- The Washington Times - Monday, July 22, 2002

I appreciate the opportunity to reply to letters by Charlie Black (“President, not columnist, has right plan for tech sector,” July 16) and Russell Frisby (“Deregulating telecoms will encourage monopolies,” July 15), which were critical of my July 10 Commentary column, “Reviving the tech sector.”

While my article focused on four areas broadband deployment, digital piracy and copyright issues, wireless spectrum deployment, and privacy regulation Mr. Black's and Mr. Frisby's complaints are directed at broadband, where both find my views too deregulatory.

Mr. Frisby, who heads an association of companies that compete with the Bell companies, naturally wants to preserve the current regulations, which allow his members to lease lines from the Bells at prices set by the Federal Communications Commission. He says the FCC's prices “allow the Bell companies to collect their cost plus a reasonable profit.” However, the “cost” the FCC uses is not the actual cost of building and running the network, but instead the hypothetical cost of building a brand-new network in a perfect world in which there is no embedded infrastructure and no investment risk. Such prices might indeed produce hypothetical profits, but in the real world, “cost” means what you paid for it, and profits happen only when you sell it for more.

Mr. Frisby's claim that these rules don't affect investment runs counter to the conclusions of the vast majority of market-oriented economists. As Progress & Freedom Foundation scholars Larry Darby and Randy May put it in a recent filing with the FCC, economic analysis leads to the “unequivocal conclusion that forcing firms to sell output at a loss reduces their incentive to risk scarce capital to build facilities for producing that output.”

As for Mr. Black, he and other Republicans representing AT&T have foisted upon the Bush White House the bizarre strategy of embracing the disastrous industrial policies advocated by Al Gore and put in place by the Clinton FCC. As FCC Chairman Michael Powell put it recently, the Clinton FCC erred by “encouraging the formation of hundreds of Bell competitors without realizing how few of them would ultimately be able to survive.” In blatantly Orwellian fashion, Mr. Black tells us that deregulation is really “federal meddling” and that eliminating the Clinton-Gore industrial policy is “industrial policy.” As a political consultant, Mr. Black can be forgiven for not understanding telecom policy; as hired help for AT&T, he can be forgiven for doing his client's bidding. But it's hard to understand how, as a Republican, he can feel comfortable wrapping former President Bill Clinton's disastrous telecom policies around President Bush's neck.


JEFFREY A. EISENACH

President

Progress & Freedom Foundation

Washington


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