In light of the recent debates on tiered access to broadband service and whether telecommunication companies have the right to charge both content providers and home users (as well as the federal government's evolving stance on the issue) I sat down with Eric Brach, journalist and co-author of Conquering the Electron: The Geniuses, Visionaries, Egomaniacs and Scoundrels Who Built Our Electronic Age and asked him to share his thoughts on the matter.
Jarod Cerf: As a journalist who has co-authored and published a book about technology, the folks who create it, and the individuals who determine how it will be used, what's your take on broadband being treated as a utility?
Eric Brach: To me, broadband clearly should be treated as a utility, as it's access to a service--like water and power--that is undifferentiated between providers.
JC: What would the utility option versus other routes mean for content providers--like us--for consumers and for businesses that rely on broadband service?
EB: Industries that naturally fall to monopolies--that is to say, those that have high fixed costs, high startup costs, and lots of physical infrastructure--should not be left unregulated by the workings of a free market economy, generally because free market economies can't check monopolies. Instead, they effectively create dictatorships within the market.
JC: In your experience, what kinds of technology tend to encourage or lend themselves to such industries?
EB: You almost want to look it at inversely: what would best allow this technology to create advances in industry and our daily lives? And given what happens when a natural monopoly has free reign, where there's no incentive for these companies to pursue any kind of technological advance, price range, or service if they have no one to compete against, the answer is regulation.
We've seen this happen particularly with cable television, where consumer costs have skyrocketed over the past thirty years, despite advances in technology that should ostensibly make the service better and more readily available. In most markets, there is no alternative: you have one cable provider and one cable provider only. If you want local cable, you have to pay at the price point set by the local monopoly, even though it creates deadweight loss in the economy as a whole.
We've also seen the same thing in local energy markets, where the costs for water and electricity in deregulated local municipal markets across the country have increased phenomenally over the past decade, largely because there's no force to check these companies from exercising free reign over pricing.
The single best thing that can be done, then, from an economic standpoint--for consumers and for providers of content--is for access to be regulated so that the people who control the toll gates can't exercise monopoly power.
JC: It does seem paradoxical that regulation would encourage growth. How does that constraint by the government allow broadband to flourish while ensuring that the product or service remains viable?
EB: Regulation accomplishes two things: first, it prevents the companies from resting on their laurels and collecting monopoly rent; second, it frees them from feeling like they have to focus exclusively on the immediate maximization of profit.
Take AT&T's Bell Labs, for example, which Derek and I explore in Conquering the Electron. For an entire century, AT&T was effectively a telephone monopoly, but not an unchecked one. Its price points were consistently regulated by the government, which meant that the company could pursue technological advances without being hidebound to knowing--out of the gate--how the results would be implemented and monetized.
Solar power collectors and the solid state triode were both invented at Bell Labs with no definitive use or implementation at the time, yet each has had a huge and positive effect on their industries and our society as a whole in the years since their invention. And without that ability to foster a pure R&D lab absent the demands of a bottom line, these advances would never have happened.
JC: In a sense, by guaranteeing that a company will--as a provider of utilities--receive a certain amount of income, regulation allows them to explore what would enhance or generate the next 'big thing'?
JC: Let's talk about consumers and whether they'll find themselves with new fees and charges to compensate for tiered programs and quality of service. What should they expect if broadband becomes a utility? And who, ultimately, will be paying for these improvements?
EB: Well, I should note that I disagree with your categorizations. Broadband access is a utility at present. The question is whether the government will continue to regulate and treat it as such.
Assuming broadband is deregulated, it's likely that we won't see much in the way of tangible "improvements"--i.e. product quality and customer service--as the markets are already captive and paying.
JC: In your opinion, where does broadband sit on that spectrum of necessity vs. luxury, and how did it arrive there?
EB: Twenty years ago broadband was a luxury; today it's a necessity. The way the world economy has evolved has made it such that it is effectively impossible for almost anyone to operate in modern life or to conduct basic commerce without access to it.
JC: Would you consider that ability 'to conduct commerce effectively' one of the key criteria for determining 'necessity'?
EB: Absolutely. Commerce is foundational to the operation of our nation, so anything that inhibits it without due course and a clear, net benefit--say, to national security, public health, or other social good--is detrimental to us.
I wouldn't consider myself in any extreme of economics or politics, but I think that in this case, not regulating for continued open access would be a limitation on commerce.
JC: Going forward, will we see an increase in technologies that allow us to conduct commerce or exchange information beyond the means we've grown accustomed to?
EB: Always. Thirty years ago, only a few people could have foreseen the kind of electronic- and computer-based commerce that we have right now; fifteen years ago, we'd have said the same for services like Paypal, Google Wallet or Apple Pay that allow people to use their phones and take banks out of the equation. There's always going to be something new and unexpected around the corner.
JC: Does it still feel like a frontier to you?
EB: An ever-changing one.
Eric Brach is the co-author of "Conquering the Electron: The Geniuses, Visionaries, Egomaniacs and Scoundrels Who Built Our Electronic Age" and has written extensively on issues facing the world of electronics and telecommunications. Jarod Cerf is a writer, journalist, Managing Partner at PB and JC, a "quite bites" consulting firm, and host of the podcast, "In Character", where he interviews authors about their work and the stories behind them.