Telecom plan to hit consumers

Industrial policy -- the idea that government planners should pick winners and losers in the marketplace -- is alive and well in the Clinton administration. Labor Secretary Robert Reich, the Dennis Rodman of industrial policy, is the administration's most unrelenting advocate of having government bureaucrats use "targeted" tax cuts, subsidies, regulations and other "incentives" to shape the landscape of business and industry. In fact, anytime you see the word "targeted," you can be sure a government planner is close by, waiting to assure you that he knows better than you do about how to spend your money -- and that he can allocate society's resources better than markets.

The administration's first two attempts to impose industrial policy failed. One was president Clinton's proposed energy tax to cap carbon emissions. Giving government de facto control of our energy industry and the power to shape decisions in the transportation industry -- including automobiles, trucking, and railroads.

Then the Clintonauts tried a government take-over of America's health care
industry. That, too, failed as Americans gave a resounding "no" to letting the government use taxes and regulations to control the growth of an industry -- including the direction and pace of innovation in management and technology.

Now, it appears, industrial policy mentality has moved to the Federal Communications Commission, where FCC chairman Reed Hundt less than two weeks ago required 1,000 pages to outline his plan to "deregulate" telecommunications in accordance with Congressional reforms to open up telecom markets. Instead, Hundt's plan will lard on new costs, add complexity and stifle new investment. It can only be viewed as an affront to the intent of Congress to bring the benefits of the digital age to more people, faster. Hundt's plan is also an assault on the constitutionally guaranteed property rights of cable, telephone and other telecom providers that actually build and repair the wires and cables and whose networks are so important to jobs and economic growth in the new economy. In short, chairman Hundt, is using the power of government to favor big cities over small towns and rural areas, big business users over residential and small business users and the densely populated East over the more thinly populated West and South.

In a new book entitled The Innovation Age: A New Perspective on the Telecom Revolution, Peter Pitsch -- a lawyer, economist and former chief of staff to Federal Communications Chairman Dennis Patrick -- makes a strong and persuasive case against government's micro-managing the digital revolution. Pitsch says, "The U.S. and its citizens may be better positioned than other countries to exploit the telecom revolution and the Innovation Age." We are already more productive. Examples: Compared to the Europeans, we have nearly twice as many on-line data bases and more than twice the revenue from on-line services. We have 42 computers per 100 office workers, compared to Japan's 10 computers, and two of every three (66%) U.S. desktops are linked to networks (17% in Japan).

Pitsch's book is a timely reminder that industrial policies produce costly mistakes (HDTV in Japan), slow investments (Japan's network infrastructure), stunt innovation (Minitel in France), and unduly politicize business decision making. Citizens, members of Congress and leaders in the computer, software, cable and telecom industries need to take a second look before they follow chairman Hundt down this dead-end road that risks our nation's important and substantial lead in telecomputing.