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The Conservative Case for Broadband

The Conservative Case for Broadband

By Bruce Mehlman - January 29, 2009

In the wake of November's elections, following extensive growth in federal spending and compounded by the partial nationalization of our financial sector, many conservatives are in retreat. Fearing a new New Deal of liberal lawmaking, conservative stalwarts are girding for years in the policy wilderness. Yet all is not lost.

One big idea that should energize and unite conservatives is creation of a national broadband strategy: policies at the state and federal level that promote more widespread deployment and adoption of truly high speed Internet connections. President Obama's economic recovery package will include billions to promote broadband deployment and adoption, and conservatives should cheer.

To many, this will not sound conservative at first blush. Conservatives have long retained a healthy skepticism towards so-called industrial policies that substitute government guessing for competitive market forces, and with good reason. One need only look at the market-distorting and anti-competitive impacts of many agricultural subsidies, auto industry handouts and government-sponsored mortgage monopolies to see the damage done when politicians pick winners, favor national champions or manage to industrial targets.

Yet too often aversion to industrial policies provokes knee-jerk assumptions that all government actions are bad and no government action is best. This has particularly been true with respect to technology policy, where minimal regulation has enabled maximum investment and cut-throat market competition has encouraged break-neck innovation.

Conservatives generally see no positive role for government in promoting the growth and expansion of America's dynamic high tech sector. Yet that is a mistake, particularly with respect to the deployment and adoption of broadband Internet, where the conservative cause cries out for a national broadband strategy. The case is straightforward.

First, a national strategy is needed to address previous policy interventions, often regulatory relics from earlier eras. In fact government is already up to its eyeballs in market-impacting actions affecting the telecom sector. *Policy makers treat telecom like a luxury, tax it like a sin, regulate it like a utility and subsidize uncompetitive players and anachronistic technologies*. Existing tax policies discourage broadband adoption, regulatory policies create barriers to investment and government actions limit competitive opportunities for new entrants.

Barriers to growth exist at local, state and federal levels, and a national broadband strategy could identify and remove many of them.

Second, broadband deployment offers positive network externalities that are greater for society as a whole than for individual actors. As a result, rational economic participants might under-invest in network upgrade and expansion. We have seen such positive externalities in other government actions that greatly benefitted America's high tech innovators. From the G.I. Bill to federal investments in basic research, from immigration policies that attract scientists and engineers to market-opening initiatives that expand entrepreneurs' global reach, many government efforts have contributed to the education, innovation, and world wide expansion of our high tech entrepreneurs. There is no better example than the Internet itself, originally born as a government-funded research project.

Third, more robust broadband deployment and adoption will promote conservative ends. Online learning opportunities offer the ultimate school choice, unbounded by tenure politics or social promotion. Broadband enables greater energy efficiency, potentially obviating the need for up to 11 percent of annual U.S. oil imports, according to the American Consumer Institute, thereby reducing our dependence on foreign oil and the dictators who profit from our addiction. Digital health care solutions are radically cutting costs and improving the quality of American health care, slowing the growth of this budget-busting entitlement and cutting down on lawsuits against doctors and hospitals. A robust blogosphere has disintermediated the "mainstream media" and its stranglehold on news coverage - just ask Dan Rather.

And broadband expansion is good for our economy as the Obama team has argued. A seven percent increase in broadband adoption could result in $134 billion in annual economic benefit to the American economy and over two million permanent private sector jobs, according to Connected Nation and the Brookings Institution respectively. This growth results from enabling entrepreneurs in the marketplace to reach customers and partners, reducing the need for taxes, welfare and stimulus handouts and putting Americans on more solid footing as they compete with others around the world.

Of course broadband alone does not address all the challenges facing our nation. And the elements of any national broadband strategy will determine whether it advances or impedes a truly conservative agenda. But there is much that can be done, from encouraging investment to reducing taxes to eliminating monopoly-era rules that no longer fit the realities of the converged and competitive digital marketplace. Though we're still awaiting specifics, conservatives should give the Obama Administration a second look in this effort toward economic growth through a national broadband strategy.

The returns could potentially be high speed.

Bruce Mehlman is Co-Chairman of the Internet Innovation Alliance and served as Assistant Secretary of Commerce for Technology Policy in the first term of the George W. Bush Administration.

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