March 7, 2005

Government Failure in the Telecom Industry

I often agree with Larry Lessig but he is off base here:

But the government also should not act as the cat's paw for one of the most powerful industries in the nation by making competition against that industry illegal, whether from government or not. This is true, at least, when it is unclear just what kind of "good" such competition might produce.

Broadband is the perfect example. The private market has failed the US so far.

First, he is absolutely correct when we rails against government enforced monopolies which reflects the state of the telecom industry for, well, seemingly forever.

Second, though, what private market has failed us? The heavily regulated, monopolistic telecom industry? No, this is better described as a government failure.

Lessig goes on to suggest:

The solution is not to fire private enterprise; it is instead to encourage more competition.
But it is not market competition he is suggesting. It is governments entering the market.

Lynn Kiesling has a great suggestion:

A better approach would be for governments to strive to be technology neutral, focus on defining the objectives, and work (interjurisdictionally, if necessary) to reduce the transaction costs and other features of the institutional landscape that prevent robust, private competition from occurring.
This is, I think, a very polite way of saying quit mucking with the market and start clearing out the sludge that has been put in the way of effective market functioning.

Posted by Steve on March 7, 2005
follow me on Twitter