OPINION
Blimps, Broadband and Bosses

It's not a bird or plane, it's the "stratellite," a huge broadband blimp announced this month. It will make high-speed Internet junkies gleeful, leave broadband competitors fearful, and tell policymakers to ignore warnings of an imminent broadband monopoly.

Some might be surprised to learn that anyone is worrying about a potential monopoly, given the many ways to obtain broadband. Consumers can get high speed service through cable, DSL, wireless, broadband over power lines, satellite, and soon, through the blimp.

Regulatory Stronghold

Once launched, the stratellite will deliver line-of-sight wireless broadband to an area the size of Texas from a single transmission point using a fleet of robotic airships hovering at 65,000 feet above the Earth. While amazing technological advances like this continue, reactionary regulators at the California Public Utilities Commission (CPUC) still believe that the market needs their help to be competitive.

A recent broadband report produced by CPUC Commissioner Geoffrey Brown and his staff, probes what it calls "the fundamental structural monopoly problem of the last mile." Such jargon from obsolete telecommunications regulation is truly shocking in a report designed to address new technology. But then, maybe the purpose of the report, from the bureaucratic point of view, is not to help consumers at all, but instead to maintain and expand regulatory reach.

Indeed, Commissioner Brown's report says that one of the reasons its recommendations should be followed is that "it may develop into a framework in which California can regain regulatory authority from the FCC" and it "maintains a role for California in the regulation of the industry." In a world where Internet communications are global, it's unclear why anyone would think a patchwork of state laws is beneficial, but again, power is like a drug bureaucrats just can't quit.

Consumers' Choice

To be fair, Commissioner Brown's report makes sure to acknowledge the marketplace. More than once, the report states "markets are the preferred method of distributing goods and services among the population." However, if you read the rest of the report, you'll see that statement only partly reveals how Commissioner Brown and his staff think about the world.

The sentence that was left unsaid in this instance is "but it shouldn't be the preferred method." Maybe that's an attitude that should be expected from authors who believe that consumers will always choose the provider whose price is lowest.

Consumers make decisions based on all sorts of inputs. A case in point is that many would rather buy a Starbucks (Nasdaq: SBUX) latte instead of settling for cheaper donut shop coffee. Or to make it more tech-specific, many will choose Verizon wireless, one of the more expensive carriers, because of their reliability and customer service.

Quality, service, convenience, aesthetics, and other issues all come into play when consumers make decisions. When regulators leave markets alone, businesses compete on all these levels. But perhaps it's not that Commissioner Brown and his staff don't like markets per se, maybe it's just that they feel markets need government help.

"If policy makers believe that market forces are a sufficient mechanism to insure that consumers receive high quality broadband service and protections from unscrupulous business practices," said the Brown report, "it is our responsibility as public servants to do all we can to create a marketplace that will in fact provide that discipline."

Maintaining Flexibility

This statement betrays an economic ignorance that would be funny if it weren't being taken seriously. Governments do not create markets, entrepreneurs and consumers do. Supply and demand do not need government help to find each other, and frequently the opposite is true. All too often, suppliers can't enter markets to satisfy demand because of government barriers to entry such as taxes and mounds of red tape.

Early next month, the CPUC will vote on what kind of broadband report to send to the California legislature, but fortunately Commissioner Brown's report is not the only choice. A different report, created by Commissioner Susan Kennedy and her staff, identifies the real policy problems responsible for slowing broadband rollout, including regulatory uncertainty and lethargy.

California's economic well-being depends a great deal on businesses having the flexibility to operate in a competitive market free of government interference. That at least some policymakers recognize this reality is a welcomed development. The broadband marketplace is far from being monopolistic and next time regulators need proof they should lift their gaze to the blimp in the sky.