Mistaking corporate monopolies with the free market

Mistaking corporate monopolies with the free market

- in Weekly Briefing

Legislative conservatives go to bat for the cable industry

For what seems like forever, North Carolina market fundamentalist conservatives have been lecturing anyone who would listen about the “genius” of the “free market” and “competition.” You know how this goes: “Just get government out of the way and promote competition” and the market will bring all sorts of remarkable goodies to everybody.

In many instances, the dedication that some of these people display for their cause borders on the fanatical – a kind of blind, black and white devotion and ideological purity that’s rather stunning to behold in a world full of shades of gray. One staffer at the John Locke Foundation wrote last week that the solution to nuclear power plant safety is to get government out the way! Others have written on multiple occasions that price gouging by opportunistic businesses during natural disasters is a good thing.

Given the apparent intensity/of some of the right’s beliefs, it’s often amusing how rapidly this ideological purity tends to evaporate or transform into something different when conservatives acquire actual political power. Often, it seems, the right-wing love for the “market” tends to turn into something more akin to a love for corporations and the wealthy.

Case in point: broadband

To witness a case in point, check out the debate in the North Carolina General Assembly surrounding a proposal sponsored by State Representative (and former Locke Foundation employee) Marilyn Avila on behalf of corporate cable monopolies on the subject of access to broadband internet service.

Though chock full of jargon and technical terminology, the crux of the bill and the debate really boils down to the following key facts:

#1 – Whether it relates to commerce, education and or just enjoying a high quality of life in one’s own home, broadband is an absolutely essential component of modern American life.

#2 – Though seemingly ubiquitous, broadband is, in fact, not available in lots and lots of communities – most of them smaller and rural and lots of them in North Carolina.

#3 – Like a lot of essential utilities to run a line or a pipe to individual businesses and residences, broadband is a natural monopoly – i.e. it doesn’t make sense to have multiple competing lines from multiple entities running into the same places.

#4 – The reason for the absence of service in many places is “the genius” of the market – that is the private telecommunications companies (many of which are giant multi-nationals) have chosen not to get in the business in a lot of poorer, rural areas because they don’t think they’ll make enough money – even if they’re granted monopolies.

#5 – To fill the gap, local governments have stepped up to the plate in many places to build community-owned networks. Many of these have been extremely successful in delivering high-quality service to customers at extremely reasonable prices. A 2005 state Court of Appeals decision upheld the practice.

#6 – Threatened by the idea of local governments developing a model that calls their model of weakly regulated, high-profit, private monopolies into question, cable companies have secured the introduction of a bill to ban new community networks and overrule the court. They are touting the bill as being about “leveling the playing field” and halting “unfair government competition with private business.”

#7 – In a skillful bit of lobbying to emphasize the free markets rhetoric, the companies have placed the former Locke staffer Avila at the top of the bill and convinced a list of longtime industry friends from both parties to sign on as sponsors. In an effort to mute potential opposition, the bill would not impact eight municipal networks already in existence.

A few weeks back, the bill zoomed through the House Public Utilities Committee. It is scheduled for consideration in the House Finance Committee today.

The opposition

Though badly outgunned by the cable giants like Time-Warner, defenders of community networks are putting up a spirited fight. They have argued convincingly that the bill is little more than a power/money grab by giant out-of-state corporations that has nothing to do “free markets.”

They’ve also put forth convincing evidence that banning community networks would actually leave many North Carolinians worse off. Last fall, an initiative called the New Rules Project at a group called the Institute for Local Self-Reliance issued a report on North Carolina’s debate over community networks. This is from the release that accompanied it:

“‘North Carolina would harm its economic future if it decides to limit broadband competition,’ said Christopher Mitchell, Director of ILSR’s Telecommunications as Commons Initiative. ‘Communities should have the freedom to build their own networks. Time after time they’ve proven better for subscribers.’

The New Rules Project’s latest analysis compared the Internet service options and prices available to residents of both Charlotte and the Raleigh-Durham area to those available to residents of Salisbury and Wilson. Salisbury and Wilson because both built community fiber networks that offer faster connections to residents and businesses at more affordable prices.”

The group’s analysis described the connections in the community network towns of Salisbury and Wilson as “the best in the state.”

Other critics of the cable companies have chimed in. An editorial in yesterday’s Winston-Salem Journal put it this way:

“Internet-service providers can’t have it both ways. They can’t delay bringing high-speed service to North Carolina communities but then turn around and lobby the legislature to deny local governments the authority to establish municipal service if their residents want it.

That’s exactly what cable and phone companies are doing, however. Ever since a 2005 N.C. Court of Appeals ruling upheld the right of towns and cities to offer broadband, telephone and cable companies have been crying about government unfairness.”

A recent contributor to Raleigh’s News & Observer persuasively compared community broadband networks to the hugely successful phenomenon of rural electrification that rescued much of America from the dark 80 years ago:

“The Internet is no less transformational than electricity. Through this world-changing technology, lives are being shared, distance learning taking place and innovative new businesses springing up. Sadly just as in the days before electrification, many North Carolina communities (particularly rural ones) are being left behind, stuck in the Internet slow lane.”

Of “markets” and monopolies

But “what about free markets?” you ask. Why is it fair for public entities to get into businesses normally reserved for private industry? This is not an unreasonable question. America’s economy is based on the centrality of private enterprise.

As even a superficial look at the broadband debate reveals, however, this is not an area that naturally lends itself “free competition.” Private cable monopolies are creatures of government. In effect, they are contractors granted authority (i.e. “hired”) by government to provide core public functions at a fair price. They are like power sellers, trash haulers, mail deliverers and any number of entities that can be private or public – depending on the needs and desires of communities and their elected representatives.

The notion that local communities might want to come together to fill such a role themselves is nothing that threatens free enterprise – especially in places where private companies can’t or won’t even act. Indeed, it’s a perfectly logical and appropriate thing to do. The cable companies know this and so do the lawmakers whom they’ve convinced to carry their water on Jones Street.

In the days ahead, the big cable companies will be tough to stop. Big money always is in politics. If nothing else, however, let’s hope the companies and their supporters have the decency to spare us the holier-than-thou arguments about “free markets” and own up – at least implicitly – to what their efforts are really about.

About the author

Rob Schofield, Director of NC Policy Watch, has three decades of experience as a lawyer, lobbyist, writer and commentator. At Policy Watch, Rob writes and edits daily online commentaries and handles numerous public speaking and electronic media appearances. He also delivers a radio commentary that’s broadcast weekdays on WRAL-FM and WCHL and hosts News and Views, a weekly radio news magazine that airs on multiple stations across North Carolina.
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