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Wednesday, July 30, 2008

Bandwidth Competition

A call for more competition in the market for broadband connections to information and entertainment services:

OPEC 2.0, by Tim Wu, Commentary, NY Times: 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. ... That’s why, as with energy, we need to develop alternative sources of bandwidth.

Wired connections to the home ... are the major way that Americans move information. In the United States and in most of the world, a monopoly or duopoly controls the pipes that supply homes with information. These companies [are] primarily phone and cable companies...

But just as with oil, there are alternatives. ... Encouraging competition...

After physical wires, the other major way to move information is through the airwaves, a natural resource with enormous potential. But that potential is untapped because of a false scarcity created by bad government policy.

Our current approach is a command and control system dating from the 1920s. The federal government dictates exactly what licensees of the airwaves may do with their part of the spectrum. These Soviet-style rules create waste... Many “owners” of spectrum either hardly use the stuff or use it in highly inefficient ways. At any given moment, more than 90 percent of the nation’s airwaves are empty.

The solution is to relax the overregulation of the airwaves and allow use of the wasted spaces. Anyone, so long as he or she complies with a few basic rules to avoid interference, could try to build a better Wi-Fi and become a broadband billionaire. These wireless entrepreneurs could one day liberate us from wires, cables and rising prices. ... The Federal Communications Commission promised this kind of reform nearly a decade ago, but it continues to drag its heels.

In an information economy, the supply and price of bandwidth matters, in the way that oil prices matter: not just for gas stations, but for the whole economy. ...

Americans are as addicted to bandwidth as they are to oil. The first step is facing the problem.

    Posted by on Wednesday, July 30, 2008 at 12:15 AM in Economics, Market Failure, Regulation, Technology | Permalink  TrackBack (0)  Comments (10)

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