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Luken: Economic Growth? There’s an App for That

The great writer William Faulkner once said that the sign of intelligence is the ability to keep two seemingly contradictory ideas in mind simultaneously. Applied to contemporary politics, it would mean understanding that some industries need fixing while others need just a little nourishment to flourish.

This notion comes into focus with the proposals of a small but increasingly vocal group of self-anointed critics of the broadband Internet industry who want the Obama administration to impose new, heavy-handed, European-style regulations on it.

But the old aphorism “if it ain’t broke don’t fix it” would seem to apply. Indeed, the broadband industry is a far cry from the dysfunction of Wall Street and the oil industries. And smart people should see the difference.

From 1996 to 2011, broadband network companies invested $1.2 trillion (more than the sum total of President Barack Obama’s stimulus package) – and $250 billion in the past four years alone – into wired and wireless infrastructure. It took Gutenberg’s printing press 30 years to gain acceptance in Europe in the Middle Ages, but in half that time the broadband Internet has increasingly become the dominant way in which we get news and entertainment and communicate with one another through social media outlets and more than 650,000 downloadable applications.

Internet connectivity is all around us and comes in many flavors. Consumers have unprecedented choice of Internet access and price plans; most have six or more providers of some kind of broadband service: one or two cable providers, fiber or DSL from the telephone companies, and new 4G LTE wireless services with speeds that can reach 20 Mbps and that will be deployed across 94 percent of the country.  In fact, there is more competition in the wireline and wireless broadband industry than in most American industries.

Cable broadband customers have seen a 900 percent increase in speed since 1999 while the cost to consumers for the service has remained largely steady.  In comparison, the Consumer Price Index has risen 37.7 percent since 1999.  Meanwhile, broadband-based telephone services are saving consumers approximately $22 billion a year, according to independent estimates.

And yet, there are critics, the Debbie Downers who always see the glass as a quarter empty. Some don’t like the fact that Internet providers have adopted “tiered pricing” plans for Internet service.  These plans leave unchanged the cost of Internet service for almost all of us and merely require the approximately 1 percent of residential users who consume roughly 300 gigabytes a month (which is the equivalent of downloading 75,000 songs per month and is on par with usage of many commercial establishments) to pay a small increment for what they use.

But this kind of tiered pricing is how the economy thrives – you pay more to fill up a Hummer than a Prius – and the small additional charges for the few super-users help prevent these costs from being shifted regressively to the rest of us. Keep in mind that the Federal Communications Commission estimates that $350 billion in broadband network improvements will be needed to keep up with demand that doubles every 18 months.

Still others argue that there is not enough competition and that broadband Internet should adopt European-style pricing and other regulations because some Europeans play less for Internet service. But massive taxpayer subsidies built many of those broadband networks – a state ownership-and-control policy that virtually no U.S. policymaker supports.  Nor should they – the taxman recoups from consumers whatever is saved on their broadband bills.

Others say that local governments should get into the business of building broadband networks because they might be able to undercut existing prices. But local government-owned broadband networks have been tried, in cities as large as Philadelphia and Chicago and as small as St. Cloud, Fla., and nearly every case has ended up in failure with budget overruns and debt, inferior networks and a lack of consumer interest.

The most important parts of our everyday lives – driving our cars, grocery shopping, our children’s education and many more – are becoming vastly more convenient and efficient because of the broadband revolution. And these thousands of flowers bloom in large part because the government has mostly adopted a light touch on broadband and allowed this magical ecosystem to flourish.

Charlie Luken is a former Democratic Member of the House and served as mayor of Cincinnati from 1983 to 1991 and from 1999 to 2005. He is now senior counsel at Calfee, Halter and Griswold, a Cleveland-based law firm.