Tuesday, September 30, 2008

USA - the bailout and increased regulation

The government is coming: what the bailout means for tech

Technology and telecoms companies should prepare themselves for the pendulum to swing towards greater regulationJonathan Weber
The US bailout of Wall Street marks the end of the deregulation era – and it isn't just the money business that's about to see a lot more oversight and other forms of government engagement. In energy, transportation, health care food and, yes, technology and telecommunications, the role of government – always much greater than acknowledged – is about to change in big ways.

The speed of the shift away from the free-market approach that has dominated since Ronald Reagan was president will depend to some extent on who is the next president. Barack Obama, liberated by the Wall Street meltdown, now talks openly of the need for a strong federal government hand in the economy. (That's a theme that Democrats, whatever they might have felt in their hearts, have had to handle delicately for years lest they be accused of socialism.) John McCain, to the extent that he thinks much about the economy, is a comparatively unreconstructed free-marketeer – but not one unwilling to shift with the times.


On the regulatory front, look for more aggressive anti-trust enforcement, and a more activist stance on privacy issues. The Bush Administration has actually been less complaisant than one might expect on anti-trust, but the angry mood towards big business is likely to translate into further scrutiny of big businesses getting bigger. And if the federal government is once again explicitly charged with defending the little guy, consumer-protection issues like privacy are likely to get more attention.

Telecommunications, which remains among the most highly regulated of all industries, promises to be a huge battleground. Some Reagan-era policies, like loosening restrictions on ownership of television and radio stations, are likely to fall by the wayside or even be rolled back. But what a new Congress and Administration might do about the rules governing competition in both fixed-line and mobile telephone services, in cable television, and on the internet remains to be seen.

The phone companies, notably Verizon and AT&T, remain incredibly potent as bi-partisan lobbying forces, but they'll likely have to fight renewed efforts to control both their rates and their business practices. In particular, the struggle over so-called net neutrality will continue, with the phone companies arguing for their right to do what they want with their networks and internet businesses, and others insisting that the network be operated in a non-discriminatory fashion.

As an internet entrepreneur, this last issue is the most critical for me. In theory, Google and the other big internet companies are standing up to the phone companies on my behalf in the net neutrality debate. But when push comes to shove, I think the big boys will be happy to cut their own deals with the providers of internet connectivity if they think it's in their interests.

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