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1. Deregulation Is Not Socialism. Swanson's main argument is that the Bell telephone companies were unfairly targeted by the "socialist telecom policies of the Clinton administration." The main instrument of that "socialist" policy was the Telecommunications Act of 1996, whose strangely non-socialist objective was to deregulate the remaining regulated part of the telecom industry, using a successful model: the deregulation of long-distance. The Bells (then seven companies; now, through mergers approved by all those socialists, just four) had, for a century, been government-protected regional monopolies, controlling the last mile — the wire from the great telecom network to just about every home and office in America. The act laid down a sensible blueprint for ending that monopoly and it allowed the Bells to get into any business they wanted. The Bells, like AT&T before them in long distance, were required to lease their lines to competitors (at a profit, of course). The long-distance experience showed that the line-sharing period would probably be brief. But without such sharing, the Bells would keep their death-grip on the last mile, deterring innovation, higher quality, and lower prices. 2. Republicans Are Not Socialists. The "socialist" Telecom Act passed the Senate, 91 to 5, and the House, 414-16, on Feb. 1, 1996. In both houses, there was only one Republican "nay" vote. (Guess who? Yep: John McCain.) Every single free-market Republican supported the bill. 3. Members of Congress Are Not Dupes. The vote presents a problem for Swanson and his boss George Gilder and their socialism thesis. So why did 288 Republican members of Congress support the Telecom Act? Clearly, because its intention was to deregulate the industry. But Swanson's explanation is that free-marketeers in Congress were duped by evil lobbyists! "There is a largely untold story of high-profile Republicans being hired by AT&T to promote the socialist policies of the Clinton administration," writes Swanson, implicitly labeling Armey, Nickles, Gingrich, Mack, Abraham, Hatch, and the 282 others as morons being led around by the nose. Truth is, this legislation was under consideration for years, and members thought long and hard about it. 4. The Bells Got Their Monopoly From the Government, Not Through Innovative Technology. Swanson writes, "In technology, temporary monopolies are abundant." I am well aware that innovative technologists often grab large market shares, which often (Lotus 1-2-3) prove ephemeral. But the Bells are not known for their innovation, and their regional monopolies have nothing in common with, for example, the large shares developed by Microsoft in computer operating systems and Intel in microchips. Unlike Microsoft and Intel (and Swanson's weird example, Henry Ford, who was faced, by the way, with far more auto competitors than exist today), the Bells were nurtured and protected by government because of the notion that their monopolies were supposedly "natural." In fact, if there was any socialism in all this, it involved the granting of a government monopoly to the quasi-governmental Bell System. The objective of the 1996 Telecom Act was to end that monopoly once and for all. 5. Pot Calling the Kettle . . . But Swanson would rather not argue the merits. Instead, he believes it's all the lobbyists' fault. For example, he quotes Jeff Eisenach of the Progress and Freedom Foundation condemning Charles Black as "hired help" for AT&T. But, if Black is hired help, what does that make Eisenach? The PFF website lists among its "supporters" three of the four Bells (the fourth, Qwest, appears to be short of cash these days), plus the Bells' trade group, the United States Telecom Association. Let's be clear. There's nothing wrong with financial support for public-policy organizations, and mature people proceed from the assumption that other mature people are intellectually sincere. They argue the merits. Follow-the-money smears are the modus operandi of people like Ralph Nader or the editors of The Nation. They are undignified in an article in a sophisticated medium like National Review Online. 6. Competition Is the Answer. But sometimes smears and overblown rhetoric are the only weapons you have. I am afraid that may be the case here. The objective of the Telecom Act that Swanson abhors was to let a thousand flowers bloom — to encourage the most intense competition possible. The answer is not monopoly or duopoly (duopoly was a failure when it was tried with cellular). The answer is a free-for-all. Yes, some producers will be hurt, but consumers will benefit from the innovation, quality, and low prices that will result. 7. Latest News: Broadband Up 81%. Here's good timing: Just last Monday, the FCC issued its new report on broadband. The number of subscribers rose 81% in a year, to 12.8 million, and in the second half of 2001 (the latest figures) DSL broadband service grew faster than cable broadband. (Swanson needs to get his facts straight. He writes that "the cable companies have consistently signed up twice as many broadband Internet subscribers" as DSL providers. In fact, according to the FCC report last week, DSL subscribers grew at a faster rate than cable subscribers in the most recent period.) Overall, high-speed Internet service is available in 79% of the nation's zip codes. There is no crisis in broadband; the problem, if there is one, is not lack of availability, but high prices and a lack of good applications and programming. Those obstacles can be overcome only with more competition, not less. Bill Gates, the chairman of Microsoft, had it right when he told a conference in April, "Clearly, if you can get [broadband prices] down to $20, $25 a month, something then will happen." Prices are twice that high now, and Bell officials have been lamenting publicly that they should be higher! The way to drive down prices is through fierce competition — just what the Bells are trying desperately to prevent. 8. Where Should Conservatives Stand? Finally, many conservatives have been confused by the debate over telecom policy. No wonder. The Bells cynically decided that the best way to bring believers in free markets over to their side was to keep using threatening terms like "regulation" and "socialism" over and over (it's the same tactic Democrats use in elections, frightening senior citizens, and it may be no coincidence that Bill Daley, formerly Al Gore's campaign manager, is now a top official at SBC Communications). This approach is an insult to your intelligence. Sure, the Bells want to maintain their century-old monopoly, but it's a shame that their executives and supporters prefer name-calling and extreme rhetoric to calm, rational discussion. Forget the Newspeak, forget the folks who are trying to demonize the Telecom Act to make up for their own failures and the deflated value of their once-puffed-up stock prices. Free markets and competition will get the job done. Trust them. — James K. Glassman is a fellow at the American Enterprise Institute and host of TechCentralStation.com, one of whose sponsors is AT&T.
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