The Perils of Overcapitalizing

From an economic perspective, I am a fan of the mixed-market economy. Free markets are great for innovation, but there comes a time when too fierce competition creates a destructive kind of competition that stifles innovation. To use Richard Stallman’s analogy, capitalistic competition is like a race: as long as those competing stick to the business of trying to run faster than their fellow runners, the fastest person is awarded the prize; however, if one or more runners decide to win by pulling out a gun and shooting all the runners faster than them the race is no longer doing its job of rewarding the fastest runner. To take the analogy further, the race can often degenerate so far that running is no longer the objective, the finish line is never crossed, and instead the racers just play last-man-standing with their guns. In this all-too-capitalist scenario, the consumers don’t win; the only winner is the runner with the most guns. Get where I’m headed?

Telcos are proposing pulling out the big guns with respect to the Internet. One of the best things about the Internet from a purely capitalistic perspective is the low level of barriers to entry for new innovators, combined with the most level playing field around. If you have some good ideas, there isn’t a great deal stopping you from hacking together some code, getting a server, and trying your luck at building the next Google; the tools are there for anyone who wants them, and the network (that amorphous in-between stuff) treats all services equally. We’ve seen it over and over again. Skype and Vonage are stealing phone revenues by offering lower rates, it was only a matter of time before the Telcos realized they could choke people’s access to these services by selectively throttling their bandwidth. I can’t be clear enough on this: if the network isn’t content-provider-neutral, you won’t see free web-applications like Tadalist, the price to access a large market share will be driven up by Telcos trying to monetize their pipe in every available way. Internet Service Providers are free to charge for the service of routing data from one paying customer to another, according to terms of service. They should not be in the business of deciding which data is routed to whom. Doing so is anti-competitive, and you should tell them so.

Thanks to Catherine, who is Out In Left Field for bringing this to my attention.

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