Bill Gurley’s talk at the All-In Summit 2023, titled “2,851 Miles,” shone a powerful light on how regulatory capture has shaped the telecommunications and healthcare industries. His insights into how large corporations have wielded legislative power to protect their interests are a wake-up call for understanding the deeper mechanics of regulation and corporate influence.
The Case of Tropos Network: How Regulation Stifled Innovation
One of the key examples Gurley highlighted was the story of Tropos Network, a company that aimed to revolutionize internet access by providing free Wi-Fi through routers at an industrial scale. This ambitious project, which could have benefited millions by democratizing internet access, was quickly derailed by powerful telecom interests.
Tropos was blocked not by consumer choice, but by legislative action. Comcast, a dominant player in the telecommunications industry, drafted a bill that was pushed through Congress, effectively stifling Tropos’ innovative efforts. This was made possible by David Cohen, Comcast’s chief lobbyist, who was recognized in 2014 by the New York Times as one of the most influential executives in the industry. This incident is a classic example of how corporate lobbying can subvert competition and innovation to maintain the status quo.
The Telecommunications Act of 1996: A Catalyst for Corporate Concentration
Gurley also delved into the broader context of regulatory capture by discussing the Telecommunications Act of 1996. Although the act was intended to promote labor and drive technological progress, it ultimately led to increased market consolidation. Prior to the Act, the top four telecom providers held 48% of the market share. Just five years later, their share had ballooned to 85%.
This consolidation highlights what economist George Stigler famously argued: “As a rule, regulation is acquired by the industry and is designed and operated primarily for its benefit.” Rather than encouraging healthy competition, regulation is often manipulated by powerful corporate interests to protect their dominance. As a result, market entry becomes more difficult for new players, while established firms can continue to inflate prices without fear of competition.
MedTech and Healthcare: A Parallel in Regulatory Capture
Gurley also drew a parallel between the telecom industry and the healthcare sector, citing the example of Judith Faulkner, CEO of the MedTech software company Epic. In 2009, Faulkner was appointed to the Health IT Council by President Obama, a move that raised eyebrows given her company’s direct stake in healthcare IT.
Shortly after, the American Recovery Act of 2009, which included the HI-Tech provision, offered financial incentives of $44,000 per healthcare provider to adopt electronic health records (EHR) software. This initiative significantly benefited companies like Epic, whose software became the standard across many healthcare systems. Faulkner’s influence, coupled with her donations to Obama’s campaign, reflects another instance of regulation being used to protect and grow a specific company’s market share at the expense of broader competition.
Conclusion: Regulatory Capture as a Societal Loss
Bill Gurley’s talk offered a sobering view of how regulation, originally designed to protect consumers and promote competition, is often repurposed to shield entrenched interests. From telecommunications to healthcare, the regulatory environment is frequently shaped by corporate lobbying, creating barriers for innovation and new market entrants. As Gurley pointed out, this results in a net loss for society, where consumers face higher prices and limited choices, and innovation is stifled.
The need for a reevaluation of how regulations are crafted and who benefits from them is clearer than ever. Without addressing the issue of regulatory capture, industries will continue to serve the interests of a few at the expense of the many.
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