tempest in a teacup

the pointless musings of a strange recluse

In need of some Band-aid

Or, should I say, broadband-aid. :P

*gets things thrown at him*

Ars Technica has been doing a lot of articles about the state of US broadband lately (here’s their latest one). I’ve ranted before about how lame the so-called ‘broadband’ in the US is (the fastest connection I can get in my area is 1.5 Megabits per second, and I live in an urban area), but another thing that this problem has reminded me about is the importance of regulation in free markets.

After the stagflation of the 1970s, most of the Western nations spent the ’80s and ’90s in a fit of deregulation, ostensibly to improve market efficiency. Deregulation is good in certain cases (most people seem to point to the airline industry as one badly in need of it, and post-deregulation one could certainly make the case that – post-9/11 shenanigans notwithstanding – the budget airline space has really taken off).

However, claiming that deregulation is universally good is misguided. People who make such claims (I’m pretty sure we all know who they are) ignore one of the important lessons of basic economics: that markets are not infallible. Market failure is inevitable most of the time, and government regulation is needed to mitigate the effects of market failure. Some of these problems have market based solutions – the success of cap-and-trade initiatives in dealing with emissions certainly demonstrates this – but even these need to be regulated so that the supply of permits is kept in check.

Regular telecom companies are subject to this kind of regulation (which is why infrastructure owners are required to act as common carriers), but broadband companies aren’t, resulting in a de facto monopoly or duopoly for broadband services in most areas. Less competition almost always results in higher prices – and that is more or less the situation the US is in now compared with most other advanced industrial nations.

If you ever need to shoot down market fundamentalists, the situation of broadband is as good an argument as any.

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