The economics of FirstNet

While I highlight your feedback to me on this show, this time I’m highlighting my feedback to another podcast.

This is my feedback to an episode of Congressional Dish, hosted by Jennifer Briney. Jennifer does the work of finding out what bills are going through Congress and brings you the “in a nutshell” versions of them to you, so you can find out what they’re doing for you, or to you. Her recent episode was about a project called FirstNet, a program designed to create a new nationwide wireless network just for first responders, so they aren’t blocked during emergencies because of everyone using their phones to find out if loved ones are OK.

This project was started in the wake of 9/11, and may come to fruition soon. She was glad to hear this was happening, but was concerned over the corruption that was part of the beginning of this process, and that the for-profit corporation AT&T was getting the contract, because, as she put it, AT&T puts profit first, and customers (in this case first responders) down on the list.

This is my response, mostly to the economic aspects of her concern, and how the free market has not been allowed to work properly, and the result is that we’re in monopolistic mess. I greatly encourage you to listen to her episode for the context of this feedback, and subscribe to her podcast.

(Jennifer never guarantees that she’ll use feedback that she gets in her show, and this bit of audio is 7 minutes 38 seconds, quite an imposition to her and her audience. So if she doesn’t use it, I’d absolutely understand.

Also, below is an extended transcript, more than what I said in my audio feedback. I got on a roll and couldn’t stop writing. I pared it back for the audio feedback, but this is everything I wanted to say.)

Mentioned links:

Congressional Dish, episode 155: FirstNet Empowers AT&T

Why Can’t The Market for Medical Care Work Like Cosmetic Surgery?

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Show transcript

Hello there Jennifer, I’m Doug Payton, another podcaster. Mine is called “Consider This!” and it’s my 10-minute-or-less conservative commentary. As a conservative, I wanted to give my feedback on your recent episode about FirstNet.

First of all, thank you so much for bringing this topic to our attention. I, for one, had no idea that this was even a thing. Like you, I like the fact that this is happening, and also like you, I’m concerned about how it’s happening.

Right off the bat, even though I’m a small-government conservative, I want to say that it makes sense for the government to do this. There are many things that the feds especially have taken upon themselves that I think should be state functions, but coordinating interstate emergency services seems very reasonable. That aspect I agree with.

As a conservative, I also want to bring up a couple side points. First, you seem to think that Republicans and/or conservatives (though the two aren’t always the same thing) believe that private enterprise is always good and government is always evil. Not really. Here’s the deal. Both private companies and government are populated by are people. People in private enterprise and government can get greedy, both for money and for power. There can be checks on that greed, but we have virtually neutered them. For private companies, the market can put a check on greed. A vibrant free market, where there are many companies competing for your dollar, forces prices down and quality up. Don’t like the store you’re buying your widgets from? Pick a new one. It’s when those companies influence government to, for example, add regulations to make getting into the widget making business prohibitively expensive, that we wind up with less competition, and the prices go up. Think the whole lightbulb situation. It was simpler to make regular old lightbulbs, but now that incandescent bulbs are outlawed, it’s harder for a new company to get started in order take on a General Electric. That’s why companies like GE wanted those regulations.

For the government, there is no competition. You can’t just stay where you are and choose another government. Every so many years you can try to vote a new one in, but you have far less influence. For government, then, the check on greed is distributing its power. Our Founding Father knew this from history, which is why we got states, and why the Constitution enumerated power to the feds and specifically said that anything not given to them were powers reserved for the states or the people. The bigger the central government, the less responsive it is. Further, the more powerful the central government, the more it is one-stop-shopping for private companies that want special favors.

So when we complain about corporations buying government power, there are two sides to that coin. It’s greed on the part of corporations trying to buy the power, but it’s also greed on the part of politicians because the power is there to be sold. If we didn’t have such a monolithic federal government, greedy corporations would have to deal with 50 states. Campaign finance and graft laws try to deal with the demand side of the coin, but there will always been demand because people are people. Smaller government deals with the supply side of the coin, and if there is smaller supply, you can’t buy more at any price. But the more we ask the feds to do, the more power we supply them.

Secondly, AT&T has that infrastructure in place because they make a profit. Shareholders are merely those who provided capital for AT&T to expand. As much as the stock market is about the fog of emotion and a reflection of the economy (basically smoke and mirrors), shouldn’t those who got it right, by either luck, research or both, be rewarded? If not, why would anyone invest? Profit, in and of itself, is not evil. The hole-in-the-wall restaurant is trying to be profitable. If they aren’t, they can’t afford to stay in business; they’re not running a charity.

At the same time, AT&T is what happens when government picks winners and losers in the market. It destroys the market, and we get crony capitalism, which isn’t capitalism. It creates, as you noted, a behemoth that is too big to fail.

Since we’re speaking of first responders, this is like the government mandating that one manufacturing company build fire engine and hydrants. That way, all the hoses and hydrants would interoperate. That creates the behemoth. Instead we have federal regulations, but no mandate as to who does it, so we have multiple companies building both; competition, which puts a check on greed.

Another example is the medical industry. We keep being told that providing insurance for all and for everything will bring costs down. But while those procedure that are covered by insurance keep costing more and more, procedures that are not covered, such as cosmetic surgeries, have risen at only half the rate of inflation over the last 25 years, and have actually been on a downward trend recently.

OK, so let’s keep that in mind when talking about FirstNet. Wireless towers, infrastructure and services are a different animal than just manufacturing a truck. Still, regulations on how the system must be implemented with requirements to interoperate — a legit government function — could then be used by states to determine who will get the contract there. If we could do that, we wouldn’t have 1 behemoth that, if it goes down, takes the whole system with it. The damage would be localized and rebuilding wouldn’t require another nationwide effort. The opt-in/opt-out mechanism does give states a choice, but as you noted, it’s the path of least resistance, so without an impetus to do this — no requirement that they act, and a promise of all costs paid by the feds if they don’t (basically “free” stuff for the states) — there’s little downside for the states, at least in the short term. Yes, some states are cash-strapped, but if the feds weren’t doing everything, at such huge waste levels, maybe the feds could reduce taxes and states could pick up some that. Typically the smaller the government, the less the waste; it’s not buried in as many layers of bureaucracy. But federal tax cuts are, for some, a bogey man. It is good to know that some are taking the road less traveled. It will be interesting to see how costs differ between the opt-out states and the opt-in states. And that, after all, is how our United States of America was supposed to work; states try things out and, if they work, other states implement them, too. Or, if absolutely necessary, the feds do. In the episode, you even note how good this can be for state and local governments and taxpayers. This is a very conservative idea. I don’t want to say a Republican idea, since they don’t often act very conservative. But as you noted, Republicans are trying to do exactly this with other programs; let the states and taxpayers take more ownership. I think that’s a good thing in the general sense.

Problem is, crony capitalism has brought us a behemoth that is uniquely qualified (at this point) to do this, and has politicians bought and paid for. Getting out of this mess would require a return to actual market economics and smaller government, which this government really doesn’t want, because it makes graft harder, as I mentioned earlier. Big government brought us here. This is what happens. It has put all our eggs in one basket, as you noted, both from an AT&T side but also from a FirstNet side. Getting out of this is much harder than it was taking decades to get into this.

And I share your concern about Donald Trump being the top of an incredibly bureaucratic food chain of accountability. Which is why this should be a 50 states thing and not a monolithic federal thing. The guy at the top now isn’t there forever, and the next President is…who knows? We’ve spent years giving our President the powers of a King, and now we don’t like the current guy there. Now what? How about divesting power from the King? Yes, the regulations can come from DC, but the power — the implementation — should be distributed.

But wouldn’t this multi-company solution take longer? Well, longer than the 16 years since 9/11? And by opening this up to multiple companies via competition (rather than choosing one from on high), the costs would be one of those things they would compete on. Now, you might say that Cut-Rate Telecomm might compete on price but be low quality. That’s fair, and it’s something for the states to decide. However, you’re currently complaining, rightly, that AT&T can charge too much. But either a monopoly is bad or competition is. Ya’ gotta’ pick a side.

Regarding the issue of ATT covering 99.6% of the population now, but also 99.6% later, two things. First, that’s likely an attempt to hide that “proprietary” information that the guy wouldn’t divulge. I think you’re dead on right; how in the world is that information proprietary from a US Congressman? But second, since this same percentage is covered by a better network that also prioritizes first responders, that’s a net gain. That’s like regular gas vs premium. I have the same size tank, but it can have better gas in it. Population coverage is not the whole story. Now, 1.3 million people is nothing to handwave away. And I share the concern that gaps will affect those out in the sticks. But if we go back to the idea of states getting bids, working from a federal standard, those states would have a vested interest in making sure their remote areas are covered and will prioritize that, unlike a federal behemoth in a contract with a telecomm behemoth.

I understand your frustration about how to best deal with this given the situation in which we find ourselves, with one huge corporation with its fingers in so much of the government. The short answer is this; whenever we ask a central government for a centralized solution, this sort of thing will result. Greed is found in all levels of government and private industry, because they’re populated with people. That’s why we need to restrict the feds to the places where they absolutely need to be — things like national defense and interstate commerce — and reserve the rest of the power to the states or the people, and we need competition to flourish.

Thanks for your fantastic podcast.

Filed under: CapitalismEconomics & TaxesGovernmentSmaller Government