Wednesday, December 02, 2009
BS Alert by Brett Narloch
Issue: Economic Development
Recently, news broke that Flow Mobile, a Bismarck-based company, is getting ready to launch a pilot project in Cass County that could revolutionize the mobile wireless communications industry. According to the Fargo Forum, the company claims to have “game-changing” technology that makes it economically feasible to provide coverage to sparsely populated areas.
Politicians and government-led economic development officials have been weighing in on the development. Bruce Gjovig, director of the Center for Innovation at UND, wrote,
Flow Mobile intends to initiate something very dramatic and deploy a mobile broadband communications network that will be the first of its kind in the world. Flow Mobile will attract millions of dollars of investment to North Dakota and launch a communications network that will make North Dakota the first state with such a network. This will foster jobs and opportunity for our state, and we should all welcome this – all red carpet, no red tape.
Sen. Kent Conrad and Gov. John Hoeven wrote letters of support for the company.
Gjovig noted that Flow Mobile would attract millions of investment dollars into the state. Conrad believes Flow Mobile will eventually serve 150,000 individual North Dakotans, along with universities and community colleges. Flow Mobile’s chief executive Sree Tangella believes that investments in Flow Mobile’s 12-state territory could reach $450 million.
There are also some pretty big-name investors in the project, including North Dakota natives, Navy admiral Bill Owens and Forbes publisher Rich Karlgaard.
If this technology is fully realized, it could be a really great thing for North Dakota. Jobs would be created, customers would get better wireless service at cheaper rates, and the state could end up saving millions of dollars by paying less for public safety services.
Its competition would be the rural telephone co-ops, and they are not taking this news lightly. Rural co-ops believe that this new technology will not be compatible with the emerging next generation of wireless communications. However, Gjovig argues that innovation is a good thing. He wrote,
While the rural telephone co-ops are an important constituency, and have served the state very well, they are also local monopolies trying to keep new entrants out. The co-ops have lots of market share, customers and financial reserves, but they have not offered the innovative solutions and technologies like Flow Mobile.
Remember, it was not the candle companies that gave us electricity, or the railroads who gave us airplanes, nor the old computer companies that gave us the laptop.
There is no advantage to letting the old providers build fences through politics. Do not hold back the innovators waiting for old providers to catch up. Market competition is a good thing even when the old providers cannot keep up with the new. Even if the new technology has glitches, progress is made.
But will the competition between the rural co-ops and Flow Mobile be fair? The answer is “no”. Gjovig’s assertion that market competition is good is correct; however, this competition will be far from market-based. Instead of competing in a free and fair market, this battle is shaping up to be little more than a race to see who can receive the most amount of state and federal financial support.
Flow Mobile has applied for $52 million in federal stimulus funds, and Gov. Hoeven has expressed his desire to give Flow Mobile access to state owned property. Besides being unconstitutional, it is direct involvement in the market by the government. In a free and fair market, the government would stay out of such matters. Furthermore, if Flow Mobile has a solid business model and can earn profits, they have no business taking taxpayer dollars. If they are unable to earn profits, then it’ll be the taxpayers on the hook. Just what we need, more bailouts!
This isn’t to say that rural co-ops operate in a free and fair market, either. They are supported by state and local governments. Many people rightfully call them monopolies.
The point is that consumers benefit when the government refrains from loaning its credit and giving its resources to private companies, and does not pick sides. Gjovig is right that North Dakota needs to roll out the red carpet for Flow Mobile. It should roll out the red carpet for any and every company that wants to relocate to North Dakota, but it should do so by eliminating corporate income taxes, reducing or eliminating regulations, and eliminating corporate welfare, which only promotes corruption and market uncertainty (will my politically popular competition be given a large subsidy in the future?).
Giving Flow Mobile, the rural co-ops, or any other business subsidies and loans only distorts markets… it does not make them fair. If Flow Mobile wants to eliminate the rural co-ops monopoly in communications, it should advocate the end of the state’s support for rural co-ops, not belly up to the trough right next to them. That’s anti-market… and, quite frankly, BS.
