On this page, we present selected quotes from What's Yours Is Mine: Open Access and the Rise of Infrastructure Socialism, by Adam Thierer and Clyde Wayne Crews Jr.

On line sharing
Not being patient enough to wait for true facilties-based innovation and investment to develop, regulators instead "opted for quick ephemeral results—a superficial froth of resale competition—over the substance of real competition based on newly built facilties," argues John Thorne, senior vice president and deputy general counsel of Verizon. "The Commission was more interested in counting noses than in counting networks," he rightly concludes. (pp. 59-60)

On the AOL-Time Warner merger and "open access" advocates
. . . consistency has not been a hallmark of the business community when it comes to advocating regulation. Regulation that burdens rivals is often readily supported. In a notable instance, America Online demanded open access to AT&T's cable lines to provide Internet service, only to reverse course once it became a major cable provider through its merger with Time Warner in 2000. The same demand for access was made by some consumer groups, particularly the OpenNet Coalition of which AOL was a member. AOL's unfortunate calculation, which it regrettably led many others to adopt, was that the mere fact that it provided online service somehow gave it the right to use cable infrastructure that it played no part in helping build or install. AOL's proper response was to use its vast resources to either buy one or more cable companies or cut legitimate deals with cable companies for access instead of asking government to shoehorn them in. Of course, that is what the company in fact ultimately did with its purchase of Time Warner.

As expected, once AOL experienced a change of heart, the forced-access community turned its attention to demanding open access to AOL's new systems and subscriber base. As Elizabeth Wasserman noted at the time, "From Disney to EarthLink to Bell South, an all-star list of enemies has come together to fight the merger of AOL and Time Warner." Although the merger was not stopped outright by regulators, the Federal Trade Commission mandated that AOL offer access to its lines to competing ISPs. That policy saved some rivals from the need to devise offsetting deals, and in that sense reduced competition, properly understood. (p.71)

On the theory of "natural monopoly"
After conducting a comprehensive survey of literature on the subject, Manhattan Institute economist Thomas Hazlett has argued:

The economists' analysis of the inefficiency of unregulated natural monopoly markets did not spring from a scientific or particularly scholarly research program but in response to "a growing clamor for more government." Indeed many of the early natural monopoly writers had attacked the problem because of personal ideological agendas; their politics preceded their studies.

Similar problems exist with essential facility theory. (p. 25)

On the history of the phone company
Once AT&T's original patents started expiring in 1893, its market dominance quickly waned. Independent competitors began springing up in areas not served by the Bell System and then quickly began invading AT&T's turf, especially in areas where Bell service was poor. According to telecom industry history Gerald W. Brock, by the end of 1894, more than 80 new independant competitors had already grabbed 5 percent of total market share, and the number of independant firms continued to rise so dramatically that by the turn of the century more than 3,000 competitors existed. . . . . Wheras AT&T had earned an average return on investment of 46 percent in the late 1800s, but 1906 their return had dropped to 8 percent. As Brock notes, this competitive period brought gains unimaginable just a few years earlier:

After seventeen years of monopoly, the United States had a limited telephone system of 270,000 phones concentrated in the centers of the cities, with service generally unavailable in outlying areas. After thirteen years of competition, the United States had an extensive system of six million telephones, almost evenly divided between Bell and the independants, with service available practically anywhere in the country.

What then caused the eventual monopolization of the industry? A variety of direct and indirect government interventions. Just before World War I, policymakers began taking steps to compel interconnection of competing systems that actually discouraged head-to-head, cutthroat competition. Brock found that "interconnection . . . eliminated the independants' incentive to establish a competitive long-distance system." Huber et al. conclude, "The government solution, in short, was not the steamy, unsettling cohabitation that marks competition but rather a sort of competitive apartheid, characterized by segregation and quarantine."

Worse yet, during World War I, the federal government nationalized the entire telecommunications system and began geographically averaging prices to artificially supress rural rates. This created a serious disincentive for local telephone competition. . . By the time the government privatized the industry again after the war, the combination of misguided interconnection policies and rate regulation had given AT&T the upper hand in its battle against independants. Eventually, the government allowed, and even encouraged, AT&T to buy up all of its competitors since policymakers came to endorse AT&T's corporate marketing slogan of "One Policy, One System, Universal Service" as official government policy. (pp. 27-28)

Back to article