Quote of the day: “The government needs to trust that the market can spend the money correctly”

A remarkable quote from Ivan Seidenberg, CEO of Verizon, the last true believer in the magic of free markets. The last time we trusted market players to spend money correctly with few restrictions, the global financial system blew up. There is no political support for letting private enterprise go on its old merry way completely unfettered, free of regulations or responsibilities. That era is over.

Seidenberg says he agrees with the goals of US government’s broadband stimulus package but thinks too many regulations over how the money will be disbursed, may torpedo them. While I agree that stupid regulations will do more harm than good, regulations are necessary¬† — to ensure that there is competition in the market for broadband services.

Look at how the iPhone is sold in France where the government has rejected the exclusive deal between Apple and Orange (France Telecom’s mobile operator). SFR, another French operator, has been allowed to carry the iPhone. It has been aggressively marketing the iPhone and now both SFR and Orange are competing for customers. They keep adding new apps and services (like TV with 20 channels application — see SFR iPhone TV app advertisement below). Competition, brought about by regulation, is driving innovation and price competition in this particular market, contrary to Seidenberg’s beliefs. Perhaps that is what Verizon doesn’t want: competition. Ironic, given that Verizon may want to carry the iPhone and compete with AT&T.

sfr-iphone-tv

By the way, where is AT&T’s TV with 20 channels application for the iPhone? When a company has no competition because it has exclusivity, there’s no fire being lit under its butt and it can just sit around and feel comfortable because life is nice and easy. Free market? What a joke.

The future tangle of net neutrality rules

Although I understand the push behind net neutrality rules, I am uneasy about them for one reason: when it comes time to define “net neutrality”, I fear the big telecom and cable players will always find a way to weasel out of true net neutrality by watering down the legislation, challenging it in court, carving out exceptions, etc. With regulations like these, the government has to devise ways to monitor the operators and keep them under control. An expensive and time-consuming proposition. This is how legislation is made and eventually enforced in Washington DC and in state legislatures where many politicians get money from big businesses and end up writing laws that benefit them, not the general public. You only have to look at what happened to the line-sharing rules in the 1996 Telecom Act.

To have true net neutrality, there is only one solution: structural separation. Everything else is just tiptoeing around the problem and ignoring reality.

Reality Check

Anyone who still doubts how legislation is made in this country and why things seem to work the way they do, watch this instructive Stephen Colbert video:

The Colbert Report Mon – Thurs 11:30pm / 10:30c
The Word – Have Your Cake And Eat It, Too
colbertnation.com
Colbert Report Full Episodes Political Humor Gay Marriage

And make sure you read Simon Johnson in The Atlantic: The Quiet Coup: How Bankers Took Power and How They’re Impeding Recovery.

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Comments

  1. Open markets can only bring stiff competetion among the telecom Giants as customers are looking for the next sexy app to add to there cell or help make them make the next decision on what phone the will purchase.

  2. Anyone else think it is ironic that the video is no longer available?

    :)

  3. Esme Vos says:

    For some reason the Hulu.com embedded video disappeared, but I found it on Colbertnation.com and reposted it. I can’t stand Hulu. I’m here in Tel Aviv and cannot gain access to it because I’m outside the US. Meanwhile, I can watch any Colbert video clip even outside the US. Hulu is so broken. I’ll never post a Hulu clip again.