Regulations And Freedom

FCC Chairman Michael Powell warned of an increase in regulation in media at a libertarian conference today.

"I do see a mood swing in Washington. I see a mood swing in the country," Powell said at the Aspen Summit, a technology and telecommunications summit held by the Progress and Freedom Foundation, a Washington think tank.

Powell said he worries about the rising belief that regulations do a better job than free markets because "the telecommunications sector and the high-tech sector are at a point in history where they can ill afford to be lined up with that kind of thinking."

He also said industry bears much of the blame. The litany of corporate fraud cases has undermined the public’s trust and generated support for more regulations.

Powell is correct, media corporations have done much to reduce their public standing and have been essentially hanging themselves with their own ropes. They committed the most serious violation one can do in capitalism – lying to their shareholders and undermining the transparency that makes the market work. Of course, those companies have also collapsed as the market have ensured that they will never do business again as is.

Powell is also correct on the point that more regulation is not the answer. An overly stringent regulatory environment does the exact opposite of what its proponents suggests. Rather than making the media more equitable it will create new barriers to entry that will ensure that small and agile firms that could offer innovative new technologies and cheaper prices will be locked out of the business.

One of the benefits of the Internet is that it grew in a regulatory tabula rasa. There were no regulations that hindered the ability for small players to enter the market – which is why companies like and eBay grew from garage operations to major players in the industry. Businesses did not have to contend with things like sales taxes, complicated bureaucracy, or any other the other problems that conventional businesses face.

If media regulations are made more stringent, the opportunities that new media technologies have created will be closed in a sea of red tape. Provisions will be created out of political expediency rather than the public interest. Experience has shown time and time again that a heavily regulated market is not more fair than an open one. Instead it create a climate where the big, politically powerful players can shape regulation to preserve their interests above the interests of innovation and fairness.

5 thoughts on “Regulations And Freedom

  1. Michael Powell speaking against regulation? What a fuckin’ shock!

    This from the guy that’s set to deregulate ownership of the media into a monopoly. What a surprise that he feels some kind of Big Utility would be a big idea.

    I’m in favor of the French system you talked about – privatize the management, sure. But the infrastructure itself needs to be public to ensure reliability.

  2. Oops.

    Next time I’ll read the article before shooting my mouth off. Why did I think this was about utilities?

    But I still like the French system you talked about.

  3. The French system works well because the water system is in municipal hands. Municipalities tend to be closer to the people and less likely to overtly defraud everyone.

    This system doesn’t work for larger utilities because things like the telecommunications system or the power grid would practically have to be managed on the federal level. Practically, that means that the government is going to try to do things on the cheap – which means the grid would have almost no redundency. In the case of communications that factor would also be in play, as well as giving the govenment ownership of communication lines that would allow them to censor all communications in the country. Having that level of control in the hands of the federal government could easily lead to some major problems.

    At the very least, you’d get a situation like the radio spectrum. The spectrum is entirely managed by the government. In the mid-1960’s we had everything we needed to create a national cell telephone network.

    Yet cellular technology did not emerge for 20 years because landline companies lobbied heavily against opening the spectrum to wireless communications. It wasn’t until Reagan partially deregulated the spectrum in his first term that cell technology could go fowards.

    The reason we have cellular service, text messaging, push-to-talk technology, and 802.11x is because the government has been opening more and more spectrum for private use.

    Yet the spectrum is limited, and the governmenthas a legitimate interest in dividing that spectrum to avoid interference.

    Telecom and electrical infrastructure have no such technical limits, and government control of infrastructure will only benefit those who can lobby the hardest for their interests above that of the consumers.

  4. Practically, that means that the government is going to try to do things on the cheap – which means the grid would have almost no redundency.

    But that’s exactly what the private companies try to do, with the same results – no redundancy. Since when has the government tried to do things on the cheap? Aren’t you always talking about government waste?

    If there’s one thing we want the government to waste money on, it’s our essential utility infrastructures.

  5. The point of having private companies do it is that each one will build their own network, and try to compete on reliability, geographic reach, and other factors of quality. This is why the power grid, which was heavily regulated, is nowhere near as reliable as the phone system, which grew massively as regulations eased.

    The reason why the government does things on the cheap yet still costs more is because the cheaper the product the more money is left for corruption and waste. The government falls under Milton Friedman’s Fourth Rule of Spending: when you’re spending someone else’s money on someone else, you’ve no incentive to either economize or produce a quality product.

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