‘First Do No Harm’: Why HF 635/SF 833 Merits Another Hard Look

Published February 28, 2008

Everyone remembers the wise counsel attributed to Hippocrates, the great founder of scientific medicine. It warned doctors first to consider any harm their intervention might do.

Before the Minnesota Legislature moves forward with HF 635/SF 833 it needs to consider whether Minnesota really wants to become the first of 50 states in the Union to impose restrictive legislation regulating its wireless service.

Are there distinct advantages for the citizens of Minnesota that will accrue from the passage of this bill that will offset the handicaps they and their state may experience in the highly competitive national wireless market?

President Bill Clinton’s highly capable technology “czar,” Ira Magaziner, successfully argued that digital technology was moving so fast that for the foreseeable future it would be almost impossible for best-intended and quickly drafted legislation to do anything but hamper the advantages to Americans of the developments and cost savings they would achieve through the offerings of competing companies wooing customers in an unregulated market.

Magaziner proposed an explicit “hands off” federal policy since the release of his “Framework for Global Electronic Commerce” in July 1997. Magaziner committed the federal government to allowing and encouraging a private-sector lead in the development of the comparatively tiny Internet and its related digital industries. It was furthering the success of that policy that caused Congress recently to extend the bill embargoing Internet taxation. The results on the national level speak for themselves.

Clearly a decade of this policy has been good for Minnesota. With seven wireless companies competing in Minnesota, prices have dropped sharply from 37 cents per minute of a wireless call in 1998 to 7 cents a minute today, 10 years later.

There is no evidence currently submitted with this bill that indicates there have been so many abuses in wireless service and billing in Minnesota that some kind of consumer legislation is now required. And the actual legislation itself does little more than codify into law the “shrink wrap” industry consumer package that describe the terms of service the seven companies currently provide their customers voluntarily–without regulation. There is really no additional consumer protection from the proposed legislation because in the event of fraud in these terms of service, the attorney general of Minnesota already has sufficient remedies at law.

And as anyone who has had wireless service in Minnesota for just the past several years knows from personal experience, these terms of wireless service seem to change every month as the seven companies jostle for competitive advantage trying to attract new customers and take customers from one another. There may be no-contract arrangements, 30-day minimums, “free phones,” varying fee offerings, and a myriad other details. It is hard enough keeping up with all of these offerings in commerce, much less trying to use these as the basis of regulation.

If state legislators wish to regulate these terms of service without injuring the advantages that have already accrued to Minnesota citizens, they need to consider if it is remotely possible that any legislature in the world could continually revise regulations like this quickly enough to do so.

And there is another critical matter to consider. As many communities, however small they may be, are painfully learning, today we are in a global market. The economic competitive environment can change rapidly. Much of the customer service callbank trade that once went to a state like South Dakota is now being serviced from India or the Philippines. One can only continue to compete in a field like that if wireless, broadband, and digital infrastructure and cost are superior to other locations all over the world.

A recent paper by digiguru George Gilder and Bret Swanson of the Discovery Institute estimates the growth of traffic on the Internet will require a 50 times increase in capacity by 2015. At this point traffic will grow to one zetabyte or 1,000 exabytes. Those aren’t exactly household terms–yet. But consider that one zetabyte is one million million billion bytes of data … roughly 50 million Libraries of Congress.

As the announcement of their study by the Discovery Institute put it: “New network investments expanding bandwidth, storage, and traffic management capabilities in the U.S. could total more than $100 billion in the next half-decade alone. Technology remains the key engine of U.S. economic growth and its competitive edge, the authors contend. Policies that encourage investment and innovation in our digital and communications sectors should be among America’s highest national priorities, they believe.”

It won’t be the State of Minnesota that will have to invest its portion of that $100 billion to create that kind of competitive capacity; it will be the seven companies currently offering wireless there and many others like them. So it is up to them where they choose to make that investment.

But it is up to the State of Minnesota to remember that the advantage of American federalism, in its ability to offer “50 laboratories” to test the winners with best execution of various state policies in fields from education to telecom, also just as conspicuously identifies losers.

By moving forward with HF 635/SF 833, Minnesota becomes the first state in the Union to impose restrictive regulation in wireless at a time when states should be especially sensitive to their need for major industry investment, as Gilder and Swanson indicate.

It is difficult to see any benefits accruing to its passage, and identifying Minnesota as breaking ranks with all the others, that offset the danger this measure poses to making Minnesota a less-attractive state for that critical investment.

At the dizzying pace of change in technology we have all seen in the past decade, that bell, once rung in the marketplace, cannot be unrung.

Thomas Lipscomb ([email protected]) is a senior fellow of The Heartland Institute. He founded two high-tech public companies based upon his patents. A veteran journalist, he is the founder of Times Books.