IP Democracy: Eminent Domain as Telecom Policy

Andy Kessler, a former hedge fund manager turned author, has a provocative piece in the Weekly Standard. Based on left-right stereotypes, you might expect him to be against net neutrality regulation. And you’d be right, but that’s not all he’s got to say:

[T]he answer is not regulations imposing net neutrality. You can already smell the mandates and the loopholes once Congress gets involved…We all know that regulations beget more lobbyists. I’d rather let the market sort these things out.

But what market? Phone lines, cable, and cellular—i.e., the means of Internet access—are all regulated; their operators are quasi-monopolies. Even if you end the monopolies, the incumbents have the advantage of a huge head start. Broadcasters own valuable spectrum and feed us cretinous shows like Wife Swap and The Bachelor. Cable has a lock on our homes via local franchise bribes, er, fees, so we get Lifetime and Animal Planet that no one watches. Satellite TV is content to charge just a hair under cable’s pricing umbrella. For phone companies, too much Internet bandwidth would threaten their bread and butter—overpriced $25 per month (it’s worth no more than $1) phone service and hot innovations like call waiting.

So how do we fix this? Are we stuck in telco hell? Silicon Valley can ignite a political arms race and spend more on lobbyists, but why play an old man’s game? Instead, these webbies should get creative, change the rules…Take the telcos and cable companies out at the knees.

I have to admit, Kessler’s proposed strategy caught me by surprise. Referring to the Supreme Court’s Kelo v. City of New London ruling, he suggests that eminent domain may have a place in the current telecom policy debate.

Surely there exists some clever Silicon Valley counsel to twist the wording of the [Kelo v. City of New London] precedent…[S]tart with this line: “Economic underdevelopment and stagnation are also threats to the public sufficient to make their removal cognizable as a public purpose.”…Sure, property rights are important, but that doesn’t mean we can’t shake a cattle prod at our stagnant monopolists and say “update or get out of the way.”

…I know, I know. This sounds wrong. These are privately owned wires hanging on poles. But so what? The government-mandated owners have been neglecting them for years—we are left with slums in need of redevelopment. Horse-drawn trolleys ruled cities, too, but had to be destroyed to make way for progress. How do we rip the telco’s trolley tracks out and enable something modern and real competition?

Forget the argument that telcos need to be guaranteed a return on investment or they won’t upgrade our bandwidth. No one guarantees Intel a return before they spend billions in R&D on their next Pentium chip to beat their competitors at AMD. No one guarantees Cisco a return on their investment before they deploy their next router to beat Juniper.

Posted by Mitch Shapiro on June 20, 2006 1:16 PM to IP Democracy