Airplanes are like cabs with wings.
That’s how I describe my philosophy about air travel. Yes, your average airliner is far more technologically advanced (and much larger) than a yellow car you hail on the street, but their purpose is the same: getting me from where I am to where I need to go and back again.
A similar view sums up how I use my mobile phone or Internet. I want them to be available to use them to communicate in ways that meet my particular needs. It’s that simple.
Unfortunately, not so simple is the noise caused by today’s debate over regulating the Internet. The White House has essentially directed the Federal Communications Commission to impose “network neutrality” regulation on Internet service providers. It can seem complicated, but it shouldn’t be.
The occasional TSA idiocy aside, there is an aspect of air travel that is relevant to that debate—it’s inherently fair and competitive. Yes, we all get annoyed by unexpected airline fees and overcrowded planes. But more importantly, most travelers have a choice of carriers and over how much to pay and when.
Last Wednesday evening I hosted an event in San Francisco and needed to return to Washington the following evening. That part wasn’t complicated. What was complicated was realizing I needed to be in San Diego on Friday for an important and unexpected meeting.
The original round trip between Dulles and San Francisco cost $450. That was easy enough. But it took some creativity to engineer a return to the West Coast—a mix of carriers, crazy early departures, and seat availability restricted to first class or full fare economy. The San Diego to Washington segment alone cost nearly three times the round trip fare to San Francisco and the only seat available was a middle one in the rear of the plane.
My seatmate on that flight paid only $178 for that same segment, having booked the flight nearly a month before. We all know booking early saves money. But the important point is that we were both able to go where we needed to on the days we needed.
And that is fair.
Most of us get the basic idea of demand pricing—tickets purchased ahead of time cost less than those purchased within a few days (or even hours) of departure. This system enables us to crisscross the country, and even the world, and far surpasses the travel choices available to previous generations.
Unfortunately when it comes to the Internet, government views fairness differently, and uses definitions created by companies already entrenched in the marketplace. That is the crux of the current debate over “net neutrality.”
We’ve been here before. In 1913 AT&T gained control over the telecommunications industry, through government fiat. As long as all had access and rates were set by the government, this private firm got to own and operate the entire network and earn a “fair” profit. That worked out just fine for Ma Bell, but not so much for consumers.
As RealClear Radio Hour host Bill Frezza noted recently, “few benefits accrued to consumers. Long distance calls long remained a luxury.” So what happened, you might ask? “In 1983 the Bell monopoly was broken up by the courts, unleashing unbridled competition for the first time in decades. Since then, the telecom industry has gone on a rocket ride of innovation we’re still on today, as entrepreneurs tinkering in their garages continue to put Bell Labs to shame.”
Importantly, Bill reminds us, the telecommunications revolution was hardly preordained.
By a quirk of regulatory fate, the nascent Internet largely escaped the federal bureaucracy’s clutches, which allowed it to flourish without being handicapped by, you got it, enforced “fairness.” Technology companies bashed each others’ brains out, with the benefits largely accruing to consumers. Prices dropped like a rock as Moore’s Law advances made long distance telephony free. With video. All the way around the world.
Another problem is that when government regulators see a particular industry as “special,” markets become distorted and captured and consumers lose. Witness the repeated bailouts of the automobile or steel industries, and the creation of “too big to fail” bank protections. Allowing government to apply the same concerns to information infrastructure will lead to similar outcomes.
In light of that, how should we move forward? I’ll give my colleague Ryan Radia the final say on that one:
Congress should start from scratch on telecom laws, identifying which FCC functions—if any—cannot be sorted out by markets or courts, and vest such authority elsewhere in the federal government. Otherwise, broadband providers will soon look and act like power companies and the old Ma Bell telephone monopoly: stagnant, slow-moving, and anything but innovative.
I’m off to three cities again next week—on different carriers of course. Thankfully, I have Wi Fi pricing options that I can use the entire flights. For now.