The Anti-Economy, Anti-Growth FCC

by Mike Wendy on February 4, 2015

Last week, government numbers came out showing that the economy “grew” at an anemic rate of 2.4% in 2014. Technically, the recession ended over four years ago. By now, many economists believe that the U.S. economy should have been growing from 3% to 4% annually. To date, however, the economy has yet to spring back to solid growth.

The broadband industry has done its part to boost the economy, helping it from becoming even weaker than it already is.  Since 1996, broadband providers have invested $1.3 trillion in their networks.  It leads all other U.S. industries in investment, including even the largest energy companies.

This investment – combined with that of the computing and Internet technology companies – touches nearly every aspect of our lives. Approximately 75% of the Internet’s economic value sits outside of the technology sector itself, in “traditional” industries. Available data indicate that that value has directly resulted in more than 10% growth in such sectors as construction, education services, management of companies and enterprises, manufacturing, and transportation, among others. Countless other studies confirm the immensely beneficial effect of the Internet on job growth, productivity and wealth creation. 

Americans know a good thing when they see it; 87% of us used the Internet in 2014.  We have access to a blinding array of competitive services, applications, content, devices and providers. That didn’t happen by accident. The Internet’s uptake was fostered by congressional policy which called on the FCC to reduce communications regulations, not increase them. This so-called “light touch”regulatory model moved away from heavy-handed, FDR-era telephone regulations and was key in birthing and sustaining the privately-funded Internet that we know and love.

Latest figures show that broadband providers invested $75 billion in their networks in 2013. But that ongoing, healthy development cannot be assured. Today, not only are American broadband providers challenged by lackluster U.S. growth, three current FCC undertakings may bring the broad economic and societal gains of the past two decades to a screeching halt. They are:

  1. Implementation of “Net Neutrality” – the agency has signaled it will impose old-fashioned telephone rules on broadband providers, strictly controlling the price and services that they may offer to consumers and businesses;
  2. Preemption of state taxpayer protection laws – in order to “promote” broadband, the FCC has indicated it will overturn state laws that protect taxpayers against wasteful and risky development of “competing” municipally-provided broadband networks; and
  3. Redefinition of broadband – last week the FCC increased the speeds it uses to determine what broadband is, meaning fewer Americans will have “broadband,” but also conveniently giving the agency a greater hook to regulate its uptake.

From these major policy initiatives it’s abundantly clear that “light touch” is over at the FCC. The agency believes that broadband providers must essentially become public property, controlled not by the private investors who took the risk to build them in the first place, but rather by three political appointees in Washington (who could barely plug in a stereo system).

Why?  Who knows?  Because they can – they have the votes to make the world “fair” and “level.”  Regardless, it’s stealing by any other name.

A rational investor would be right to ask, “Heck, is it worth risking my labor and capital to build tools for economic growth when it looks like the government could willy-nilly take them away”?

Well, only if you like bureaucrats belittling, hogtying and then confiscating your investment for their own (and their cronies’) gain.

The new (old) model means the FCC is back full force in the extortion racket. You want to try something new for consumers? Well, you have to go through the political bosses in Washington first. Sadly, we’ve been here before – from 1934 through 1996. All it resulted in was the Princess Phone and state-protected telephone monopolies. Competition, lower prices, and more innovation? Not so much.

Until last week, 99% of Americans had access to at least one flavor of “broadband.” But with a flick of switch, the FCC determined that only 83% of the U.S. had access to “real broadband,” casting 55 million Americans into the abyss called the “digital divide.” Add restrictive “Net Neutrality” regulations and preemption of state taxpayer protection laws into this picture, and you’ve just sentenced broadband providers to indeterminate years of hard labor to serve the bureaucratically slippery public interest.

The beatings will continue until the morale improves is no way to boost broadband infrastructure or the U.S. Economy. If policymakers at the FCC (and elsewhere) can do no better than this, then expect sickly, sub-3% “growth” to be the new normal, and along with it fewer jobs, less prosperity, and decreasing individual liberty.

If I were a broadband provider or investor, I would be taking less of that risk, not more. Why invest when punishment is the only reward?

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