Nothing is Free (Unless You're Rich)

America’s phone companies, anticipating with glee further business-friendly rulings by the increasingly pro-corporate Supreme Court, have approached the Federal Communications Commission with palms outstretched. What do they want? Exclusive rights to provide wireless internet service. When do they want it?

Now.

The FCC requires phone companies to share the lines by which we get our internet service, on the grounds that if they have to share, they’ll have to compete with other companies, thereby keeping prices down and quality up, which is good for consumers.

The Supreme Court recently ruled, however, that cable companies that provide internet service don’t have to share with their competitors. So now we have the phone companies coming to the FCC, saying, Not Fair! Not Fair! We want exclusive rights, too!

And they’ll probably get them, if not now, then a few months from now, when the FCC becomes majority-Republican just like everything else in Washington.

We at the Blasphemy Blog have said it before, and we’ll say it again: this will be bad for America, because monopolies are bad for business.

Monopolies are bad for many reasons, but the main two are: they’re bad for consumers, and they’re bad for the economy as a whole.

For one, a monopolizing company can charge any price it wants. Now, if you’re selling milk, this isn’t so bad, because it’s not so hard for someone else to buy another cow and undersell you. Then, you try to undersell them, and the price goes down to the minimum level where you can still make a profit.

But if you’re selling wireless service, it’s more difficult than that. You can’t just wake up one morning and decide you want to start providing wireless internet; the costs of starting up that business are enormous. Moreover, when you apply for a loan to defray those costs, you might find out that the banks won’t lend to you because the monopolizing company has paid them off not to. Monopolies can do things like that.

Because of these “barriers to entry”, providing services like phone and cable naturally lends itself to monopolization, because there are only so many wires with which to transmit, and the company that laid them probably also owns them.

That’s why the government sometimes makes the companies share their wires. It is called the “essential facilities” doctrine, and it is a well-established principle of antitrust law. The classic example of this is the ski rental company that also owns lots of ski slopes; even though one company owns lots of slopes, they have to let skiers who rent from other companies ski their slopes, because otherwise they could charge monopoly prices, which would be bad for consumers.

In giving the cable companies, and likely now the phone companies, exclusive rights, the Supreme Court is telling them they can charge whatever they want. Don’t like it? Well, maybe you don’t need to ski the internet.

The other reason monopolies are bad, though, has less to do with consumers and more to do with the health of the economy. This is a complicated principle of economics called the monopoly deadweight loss. Basically, if the monopolizing company is enriching itself at the expense of consumers, it breaks the equilibrium of mutual benefit that keeps economies humming along efficiently. Think of it this way: the monopolizing company is charging more for its products than what they are worth, thereby taking money away from people who might want to invest in a new business or a college degree and keeping it for itself.

And where does that transferred money go? We’re glad you asked.

(There is a school of thought that argues that giving rich people more money is good for the economy, but this school of thought is a lie and makes us physically ill.)

The wires ought to belong to the people, anyway, like the roads. They’re an avenue of commerce and innovation and should not be privately owned. The political philosopher Michael Lind has suggested treating them like a natural resource and splitting up the proceeds from their use to give every American citizen a $20,000 check when they turn 18.

Lind’s idea is pie-in-the-sky, because our Congressmen are not about to give up the perks they get for giving away our natural resources to corporations for free. But, at the very least, we should make the corporations share them with each other, so that we don’t get fleeced.