Innovation, competition, and choice produce good results in Helsinki — why not in your town?
One thing about being a “roving correspondent” — you learn to hate airlines. And I mean hate: If hate were carcinogenic, I’d be one big human tumor every time I hit the exits at LaGuardia. A couple of months ago, I sent US Airways CEO Doug Parker a 1,700-word denunciation on the general awfulness of his service, his company, his employees, the malevolent porcine glint in his dead, soulless eyes — a pointless exercise, to be sure, but a cathartic one.
The partial deregulation of the airlines produced some benefits, notably on the matter of cost. Whereas airfares had previously been set by political operatives — a perverse situation —deregulation allowed the emergence of price competition, with the predictable result that in real (inflation-adjusted) terms, airfares have fallen by about half since the early 1980s. Air travel has gone from being a luxury good to a mass-market good, the lifestyles-of-the-rich-and-famous connotations of the formerly evocative midcentury term “jet set” sounding slightly ridiculous to anybody who has spent much time at JFK, IAH, MCO, etc. The level of service has become much more — how to put it? — democratic, less Barney’s and more Walmart.
You can pay more for better food and drink, more efficient customer service, etc., if you are so inclined. But you cannot pay more for what is most important to many travelers: on-time arrival. About one in five U.S. takeoffs are delayed. Delays vary by airline, but they vary most significantly by airport manager. The New York metro area’s airports can account for as many as half of all flight delays in a year, and the cascading effect of New York’s incompetence is responsible for about a third of the flight delays in the rest of the country. The airlines themselves have been partly deregulated, but the airports, and the flight lanes remain in the hands of the politicians, producing the utterly predictable stagnation, inefficiency, and corruption associated with practically all political enterprise. As the aviation director of the New York airport authority told the New York Times, “You can be in a cab in Manhattan with GPS and you are dealing with more sophisticated technology than is being used by the FAA.”
Air travel, as Fred Smith and Braden Cox of the Competitive Enterprise Institute explain, is a network enterprise organized around a grid-and-flow model, much like telecommunication or electricity generation. In that sort of industry, there are two important sets of factors: the moving parts (airplanes, electrons) and fixed infrastructure (airports, transmission lines). Our grid-and-flow systems very often are highly regulated, with the fixed infrastructure either owned and operated by political institutions or so highly regulated as to be indistinguishable from a state-owned facility. The degree of political involvement with such networks tends to correlate very strongly with how intensely you are inclined to hate it: Airports, cable television, and utility companies are not winning any popularity contests — when was the last time you stood in line for an hour to be the first to get your hands on the hot new product from Con Edison? This provides an instructive study in contrasts: If you are willing to pay for it, air travel can still include some pretty swanky amenities, like American Express’s Centurion lounges and Virgin’s Heathrow clubhouse. But the basic service remains dysfunctional, and substantially so — flight delays cost the U.S. economy tens of billions of dollars a year.
But we do have a network industry that manages to flourish — the network industry, in fact: the Internet. The Internet is a global phenomenon, but it is nominally under the management of the U.S. Commerce Department, which oversees the operations of the private nonprofit Internet Corporation for Assigned Names and Numbers, the closest thing to a central authority that the Internet has. Other aspects of Internet connectivity are of course subject to various kinds of regulations in the U.S. and abroad, from the Federal Communications Commission in the United States to the Supreme Council of Virtual Space in Iran, which surely has the most William Gibson-y name of any regulatory body on Earth and labors perfervidly to ensure that the pristine youth of the so-called Islamic Republic are not corrupted by Facebook cats that want to haz cheeseburger. But, broadly speaking, the Internet is almost certainly the most unregulated feature of the 21st-century global economy — and successful precisely because of its unregulated, decentralized, distributed nature.
But Charles Schumer, like Clement Attlee following Winston Churchill into the gents’ facilities, never saw anything large and functional that he did not want to nationalize, and thus is pressing the FCC to reclassify broadband Internet service as a utility. Columbia law professor Tim Wu, the main intellectual force behind this effort, scored one of the all-time great rhetorical victories by naming this regulatory effort “net neutrality,” but a better term would be “net political conformity.” In effect, Senator Schumer’s policy would subject Internet providers to the same sort of regulation that airlines endured until the 1970s. Most notably, the policy would forbid certain kinds of price competition, just as airfares once were set by federal bureaucrats. It would, for instance, forbid providers from charging different rates for high-volume services such as Netflix (which can by its lonesome account for more than a third of all Internet traffic during peak times) versus relatively low-volume sites. It would also forbid services that are inclined to do so to pay extra for premium “fast lane” connectivity to their customers, and vice versa. Providers would remain private entities, but private entities that are very limited in terms of how they can compete with one another — i.e., you could expect the same vitality and innovation that you get from domestic airlines and your local electric utility.
This would be the largest federal effort to regulate the Internet to date, and it is completely unnecessary: Internet providers tend not to want to get between their customers and the content those customers want, mainly because they enjoy getting paid. Across the technology-powered economy, practically all of the strongest trends are toward customer choice, openness, and low-friction commerce. Google and Apple are fierce competitors, but it’s not as though Apple could, even if it wanted to, get away with manufacturing devices that refuse to work with Google. Likewise, Sony is only too happy to accommodate Apple’s iTunes content on its hardware, even though the two firms are competitors. It surely is the case that some cable companies that are Internet providers would have economic incentives to want to hobble content-streaming competitors; it is almost as surely the case that this would result in customers’ abandoning them for other providers that want to enable their viewing pleasure rather than interfere with it. In the matter of the Internet, a very light regulatory hand, robust competition, and constant innovation are working quite well without the need of assistance from such intellectual mediocrities as are seated in the United States Senate.
In other contexts, the political implications of the Internet’s largely spontaneous order are more readily appreciated. Consider the case of Finland. Finland is in some ways a fairly typical northern European welfare state, but that means a good deal less than conservatives sometimes imagine that it does. Consider, for example, that per capita government expenditures in Finland and the United States are in fact quite close to one another, that in the matter of health care the Finns practice the sort of subsidiarity that American conservatives like to talk about, etc. Taxes are high, but deficits are low, and budget-hawkery is in fashion. There is much for the Right to admire there.
Helsinki, consistently rated one of the world’s most livable cities (No. 1 in Monocle’s 2011 rankings), is the sort of place that American progressives hold up as the proof of the goodness and correctness of their own policy preferences, but it is in fact moving away from the kind of centralizing, monopolizing model that Senator Schumer and the American Federation of Teachers advocate. (Our AFT friends might note that Finland’s widely admired, slightly hippy-dippy education system is run at a 30 percent discount on the American rate.) In fact, in one of the most reliably sclerotic, government-monopolized fields of all — mass transit — Helsinki is getting the message that its American counterparts are unable or unwilling to hear. Helsinki wants a mass-transit system that runs like the Internet, not one that runs like a utility.
Helsinki aims to make private automobile ownership largely unnecessary, a desire shared by many urban liberals in the United States. (The prose in this account is not elegant, but, really, how’s your Finnish?) According to Sonja Heikkilä, a graduate student in engineering whose master’s thesis is providing the template for Helsinki’s transit future, the model would rely on mobile technology (an app that functions as a trip-planner and universal payment platform) and would enable the emergence of new modes of transit. Notably, the Helsinki model would end some transportation monopolies (the rail service would no longer have a monopoly on ticket sales, for instance) and would rely on competition among private providers to match resources with consumer demand. The Finns already have had some success with this sort of thing — for instance, supplementing their bus service with a popular new on-demand “mini-bus” service in which riders choose a pickup point and destination and determine whether they want a private trip or desire to share the cost with others along the way, while an automated scheduling and algorithmic route-planning system handles the dispatch.
Imagine trying to implement such a thing in New York City or California — imagine the union friction alone — and you’ll have a pretty good indicator of why European-style policies are unlikely to produce European-style results in the United States. It is not as though Helsinki is a free-market, limited-government utopia — far from it. But on the liberty–statism spectrum, it matters not only where you are but in which direction you are moving — and why. American progressives love railroads and hate cars, and that is not without a political dimension: Railroads tell you where to go, which is very appealing if you see society as one big factory to be subjected to (your) expert management. And that’s really the basic question of liberalism in the better, classical sense of that word: Is the state here to tell you where to go, or is it here to help you get where you are going? And how to get there? Do we want the same combination of incentives, taste, and intelligence that brought us the TSA to be regulating the Internet? And if choice, innovation, and competition produce good results in mass transit with Helsinki, why not with education or health care in your town?
— Kevin D. Williamson is roving correspondent for National Review.