Public Utilities

Henry George: The Common Sense of Taxation (1881 article)

As to amount of taxation, there is no principle which imposes any arbitrary limit. Heavy taxation is better for any community than light taxation, if the increased revenue be used in doing by public agencies things which could not be done, or could not be as well and economically done, by private agencies. Taxes could be lightened in the city of New York by dispensing with street-lamps and disbanding the police force. But would a reduction in taxation gained in this way be for the benefit of the people of New York and make New York a more desirable place to live in? Or if it should be found that heat and light could be conducted through the streets at public expense and supplied to each house at but a small fraction of the cost of supplying them by individual effort, or that the city railroads could be run at public expense so as to give every one transportation at very much less than it now costs the average resident, the increased taxation necessary for these purposes would not be increased burden, and in spite of the larger taxation required, New York would become a more desirable place to live in. It is a mistake to condemn taxation as bad merely because it is high; it is a mistake to impose by constitutional provision, as in many of our States has been advocated, and in some of our States has been done, any restriction upon the amount of taxation. A restriction upon the incurring of public indebtedness is another matter. In nothing is the far-reaching statesmanship of Jefferson more clearly shown than in his proposition that all public obligations should be deemed void after a certain brief term — a proposition which he grounds upon the self-evident truth that the earth belongs in usufruct to the living, and that the dead have no control over it, and can give no title to any part of it. But restriction upon public debts is a very different thing from restriction upon the power of taxation, and reasons which urge the one do not apply to the other. Nor is increased taxation necessarily proof of governmental extravagance. Increase in taxation is in the order of social development, for the reason that social development tends to the doing of things collectively that in a ruder state are done individually, to the giving to government of new functions and the imposing of new duties. Our public schools and libraries and parks, our signal service and fish commissions and agricultural bureaus and grasshopper investigations, are evidences of this.... read the whole article

Peter Barnes: Capitalism 3.0 — Chapter 8: Sharing Culture (pages 117-134)

The airwaves, also known as the broadcast spectrum, are a gift of nature that modern technology has turned into a valuable resource. As a medium for sharing information and ideas, airwaves have enormous advantages over paper and wires. The problem in the early days was that signals often interfered with one another. If two nearby transmitters used the same or adjacent frequencies, a radio listener would hear two sound streams simultaneously. America’s approach to this problem (though not Britain’s or Canada’s) was to give free exclusive local frequencies to private broadcasters, subject to periodic hearings and renewal.

The quid pro quo for this gift, according to the Communications Act of 1934, was that broadcasters would serve “the public interest, convenience, and necessity” — whatever that might mean. The airwaves themselves would remain, in theory, public property, with the Federal Communications Commission (again in theory) acting as trustee.

Private broadcasters grew large and profitable under this arrangement. But over time, as their advertising revenues soared, their public-interest obligations declined. In the 1980s, the FCC dropped the Fairness Doctrine, which required broadcasters to air both sides of controversial issues. Educational programming also waned. In the 1990s the spread of cell phones created huge new demand for airwaves. Instead of giving frequencies to cell phone companies for free, Congress wisely chose to auction them, raising billions of dollars for the federal treasury. Broadcasters, however, lobbied hard for more free spectrum, and in 1996 Congress gave it to them, ostensibly for digital TV. This was the $70 billion giveaway I described earlier. Today, digital technology makes it possible for “smart” receivers to pick out only the signals they need. Signal interference thus is, or soon could be, a thing of the past — which makes exclusive licenses unnecessary. The airwaves could be an open access commons with virtually no capacity limits, a possibility that makes broadcasters, phone, and cable companies extremely anxious.

Some broadcasters have another idea. They want to privatize the airwaves, with ownership assigned to them. Under this plan, the free licenses they received for digital TV would become permanent entitlements usable for any purpose. Broadcasters could then sell their entitlements to cell phone companies and pocket the windfall. The big winners would be General Electric (NBC), Disney (ABC), and Rupert Murdoch (Fox). Other beneficiaries would include Pat Robertson (Christian Broadcasting Network) and Lowell “Bud” Paxson (Pax TV). When a reporter asked Paxson why he should receive millions of dollars for selling the public’s airwaves, he replied: “I was a farmer and I got lucky. Now people want to build a mall on my farm. God bless America.”

If Congress treated the airwaves as a common asset, it would lease most of them at market rates for limited terms to the highest bidders. The billions of dollars thus raised could buy free airtime for political candidates, fund noncommercial radio and TV, and help sustain the arts.

Alternatively, Congress could turn the airwaves into an open access commons like roads and streets. Using technologies like wi-fi (wireless fidelity), everyone could enjoy high-speed Internet access for almost nothing. As of early 2006, nearly 150 U.S. cities were deploying or planning public wi-fi networks. These efforts are hampered by the fact that the frequencies allotted to wi-fi don’t travel as far, or penetrate buildings as well, as do the frequencies given to broadcasters. A bill to open unused TV channels for wi-fi has been introduced by a group of senators, but it faces stiff opposition from broadcasters, telephone, and cable companies.

The Internet

The Internet is a human-made commons that, for all intents and purposes, can be used without limit. It’s arguably the most remarkable technological achievement of the twentieth century, given that it revolutionizes commerce, community, and culture in one swoop. As with other valuable commons, it’s coveted by private corporations. The battle in coming years will be between those who want to privatize big chunks of the Internet, and those (including many corporations) who want it to be as free, universal, and open as possible. What’s unusual is that this is one of the few battlegrounds where those on the side of the commons have an early edge.

One looming battle concerns access — in particular, bridging the “last mile” between the Internet and the millions of people (billions worldwide) who could use it, but now don’t. When the Internet began, the last mile was typically crossed by telephone. A user would dial up an Internet server and log on. However, because telephone wires were sized for voice signals, they can’t carry high volumes of data at high speeds.

In due time, cable companies began offering their thicker cables to Internet users. Phone companies also came up with a system — DSL — that squeezes more data through their skinny wires. There are thus now two good ways to get high-speed access to the Internet — if you can afford roughly $30 a month, or $360 a year. Since not everyone can afford this, however, we have what some people call a digital divide — a financial barrier to universal access.

This is where the airwaves come in. Using digital signals, it’s now possible to bridge the last mile to the Internet through the public’s own airwaves. Not only that, it’s incredibly cheap to do so, using technologies like wi-fi. At the same time, another technical breakthrough is imminent: the Internet — including this last wireless mile — will soon be “thick” enough to carry data, telephone calls, and television pictures. In theory, a small public investment could bring all these services to the doorsteps of virtually everyone. There’d be no more need for private TV networks, telephone and cable companies. The so-called information highway would be, like public streets, truly open and free.

This is an extraordinary possibility. Americans now pay some $300 billion a year for telephone and cable services; perhaps half of this could be saved. That’s the equivalent of raising every worker’s take-home pay by about $1,000 a year. It should be cause for celebration.

What’s more, free universal Internet access would be a boon to the corporate side of the economy — another example of a commons having positive external benefits. Think of an urban shopping street, or Main Street in a small town. Merchants on these streets depend on foot traffic; the more passersby, the more sales they make. If someone put checkpoints or tollbooths on these streets, merchants would scream. So it is with the Internet. Everyone doing business on the Internet wants more traffic. Making the Internet free to all would be the best thing that ever happened to merchants.

Except, of course, for the phone-and-cable duopoly. In several states, these powerful companies have pushed through laws prohibiting cities from offering wireless Internet service, and they’ve sponsored a similar ban in Congress. The companies say their right to profit trumps the consumer’s right to save money and a city’s right to serve its citizens. Many politicians still buy that argument, so the end of this story has yet to be written.

A similar battle looms over what’s called “net neutrality.” At the moment, the Internet — like the telephone system — treats all content equally. No one’s data is discriminated against, and no one’s gets favored either — your personal webste is treated the same as Google’s. However, cable and phone companies want to create a two-tiered Internet, with some content providers getting slow speed and others — who pay the phone and cable companies — getting high speed. That would mean more revenue for the companies, but also a permanent divide between corporate content providers and everyone else.

Congress is now considering bills both to allow and to ban such tiering, and the outcome as this is written is uncertain.

 

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