Let the market drive

When I posted my first blog upon my return from Africa on Monday, I told you I wanted to discuss how important a light touch in government regulation was in telecommunications policy.  Just so you know, I wasn't born with an anti-regulation gene that caused me to be so firmly in the camp of being pro competition and anti regulation.  Indeed, it was an acquired taste for me, drawing from several very real experiences in my life-long career in cable. 

Here's one of them. 

In 1994, the cable industry was in dire straights.  Two years prior, Congress had passed the Cable Act of 1992 which imposed massive regulation on the industry ending a decade of dramatic expansion into new areas and an unprecedented increase in program options.

As a result of the heavy-handed dose of regulation, capital for the industry completely dried up.  Cable operators struggled to make even the slightest improvements.  The creation of new networks screeched to a halt and service extensions all but disappeared.  Basically, the industry was completely stalled.

Worst of all, cable operators were unable to invest in the newest emerging technologies.  New fiber optic wires were being developed and deployed all over the world, but not here in the US.  They were simply beyond our economic ability. 

Luckily, at around that time, Congress decided to review the nation's overall communications policy which still was being governed by a 60-year-old law.  It was becoming abundantly clear that the planet's next big "revolution" was going to be centered around communications and America either had to get with the program or be left behind.

Congress realized that the only way to ensure that we would be a leader nation in that revolution was to encourage competitive markets to be the primary driver of the huge amounts of capital needed for infrastructure. Otherwise, the bill would go to the federal government and Congress had no desire to foot that bill. 

Two years later, an all-encompassing rewrite of communications legislation was passed.  The heavily-regulatory 1992 Cable Act was largely undone and the industry was reinvigorated to invest what would ultimately total over $120 billion in upgrading its infrastructure.  That investment put America in a leadership position in the emerging Communications Revolution.

The rest is pretty much history.  Deregulation and the cable industry investments became the catalysts that unleashed the Internet as we know it today.  Back then, online experiences began with a modem making a phone call and the incumbent phone companies liked it that way.  DSL had been invented years earlier but the phone companies had no motivation to release it to the public. After all, they enjoyed a fabulous monopoly on phone service and people were buying additional high-margin phone lines to keep their telephones clear while they went surfing online.  And, oh, let's not forget that Ma Bell had a hugely profitable T-1 business service that they didn't want to put at risk if an inexpensive DSL technology was offered.

Despite painfully slow speeds, the potential of the Internet was too much to ignore.  Consumers persevered. They had just enough of a taste of the Internet's opportunities and it became obvious there was so much more they could do. 

A few people in the newly deregulated cable industry understood that this new medium was going to revolutionize the way the world communicates. And they also understood the potential of cable's technology and how it related to the Internet. Broadband service was developed as engineers created an open standard for high speed broadband connections to power cheap but speedy modems.  That's what became DOCSIS which was the catalyst that forced the phone companies to unlock the DSL vault.  In other words, it was competition that forced Ma Bell's hand.

Why am I telling you about ancient history?  Because it is a perfect example of how efficient markets can be and how inefficient government regulation can be. 

During the period of heavy regulation, cable customers suffered.  New services stagnated.  When Congress deregulated that same business, capital flowed into the industry and expansion, innovation and, even the beginnings of a "revolution" was ignited.

Now, I know all is not perfect in the world.  We all could do a better job in providing world class customer service to customers.  And we, at Insight, know that and are working really hard to do just that.

That said, I will also contend that without deregulation, we would have been unable to provide the services we are today, and Ma Bell, who could have, would continue to choose not to.

Comments

[John Summers]

A well regulated market is the best market of all. As an Umpire in a baseball game or basketball game or football game where millions of dollars are involved is the key to a fair and balanced game.

Without regulation cheating, stealing and lying is rampant and corruption becomes a cancer on the body of Society. Almost all our problems are due to lack of responsibility of regulators being paid off to look the other way.

Rules may need update but regulation is the key. Most of the time lack of innovation and invention happens when greedy Corporations refuse to do more if they can't get their way. Much as the energy Corporations have refused to invest in new refineries and auto Corporations along with oil Corporations have destroyed the electric car.

We need a better Umpire in Washington. We need McKinney & Clemente 2008.

[Dog Balls]

In the not too distant past, phone companies were required by law to open their networks to Independent ISPs wishing to offer DSL and other data services. Cable companies were never required to do this, however. And recent changes in regulation have empowered phone companies to boot Independent ISPs off their networks.

This eliminates competition. And that's never good for the end user. It is laughably ridiculous to read comments in your blog about the good that comes of deregulation now that our national economy has been crippled as a result of limited to no oversight of the financial markets.

As the saying goes, when the cats away the mice will play.