|
 he
big vote on telecom deregulation in the U.S. House ("Tauzin-Dingell")
happens today or tomorrow.
In this heavyweight
prizefight among huge corporate interests, there are no angels on
either side. It's easy to hate your local phone-company monopoly
every time you get your phone bill. And AT&T has a dreadful
record of supporting free-market deregulatory policies in telecom
and in economic policy generally. (AT&T has consistently had
the most left-wing corporate foundation giving of any major Fortune
500 company.) This is like the Iran-Iraq war. It's hard to root
for either side.
But this is
a hugely important economic issue — and has enormous potential
gains for the U.S. economy if we can just get broadband policy right.
No industry needs more intelligent help than the embattled telecommunications
sector, where profits and investment spending have vaporized.
So who is right
in this fight, AT&T or the baby bells?
The bells are
and here's why. If approved, the Tauzin-Dingell bill has the potential
over the next decade to bring high-speed web service to nearly every
U.S. home.
Broadband service
is the lightning-quick Internet technology that will bring to Americans
the next generation of web services. This technology could possibly
transform the web from a device for exchanging e-mail and checking
stocks into a tool that will link all businesses in an e-commerce
web, allow users to quickly download video or music on demand, and
give rise to products and applications we only dream of today.
Economist Robert
Crandall of the Brookings Institution, and a top deregulation scholar,
calculates that if we can accelerate broadband deployment, the value
to the U.S. economy could reach $500 billion a year.
That's more
than the entire economies of most nations.
Very few actions
that Congress could take — short of scrapping the income tax
for a consumption tax or privatizing Social Security — could
deliver those sized benefits to workers and consumers.
Today, eight
of ten homes and businesses still use clunky dial-up technology
to access the web. Broadband technology is more than a decade old
and still it's a rarity in most areas. This makes no sense: It's
as if we're still playing phonographs or using rotary phones. A
hallmark of the U.S. era of high-tech innovation has been to spread
the technological breakthroughs to the great middle class in short
order. But after a decade, few Americans are hooked up to broadband
service.
Why the still-lingering
digital divide between the information haves and have-nots? Because
outdated government regulation is stifling the private-sector investment
needed to build the network.
Technology analyst George Gilder argues that today's regulation
"privatizes the risk and socializes the benefit." Here's
how it works: When a phone company risks its own money to wire homes
and businesses to broadband, the federal government forces it to
open its network to competitors at money-losing, government-set
rates. This prevents the original investors from capturing the full
value of its risk-taking expenditures.
A predictable
result was the collapse in telecom investment over the past 18 months.
In 2001, telecom investment contracted by $75 billion, a 15% decline,
according to NR's own Larry Kudlow. That's one of the biggest
reasons why the telecom industry shed over 317,000 jobs last year
— the largest job loss for any industry ever recorded in a
single year.
By some estimates,
it will cost telecom companies some $200 billion of added broadband
investment to lay down the cables to bring this technology into
most homes and businesses. How can this investment be accelerated?
One answer is for Congress to allow businesses to write off their
mega-investments the year they're made. But it must also create
a fair-minded regulatory structure that allows those firms that
make the investments to reap financial rewards. This means eliminating
free-riding competitor access without fair payment.
What's the
alternative to Tauzin-Dingell? Sen. Daschle wants tax credits, business
subsidies, and a concoction of other corporate welfare giveaways.
That's a recipe for destroying the industry, not for reviving it.
The Left talks
a lot about closing the digital divide between the information haves
and have-nots. This week Congress has an opportunity to do just
that.
|
