Rural American? Want Broadband? Don’t Ask the FCC.

SHERIDAN, Wyo. — I’ve seen a lot of sights over the years on our family ranch here, but I never expect to see a cable-company crew stringing wire across miles of grazing land to provide us with cable television and the option for broadband digital services.

By MALCOLM WALLOP Wall St. Journal Opinion

It’s not going to happen. The economics don’t exist, even if the cable companies were interested. There is nothing in it for them.
* * *

(I’m sure this will be discussed at the Roundtable on Wed. with Steve DelBianco- VP Association for Competitive Technology http://www.ACTonline.org in Missoula on Wednesday 10/16 at The Inn on Broadway- 1609 W. Broadway- Missoula, MT http://matr.net/events.phtml?showdetail=294 Hope to see you and a friend there-)

Having represented a rural state in the Senate for 18 years, I’ve heard more than my share of empty promises. I’m not impressed when I hear the regional Bell companies promise that they will provide rural America with broadband services if Congress will give them just one more huge handout and shield them from the horror of fair competition.

The best hope that rural Westerners won’t be left on the wrong side of the digital divide has been the satellite industry. Satellite television has a strong track record of serving rural America, not with promises but with programming. Satellite providers deliver service in areas that other companies literally won’t go near.

Last year, the two leading satellite providers, EchoStar and DirecTV, announced plans to merge into one company with the combined capacity to offer broadband digital services along with television programming via satellite. This merger would be a free-market solution to the digital divide problem. It would make affordable broadband digital services as easily available to rural areas as satellite television programming is now. No new government programs, fees or subsidies would be required.

Never has a corporate merger been more clearly in the public interest. Yet — incredibly — last week the Federal Communications Commission ruled exactly the opposite. On Thursday, in unusually harsh language, the FCC’s chairman Michael Powell and his apparatchiks did their best to drive a stake in the heart of this deal, declaring the merger not to be "in the public interest." This is an entirely urban point of view.

It was an act of arrogance common in Washington, but to those of us who inhabit the real world it is a kick in the gut. Mr. Powell and his gang stood up at the lectern, used inflammatory language, said the potential harm to consumers from the merger would be "staggering" (though with no explanation as to why); said the potential upside to the merger was "minimal" (though they’ve never articulated exactly how broadband would reach rural America without the merger); and hypocritically used rural concerns to justify their actions, even though they were forced to admit that the 100 smallest markets in America will now never get satellite access to local broadcasting.

I have seen government agencies reach conclusions that have nothing to do with reality, but this is far and away one of the worst. A reasonable observer could conclude that the decision was made not on the merits, but solely on political considerations. And there are plenty of those!

For example, last week The Wall Street Journal detailed the extensive, multimillion dollar lobbying campaign orchestrated by Rupert Murdoch to torpedo the merger. Thanks to the FCC’s "No" vote, he’s potentially in a position to pick up an incredible asset, DirecTV, at a firesale price. Yet despite the numerous news stories about his massive lobbying and PR effort, an FCC official publicly denied that NewsCorp had any influence on the decision at all. Give me a break!

The message to corporate America from this latest FCC decision is clear: It is now acceptable to use virtually any tactic available to hamstring competitors and to use government regulatory authority to gain an advantage that you can’t fairly win in the marketplace. This unspeakable precedent, Michael Powell, deserves pure outrage!

Or consider the widespread belief that Mr. Powell was simply looking for a merger to trash as a way to show he’s tough on corporate America. Anti-business sentiment is swirling around in Washington, and one way to appease the anti-corporate crowd is to reject this merger. In their timid view, this gives the FCC some breathing space for other business-related decisions that are coming down the pike. On such flimsy political calculations is the broadband future of rural America now determined.

It is an appalling situation when a government agency with virtually no understanding of how the private sector actually operates (and certainly no understanding of rural needs), substitutes its judgment for the collective decisions of business leaders and millions of shareholders. The same Michael Powell who is trying to squash entrepreneur Charlie Ergen’s dream regularly gives slaps on the wrist to the Bell monopolies who engage in aggressively anti-competitive behavior. Yet somehow Mr. Ergen, the entrepreneur, is a threat, and the Bells are to be coddled. Go figure.
* * *

There is still a chance that government can step back, catch its breath, and do the right thing. The Department of Justice is still reviewing the matter and may bring some sense to the issue. And there’s still a 30-day period for the Federal Communications Commission to accept new proposals and step back from the brink.

The bottom line is this: Satellite delivery of broadband by the merged EchoStar and DirecTV would be a competitive sweetener for areas already served by both cable and satellite television companies. Much more importantly for many rural areas of the West, this merger offers the only — and I repeat the only — affordable ticket to the digital future.

All government has to do is stay out of the way and let this merger happen. It’s as simple, and as infuriating, as that.

Mr. Wallop, a former U.S. Senator from Wyoming, is chairman of the Frontiers of Freedom Institute, a nonprofit public policy organization.

Copyright © 2002 Dow Jones & Company, Inc. All Rights Reserved