The End of the Telecom Revolution?

The End of the Telecom Revolution?

By Chip Pickering - May 18, 2011

"The Member of Parliament who supports every proposal for strengthening the monopoly is sure to acquire  not only the reputation of understanding trade, but great popularity and influence with an order of men whose numbers and wealth render them of great importance. If he opposes them, on the contrary, and still more if he has the authority to be able to thwart them, neither the most acknowledged probity, nor the highest rank, nor the greatest public services can protect him from the most infamous abuse and detraction, from personal insults, nor sometimes from real danger, arising from the insolent outrage of furious and disappointed monopolists."

-Adam Smith, Wealth of Nations (1776)

Adam Smith, the Father of Capitalism, knew two threats existed to economic freedom and the wealth of nations.  One would be through inefficient, bureaucratic, government control of an economy and the other equally insidious threat would be through the corrupting, distorting control of the market into the concentrated hands of monopolies, duopolies or oligopolies.   His writing guided our great experiment in political and economic freedom and influenced at critical moments in our history, the indispensable American Presidents most responsible for our success and prosperity over the last century.

Roosevelt and Reagan: From Industrial Revolution to Information Age

At the turn of the 20th century and at the height of the Industrial Revolution, President Theodore Roosevelt broke the monopolies that were beginning to dominate the American economy.  He fought the establishment and elite of his day with an uncommon courage, tenacity and remarkable success.   Free markets were preserved and protected.   A permanent defining of American capitalism occurred.  More importantly, in a time of economic transformation and tremendous change, America’s character remained true and fixed. We would be a land of opportunity for all; not a land dominated by a new aristocracy.  Instead of protecting the monopolies, our nation, faithful to Adam Smith’s vision of economic liberty, would act to maximize the wealth and opportunity for all its citizens.

Thirty years ago, Ronald Reagan came to the presidency with a clear purpose -- renew economic freedom and prosperity at home and spread political freedom abroad.  A significant part of Reagan’s legacy includes the celebrated break-up of the AT&T monopoly in 1983. In hindsight, this action is more lasting and consequential than any other economic decision he made, even more than lowering taxes. The contribution his administration made in breaking the stranglehold Ma Bell held over the nation’s political and economic future has yet to be fully captured or appreciated today. But history is now clear; the end of the AT&T monopoly and the ensuing competition and investment in fiber networks and digital technologies transformed our economy.  Investment in the wired and wireless infrastructure of the Internet exploded and the information age was born. This age brought about the best example and greatest expansion of free market capitalism ever known. Not only was the wealth of our nation greatly increased, but the resulting telecom revolution became an unbridled force for economic and political liberty from the old Soviet Bloc to the present democracy movements in the Middle East.

Roosevelt and Reagan define the best in American leadership.  Both had the courage to stand against those who would try to monopolize our economy, limit our freedom and hoard America’s opportunity. It is a remarkable history that similar presidential action during distinctly different times had strikingly similar outcomes.  The two most significant economic transformations of the last century and the rise of American power occurred because of bold decisive action to end existing monopolies.

"Too Big to Fail"

We now know that our nation’s history would be much different if Roosevelt and Reagan had not broken the concentrated market power of the industrial and information age.   How do we know? "The Great Recession" of the last several years demonstrates the clear consequences of an economic policy predicated on market power and concentration in the hands of a few. "Too Big to Fail" failed miserably.  The contrast cannot be more conclusive.  Adam Smith’s words of warnings were true and his economic principles stand the test of time.  The past president and previous Congresses allowed excessive concentration in the financial sector and it came close to irreparably harming free market capitalism and bankrupting our country. The resulting financial collapse destroyed more wealth than ever before and wiped out individual incomes and retirements. Job losses were severe.  America’s confidence and power were shaken.

A Defining Decision

President Obama and most Members of Congress represent the information-age generation and personally understand the amazing benefits of the last 30 years of telecommunication policy.  A policy that is remarkable for its bipartisan support. After the break-up of AT&T, Congress continued a consensus based competition policy. In 1993, Congress ended the wireless duopoly and competitive auctions began. Wireless investment soared (with up to seven competitors per market!), prices plummeted and subscriptions rose dramatically.  Full competition transformed analog networks to digital and today mobile applications have exceeded our nation’s wildest imagination.  Next, with overwhelming support, a Republican Congress passed and President Clinton signed the Telecommunications Act of 1996.  Finally, all sectors of telecommunications -- cable, wireless, broadcast, data, voice, local and long distance would be subject to vibrant, free market competition.  The Depression era monopoly policy of 1934 was dead and the revolution was in full bloom.

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Chip Pickering represented Mississippi’s 3rd Congressional District from 1996 – 2008. During that time, he served as the vice chairman of House Energy and Commerce Committee and was the first chairman of the House Wireless Caucus. Prior to his work in the U.S. House, he helped shape the landmark Telecom Act of 1996 as a staffer for U.S. Senator Trent Lott and the Senate Commerce Committee. He currently represents COMPTEL, the leading industry association of competitive communications providers and their supplier partners.

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