Regulation is usually a Democrat's way of controlling monopolies in order to keep them from fleecing the public since they have no competition in a particular market place. Deregulation is usually the Republicans way of allowing business to find its own place in the market. Regrettably, neither works well in every case.
In an unusual act, it was a Democratic, President Carter, that deregulated the telephone companies. While there were some growing pains after the break-up of the companies, for the most part it was a successful deregulation. Today's phone service cost about the same but is many times better. At the time of the break-up telephone frequency response standards were on the order of 3 KHz. Today we enjoy a 40 to 50 KHz frequency response. It was this change that allowed the Internet to move from a command and respond mode to today's high-resolution client driven Internet. The competition between long distance companies had dropped the price of this service to next to nothing.
The problem with regulation is that the regulating agency has to guarantee the company a profit. This profit can be just about anything but is usually in the area of 6% on investment. AT&T at its peak was so large that the regulating agencies were at a loss to regulate it. anyway. AT&T generated an empire with half a hundred level of very high paid management. Since their profit was guaranteed anyway, there was less effort in research and development. The game play was to spend money on salaries and the empire.
Deregulation has its problems, too. The deregulation of the cable and satellite television industry has been a complete flop. Both services have increased their prices without increasing services, at a rate many times that of inflation. The government's decision to take competition out of the market place by allowing the mergers of these companies has been the primary cause of the problem. Today there is, for all practical purposes, only one small dish Satellite Company, where once there were four. They merged, cornered the market, and then raped it while our government looked on with a blind eye.
The regulation of smaller companies such as public utilities has fewer problems, except in California, of course, where they regulate at a micro management level. It is true that some cities and states are not qualified to regulate from a business viewpoint. They simply grant the contract, and if they don't like the way it has performed they get another company at the end of contract. These smaller State and Municipal contract are frequently cause for corruption as there is fierce competition to get the franchises. Cable TV companies are notorious for kicking back to cities and city officials to get the contract.
I believe strongly in as much deregulation as possible. I also believe that any company business or industry that monopolizes a market unfairly should be regulated. To go one step further, I believe that any business or industry that monopolizes unfairly and endangers the national security or economy should be nationalized. This is a worst-case scenario, as the government is incapable of managing almost anything efficiently.
In recent years the oil companies have unfairly served their market place by deceit, price fixing, hording and a hundred other tactics. To regulate or nationalize this industry would be a disaster. The cost of government mismanagement in regulating or nationalizing them would far exceed the money stolen by the industry itself. All you have to do to see what a nationalized oil company would be like is to take a look at the price of gas in every country that has nationalized oil.
The US Postal Service is, for all practical purposes, a nationalized industry. It has a complete franchise on first and second-class mail delivery. Every day it hires more people at higher salaries then goes to congress and begs for higher postal rates or money to cover losses. Yet everyone in the loop knows that private, unregulated mail companies could deliver the mail at less than half the cost. The other day I got a bill for $4.00 in the mail. I paid via first class mail. The cost of sending the bill and returning payment via the US mail was 20% of the original bill.
In summary, regulation is one of the fallacies of capitalisms. No body really wants it and it seldom achieves the desired results. But, sometimes, it is necessary.
Winston Rogers
August 8, 2002