The Joint Economic Committee released Enabling the Future: Communications Law Should Anticipate Future Trends, Avoid Stalemate Over Issues that Will Soon Become Moot (May 2006), by Senior Economist Joseph V. Kennedy.

Abstract:

The communications industry has experienced rapid innovation but the nation’s communications laws have not kept up. For legislation to encourage future advancements rather than impeding them, it must provide the public with greater certainty about the main goals of communications policy but allow much greater flexibility in achieving them.

In the future, most video, voice and data will flow through the Internet, rather than dedicated channels. It will also be mobile. This will threaten traditional business models but will release a great amount of investment, social welfare and economic growth. It will also change the nature of most current communications issues.

Congress should foster this trend by encouraging the rapid spread of high-speed broadband and ensuring active competition in all markets of the communications sector. This will inevitably threaten many existing business models. One of the best ways to spread broadband is to ensure that radio spectrum is used to maximize social value.

The future of the communications industry is likely to be heavily influenced by new entrants, as opposed to the more established companies. These entrants must be free to offer new products and services irrespective of the interest of the incumbent firms.

Congress needs to always keep in mind that the incumbent media and communications companies have a strong interest in the status quo. Their shareholders benefit from higher profits whether or not consumer welfare is maximized. And their lobbyists try to shape legislation to maximize their clients’ competitive advantage, not social welfare. On many issues the interests of incumbent companies and consumers overlap. But on other issues they diverge significantly, especially those affecting the competitiveness of new entrants and new technology. Congress must recognize when this divergence occurs and should side with consumers, even if this threatens the viability of current business models.

(1) The entrants are no more motivated by the spirit of pro bono publico than are the incumbents, and many of the business models drafted for the Internet take the form of "who is making or has made investments on which we can free ride?"

(2) The incumbents do not care about the status quo; they care about MONEY. Just like the entrants. If innovation makes money, incumbests will innovate, as will entrants. So get the property rights correct and certain, and then let the market work. The worst outcome is for Congress and/or the FCC to keep tinkering, trying to fine-tune resuls.

ADDENDUM (06-09-06): In my comment, I failed to grasp with precision the point being made. Joe Kenedy clarifies:

I did not mean to imply that the motives of new entrants are necessarily any purer than those of established companies and I certainly agree that getting the property rights is important. My point, which follows Clayton Christensen [LINK], is that established players often have more of an interest in preserving existing technology since it is generating returns for them. They are often reluctant and unable to cannibalize existing markets in order to pursue what Christensen calls disruptive innovations. Since society has an interest in seeing disruptive innovations flourish, it must often rely on new firms whose very existence depends upon the innovations. I do agree that net neutrality seems to be one area where it is the new companies that are actively lobbying for government action that would give them a competitive advantage.

posted by James DeLong @ 2:07 PM | Internet: P2P, Search Engines...

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