Monday, April 12, 2010

Renting the Phone

For decades, the telephone company would not let people own phones. The idea was that the phone was part of the network and you couldn't risk having iffy third party equipment attached to the network.

Each month, you would get a phone rental fee in the bill. At the time, I thought that renting phones was wonderful because we all shared in the cost of providing phones. It turns out that consumers paid many multiples of the cost of the phone.

The small decision of allowing people to own a phone transferred a sizeable chunk of wealth from the telephone company back to the people. Not only that, the change in law led to immediate advances in answering machines, fax machines, modems and wireless phones.

I've come to believe that increasing private ownership is a good thing.

Our current broadband debate is which group should own the last mile. Whoeever owns the last mile gets to dominate local media. Should it be an evil company like Comcast or the political drones in the municipality. The municipal ownership sounds intriguing until one realizes that it brings pretty much all local media under direct control of local political leaders.

The politicians arguing for broadband regulation are very much aware of the consolidation of political power that comes with the political regulation of broadband and municipal ownership of the last mile.

Yes, there are some big corporations (like Google...currently valued at $181 billion dollars) who will get even bigger with government ownership of the Internet. But the fact that politically connected companies get bigger as government gets bigger does not mean the system is market oriented.

As I look at the bad choice of domination by big government or big business, I can't help but think that if individuals owned the last mile and had direct property rights to the wire leading to a switch, then it would be possible to have our broadband and freedom too.

Of course, it is nice to have multiple houses on a single communication wire. It would be possible to do this bundling through a system of buyer's co-ops. With a buyer's co-op, each home in the branch would own a share of the wire. The co-op would pay costs as they occur. A very simple accounting system could handle the finances.

An industry of small private contracters would emerge to service the lines.

Just as letting people own their phone saved consumers millions, a system of direct ownership of the last mile would cost less, and increase the equity of homeowners.

NOTE: A system of co-ops saves money in two ways: It saves the overhead of the municipality or private business. Since small co-ops assume the cost of each of the lines, it reduces the costs associated with risk management.

The public debate about who should own the last mile (and consequently, who should dominate local media) gives us the choice of big government (the municipality) or big business (the cable company).

I believe that we could solve the cunundrum by finding a way in which the end users directly owned the portion of the last mile that they use. Either through direct lines to a telephone box, or by having the branch line owned by a co-operative structure.

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