Strangling a Cartel in Its Crib

There’s a genuinely interesting op-ed from Tim Wu in the New York Times today that draws an analogy between energy and information:

AMERICANS today spend almost as much on bandwidth — the capacity to move information — as we do on energy. A family of four likely spends several hundred dollars a month on cellphones, cable television and Internet connections, which is about what we spend on gas and heating oil.

Just as the industrial revolution depended on oil and other energy sources, the information revolution is fueled by bandwidth. If we aren’t careful, we’re going to repeat the history of the oil industry by creating a bandwidth cartel.

Like energy, bandwidth is an essential economic input. You can’t run an engine without gas, or a cellphone without bandwidth. Both are also resources controlled by a tight group of producers, whether oil companies and Middle Eastern nations or communications companies like AT&T, Comcast and Vodafone. That’s why, as with energy, we need to develop alternative sources of bandwidth.

He goes on to urge us to prevent a cartel controlling information from gaining a stranglehold.

Unfortunately, this particular infant had a long white beard when your grandpa was in three-cornered pants. Information has always been controlled by cartels whether you’re talking about a literate priesthood wielding its influence over an illiterate population or Ma Bell. I agree with Mr. Wu that it would be nifty if there were some sort of competitive market for telephone services, Internet access, and so on but it’s hard for me to see how that might come about.

Here in my neighborhood of Chicago I have three choices for television access: broadcast, Comcast cable, and satellite. That’s it. Each of them is found on a licensed monopoly. Telephone service and Internet connectivity are similarly restricted and ultimately depend on local monopolies. I have a pretty good idea of the costs in involved in operating each of these and I don’t see any way we’d be paying the outlandish fees we’re paying for information if there weren’t monopolies involved.

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