Does Government Belong in the Telecom Business?

Widespread recognition of the inefficiencies of government-operated businesses has led to a worldwide movement towards privatization. From airports to bus services, from steel mills to public housing, privatization has saved consumers and taxpayers billions of dollars through increased efficiency and market competition.

When it comes to telecommunications and the Internet, the United States has played an especially important role in the privatization movement. In 1993, the U.S. privatized management of the Internet infrastructure. In 1997, it negotiated the World Trade Organization General Treaty on Telecommunications Services, which encourages privatization of government-operated telecommunications carriers in other nations. It has privatized communications satellites, and even created a new entity, the Internet Corporation for Assigned Names and Numbers (ICANN), to facilitate the privatization of domain name management on the Web.

At the state and local level, however, the trend would appear to be going in the opposite direction: Instead of privatizing their government-owned telecommunications assets, some cities and states are expanding existing telecommunications activities, or even starting new ones. Typically, this means expanding existing municipal electric utilities or cable providers by entering the telecommunications business, but it can also include new infrastructure investments by state governments and even by such Federal entities as "power marketing administrations."

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