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Why Get For Free What You Can Pay For?

March 7, 2011

Wired.com ran a story today about a great new innovation over at speedtest.net. The site has jumped on the social networking bandwagon and is enabling nerds around the world to engage in the age-old tradition of measuring themselves against their peers. Now anyone can test their internet connection speed and post the results to facebook and even earn “badges” to show off their uber-fast connection to the digital universe.

What does any of this have to do with economics? Registered users can create groups for their office or even their city and compare their results to others around them in real time. This is pretty valuable information for internet service providers wishing to evaluate their service’s performance and that of their competitors.

The federal government decided this information would be useful for central planners too. The theory is that sage bureaucrats will be able to use the information to provide high-speed access to those overlooked by corporations. So the FTC created the Consumer Broadband Test which is essentially supposed to collect the same data as speedtest.net. It just so happens that speedtest.net offered to give the FTC all of its data for free but the government turned them down.

To summarize, we have a private company which entices people to use their free service with innovative social networking tools. The private company collects valuable information that will help private internet service providers improve the services they offer to consumers. Meanwhile, the federal government takes money out of peoples pockets to create a program that is designed to collect the same information (only without incentivizing users to participate) while refusing to accept the very data it seeks when it is offered by the private company free of charge.

Such is the nature of government and markets.

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