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The FCC Goes Backward To The Future

A couple of decades ago, trucking companies could carry frozen TV dinners containing chicken, turkey, and fish at whatever price they wanted. But if those dinners contained hamburger patties instead of turkey legs, then price controls kicked in, increasing transportation costs by about 20 to 25 percent.

Before deregulation, companies had to obtain rights to haul freight over specific routes, adding unnecessary costs for shippers. A company that held hauling rights from Cleveland to Buffalo and from Buffalo to Pittsburgh, but not from Cleveland to Pittsburgh, had to carry goods originating in Cleveland through Buffalo first if it wanted to get them to Pittsburgh legally.

Costs fell and service improved dramatically after legislation in the 1980s and 1990s deregulated the trucking industry. But not everyone learned from this real-world lesson in free-market economics. The Federal Communications Commission recently announced that it plans to become more involved in regulating broadband services.

The FCC says it has “identified critical gaps in the nation’s policies, programs and practices that must be filled before America can take advantage of the technological advantages that universal adoption and deployment of affordable, robust broadband can bring.”

One way the FCC says it might close the gaps is by tapping into the Universal Service Fund. The USF is funded by contributions from long distance companies, local telephone companies, wireless telephone companies, paging companies and pay phone providers. It is used primarily to defray the costs of providing phone service to rural communities.

According to the FCC, subsidized phone service in rural areas is not enough; these areas must get subsidized broadband as well. That subsidy will come out of the pockets of telephone customers.

The Commission argues that high-speed Internet access is increasingly necessary in order to be an informed citizen and consumer and that those who lag in terms of connectivity are likely to be left behind in other domains as well. Providing high-speed Internet service to all households is, therefore, a matter of national interest, according to the FCC.

Did anyone, even in the remotest corner of America, need the FCC to point out that the Internet is a big deal? More importantly, is it really the rest of the country’s job to pay for cheap broadband in the remotest Rocky Mountain valley, Alaskan tundra, New England island and Texas bayou? Folks living in these areas often have lower costs for some of life’s other necessities, such as housing. And they are free to move to more densely populated parts of the U.S.A.

Consumers, not bureaucrats at the FCC, are in the best position to determine how they can most effectively get online in their area. Satellite Internet service is available virtually everywhere. Cell phone-based wireless data services cover all urban and suburban areas of the U.S. and an increasing swath of the country’s rural reaches. Cable and telephone companies also are improving their products. Some rural areas, such as the region around my Vermont vacation home, are trying to set up their own fiber-based broadband services as government-sponsored cooperatives.

If the FCC really wants to improve matters, it will fight to wrest more spectrum from politically connected broadcasters and make it available to new wireless broadband competitors.

Traditional phone service seems to be on its way out, but that is no reason for the FCC to hasten its demise with new fees that make it artificially uncompetitive. Why will Granny pay $50 a month for a landline on which to talk to her granddaughter, if she has a modem and can talk via Skype or instant messaging software? A new layer of USF charges will only encourage Granny and the rest of us to find substitutes for our old phone services in new technologies.

To keep data flowing freely along the information highway, the FCC ought to do the same thing that worked to keep goods moving along physical highways: Let the market do its job.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s most recent book, The High Achiever’s Guide To Wealth. His contributions include Chapter 1, “Anyone Can Achieve Wealth,” and Chapter 19, “Assisting Aging Parents.” Larry was also among the authors of the firm’s previous book, Looking Ahead: Life, Family, Wealth and Business After 55.

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