Articles by Hance Haney 
Hance Haney is Director and Senior Fellow of the Technology & Democracy Project at the Discovery Institute. Haney spent ten years as an aide to former Senator Bob Packwood (R-OR), and advised him in his capacity as chairman of the Senate Communications Subcommittee. He subsequently held various positions with the United States Telecom Association and Qwest Communications. He earned a BA in history from Willamette University and a JD from Lewis and Clark Law School in Portland, Oregon.
Congress freed up much-needed electromagnetic spectrum for mobile communications services Friday (H.R. 3630), but it set the stage for years of wasteful lobbying and litigating over whether regulators should be allowed to pick winners and losers among mobile service providers.
The wireless industry has thrived in the near absence of any regulation since 1993. But lately the Federal Communications Commission has been hard at work attempting to change that.
A leaked staff report in December helped sink AT&T’s attempted acquisition of T-Mobile. And the commission has taken the extraordinary step of requesting public comments on an agreement between Comcast and Verizon Wireless to jointly market their respective cable TV, voice and Internet services, beginning in Portland and Seattle. Nothing in the Communications Act prohibits cable operators and mobile phone service providers from jointly marketing their products.
FCC Chairman Julius Genachowski objected to a previous version of the spectrum bill which, among other things, would have prohibited the commission from manipulating spectrum auctions for the benefit of preferred entities. The limitation was removed, and Sec. 6404 provides that nothing in the legislation “affects any authority the Commission has to adopt and enforce rules of general applicability, including rules concerning spectrum aggregation that promote competition.
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AT&T and T-Mobile withdrew their merger application from the Federal Communications Commission Nov. 29 after it became clear that rigid ideologues at the FCC with no idea how to promote economic growth were determined to create as much trouble as possible.
The companies will continue to battle the U.S. Department of Justice on behalf of their deal. They can contend with the FCC later, perhaps after the next election. The conflict with DOJ will take place in a court of law, where usually there is scrupulous regard for facts, law and procedure. By comparison, the FCC is a playground for politicians, bureaucrats and lobbyists that tends to do whatever it wants.
In an unusual move, the agency released a preliminary analysis by the staff that is critical of the merger. Although the analysis has no legal significance whatsoever, publishing it is one way the zealots hope to influence the course of events given that they may no longer be in a position to judge the merger, eventually, as a result of the 2012 election.
This is not about promoting good government; this is about ideological preferences and a determination to obtain results by hook or crook. Continue reading →
Futurists have been predicting for years that there will be diminished privacy in the future, and we will just have to adapt. In 1999, for example, Sun Mcrosystems CEO Scott McNealy posited that we have “zero privacy.” Now, Wall Street Journal columnist Gordon Crovitz is suggesting that technology has the “power to rewrite constitutional protections.” He is referring to GPS tracking devices, of all things.
The Supreme Court is considering whether it was unreasonable for police to hide a GPS tracking device on a vehicle belonging to a suspected drug dealer. The Bill of Rights protects each of us against unreasonable searches and seizures. According to the Fourth Amendment,
The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.
In the case before the Supreme Court, U.S. v. Antoine Jones, the requirement to obtain a warrant was not problematic. In fact, the police established probable cause to suspect Jones of a crime and obtained a warrant. The problem is, the police violated the terms of the warrant, which had expired and which was never valid in the jurisdiction where the tracking occurred. Therefore, first and foremost, this is a case about police misconduct. Continue reading →
Is it “insane” for free market oriented thinkers to support the AT&T/T-Mobile merger? Although AT&T says there are five choices of wireless providers to choose from in 18 of 20 major markets, Milton Mueller argues that 93 percent of wireless subscribers prefer a seamless, nationwide provider. If the merger is approved, there would only be three such providers.
A market dominated by three major providers is neither competitive nor noncompetitive as a definitional matter. Factual analysis is necessary to determine competitiveness.
And it may be premature to conclude that there is no competitive significance either to the fact there are over a hundred providers currently delivering nationwide service on the basis of voluntary roaming agreements that are common in the industry, or to assume that the possibility the FCC will double the amount of spectrum available for wireless services will not impact the structure of the industry.
The trouble with antitrust generally is the possibility that government will choose to protect weak or inefficient competitors, thus preventing meaningful competition that attracts private investment which leads to innovation, better services and lower prices. Antitrust is supposed to protect consumers, not politically influential producers. Although this sounds simple in theory, it can get confusing in practice. As free market oriented thinkers, we do not want government picking winners and losers.
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Julius Genachowski is in a hurry.
He is arguing that the commission must act quickly to “restore the longstanding deregulatory—as opposed to ‘no-regulatory’ or ‘over-regulatory’—compact” that governed broadband Internet access services prior to a recent court decision. Such an approach is urgently needed to “restore the status quo,” he claims.
If the Federal Communications Commission cannot regulate the Internet, it may die. The telephone and television industries are declining, whereas communications industries which the FCC monitors to some extent but does not regulate, e.g., the Internet backbone, broadband Internet access and wireless, are thriving. The Internet, which the FCC cannot regulate, is subsuming legacy communications services which the commission can regulate. That spells doom for legacy regulation. Career regulators are worried.
Genachowski’s plan would reclassify broadband as a “telecommunications” service subject to blunt, onerous, industrial-era regulation under Title II of the Communications Act of 1934 – which governs common carriers – and then forbear from enforcing most of Title II’s heavy-handed provisions.
Broadband services haven’t been subject to Title II regulation for several years, so reclassification would not restore the status quo. It would harken back to a bygone era.
Broadband services provided by cable operators have thrived in the absence of common carrier regulation since before 1999, when William E. Kennard (designated FCC chairman by President Bill Clinton) declared:
If we’ve learned anything about the Internet in government over the last 15 years, it’s that it thrived quite nicely without the intervention of government.
If fact, the best decision government ever made with respect to the Internet was the decision that the FCC made 15 years ago NOT to impose regulation on it. This was not a dodge; it was a decision NOT to act. It was intentional restraint born of humility. Humility that we can’t predict where this market is going.
Though under significant pressure to do so, Kennard refused to regulate broadband services provided by cable operators like the broadband services provided by telecommunications carriers. In 2005 and 2007, respectively, the commission finally admitted that neither telecommunications carriers nor wireless providers provided broadband services that met the statutory definition of a “telecommunications” service under Title II, either.
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While the FCC considers whether to impose nondiscrimination and transparency regulation to all forms of broadband Internet access, Public Knowledge is proposing to subject broadband services to the same pervasive, overlapping, heavy-handed regulatory framework as century-old telephone service (see this and this) — a framework which a former FCC chairman during the Clinton Administration described as a hopeless “morass.”
PK is worried the U.S. Court of Appeals for the D.C. Circuit might rule in a pending case that the FCC doesn’t have jurisdiction to regulate broadband. The group also is fretting over a recent observation by AT&T that, “with each passing day, more and more communications service migrate to broadband and IP-based services,” leaving the public switched telephone network (“PSTN”) and plain old telephone service (“POTS”) we all grew up with “as relics of a by-gone era.” Continue reading →
Pre-release rumors and press reports were making it sound like the Obama administration let Rep. Ed Markey draft the FCC’s Notice of Proposed Rulemaking to “Preserve the Free and Open Internet.”
Maybe there was a last-minute change of plan.
There were rumors and/or reports that the NPRM would contain a “viewpoint diversity” mandate and only allow forms of network management which someone has managed to prove to the FCC satisfy a “strict scrutiny” test.
In the Markey-Eshoo bill, the strict scrutiny test is defined as follows:
[A] network management practice is a reasonable practice only if it furthers a critically important interest, is narrowly tailored to further that interest, and is the means of furthering that interest that is the least restrictive, least discriminatory, and least constricting of consumer choice available.
But in paragraph 137 of the NPRM, the commission declines to adopt a strict scrutiny standard.
We recognize that in a past adjudication, the Commission proposed that for a network management practice to be considered “reasonable,” it “should further a critically important interest and be narrowly or carefully tailored to serve that interest.” We believe that this standard is unnecessarily restrictive in the context of a rule that generally prohibits discrimination subject to a flexible category of reasonable network management. We seek comment on our proposal not to adopt the standard articulated in the Comcast Network Management Practices Order in this rulemaking.
There were also reports the NPRM would include a carve-out for application and service giants like Google. But the definitions in the draft regulations included in the NPRM are so broad that many applications and services arguably could be included:
Broadband Internet access. Internet Protocol data transmission between an end user and the Internet. For purposes of this definition, dial-up access requiring an end user to initiate a call across the public switched telephone network to establish a connection shall not constitute broadband Internet access.
Broadband Internet access service. Any communication service by wire or radio that provides broadband Internet access directly to the public, or to such classes of users as to be effectively available directly to the public.
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Julius Genachowski, the new FCC chairman, announced that the commission will begin a rulemaking process to formalize and supplement existing network neutrality policy. According to Genachowski,
This is not about government regulation of the Internet. It’s about fair rules of the road for companies that control access to the Internet. We will do as much as we need to, and no more, to ensure that the Internet remains an unfettered platform for competition, creativity, and entrepreneurial activity.
Of course it is about regulation. The formal rulemaking process Genachowski is planning is for the avowed purpose of enshrining network neutrality principles in the Code of Federal Regulations.
Regulation always starts out small, before it grows really big. It has to: Loopholes and other unintended consequences (and opportunities) are always discovered after the “product” launches.
Genachowski unfairly and innaccurately implies that network neutrality opponents want to “abandon the underlying values fostered by an open network, [and] the important goal of setting rules of the road to protect the free and open Internet.” In fact, the existing Internet Policy Statement that would serve as the foundation of a new network neutrality regulatory regime received 2 Republican votes and 2 Democrat votes.
Genachowski is attempting to present a false choice between letting minimally trained politicians and myopic bureaucrats get their hands all over the Internet to remake it as they see fit versus “doing nothing.”
Saying nothing — and doing nothing — would impose its own form of unacceptable cost. It would deprive innovators and investors of confidence that the free and open Internet we depend upon today will still be here tomorrow. It would deny the benefits of predictable rules of the road to all players in the Internet ecosystem. And it would be a dangerous retreat from the core principle of openness — the freedom to innovate without permission — that has been a hallmark of the Internet since its inception, and has made it so stunningly successful as a platform for innovation, opportunity, and prosperity.
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Reacting to Apple’s decision to not allow Google Voice for the iPhone, Wall Street Journal guest columnist Andy Kessler complains,
It wouldn’t be so bad if we were just overpaying for our mobile plans. Americans are used to that—see mail, milk and medicine. But it’s inexcusable that new, feature-rich and productive applications like Google Voice are being held back, just to prop up AT&T while we wait for it to transition away from its legacy of voice communications. How many productive apps beyond Google Voice are waiting in the wings?
So Kessler proposes a “national data plan.”
Before we get to that, Kessler complains that margins in AT&T’s cellphone unit are an “embarrassingly” high 25%. He doesn’t point out that AT&T’s combined profit margin — taking into account all products and services — is only 9.66%.
AT&T is actually earning less now than it was legally entitled to earn when fully regulated — 9.66% versus 11.75%.
Don’t fall for the myth that AT&T killed Google Voice.
The truth is regulators are quietly expropriating wireless profits to hold prices for regulated services like plain old telephone service artificially low. Continue reading →
A new coalition, NoChokePoints, has been formed to lobby Congress and the Federal Communications Commission to further regulate the prices that incumbent telephone companies (Regional Bell Operating Companies or Incumbent Local Exchange Carriers) can charge for special access services purchased by businesses and institutions. Special access circuits are dedicated, private lines. For example, Sprint purchases special access circuits to connect its cell towers to its backbone.
According to a coalition spokeswoman,
Huge companies like Verizon and AT&T control the broadband lines of almost every business in the United States. The virtually unchallenged, exclusive control of these lines costs businesses and consumers more than $10 billion annually and generates a profit margin of more than 100 percent for the controlling phone companies, according to their own data provided to the FCC. This hidden broadband tax results in enormous losses for consumers and the economy, and this country cannot afford it; especially now.
An analysis prepared by Peter Bluhm with Dr. Robert Loube under contract with the National Association of Regulatory Commissioners (NARUC) disputes this conclusion.
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