Recently, the Minnestoa Public Utilities Commission (PUC) tried to assert jurisdiction to regulate Vonage, the provider of telephone service using the Internet.
This is *wrong* in every way and every respect. Let me count the ways.
The notion of "public utility" is a socialist abortion that basically means: your business is so big and so important, we're going to sort-of nationalize it. You will be entitled to a profit--so long as we deem it "reasonable"--but we will control your every decision.
Each state has its own PUC, and some counties and cities have additional regulatory layers. Of course, everything Telecom is regulated by the Federal Communications Commission, and there is some overlap by the Federal Trade Commission, Department of Justice, Department of Homeland Defense, Department of Treasury, etc. There is not one body of non-objective laws that controls a national telephone service provider company; there are at least 54 bodies of non-objective law.
Telecommunications regulation goes back to the Radio Act of 1927 and the Communications Act of 1933. They are based on several bad premises. First, radio spectrum is "scarce". Second, that therefore the government should force people to use it only for the "public good". And third, that there is a "natural monopoly" for telephone networks.
Of course, all property is scarce--it can have only one owner. To cite this as a reason for government control is simply the Marxist argument for a government takeover of everything. It's true that wishing is not sufficient to obtain values, but only dishonest people are bothered by this fact.
The "public good" is a banner that, when one can grab it, one can use to ram one's special interest down everyone else's throat. For decades, AT&T had held this title. When they lost it, the new carriers used it to destroy AT&T. Today, it is quite plausible that the remaining husk of AT&T itself will be acquired from one of the companies it was forced to spin off.
The economic principle of networks was stated by Bob Metcalf, the value of a network is proportional to the square of the number of connected nodes. This means that if I have an intercom in my house, that connects my wife in one room to me in another, the value is pretty low. But if I build a nationwide telephone network, the value is vastly higher.
But this does not mean that a network is a "natural" "monopoly". I put these words in separate quotes deliberately. In business, there is nothing which is "natural". Objective value is created by an idea, acted out by people, enabled by spending money over a period of time. This is fundamentally unlike a rock or a mud puddle.
The "Monopoly" itself is a rationally unusable term. There is only one kind of business entity that can sustain itself against more able competitors. I refer, of course, to the kind of business that has special favors from the government. Merely having built a nationwide network is no guarantee of future profitability. The Bell “monopolies” today face competition for their core businesses from cellular, Voice Over IP, cable companies, and even electric power line companies.
As if this were not bad enough, the alleged scarcity of radio spectrum has been proven to be a Big Lie. This lie is the foundation of the national communications policy. It is obviously a lie, and yet few are willing to ask if the emperor has any clothes.
Witness the huge success of Wi-Fi. 802.11b uses a small block of radio frequency in the 2.4 GHz range. This is not particularly good spectrum, as it’s subject to interference from many things including microwave ovens.
I submit that more innovation has occurred in this narrow piece of mediocre spectrum in 3 years than has occurred in a decade over all other spectrum combined. An apt analogy is Israel in the Middle East. They have a mediocre chunk of desert without oil, and yet have thrived whereas their neighbors have not.
Let’s get back to the Minnesota PUC’s attack on Vonage. Regulation, by its nature, is unconstitutional. According to the document on which the legal system of the USA is based, one branch of government creates the laws, a different branch enforces them, and a third adjudicates.
Regulation breaks this model: it is written, enforced, and judged by a single agency.
That musty old document also declared that one is presumed innocent until proven guilty. Regulation repeatedly presumes one’s guilt, and forces one to prove one’s innocence--until next time.
The Constitutional also prohibits ex-post facto law (law, written after an action, applied in order to punish that action). Regulation does this, also.
Finally, the Founding Fathers wrote about Bills of Attainder. This is a law targeting a specific person or company. I don’t believe there can be any serious debate about whether or not Bills of Attainder attack liberty to the roots, and yet regulation is often written to target a specific company.
My biggest attack on regulation is to consider its objectivity. Objective law has several criteria: it must be clear in advance what is legal and illegal, it must apply to everyone, and it must be based on a rational standard of prohibiting the initiation of the use of physical force.
The murder trial of OJ Simpson is an interesting comparison to the antitrust trial of Microsoft. In the OJ case, there was no debate over whether it should be illegal to beat and stab two people to death. The entire debate was over whether or not Mr. Simpson did, or did not do this. This is proper (except for the fact that the jury acquitted him out of political correctness).
In the Microsoft trial, there was no debate about whether or not Microsoft bundled Internet Explorer into Windows. The entire debate was over whether or not this should be legal or illegal(!)
The alarm bells going off from this should be enough to scare the hell out of anyone who prefers liberty to dictatorship.
Currently, the telecommunications industry is in limbo. It is waiting for Congress, the courts, the FCC, for *somebody* to tell them what is legal and what is illegal.
Into this scene, bursts the power-lusting bureaucrats from Minnesota. It should be illegal, they say, to offer a new kind of Internet service without first asking permission from at least 54 different agencies.
This is nothing more than the expression of a thug’s envy.