The United States learned the hard way that unregulated monopolies are great for robber barons but bad for the country as a whole. We need to apply the lessons of the Gilded Age to modern-day communications issues.
Oregon state is mighty fine
If you’re hooked on to the power line
But there ain’t no country extra fine
If you’re just a mile from the end o’ the line
Ain’t no country extra fine,
If you’re a mile from the end of the line
Ain’t no country extra fine
If you ain’t on to the power line
— Woody Guthrie
Today we take it for granted that Americans should have access to electricity.
It wasn’t always that way.
In 1905 Henry Anderson, a lawyer in Richmond, Virginia, argued that electricity, unlike water, was not an essential service and therefore should be provided by private entities only to the wealthy who could afford it. He said:
Electricity is not in any sense a necessity, and under no conditions is it universally used by the people of a community. It is but a luxury enjoyed by the small proportion of the members of any municipality, and yet if the plant be owned and operated by the city, the burden of the ownership and operation must be borne by all the people through taxation.
Woody Guthrie wrote about the other side of the issue in his 1941 song “End of the Line.” “There ain’t no country extra fine / If you’re just a mile from the end o’ the line.”
Thankfully things have improved since then.
Or have they?
A few weeks ago the contract for my phone and Internet service expired. Here in the mountains of Western North Carolina, our options for Internet are constrained. In many areas of Jackson County, North Carolina, cell service can be spotty.
Our local wired phone systems are ancient. In today’s data-heavy environment, DSL service is questionable at best, but DSL on wired systems that are generations behind is virtually useless.
Verizon offers our area hotspot wireless services that are substantially faster than DSL, but they are pricey and come with limitations that make them even more expensive. In some smaller towns, cable systems offer wired Internet with acceptable speeds. But often these services come with TV-service bundles that raise the overall price.
Fiber to the home yields the fastest Internet connections. These are sufficient for the robust upload and download speeds needed for business applications like cloud computing. Some cities have tried to build their own systems. Lafayette, Louisiana, and Chattanooga, Tennessee, are two success stories. In many states, however, the large players like Comcast, Time Warner and AT&T have lobbied legislatures through trade associations and groups like the American Legislative Exchange Council to prevent local governments from becoming involved in cable and Internet infrastructure development.
The result is that America lags in the development of fiber-optic infrastructure, which offers the fastest and best connections. Wireless connections, which are not as robust as fiber, also lag in the U.S., primarily because the wireless industry is controlled by two players, AT&T and Verizon. Rather than investing in infrastructure to improve their service, these companies have focused on stock buybacks and dividends.
In a lot of ways, folks in rural America can still find themselves “just a mile from the end o’ the line.”
In her book, Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age, Susan Crawford compares our current communications predicament to the regulatory environment of the Gilded Age. She looks at recent consolidation in the cable, Internet and wireless industries. And what she sees is a parallel to 1905, when a rich Virginia lawyer could argue that electricity was “but a luxury,” not an essential service that should be broadly available to everyone.
Crawford argues that consolidating communications into the hands of a few corporations has resulted in expensive service for those who can afford it and limited to non-existent service for more vulnerable populations. Americans pay more for slower service than virtually any other industrialized nation in the world, she says.
American communications have been both horizontally integrated (fewer companies own the “pipes” that deliver cable and Internet service), and vertically integrated (companies like Comcast own both the delivery system and create content that flows through that system, thereby controlling both access and information). It’s similar to the way robber barons of the Gilded Age – like the railroad magnates – controlled infrastructure with virtual monopolies and little regulation.
Also like the robber barons of yore, communications corporations espouse laissez faire economics while doing everything they can to avoid competition. In The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance, author Ron Chernow says Pierpont Morgan disdained competition as inefficient. He and other industrial barons like the Vanderbilts and the Rockefellers sought to limit competition through consolidation. Massive trusts controlled by private interests took over infrastructure like the railroads, in the same way that much of our communications infrastructure today rests in the hands of just a few corporations.
Large, expensive infrastructure creates natural monopolies. It’s not likely that several electric companies will build power lines to each house so they can compete. We also don’t build duplicate water or cable systems. In the past we’ve recognized this and created utility structures that are regulated, ensuring universal service and reasonably priced access. It just makes common sense.
The U.S. seems bound to return to some of the same costly mistakes that we made in the past. We face a huge infrastructure deficit in this country. We continue to fall behind the rest of the world in the development of our communications infrastructure. We keep trying to privatize essential networks.
Woody Guthrie’s songs about public projects like the Grand Coulee Dam instilled in us a pride in the value of public goods. Those ideas resulted in the electrification of rural America and other projects like the national Interstate system. This sort of public infrastructure has brought connection, attachment and prosperity to more corners of America.
Today we are faced with the challenge of updating and building new infrastructure. The only way we can accomplish this is by understanding the value of public goods. Otherwise, we’re doomed to repeat the failures of the Gilded Age.
Mark Jamison is a retired U.S. postmaster who lives in western North Carolina.