Railroads, Radio and The Internet
Telecommunications policy isn’t flashy. It’s, not particularly dramatic, and doesn’t get much coverage in the press. Many people are not even aware of telecommunications policy, believing it to be the stuff of back rooms in Washington. This view is mostly correct, but there are few issues with as much impact on the ability of the United States to remain competitive in the 21st century that are as important as telecommunications policy. There are few issues of this importance that are as misunderstood by large percentages of the population.
I attended several sessions at SXSWi on telecommunications policy. All had a very clear understanding of the problem, but few, if any, solutions. Here are my observations on the issue, based some on personal experience, some on my own study of the history of telecom regulation, and some on the presentations I’ve attended.
My first encounter with the Federal Communications Commission was at the age of 13. I desperately wanted to become a ham radio operator, and the only way to do that was to go to the FCC office and take a test. My mother drove me 150 miles to the FCC office in Houston, and I sat down in a room full of people much older than I was, and took the exam to obtain my license. It was terrifying! I’ve been involved with radio both as a hobby and later, as a career, ever since. My obsession with radio led me to study some of the history of telecommunications policy in the United States. I’m no expert, but try to stay as informed as I can.
The FCC was created in 1934, and charged with regulating all non-government use of the radio spectrum, all interstate telecommunications, and all international communications originating in the United States. From the moment of its creation, the FCC clashed with the businesses it was supposed to regulate.
In the 1920s, ham radio operator Frank Conrad built something in his garage that completely changed the media landscape. A totally new application of technology provided ordinary citizens unprecedented access to news and entertainment at the time and place of their choosing. Tremendously disruptive, this technology challenged all the old distribution channels, and threatened the existence of huge media companies. What Conrad built was the first broadcast radio station.
By the 1930s, radio broadcasting was a huge business, and it created a challenge for regulators. Should radio be regulated like an information service, a newspaper in this case, or should it be regulated like the telephone system, as a common carrier? Who owned the infrastructure and who owned the radio spectrum were inextricably linked, and regulators in 1930 had few examples to work from. At the time, the most recent example they had of an industry where the infrastructure was closely linked to the spectrum and also closely linked to the national/public interest was the railroad industry. Because of this, US telecommunication policy is largely based on regulations developed for the railroad industry.
A bit of history: By the late 1800s, the railroad industry had made a huge investment in infrastructure by building tracks across the United States, much of it on public land. The urban areas were connected by multiple tracks providing many options for shipping products, but only a few tracks extended into the rural areas of the country. Urban shippers had multiple carriers, and there was competition for pricing. In rural areas, you had to pay whatever the operator of the single track charged if you wanted any service at all. Does any of this sound vaguely familiar?
It’s clear why regulators saw railroad legislation as the model for creating telecommunications policy. The underlying principles are very similar: Access to land (rights-of-way, radio spectrum) is given to private companies (RCA, GE, AT&T, etc.) to build their tracks (poles, wires, radio transmitters), and in return, the public had to be given equal access to the trains (phone calls, radio programs, data packets) at a reasonable price. Mechanisms were also put in place to promote development in rural areas (universal service fund, subsidies).
This is network neutrality, and we find ourselves in the same predicament with broadband access.
The battle pits large telephone, wireless and cable TV companies against each other, the FCC, local governments, and the public. The battle lines are vaguely defined, sometimes technically and economically complex, and with many conflicting interests.
First, the infrastructure costs are staggering. Really staggering, and the telephone, cellular and cable TV companies have a huge advantage because of their existing infrastructure. For this reason alone, it’s almost impossible to enter this industry. Think of how difficult it would be to build a transcontinental railroad today if you had to compete with Union Pacific to do it! It’s the same kind of thing.
Second, competition is limited to non-existent. People in the urban United States, if they’re lucky, have two choices for broadband internet access: The phone company and the cable TV company. People in rural areas, if they’re lucky, have only one choice: Either the phone company a cable TV company, or some kind of limited WiFi network. If you are really out in the sticks, your ability to obtain any broadband service at all is extremely limited. Satellite-delivered service is likely your only option.
Third, the service providers have little incentive to provide service to rural areas because of the immense cost per user. There’s just no money in it for them.
Crafting effective legislation to promote broadband access and competition is extremely difficult because of the conflicting interests and lack of understanding surrounding the technical and political challenges. It took almost half a century for railroad legislation to emerge, and the effects of that are still being debated today. Have you driven on an interstate highway lately? Ever wonder why there are so many 18-wheelers? The long haul trucking industry was an unintended consequence of railroad regulation.
The FCC has a very difficult job ahead of them because this issue is at least as sticky as regulating the railroads or radio. The pitfalls are huge, and like many big problems, there are no silver-bullet solutions. One question I asked Susan Crawford of the Princeton Center for Information Technology Policy was “Not to get too political, but many rural legislators have philosophical objections to placing regulations on companies, even when those regulations would help their constituents. How are we going to get real-world solutions under these conditions?” Her response was constituents in rural areas should be angry they’re being left out, and that their representatives also wanted good schools, roads, clean water, etc., and surely they could see the value of broadband to the competitiveness of their regions.
Given the current budget challenges in many states, it’s hard for me to see broadband being very high on that list of priorities.