Strengthening Constitutional Self-Government

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Rocky Road

So I'm reading Tim Wu's The Master Switch and I was struck by a couple of quotes.  Wu wrote "in the immediate aftermath of the AT&T breakup, consumers saw a drop-off in service quality utterly unexampled since the formation of the Bell system.  In fact, the "competitive" industries that replaced the imperial monopolies were often not as efficient or successful as their predecessors, failing to deliver even the fail-safe benefit of competition: lower prices."  But there is a payoff.  Wu writes that "the breakup of Bell laid the foundation for every important communications revolution since the 1980s onward.  There is no way of knowing that thirty years on we would have an Internet, handheld computers, and social networking, but it is hard to imagine their coming when they did had the company that buried the answering machine remained intact."

This got me think of the Ryan Roadmap's approach to reforming health care. The Roadmap (and other conservative proposals like the one offered by James Capretta and Thomas Miller) would transform our system from one with little or no visible price system for consumers and where health care providers are used to billing either private insurers or government for routine medical costs, to a system in which providers would compete for health consumer dollars (for noncatastrophic costs) directly through price and quality.  While I'm all in favor of this shift, I wonder if a sudden transition (even one phased in over several years) would produce similar problems to the ones that Wu described as providers initially flounder around trying to adjust to a new model.  I'm even more worried about whether our politics would ever allow such a sudden shift to happen.  People are a lot more risk averse about their health care security than they are about their phone service.  That is why I think it is important to push primarily for incremental reforms that increase the number of people on consumer-drive health insurance policies and that show concrete benefits to subgroups of the population (and also regulatory reforms to improve price transparency.)  This would allow providers to partially reorient themselves towards customers as well as insurers and the government and show the broad public that moving to a more market-oriented system has more benefits than drawbacks.

So what would this market-oriented system look like?  Well when I first read this Walter Russell Mead post I thought it sounded too science fictional, but really it presents a change no weirder than the change from the rotary phone my parents had in 1980 to the cell phones that are now available to the middle-class (and often the nominally poor.)  I don't think conservatives should promise those kinds of benefits if conservative reform proposals are adopted.  Greater take home pay with continued health care security should be enough.  But we will only get there piece-by-piece and every gain will be through political trench warfare.  Staking reform on one huge radical-sounding change probably reduces the chances of averting government-run health care.    

Categories > Politics

Discussions - 3 Comments

I recall no decline in service quality when the local phone companies were detached from AT & T, merely more complicated phone bills. (As the local phone companies remained regulated monopolies, you were not likely to see much in the way of lower prices in that venue. It was long-distance prices and equipment prices that were to benefit from competition).

AD, I don't remember any such decline either but 1) I was a kid at the time 2) I have no clear memories of the quality of service in the earlier era and 3) I grew up in an urban area that whatever problems it had, also had good communications infrastructure (we got cable before lots of other places.) My Father-in-Law was living in suburban Maine at this time and also recalls no service decline. Wu doesn't supply footnotes for his claim. Wu does write on page 195 that local phone costs went up (no cite) and writes about "mystifying connection fees and surchanrges", but doesn't repeat his claim of service decline.

I recall pre-1984 service quite well, both in a town where a Bell affiliate was the local phone company and in a town where an independent firm held the local phone monopoly.

There was initially some confusion about whom to call for repairs (because responsibility for the connection had been detached from responsibility for the telephone set itself.

IIRC, regulators or company policy had induced the Bell System to subsidize local rates by charging excess on long distance rates. (Recall that in 1981 AT & T Long Lines controlled 97% of the long distance business). Severing the connection between AT&T Long Lines and the local phone companies would have killed the cross-subsidy. Ergo, local phone rates likely did increase. (I do not recall that they did, but there's been some water under the bridge these 27 years).

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