Obama and the Internet

President Barack Obama didn’t invent the internet (that honor is reserved for former Vice-president Al Gore) but he may well retard its growth. According to Politico, Mr. Obama will propose increasing competition for high speed internet service by encouraging local municipalities to offer their own internet facilities in competition with existing providers. And while Mr. Obama may believe that this is a brilliant new strategy; it is neither new nor brilliant. In fact, it may prove to be one of the dumbest ideas that Mr. Obama has ever proposed or initiated.

First, Mr. Obama has apparently noted there are “large numbers” of Americans who do not have high speed internet access. As usual with Mr. Obama you have to define what “high speed internet access” is. In his speeches he is talking about speeds of 100 Mbs – a capacity far in excess of what is needed by most people using the internet.

Second, municipal governments competing with existing private providers is neither fair nor efficient and it does virtually nothing for those who live in areas where distribution facilities are unavailable. There are several things wrong with that bizarre notion:

1. Local government is the least efficient means of delivering any service – other than police and fire protection. The reason is quite simple. Governments let a whole host of other priorities intercede in the delivery of services. For instance, Portland city government is wholly beholden to the public employee unions and their salaries, benefits, work rules, and staffing requirements. There is little concurrence between those requirements and the delivery of quality service. Many local governments like Portland have an endless stream of social programs that can be imposed as a condition for access to municipal provided internet. (Think of the pointless “local channels” imposed on cable television providers that are so banal as to make one cringe but required to appease whatever area of political correctness that abounds that week.)
2. When governments control communications services, their first instinct is to control the content. It is often done in the name of “fairness”, “balance” or “unfilled need.” Regardless of the euphemism it is reflective of the politicians’ sense of “fairness”, “balance” or “unfilled need” and not the communities or the market place. The debate over “net neutrality” (another euphemism for government control similar to the former Federal Communications Commissions requirement for “equal time”) will be over with the big government advocates again ensuring that their brand of “fairness” is all that is allowed.
3. The provision of communications services by local governments is generally done on the backs of existing providers by requiring them to overbuild their systems and cede certain amounts of capacity to the local government. In essence it is requiring current providers to fund their competition.
4. The ability of local governments to provide communications services at or near the cost of existing providers is based on two major elements:

• They have little or no sunk costs for providing a distribution network since they have required existing providers to build and cede control of capacity to them.
• They avoid a substantial amount of costs – taxes, fees, assessments, and regulations – that they and other units of government (federal, state, and local) impose on private competitors but wave for themselves. In extreme instances, should a municipality succeed in driving a private sector competitor from the market, tax revenues generated by that competitor will be lost and the burden will fall on others to make up the lost revenue.

But the biggest reason that makes this one of Mr. Obama’s dumbest ideas is that it fails to recognize the rapid change in technology that will solve the problem without the help of either Mr. Obama or the nation’s municipal governments. By the time the Mr. Obama and municipal governments could finish their “impact” statements, negotiate a favorable “rake” for the public employees unions, ensure that their campaign donors get their share, settle on the rules for ensuring “fairness” on their network, and create oversight committees staffed by all of the requisite special interest groups, technology will have changed so dramatically that whatever they have decided will be antiquated already.

As best as I can understand the capacity of the latest evolutions in wireless capacity, the conversion from 3G (third generation) to 4G (fourth generation) has increased internet speed nearly five-fold and, when fully developed, can provide broadband service at speeds in excess of what most in-home wireless routers are capable. We now have 4G LTE and WiMAX both of which will provide speeds in excess of 100 Mbs – apparently Mr. Obama’s preferred standard. And 5G (fifth generation) technology, with speeds a thousand times greater, is already on the drawing boards.

A recent article, in USA Today, notes that Richard Branson’s Virgin Group and Qualcomm (both proven innovators) are investing in technology to provide high speed broadband service via satellites which will open access to those living in BOTH rural and urban areas (a point all but ignored by Mr. Obama.)

If Mr. Obama is concerned about increasing access and speeds of the internet, the best thing he can do is get out of the way. No matter what decision governments make about technology, it will be too slow, too myopic and too late.

The industry is doing just fine. Stop effing around with it.