On Nov. 2, Gov. John Engler held a press conference to announce that the Michigan Economic Development Corporation (MEDC) would muscle its way into a new area already being ably handled by the private sector: wiring the state for high-speed Internet access, or what's usually referred to as "broadband."
This MEDC plan dates back to the agency's May 2001 report entitled "LinkMichigan," which cited two major problems with the telecommunications infrastructure as provided by the free market: congestion and a lack of access. These problems, argued the report, justify state intervention in the Internet access provider market.
Of course, this is like saying in 1890 that the reason the government should become involved in the fledgling U.S. auto industry is that horses are too slow. No, that's a reason for government to stay out of the way, so Henry Ford and his competitors can solve the problem. Similarly, government intervention today is not the answer to Internet congestion and lack of access. The solution to those problems is the free market, which allows broadband providers to compete to supply Internet access according to the demands of consumers.
Nevertheless, state officials insist they need to intervene because adequate broadband service is not available in all locations across the state, especially in rural areas. To continue our auto industry analogy, the state's position is like saying the government needs to jump into making automobiles because not everybody has a car yet.
But people who choose to live in rural areas give up convenient access to the many things that individuals living in the city enjoy in favor of a less congested lifestyle. This voluntary tradeoff is evidence that the market is working in a reasonable and efficient manner. The MEDC wants to disrupt this process.
Consider some facts. According to Federal Communications Commission (FCC) data, Michigan already ranks 11th among the 50 states in terms of the number of providers of high-speed Internet cable lines, with 15 providers. The only states that have more providers than Michigan are, not coincidentally, those with larger populations needing service. In another report, the FCC concluded that "overall, deployment of advanced telecommunications capability is proceeding in a reasonable and timely fashion." In terms of the number of high-speed lines, Michigan ranked 10th. According to the "Statistics of Communication Common Carriers," an FCC publication, there were over 1.1 million kilometers (over 687,000 miles) of high-speed cable deployed in Michigan as of December 1999.
Even if government intervention in the Internet access market were a good idea, there already are over 20 federal subsidy and loan programs aimed at deploying broadband-type services in schools, libraries, and other, mostly rural areas. How much good will another state-based program do? At best, its effect will be neutral; at worst, it will delay or kill the growth of new telecommunications technologies such as satellite-based Internet connections, that could, and in some cases already do, provide advanced broadband services to people in inner cities, suburbia, and rural communities. These advanced providers already are gaining ground and could very well surpass cable broadband in popularity before the government has finished wiring the state.
There are currently six major alternatives to cable-delivered broadband either being used today or being developed. The next generation of data transmission likely will come from satellite firms such as DirecTV. DirecPC, DirecTV's Internet service, can now transmit Internet data by satellite, at twice the speed necessary to qualify as "advanced" or broadband technology.
Other options catching up to cable delivery include mobile wireless technology (Internet data sent to mobile phones); fixed terrestrial wireless (Internet data transmitted by cell phone towers to a computer); digital broadcast television (traditional television broadcasters using a portion of their spectrums to provide Internet access); and lastly, electricity providers. Technology is now being developed that would allow data transmissions through the very power lines that bring electricity to the homes of Michigan citizens.
The state of Michigan is trying to substitute the wisdom of a few central planners for that of consumers as a whole. Entrepreneurs seeking a profit are in a much better position than the state to accommodate the broadband needs of Michigan citizens. Before the automobile completely replaced horse-drawn transportation, many people in Michigan still relied on buggies. But that wasn't a reason to call the government; it was a reason to call Henry Ford.
(Dr. Donald L. Alexander is associate professor of economics at Western Michigan University and an adjunct scholar with the Mackinac Center for Public Policy. Michael LaFaive is a policy analyst with the Mackinac Center. Permission to reprint in whole or in part is hereby granted, provided the authors and their affiliations are cited.)
Note: for a thorough policy analysis of the state's "LinkMichigan" broadband plan, click on http://www.mackinac.org/3865.