Monday, April 08, 2013

The Wrong Way to Free Markets and Free Speech

In a report in today's Broadcasting & Cable entitled, "Susan Crawford: Country and the FCC at Crisis Point," John Eggerton reports on Susan Crawford's address at Free Press's National Conference for Media Reform. 
Right now I'm much more worried about the "crisis" that may be created by North Korea than anything happening at the FCC. But, be that as it may, I will say this: If Professor Crawford's ideas were ever to prevail at the FCC, then the country – if not hurled into a "crisis" – surely would be put in a position which jeopardizes the country's future economic and social well-being. 
Here's why. 
According to the Broadcasting & Cable report, Ms. Crawford declared, "regulation of infrastructure, government intervention, makes free markets and free speech possible." 
In today's increasingly competitive, dynamic digital marketplace environment, Professor Crawford's assertion that government intervention makes possible free markets and free speech is emphatically wrong. In fact, Professor Crawford has it just backwards. 
To borrow from Hayek, it is Ms. Crawford's "Fatal Conceit" – and that of those who share her views – that the communications marketplace can never be considered competitive "enough" to forego government intervention. In her view, today's digital Internet providers should be regulated in the same way electric utilities are regulated. As she says in her book, "Captive Audience," for today's broadband Internet providers, "America needs to move to a utility model." To drive home the point, she harkens back to the late nineteenth-century public utility regulation of railroads, which predated, of course, public utility regulation of the electric power companies. 
I wrote a long piece, "Captive Audience's Captive Thinking," debunking Professor's Crawford's theories. I am not going to repeat here all that I said in that piece. But I hope you will read the piece in its entirety if you missed it before. 
Here is the essence of the way I explained Ms. Crawford's "fatal conceit" regarding her misunderstanding of the current marketplace:
"In support of her claim that cable already has 'decisively' won the battle, Professor Crawford engages in a bit of sleight of hand. This is because her claim is based entirely on substantially narrowing the market definition by defining the relevant market – and this is buried in a footnote [page 284, note 3] – as 'cable companies with DOCSIS 3.0-enabled infrastructure that can offer very high peak download speeds.' In other words, in the few places where Professor Crawford addresses market power and market definition in any serious way, she distinguishes, albeit very subtly, between 'high-speed' and 'very high peak download speed' broadband services. The latter only includes services with speeds above 100 Mbps. In other places, she distinguishes between high-speed wired broadband and what she calls 'truly' high-speed broadband.
The problem with this approach is that it doesn't reflect present marketplace reality. Even though Professor Crawford may think otherwise, for most consumers, telephone company-provided high-speed broadband services provide a satisfactory alternative to those of cable operators, even in areas in which fiber technology is not employed. Many consumers consider the broadband service provided by satellite operators a satisfactory alternative to cable broadband. And still other consumers consider wireless broadband services not only complementary to cable (as Professor Crawford maintains), but substitutable as well. This is increasingly so as high-speed 4G wireless services become more ubiquitous.
Indeed, over 80% of American households have access to at least two high-speed wireline providers consistent with the FCC's definition of high-speed, even if one does not provide service, at peak times, at the 'truly' or 'very' high-speed above-100 Mbps that Professor Crawford insists on employing for market-defining purposes. 
So, the problem with Professor Crawford's claim of cable monopoly power is that it rests on a hypothesized marketplace based on an unduly restrictive market definition, not on the broadband market as it presently exists. Her hypothesized market definition is based on her own personal predilections concerning the level of service she thinks she will demand in the future, rather than on an analysis of the services consumers demand in today's actual marketplace. Note that she does not report that when the FCC last surveyed consumers, the agency found that 93% were satisfied with their broadband service. And note also that right at the outset of her book [on page 2] she predicates her assertion of Comcast's dominance on the level of service that she hypothesizes will be sufficient to satisfy Americans 'in the near future,' without explaining what that means."

Sad to say, I am very doubtful that any amount of evidence whatever would sway Professor Crawford from her view – apparently still being peddled as well at the Free Press conference by former FCC Commissioner Michael Copps – that the digital broadband marketplace is monopolized. I do find it ironic that, even as I write this, there is a yet another story featured in today's Washington Post to the effect that a growing number of viewers watch whatever video programming they watch – solely – over the Internet, and, yes, over their smartphones. 
It is completely fallacious, of course, to assert, as Ms. Crawford does, that more government intervention makes possible "free markets" or "free speech." It is one thing to recognize – as I do – that in cases of demonstrated market failure, there is a role for government regulation to play in protecting consumers. It is another case altogether to think that, in the current increasingly competitive, dynamic broadband Internet marketplace, government intervention makes possible a free market. Such intervention, especially along the lines of imposition of the "utility model" recommended by Ms. Crawford, is completely at odds with a free market. Simply put, absent market failure, the way to promote consumer welfare and incentivize economic growth is too rely on free market principles. 
Finally, and as importantly, as I have so many times in the past, this must be said yet once again: Ms. Crawford's notion, shared by Mr. Copps, that government intervention and regulation of broadband Internet providers makes possible "free speech" is exactly backwards – and dangerous too. The First Amendment's free speech guarantee is intended to protect private persons and entities from government interference with their speech – not to authorize government intervention curtailing speech under the guise of some government official's notion of ensuring of "fairness" or "non-discrimination."