innovation

Robert Reich Gets It

by Ryan Young on October 15, 2009

in Economy, Health and Illness, Healthcare, Politics as Usual, Regulation

Some of the consequences of increasing government’s role in health care are easy to predict. One is that cutting costs requires cutting the amount of care. That means rationing. People judged not deserving of care would be denied it.

Another is that if government uses its increased bargaining power to lower drug prices, there will be less money for R&D. That means less innovation. That could well mean the end of increasing life expectancies.

Some people see these consequences and oppose more government in health care (I refuse to call President Obama and Congress’ proposal a reform; that word implies improvement). Others see those same consequences as reasons for supporting proposed legislation.

Today’s issue of OpinionJournal’s Political Diary (requires paid subscription) shows that Robert Reich, who supports government-run health care, realizes its effects on rationing and innovation, supports it anyway, and said so in a public speech at UC Berkeley in 2007.

Mr. Reich told the Berkeley youngsters: “You — particularly you young people, particularly you young healthy people — you’re going to have to pay more. And by the way, if you’re very old, we’re not going to give you all that technology and all those drugs for the last couple of years of your life to keep you maybe going for another couple of months. It’s too expensive . . . so we’re going to let you die’”

Reich goes on:

“I’m going to use the bargaining leverage of the federal government in terms of Medicare, Medicaid — we already have a lot of bargaining leverage — to force drug companies and insurance companies and medical suppliers to reduce their costs. What that means, less innovation and that means less new products and less new drugs on the market which means you are probably not going to live much longer than your parents.”

Whether you support more government in health care or not is up to you. But it is not disputable that those consequences exist. They should be factored into your opinion. Supporters of proposed legislation should acknowledge the effects of their ideas. Instead, they usually run away from them.

Kudos to Robert Reich for the intellectual honesty he displayed in his speech. More, please.

Gateway Neutrality: Just A Taste

by Nick Brown on January 23, 2009 · 7 comments

in Stimulus to Nowhere, Tech & Telecom

Right behind the broadband stimulus goldmine within the Obama administrations stimulus plan sits Sec. 3102 (E). Sec. 3102 (E) is a fairly simple bit of reading that deals with requirements that must be met in order to receive grants for funding broadband deployment in rural areas. If we break this section down, which truthfully is only necessary if you are a rock, it goes over a few items.  For instance, making sure no one gets “unjust[ly] rich”, which begs the question what is “justly rich”.  The grant holder would have to meet buildout requirements, which have yet to be determined.  And it calls for the vaguely worded, “maximize use of the supported infrastructure by the public,” which probably infers that a network would need to capitalize on the number of users that could connect rather than providing the best speed possible for less users.  We do know that the administration does in fact want broadband.  We know that because they called it that.  And we know that the FCC determined that broadband is at least 768Kbps last March, so we can safely assume this would be the bare minimum.

After this, it gets a little more interesting.  The requirements call the grant recipient to operate the wired/wireless broadband network on a open access basis, and additionally “adhere to the principles contained in the Federal Communications Commission’s broadband policy statement.”

Those who are a little more familiar with communications policy are probably already aware that “open access” is just the softer, more gentle way of saying network neutrality.  Additionally, the FCC Policy Statement on Broadband is most certainly a position statement and a point by point of net neutrality rules that it believes it can regulate based on Title I of the 1996 Telecommunications Act.  In reality the FCC has no authority to regulate net neutrality, and evidence of this is the legislation submitted in committee year after year to create neutrality enforcement.

The issue here is that it doesn’t matter if the FCC or the Fed can regulate net neutrality on the grand scale right now, the recipient of these grant funds will be legally bound to adhere to the FCC policy statement implementing net neutrality and establishing open networks.  After that, the fix is in.  One or more publicly funded networks would exist running under regulated and enforced net neutrality principles.  A few years later, legislation will be introduced again to mandate net neutrality in all U.S. networks.   Backers of the legislation will refer to the networks built under the stimulus plan pointing out how flawlessly they are running, and how neutrality principles have provided for that condition because the FCC can watch dog the network.

This is about the point when infrastructure side innovation will take a bow.  Techniques like providing the user the freedom to prioritize their own packets through flagging in their personal user accounts, or tiered application based service will never be.  Maybe the market will demand neutrality in packet exchange.  Or possibly the market will demand specialized service that caters toward individuals streaming high bandwidth, time sensitive HD video or gamers where micro-seconds are of extreme importance and lag can destroy the entertainment experience, and where others simply don’t care about neutrality because all they use the Internet for is non-time sensitive email and casual browsing.

These are most certainly things that the market should be determining and not the government via regulation, especially for a technology that in the grand scheme is still in its infancy.  So a warning goes out to those companies itching to get their hands on this grant.  The first taste is free, but the second ends in regulated neutrality.

Update: I actually wrote this piece two days ago, but we have been having some server issues and it just went up today.  So today, according to the Washington Post, “the House Energy and Commerce Committee backed including about $3 billion in grants to expand Internet service as part of a larger economic stimulus bill, including a provision requiring “open access” in wireless service and on the Internet.”  More “open acess” requirements leading to more enforced and government regulated net neutrality on networks built with stimulus grants.  This is obviously the pro-neutrality lobbies plan of attack, and boy have they got the ball rolling quickly.

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