I commented on this over at TechDirt, but had to challenge their assertion here as well. I’m not one to let a ridiculous claim go unanswered, so below is the text of my reply to Mike at TD. Their basic contention was the telcos are opposing regulations now, but it was regulation that built them (which is essentially true). But TD goes further and says:

[T]he next time someone says this is all about keeping regulators away from the telcos, remind them that regulations built these telcos into the position they’re in today — and ask them if they’re willing to trade in all the benefits they got from those other regulations?

The trouble is, TD is misrepresenting the debate. This is not about keeping regulations off the telcos, it’s about keeping regulations off the market, and that is the key distinction. My reply explains why:

Just a couple of facts to get in the way of [TechDirt's] logic. Cable companies are responsible for 60% of the residential broadband internet connections versus the 40% provided by telcos. The cable network was not built with government regulations. It was built with private investment and initiative.

The common carrier laws that applied to telcos did not apply to cable and cable flourished. In fact, it was only because cable began pushing broadband service that the telcos decided to provide DSL. Telcos sat on that technology for years, opting instead to charge more money for T-1 lines. The competitive market for broadband was created by people who wanted to do more.

If you’re going to point to the technology stagnation that occurred under government regulation of the telcos as an example of successful regulations, you might think again.

Broadband is where it is today because of free markets, not in spite of them.

The phone companies had a pretty sweet gig. They made a killing off of T-1 lines, and little margin off of DSL. So rather than sell more units at a lower cost, they sat on DSL and pushed T-1s.

Cable began looking at broadband deployment in the early 1990s. Unfortunately, the unintended consequences of the 1992 Cable Act (with price controls and overbearing regulation) led revenue to stagnate and investment to dry up. We would have moved toward broadband through cable years earlier if Congress had stayed out of the way.

Given Congress’ determination to discuss, debate, and perhaps pass net neutrality legislation in the complete absence of any actual threat, I found this Wall Street Journal editorial interesting. It requires a subscription and has nothing to do with net neutrality, but it highlights a growing trend in Congress – legislation without a cause.

Yesterday FTC Chairman Deborah Platt Majoras testified to the Senate about her agency’s latest non-findings of price manipulation. The report came in response to two Congressional requests for investigations, one part of last summer’s energy bill, and another post-Katrina…

None of this truth-telling was what Congress wanted to hear, eager as it is to shift its failed energy policies onto the industry in an election year. Senators on both sides of the aisle responded to the FTC’s lack of price-gouging evidence by promising . . . anti-gouging legislation. This despite Ms. Majoras’s warning that such a law could encourage suppliers to keep prices artificially low, resulting in shortages. Congress may be one loopy piece of legislation away from recreating 1970s gas lines.

It’s interesting that Congress has, over the years, shifted its mission from legislating against actual abuses to legislating against the public’s perceived abuses, even when none exist.

There is no evidence of price gouging, but ‘the people’ believe they’re getting gouged So Congress is writing legislation to address that belief, not an actual problem.

People believe that someone may block their access to the Internet, despite the fact that the one case where that actually happened was successfully managed without such a bill, so Congress is writing legislation in search of a problem, and, in the process, insinuating government forces into an otherwise flourishing open market.

There is a term thrown around in Washington that specifically describes the net effect of legislation gone awry. It happens so frequently that they have a phrase to describe it. It basically means that Congress didn’t think things through, acted brashly and enacted legislation that ended up having a significant negative impact.

Before we demand Congressional action for something we perceive to be a problem, but for which we have little to no hard evidence, we might want to keep that term in mind. It’s the one law that Washington gets right every time – the law of unintended consequences.