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Proof the FCC Loves Monopolies

We have heard over and over again how regulatory uncertainty can impede decision making on the part of business. The same holds true for the communications industry. In an article published in the National Review Online, Kevin Hassett provided an example of the dampening effect on growth ill-advised policy can have.

Mr. Hassett referred to the Federal Communications Commission’s finding that transferring licenses from T-Mobile was not in the public interest and that such a transfer would have a negative impact on competition. What Mr. Hassett points out is that decisions like the one by the FCC would have a negative impact on the nation’s growth. He wanted us to envision the collective negative impact these types of decisions would have on an industry that accounts for one-sixth of the economy.

Private investment, such as the investment that would have been initiated by the merger, is at the base of any economic recovery. As much as we may talk about government making investments, it was private investment that drove growth during six years of the Clinton Administration and five years of the Bush II Administration.

On the issue of competition, the FCC’s decision to deny the license transfers was based in part on giving smaller carriers the opportunity to either enter or, in the case of Sprint, stay in the market. Smaller, regional carriers don’t have the economies of scale or other capital necessary to provide the same level of national output of wireless services, even with access to additional spectrum. Just ask T-Mobile.

If smaller carriers are not increasing their services, and AT&T and Verizon are not allowed to increase their services due to a lack of spectrum, these carriers will raise their rates in order to regulate the increase in consumer demand for wireless services. Reduced output and increased prices are characteristics of a monopoly, the very scenario the FCC allegedly wanted to avoid. Consumers get shafted on both ends.

This is the irony of over regulation. Not only is capital investment impeded, but the regulatory agency creates a non-competitive market.

Declining GDP growth means downward pressure on demand for broadband

Posted July 30th, 2010 in economy, GDP, net neutrality and tagged , , , by Alton Drew

The Department of Commerce’s Bureau of Economic Analysis released its first estimates for gross domestic product, the measure of our nation’s output and consumption. It was not encouraging.

The annual increase in GDP is at 2.4% for the second quarter of 2010. This is down from a revised 3.7% for the first quarter of 2010.

More telling of the state of broadband demand is the state of computer purchases. Final sales of computers accounted for .04 percentage point of the change in GDP for the second quarter, compared to an addition of .10 percentage points to the overall change in GDP in the first quarter of 2010.

What does this imply for broadband demand? Well, you can’t ride the super information highway without a computer. What’s even more troubling is that for the past 17 months, the FCC has wasted time and resources pushing a net neutrality policy that does not nothing for increasing facility deployment, reducing consumer prices, or increasing consumer demand.

Net neutrality may end up compounding the neutralization of consumer demand for broadband if GDP numbers keep declining this way.