “National Information Infrastructure” (NII), according to government standards. Presumably, most transmissions would have to use that one central highway.

The government wants to subsidize the building of that highway so that its price will be low enough to attract others from any market-based network that might offer a competing service. After using its power to price out market-based networks, the government would have de facto control over virtually all telecommunications. The government has also decided that in order to subsidize access to NII “for everyone,” it must levy a tax on all phone, cable, and other information services. Of course, that means “everyone” would have to pay that tax, at least indirectly.

One irony of this intrusion is that, in the name of “promoting competition,” the government claims it wants to “force competition.” No one in the industry, it seems, has pointed out that competition cannot be “forced.” Competition is only one element of sound markets, and it must evolve spontaneously. The monopolies the government officially wants to avoid are possible precisely because of the government’s involvement. No monopoly could survive the modern telecommunications era without government protection or privilege. Under free markets, without government meddling, competition is guaranteed.

But apparently the big multimedia firms don’t want competition. They prefer the easier life of government privilege and protection. They want the government to control and structure the market to their advantage. Cable and telephone firms, citing the large investments needed to begin laying cable, told the government they were reluctant to begin, unless officials would carve up the market in advance and let the corporate players know who their limited competitors would be in each region. Then they could proceed with “certainty.” The government was all too happy to comply. That means free markets and competition in communications and entertainment have been sacrificed to power-hungry corporations, legislators, and bureaucrats.

The first casualty of that communications monopoly is consumer privacy. As the telephone, computer, and cable services merge, the Clinton administration is already pushing a bill to allow the Federal Bureau of Investigation, the National Security Council, and other law-enforcement agencies to tap into citizens’ voice and data transmissions over the NII.

The second casualty, common in business-government arrangements, is the freedom of suppliers to select their customers. The regional phone companies (the seven “Baby Bells”) will have to make the NII available on a “nondiscriminatory” basis. The government wants “universal service,” meaning advanced telecommunications services “available to all.” It also wants the system’s developers to put schools, libraries, and hospitals “on-line” for free. If not, it will “re-regulate” the system. Declaring telecommunications a “necessity,” Vice President Al Gore said, “Congress, the executive branch, the FCC, and the states will share responsibility for revising universal service [and] will share responsibility for meeting those obligations . . . .”

Citizens, including multimedia firms, should resist the idea of a single superhighway created under government fiat. Indeed, some personal computer makers have already expressed “disdain” for the government’s single-superhighway idea. Competition and choice requires free markets, not rigged games benefiting those corporations with the most political weight. Consumers should not be satisfied with any centralized monopoly, especially in such an important area as communication of information.

ASSOCIATED ISSUE

August 1994

ABOUT

ERIC BANFIELD

Mr. Banfield is owner of Banfield Analytical Services in Westmont, Illinois. As an adjunct policy analyst for the Heartland Institute, he has testified before the National Association of Insurance Commissioners, The Illinois General Assembly, and a U.S. Republican Hearing on health-care reform.

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