Today, the U.S. Department of Transportation released its eagerly-awaited “Federal Automated Vehicles Policy.” There’s a lot to like about the guidance document, beginning with the agency’s genuine embrace of the potential for highly automated vehicles (HAVs) to revolutionize this sector and save thousands of lives annually in the process.

It is important we get HAV policy right, the DOT notes, because, “35,092 people died on U.S. roadways in 2015 alone” and “94 percent of crashes can be tied to a human choice or error.” (p. 5) HAVs could help us reverse that trend and save thousands of lives and billions in economic costs annually. The agency also documents many other benefits associated with HAVs, such as increasing personal mobility, reducing traffic and pollution, and cutting infrastructure costs.

I will not attempt here to comment on every specific recommendation or guideline suggested in the new DOT guidance document. I could nit-pick about some of the specific recommended guidelines, but I think many of the guidelines are quite reasonable, whether they are related to safety, security, privacy, or state regulatory issues. Other issues need to be addressed and CEI’s Marc Scribner does a nice job documenting some of them is his response to the new guidelines.

Instead of discussing those specific issues today, I want to ask a more fundamental and far-reaching question which I have been writing about in recent papers and essays: Is this guidance or regulation? And what does the use of informal guidance mechanisms like these signal for the future of technological governance more generally?

When Is “Voluntary” Really Mandatory?

The surreal thing about DOT’s new driverless car guidance is how the agency repeatedly stresses it “is not mandatory” and that the guidelines are voluntary in nature but then — often in the same paragraph or sentence — the agency hints how it might convert those recommendations into regulations in the near future. Consider this paragraph on pg. 11 of the DOT’s new guidance document:

The Agency expects to pursue follow-on actions to this Guidance, such as performing additional research in areas such as benefits assessment, human factors, cybersecurity, performance metrics, objective testing, and others as they are identified in the future. As discussed, DOT further intends to hold public workshops and obtain public comment on this Guidance and the other elements of the Policy. This Guidance highlights important areas that manufacturers and other entities designing HAV systems should be considering and addressing as they design, test, and deploy HAVs. This Guidance is not mandatory. NHTSA may consider, in the future, proposing to make some elements of this Guidance mandatory and binding through future regulatory actions. This Guidance is not intended for States to codify as legal requirements for the development, design, manufacture, testing, and operation of automated vehicles. Additional next steps are outlined at the end of this Guidance. [emphasis added.]

The agency continues on to request that “manufacturers and other entities voluntarily provide reports regarding how the Guidance has been followed,” but then notes how “[t]his reporting process may be refined and made mandatory through a future rulemaking.” (p. 15)

And so it goes throughout the DOT’s new “guidance” document. With one breath the DOT suggests that everything is informal and voluntary; with the next it suggests that some form of regulation could be right around the proverbial corner.

Agency Threats Are the Future of Technological Governance

What’s going on here? In essence, DOT’s driverless car guidance is another example of how “soft law” and “agency threats” are becoming the dominant governance models for fast-paced emerging technology.

As noted by Tim Wu, a proponent of such regimes, these agency threats can include “warning letters, official speeches, interpretations, and private meetings with regulated parties.” “Soft law” simply refers to any sort of informal governance mechanism that agencies might seek to use to influence private decision-making or in this case the future course of technological innovation.

The problem with agency threats, as my former Mercatus Center colleague Jerry Brito pointed out in a 2014 law review article, is that they are fundamentally undemocratic and represent a betrayal of the rule of law. The use of “threat regimes,” Brito argued, “places undue power in the hands of regulators unconstrained by predictable procedures.” Such regimes breed uncertainty by leaving decisions up to the whim of regulators who will be unconstrained by administrative procedures, legal precedents, and strict timetables. “[B]ecause it has no limiting principle,” Brito concluded, the agency threats model “leaves the regulatory process without much meaning” and “would obviously be ripe for abuse.”

The danger exists that we are witnessing gradual mission creep as the DOT’s “guidance” process slowly moves from being a truly voluntary self-certification process to something more akin to a pre-market approval process. Every “informal” request that DOT makes — even when those requests are just presented in the form of vague questions — opens the door to greater technocratic meddling in the innovation process by federal bureaucrats.

Coping with the Pacing Problem

Why are agencies like the DOT adopting this new playbook? In a nutshell, it comes down to the realization on their part that the “pacing problem” is now an undeniable fact of life.

I discussed the pacing problem at length in my recent review of Wendell Wallach’s important new book, A Dangerous Master: How to Keep Technology from Slipping beyond Our Control. Wallach nicely defined the pacing problem as “the gap between the introduction of a new technology and the establishment of laws, regulations, and oversight mechanisms for shaping its safe development.” “There has always been a pacing problem,” Wallach noted, but like other philosophers, he believes that modern technological innovation is occurring at an unprecedented pace, making it harder than ever to “govern” it using traditional legal and regulatory mechanisms.

Which is exactly why the DOT and whole lot of other agencies are now defaulting to soft law and agencies threat models as their old regimes struggle to keep up with the pace of modern technological innovation. As the DOT put it in its new guidance document: “The speed with which HAVs are advancing, combined with the complexity and novelty of these innovations, threatens to outpace the Agency’s conventional regulatory processes and capabilities.” (p. 8)  More specifically, the agency notes that:

The remarkable speed with which increasingly complex HAVs are evolving challenges DOT to take new approaches that ensure these technologies are safely introduced (i.e., do not introduce significant new safety risks), provide safety benefits today, and achieve their full safety potential in the future. To meet this challenge, we must rapidly build our expertise and knowledge to keep pace with developments, expand our regulatory capability, and increase our speed of execution. (p. 6)

Rarely has any agency been quite so blunt about how it is racing to get ahead of the pacing problem before it completely loses control of the future course of technological innovation.

But the DOT is hardly alone in its increased reliance on soft law governance mechanisms. In fact, I’m in the early research stages of a new paper about what soft law and agency threat models mean for the future of emerging technology and its governance. In that paper, I hope to document how many different agencies (FAA, FDA, FTC, FCC, NTIA, & DOT among others) are using some variant of soft law model to informally regulate the growing universe of emerging technologies out there today (commercial drones, connected medical devices, the Internet of Things, 3D printing, immersive technology, the sharing economy, driverless cars, and more.)

If nothing else, I would like to devise a taxonomy of soft law/agency threat models and then discuss the upsides and downsides of those models. If anyone has recommendations for additional reading on this topic, please let me know. The best thing I have seen on the issue is a 2013 book of collected essays on Innovative Governance Models for Emerging Technologies, edited by Gary E. Marchant, Kenneth W. Abbott and Braden Allenby. I’m surprised more hasn’t been written about this in law reviews or political science journals.

What Does It Mean for Innovation? And Accountable Government?

So, what does all this mean for the future of driverless cars, autonomous systems, and other emerging technologies? I think it’s both good and bad news.

The good news — at least from the perspective of those of us who want to see innovators freed up to experiment more without prior restraint — is that the technological genie is increasingly out of the bottle. Technology regulators are at an impasse and they know it. Their old regulatory regimes are doomed to always be one step behind the action. Thus, a lot of technological innovation is going to be happening before any blessing has been given to engage in those experiments.

The bad news is that the regulatory regimes of the future will become almost hopelessly arbitrary in terms of their contours and enforcement ceiling. Basically, in our new world of soft law and agency threats, you can tear up the Administrative Procedures Act and throw it out the window.  When regulatory agencies act in the future, they will do so in a sort of extra-legal Twilight Zone, where things are not always as they seem. Agencies will increasingly act like nagging nannies, constantly pressuring innovators to behave themselves. And sometimes that nagging will work, and sometimes it will even improve consumer welfare at the margin! It will work sometimes precisely because government still wields a mighty big hammer and no innovator wants to be nailed to the ground in the courts, or the court of public opinion for that matter. Thus, many — not all, but many — of those innovators will go along with whatever agencies like DOT suggests as “best practices” even if those guidelines are horribly misguided or have no force of law whatsoever. And because agencies know that many (perhaps most) innovators will fall in line with whatever “best practices” or “codes of conduct” that they concoct, it will reinforce the legitimacy of this model and become the new method of imposing their will on current or emerging technology sectors.

Again, agency threats won’t always work because some innovators will continue to engage in rough forms of “technological civil disobedience” and just ignore a lot of these informal guidelines and agency threats. Agencies will push back and seek to make an example of specific innovators (especially the ones with deep pockets) in order to send a message to every other innovator out there that they better fall in line or else!

But what that “or else!” moment or action looks like remains completely unclear. The problem with soft law is that, by its very nature, it is completely open-ended and fundamentally arbitrary. It is really just “ non-law law.” That’s the “legal regime” that will “govern” the emerging technologies of the present and the future.

Isn’t Soft Law Better Than the Alternative?

Now, here’s the funny thing about this messy, arbitrary, unaccountable world of soft law and agency threats: It is probably a hell of lot better than the old world we used to live in!

The old analog era regulatory systems were very top-down and command-and-control in orientation. These traditional regimes were driven by the desire of regulators to enforce policy priorities by imposing prior restraints on innovation and then selectively passing out permission slips to get around those rules.

As I noted in my latest book, the problem with those traditional regulatory systems is that they “tend to be overly rigid, bureaucratic, inflexible, and slow to adapt to new realities. They focus on preemptive remedies that aim to predict the future, and future hypothetical problems that may not ever come about. Worse yet, administrative regulation generally preempts or prohibits the beneficial experiments that yield new and better ways of doing things.” (Permissionless Innovation, p. 120)

For all the reasons I outlined in my book and other papers on these topics, “permissionless innovation” remains the superior policy default compared to precautionary principle-based prior restraints. But I am not so naïve as to expect that permissionless innovation will prevail in the policy world all of the time. Moreover, I am not one of those technological determinists who goes around saying that technology is an unstoppable force that relentlessly drives history, regardless of what policymakers say. I am more of a soft determinist who believes that technology often can be a major driver of history, but not without a significant shaping from other social, cultural, economic, and political forces.

Thus, as much as I worry about the new “soft law/agency threats” regime being arbitrary, unaccountable, and innovation-threatening, I know that the ideal of permissionless innovation will only rarely be our default policy regime. But I also don’t think we are going back the old regulatory regimes of the past and we absolutely wouldn’t want to anyway in light of the deleterious impacts those regimes had on innovation in practice.

The best bet for those of us who care about the freedom to innovate is to make sure that these soft law governance mechanisms have some oversight from Congress (unlikely) and the Courts (more likely) when agencies push too far with informal agency threats. Better yet, we can hope that the pace of technological change continues to accelerate and pressures agencies to only intervene to address the most pressing problems and then largely leaves the rest of the field wide open for continued experimentation with new and better ways of doing things.

But make no doubt about it, as today’s DOT guidance document for driverless cars makes clear, “agency threats” will increasingly shape the future of emerging technologies whether we like it or not.

This seems like a logical follow-up to Berin Szoka’s previous post about technology, social activism, and government power. ReasonTV has produced this important short clip on “Cops Vs. Cameras: The Killing of Kelly Thomas & The Power of New Media.” It documents how the combined power of citizen journalism, social media, and surveillance video can ensure that our police authorities are held accountable for their actions. In this particular case, it can hopefully win some justice for Kelly Thomas, the homeless Fullerton, California man who was brutally beaten to death by police officers on the night of July 5, 2011.

There is live video from the horrific beating here, but I caution you it is not for the faint of heart. Watching the last moments of man’s life slip away from repeated blows to the head while he begs for his life and calls out for his father is, well, stomach-turning. But imagine if this video and the other citizen videos that were taking that night had not existed. As the ReasonTV clip notes, the Fullerton police department basically ignored requests for more information about the case until Kelly’s father (who was former police officer himself) took cell photos of his son’s beaten face in the hospital and released them to the public. Then the citizen videos of the beating were posted on YouTube and went viral. And then, finally, mainstream media started paying attention. And now the surveillance video from a nearby street camera has been released after citizens and activists demanded it.

While we spend a lot of time today worrying about the privacy implications of new technologies, especially surveillance technologies, episodes like these make it clear that there are also powerful benefits from these new surveillance tools. David Brin first pointed this out in his provocative 1997 book, The Transparent Society, in which he noted:

While new surveillance and data technologies pose vexing challenges, we may be wise to pause and recall what worked for us so far. Reciprocal accountability — a widely shared power to shine light, even on the mighty — is the unsung marvel of our age, empowering even eccentrics and minorities to enforce their own freedom. Shall we scrap civilization’s best tool – light — in favor of a fad of secrecy?

Of course, that doesn’t mean we shouldn’t take steps to limit the surveillance powers of our government over the citizenry. We absolutely must. But we must draw a distinction between the tools and their uses and make sure we do not go overboard with what Brin called the “fad of secrecy” such that new privacy rules limit the use and spread of these technologies.

For far too long governments have avoided accountability for their actions because of a lack of transparency. Nowhere has this been more dismaying that in matters of policing. While our law enforcement officers deserve respect for the hard jobs they have to keep the public safe, they also must account for their actions when they go too far precisely because we grant them coercive powers held by no other group in society. Luckily, new technologies can help us keep their power in check and hold them accountable. While some authorities are fighting back and trying to limit citizen efforts to record them and hold them accountable, the genie is already well out of the bottle. These surveillance tools are not going away and law enforcement authorities will now be forced to live under the gaze of an empowered citizenry. Hopefully that increases transparency and accountability in all policing activities going forward. Read Brin’s short 2011 essay “Sousveillance: A New Era for Police Accountability” for greater elaboration.

Proponents of Net neutrality regulation continue their full-court press to get the Federal Communications Commission (FCC) and its chairman, Julius Genachowski, to unilaterally push through a new industrial policy regime for the Internet. The latest word, according to Politico, is that the agency is pushing back its scheduled December open meeting from Dec. 15 to Dec. 21 to give the agency more time to plot its next move.  There’s no word yet what the agency’s regulatory blueprint will look like, so it’s impossible to critique the agency’s plan at this point.  I’ve made the case against Net neutrality regulation here before, however, and I’m sure those same concerns and critiques will apply to whatever the agency ends up adopting.

What’s most concerning about the way this process is playing out currently is just how anti-democratic it is.  I understand the zeal of the pro-regulatory forces on this issue, but there is simply no good excuse for advocating that 3 unelected officials at an independent regulatory agency rush through a vote to regulate a such a massive and important sector of the American economy.

It used to be the case that a broad and non-partisan coalition of academics and organizations supported the non-delegation principle, which, generally speaking, refers to the notion that only democratically elected officials should be in a position to pass laws and make the really important decisions about the future course of our polity and its economy.  Of course, when it comes to the economy, I’d prefer most of those decisions be left to marketplace experimentation.  However, to the extent regulation is deemed necessary and that regulation governs such a massively important portion of the American economy, that determination should definitely be made by elected leaders in Congress and not delegated to bureaucrats who would ram through regulations with 3 votes and sketchy plan for reordering that sector.

On this point, I strongly recommend the work of David Schoenbrod, a professor at New York Law School and the author of Power Without Responsibility: How Congress Abuses the People Through Delegation. Here’s a great overview of his work in which he addresses the arguments against the anti-delegation principle.  In sum, there really aren’t any good arguments against it.  “The genius of our Constitution was that the people would get to decide how much government they want,” Schoenbrod notes. If critics believe that “the people’s welfare would be advanced by giving up some of that decisional power, let the people so decide through the constitutional amendment process,” he argues.  “Instead, the insiders have done that for them” and that undercuts accountability, transparency, and true democracy.

That’s a principle that many people of different political persuasions have long supported.  Regrettably, however, when it comes to Net neutrality regulation, it’s increasingly clear that the ends justify the means for proponents.  To hell with democracy and accountability, they say. We want regulation and we want it now!  That’s obviously the rallying cry of radical pro-regulatory organizations like Free Press and Public Knowledge.  What’s more surprising, however, is how even more mainstream advocates of Net neutrality regulation seem willing go down that path.  That’s a real shame because I know some of them have fought against unaccountable exercises of power by the FCC in other contexts. Yet, in this case, it appears that they are turning a blind eye to the dangers of delegating so much authority to a regulatory agency that, quite frankly, has a fairly miserable history of (mis)managing its own affairs and the markets it oversees.

The recent elections had a impact on all this, obviously.  With presumably less of an appetite in Congress now for expansive regulation of the Internet economy, advocates of Net neutrality mandates want the FCC to do all the dirty work here.  Regardless of the merits of the arguments for or against such regulation, it’s simply not good for our democracy when we shift all those really important decisions to bureaucracies, which are less accountable to the people and where reforms take longer to push through when things go bad.

In a 3-2 vote, the Federal Communications Commission recently decided to jack up its official definition of “broadband” from 200 kbps download to the 4 mbps dpwnload/1 mbps upload used as a benchmark in Our Big Fat National Broadband Plan. The three commissioners in the majority also declared that the definition of broadband will continue to evolve as consumers purchase faster connections to utilize new applications.

Several months earlier, the FCC launched a proceeding to figure out how to convert universal service subsidies for rural telephone service into universal service subsidies for rural broadband service.  Put these two decisions together, and it looks like the majority on the FCC is hell-bent on establishing rural broadband subsidies as a perpetual entitlement program that will never “solve” the rural availability problem because the goalposts will keep moving.

The current USF program taxes price-sensitive services (long distance and wireless) to subsidize a service that is not very price sensitive (local phone connections).  If the FCC takes a further step on the funding side and starts collecting universal service assessments from broadband, it will diminish broadband subscribership by taxing a service that is even more price sensitive: broadband connections. (I explained this a few months ago here.)

It’s time to get off this merry-go-round. The solution was suggested by MIT economist Jerry Hausman back when the FCC first started creating the current universal service programs in response to the Telecom Act of 1996: use revenues from spectrum auctions. 

Instead of having the FCC perpetually collect assessments from broadband or telephone services to subsidize broadband buildout in rural areas, Congress should earmark revenues from the next spectrum auction for one-time buildout grants in high-cost areas. The grants should be awarded via a competitive procurement auction that would force subsidy-seekers in different locations to compete with each other for the federal dollars. And Congress should explicitly wind down the universal service telephone subsidies in high cost areas and prohibit the FCC from using universal service assessments to fund broadband deployment in these places.

Using revenues from spectrum auctions would avoid the distortions and perverse consequences caused by ongoing universal service assessments on broadband or telephone services. One-shot deployment grants would ensure that the availability problem gets solved, so the federal government can declare victory and get out of the perpetual subsidy business.

Of course, some locations in the US are so expensive to serve that the potential revenues might not even cover the operating costs of broadband. But it does not follow that operators in these places need an ongoing stream of subsidies. When preparing their subsidy bids, they will have to calculate how large the one-shot payment needs to be to induce them to take on the capital costs and the ongoing operating costs. In other words, they can bank some of the one-shot subsidy and use it to cover the difference between revenues and operating costs.

This modest proposal does not address all aspects of the universal service fund. But it would achieve a clear objective — bringing broadband to rural areas — while allowing the FCC to extricate itself from the business of distributing $4.6 billion a year in subsidies. Let’s see a timetable for withdrawal!

Several years ago at a conference on universal telecommunications service, one panel moderator noted, “Everything that can be said about universal service has already been said, but not everybody has had a chance to say it, so that’s why we still have these conferences.” After hearings and a study by the Federal Trade Commission, a Federal Communications Commission Notice of Inquiry during the previous administration, the National Broadband Plan, the FCC’s still-open Open Internet proceeding, and Wednesday’s extension of the reply comment period in the Open Internet proceeding, net neutrality is starting to have the same vibe.

That’s why, instead of virtually killing some more virtual trees by writing more lengthy comments and replies, Jerry Brito and I signed onto a declaration by telecommunications researchers which explains that there is no empirical evidence of a systemic problem that would justify net neutrality rules, and these rules might actually ban practices that benefit consumers. Since the world probably doesn’t need another blog post rehashing arguments about this issue, I’ll simply point you to the comment here. It was masterfully written by economist Jeff Eisenach, a veteran of the Federal Trade Commission. (The teeming throngs of humanity who are curious to know whether Jerry and I have any original thoughts to contribute to the issue can read this CommLaw Conspectus article.)

Now that I’ve gotten the shameless self-promotion out of the way, let me MoveOn to a broader point. The debate over net neutrality illustrates how important it is to identify and demonstrate the nature of the problem before trying to solve it.  This applies whether the issue is net neutrality or health care or financial market regulation. Two points in particular bear repeating.

First, ensure that there is empirical evidence of a system-wide problem. The arguments for net neutrality are based on concerns about things the broadband companies might have the ability to do – not empirical proof of widespread abuses that have actually occurred. Less than a handful of famous anecdotes support the argument for net neutrality. Sweeping, systemwide policy changes should only occur when a sweeping, systemwide problem actually exists.

Second, understand the actual nature of the problem. Have a coherent theory of cause and effect that explains why the problem occurs with reasoning that is consistent with what we know about human behavior. Ignoring this point has led to some odd decisions on issues far afield from net neutrality. In 2009, for example, the Department of Energy proposed energy efficiency standards for clothes washers to be used in laundromats and apartment buildings. The justification for the regulation assumed that greedy business owners and landlords willfully ignored opportunities to earn higher profits by investing in energy-efficient appliances! One might argue about whether consumers always identify and act on opportunities to save energy, but assuming that businesses will ignore opportunities to save money is a much bigger stretch.

If you don’t get the problem right, you won’t get the solution right!

The national broadband plan drafted by Federal Communications Commission staff has a lot of goals in it. Goals for broadband infrastructure deployment include:

1. Make broadband with 4 Mbps download speeds available to every American
2. Over the long term, have broadband with 100 Mbps download and 50 Mbps upload speeds available to 100 million American homes, with 50 Mbps downloads available to 100 million homes by 2015
3. Have the fastest and most extensive wireless broadband networks in the world
4. Ensure that no state lags significantly behind in 3G wireless coverage
5. Ensure that every community has access to 1 Gbps broadband service in institutions like schools, libraries, and hospitals

The plan also outlines a number of policy steps that the FCC and other federal agencies could take to help accomplish these goals.

So far, so good. But to truly hold federal agencies accountable for achieving these objectives, we need more than goals, measures, and a list of policy proposals. We also need a realistic baseline that tells us how the market is likely to progress toward these goals in the absence of new federal action, and some way to determine how much the specific policy initiatives affect the amount of the goal achieved.

Here’s what will happen in the absence of a well-defined baseline and analysis that shows how much improvement in the goals is actually caused by federal policies: The broadband plan announces goals. The government will take some actions. Measurement will show that broadband deployment improved, moving the nation closer to achieving the goals. The FCC and other decisionmakers will then claim that their chosen policies have succeeded, because broadband deployment improved.

But in the absence of proof that the policies cause a measurable change in outcomes, this is like the rooster claiming that his crowing makes the sun rise. Scientists call this the ” post hoc, ergo propter hoc” fallacy: “B happened after A, therefore A must have caused B.” (Brush up on your Latin a little more, and you’ll even find out what Mercatus means. But I digress.)

Enough abstractions. Let me give a few examples.

The first goal listed above is to ensure that all Americans have access to broadband with 4 Mbps download speeds. In his second comment on my March 17 “Broadband Funding Gap” post, James Riso notes that the plan acknowledges that 5 out of the 7 million households that currently lack access to 4 Mbps broadband will soon be covered by 4th generation wireless. That means coverage for 83 percent of the households that lack 4 Mbps broadband is already “baked into the cake.” 

Accurate accountability must avoid giving future policy changes credit for this increase in deployment, because it was going to happen anyway.  (Of course, policymakers need to avoid taking steps that would discourage this deployment, such as levying the 15 percent universal service fee on 4th generation wireless.) The relevant question for evaluating future policy changes is, “How do they affect deployment to the remaining 2 million households?”

Similarly, the goal of 50 Mbps to 100 million households by 2015 seems to have been chosen because cable and fiber broadband providers indicate that they plan to cover more than that many homes by 2013 with broadband capable of delivering those speeds (pp. 21-22). Future policy initiatives should get zero credit for contributing toward this goal unless analysis demonstrates that the initiatives increased deployment of very high speed broadband over and above what the companies were already planning.

If you think this point is so basic that it’s not worth mentioning, you haven’t read enough government reports. Post hoc, ergo propter hoc is endemic, and not just on technology-related topics. For example, both sides regularly display this fallacy whenever the unemployment figures get released: “Unemployment increased after Obama’s election, therefore his administration caused the unemployment.” “The recession started when Bush was president, therefore his administration caused the unemployment.” These are at best hypotheses whose truth, untruth, and quantititive significance needs to be established by analysis that controls for other factors affecting the results.

Just take this as an advance warning on reporting results of the national broadband plan: Tone down the triumphalism.  

Note: For those of you who just can’t get enough discussion of the national broadband plan, Jerry Brito and I will have a dialog on other aspects of the plan in a future podcast that will be available here on Surprisingilyfree.com.

The FCC today released an executive summary of its National Broadband Plan, which is supposed to be delivered to Congress tomorrow.  Of course, executive summaries by their nature are brief and usually don’t explain the underlying logic and evidence supporting the conclusions. Here are a few highlights, some possible interpretations, and things to look for when the full plan gets released tomorrow:

Recommendation: “Undertake a comprehensive review of wholesale competition rules to help ensure competition in fixed and mobile broadband.” This could signal that the FCC plans to re-impose “unbundling” or “line sharing” regulations, which would require broadband companies to let competitors use their lines and other facilities at regulated rates. Such initiatives would likely undermine broadband deployment and investment.  Economic research by my GMU colleague Tom Hazlett and others finds that broadband investment, competition, deployment in the US took off only after the FCC eliminated line-sharing requirements. Christina Forsberg and I summarized a lot of this research here.

Recommendation: “Make 500 Mhz of spectrum available for broadband within ten years … Enable incentives and mechanisms to repurpose spectrum.” This is a fantastic recommendation. A Mercatus Center review of the costs of federal telecommunications regulations found that federal spectrum allocation, which prevents spectrum from being reallocated to uses that consumers value highly (like broadband), is by far the costliest federal regulation affecting telecom and the Internet. This recommendation indicates the FCC leadership would like to auction a lot more spectrum and share the proceeds with existing users (like broadcasters) in order to overcome resistance to reallocation. It’s not quite a market in spectrum, but it might be the closest the FCC can come.

Recommendation: “Broaden the USF contribution base to ensure USF remains sustainable over time.” Uh-oh. I’m not sure what this means, but if means that broadband subscribers will have to start payng into the FCC’s universal service fund (USF), watch out! Most economic studies find that consumer demand for broadband is very price-sensitive. That means if the FCC slaps broadband with universal service fees (which currently exceed 10 percent), we’ll see a big drop in broadband subscribership — maybe by 4-7 million subscribers. This is , of course, precisely the opposite of what the FCC wants to accomplish!

Recommendation: “Reform intercarrier compensation, which provides implicit subsidies to telephone companies by eliminating per minute charges over the next ten years…” Another excellent idea.  “Intercarrier compensation” refers to payments phone companies make when they hand traffic off to each other. Small, rural phone companies usually receive the highest per minute payments — as much as 15-30 cents per minute! This is a huge markup on long-distance phone service — another price-sensitive service!

Recommendation: Provide subsidies so that rural areas can have broadband with download speeds of 4 MB.  It will be interesting to read in the full plan where this 4 MB figure came from. Does it reflect the speed of service that a lot of Americans currently have, so these subsidies are just supposed to help equalize opportunities for rural residents? Or does it reflect some balancing of the costs and benefits of subsidizing broadband in rural areas?  Or is this a magic number experts believe subscribers need, regardless of the choices consumers actually make in the marketplace and regardless of what it costs?

The executive summary also lists a set of goals, such as ensuring that every American has the ability to subscribe to “robust” broadband service, having 100 million households with access to 100 MB broadband, and ensuring that the US has the fastest and most extensive wireless networks of any nation.  When the full plan comes out, look carefully at whether or how the FCC plans to measure accomplishment of these goals.  More importantly, look to see whether the FCC explains how it will quantify how much its own policies actually contribute to these goals over time. The FCC is famous for NOT doing these kinds of things, so let’s see if the broadband plan signals a new era in accountability.

The Federal Communications Commission released its 102-page fiscal year 2011 budget request to Congress this week.  Here are some fascinating factoids about the agency that I’ll pass on without commentary, beyond saying that they caught my attention:

• The FCC has hired “close to 54 data experts, statisticians, econometricians, economists, and other expertise” to help with the National Broadband Plan mandated under the Recovery Act. These are “term employees,” meaning they’re not permanent, but the FCC says it needs more permanent hires to work on broadband after the plan is done. (p. 2)
• The commission asks for a “budget” of $352.5 million. (p. 1) But its total requested spending actually tops $440 million, because it also asks for authority to spend $85 million of spectrum auction proceeds to cover the cost of auctions. (p. 5)
• The administration proposes to give the FCC authority to charge user fees for unauctioned spectrum licenses, with projected revenues totaling $4.8 billion through 2020. (p. 6)
• The FCC commits to 24 “outcome-focused performance goals.”  (pp. 16-29) Most of these goals are phrased as activities, not accomplishments, with lots of verbs like “enact,” “encourage,” “facilitate,” “enforce,” “promote,” “work to,” “foster,” advocate,” and “maintain.” In some cases, one can identify the actual concrete outcome by looking at additional wording or performance targets. It’s clear, for example, that the FCC wants to make sure that all Americans have access to broadband. In other cases, the concrete outcome, or how we would know if it is accomplished, is not clear.  For example, the only targets listed under the goal “Promote access to telecommunications services to all Americans” are targets for enforcement actions rather than measures of whether the FCC has actually accomplished the desired outcome.
• The FCC has been supported almost entirely by regulatory fees assessed on regulated companies, with virtually no direct appropriations of tax dollars since fiscal year 2003 (p. 31).
• Spectrum auctions have generated more than  $51.9 billion for the US Ttreasury. (p. 33)

Just finished watching President Barack Obama’s State of the Union speech and Virginia Governor Bob McDonnell’s response.

For some reason, this reminds me of the annual honors ceremony at my daughter’s school.  Why?  Because at my daughter’s school, when they award a plethora of awards to students in each grade, they ask the audience to hold our applause to the end.  Why? Because  applause prolongs the ceremony interminably.

Sound familiar? Members of Congress imitate Jack-in-the-Boxes springing up and down at appropriate applause lines. Democrats sprang up at appropriate applause lines relevant to the president’s agenda. Republicans sprang up too, when the president praised small business or said said he wanted more nuclear power plants.  President Obama expected applause from Republicans when he listed his tax cuts, but he was disappointed and then joked about it. If you watched the speech on TV, some members of Congress seemed to be applauding with a look on their faces that said they didn’t quite know why they were applauding. The Joint Chiefs of Staff finally stood up and applauded when Obama praised veterans. Vice President Joe Biden has perfected the “sage” look, though sometimes he looked grumpy enough to be mistaken for a Republican!  

Republicans have finally cottoned to this phenomenon. Instead of presenting a solo speaker in a sterile environment, they presented Virginia Governor Bob McDonnell with an audience in the Virginia State Capitol. Like the president, the governor was interrupted by applause from legislators and others in the audence. Rhetorically, I thought it added an extra “oopmh” to the governor’s speech — both because it showed he has folks who agree with him and because he highlighted the state perspective. Given the rules of the political game, it was a smart choice. 

But that doesn’t mean a change in the rules wouldn’t make everyone better off. It’s friggin’ 11:50 at night, and I’m wiped out from a day of simultaneously working at home to get something written and running multiple scans on the home computer to get rid of the friggin’ Security 2010 virus, or Trojan, or whatever that thing  is.  I would have appreciated shorter speeches that simply told me what each party wanted to accomplish.

So here’s my suggestion. For the State of the Union Speech and the opposition party’s response, they should make the same request made at my daughter’s school awards ceremony: “Please hold your applause until the end.”

Now … anybody got any interesting technological solutions that would accomplish this goal?

An Associated Press story posted at 9:31 pm last night by Brett J. Blackledge notes that the Obama adminsitration “has abandoned its controversial method of counting jobs under President Barack Obama‘s economic stimulus, making it impossible to track the number of jobs saved or created with the $787 billion in recovery money.” Recipients of federal money were originally supposed to report how many jobs they had “saved or created.” Now, they’re just supposed to report how many people got paid with the money. 

The “saved or created” approach was an attempt to estimate how the Recovery Act spending affected employment. Unfortunately, it was impossible for this approach to deliver what it promised, as I pointed out in testimony to Congress last May. To know how many jobs the Recovery Act spending saved or created, we need to control for other factors that affect employment. We also need to control for the employment effects of the borrowing (and future taxing) that pays for the spending.

This is what good “macroeconomic” analysis does. It is not what employers do when they put people on the payroll.  Asking employers who received federal money to tell us how many jobs were created or saved is asking them to give us information that they do not have and cannot acquire.

Under the new approach, employers will report quarterly how many people they are paying with the federal money. Since the reports will be quarterly, some jobs may be counted more than once — I guess as much as four times a year. According to the AP story, some Republicans are complaining that the new approach will lead to even larger and more misleading job numbers.

The numbers will likely be higher. But they will not necessarily be misleading, as long as recovery.gov makes clear that these are simply reports on the number of people paid with the federal money, not an attempt to measure the number of jobs created.

Estimating jobs created is work for serious macroeconomists who try to control for other factors affecting the results. There’s of course plenty of room for disagreement over how to do this, as this commentary by my Mercatus Center colleagues Garrett Jones and Veronique de Rugy demonstrates.

The administration’s decision demonstrates once again the old adage that data is not knowledge.

Good ideas, supported by evidence, eventually matter.

That’s the conclusion I reached after reviewing the outline the FCC’s broadband task force presented to the commission yesterday. Here are some ideas perceptive scholars have been discussing for a long time that are apparently going to be part of the National Broadband Plan:

• “Private sector investment is essential; new funding is limited.” So I guess the Interstate Highway System won’t be the funding model for universal broadband. Whew!
• “Policy changes require the consideration of unintended consequences.”
• “Competition drives innovation and better choices for consumers.”
• Wireless broadband needs a big new chunk of spectrum, and policymakers need to consider reallocating broadcast TV spectrum and spectrum reserved for use by the federal government.
• “Market forces should be applied to all [spectrum] bands, though other policy objectives should play a role in allocation decisions.”
• Fundamental reform of the Universal Service Fund, which subsidizes phone service very inefficiently, should actually be done, not just talked about.
• Universal service reform should include reform of “intercarrier compensation,” the charges phone companies pay each other when they hand off traffic.
• “USF policies should be designed to achieve measurable outcomes with transparency, oversight, and accountability.”

Most of these ideas were considered wacky, ideological, politically unrealistic, or just not relevant a few decades (or even a few years) ago.  Now they are the mainstream.

That doesn’t mean everything is wonderful with the National Broadband Plan. The FCC is supposed to plan how broadband will be used to promote consumer welfare, civic participation, public safety, education, health care, energy independence, community development, worker training, and a host of other legislative goals. In many cases there may be a fundamental tension between consumer welfare — a term of art in economics that means resources are allocated so that consumers get the selection of goods and services they are most willing to pay for, with the quality attributes they most prefer, at the best possible prices — and the other goals, which often involve planners deciding what consumers should want. Similarly, FCC Chairman Genachowski’s comments illustrate some decisionmakers’ disturbing tendency to conflate access (the service is available to those who want it) with adoption (everybody actually chooses to use it). Technophiles sometimes have an annoying habit of assuming that those of us who fail to adopt the latest info tech gadget or service must be ignorant rubes who don’t understand the glories of being hooked up to a fat information pipe 24/7 — rather than careful shoppers who have better things to do with our time than read Yahoo OMG! while driving. For this reason I fully expect to be annoyed by the National Broadband Plan, as well as gratified to see that some good ideas have finally made it from the Ivory Tower to real-world policy application.

But there’s enough good stuff in there to stick with “gratified” for at least one day.

In a speech yesterday, FCC Chairman Julius Genachowski pledged to revisit the Federal Communications Commission’s universal service programs for telecommunications as part of the National Broadband Plan: 

 The key points for today are these: USF is a multi-billion dollar annual fund that continues to support yesterday’s communications infrastructure. The goal of universality is as important as ever — and to meet our country’s innovation goals, we need to reorient the fund to support broadband communications. This is a thorny issue, with no shortage of practical and statutory challenges. We need to wring savings out of the system, protect consumers, avoid flashcuts, while ultimately moving USF in the direction it needs to go to support our 21st century platform for innovation. 

The USF program spends approximately $7 billion annually. Most of the money goes to subsidize phone service in “high cost” areas. Eeuww – phone service.  So twentieth century! All of us who have not yet shifted 100% of our personal communications to Facebook and Twitter pay for the universal service fund via surcharges of about 12 percent on our wireless and  wireline phone bills, including VOIP. (Dirty little secret: you also pay for universal telephone service if you use a wireless broadband card, because each card is assigned a phone number.) 

Genachowski’s comment follows some rather interestingly-timed announcements from the FCC’s broadband task force. On November 13, the task force asked for public comment on the role the universal service fund and “intercarrier compensation” (another, more opaque set of transfers from consumers in general to rural phone companies) should play in the national broadband plan. Comments are due December 7. Five days after soliciting comments, on November 18, the FCC announced that the structure of the universal service fund is one of the “critical gaps” in the path to universal broadband.

I doubt the FCC has telepathically determined what the parties will say in the comments they file on December 7, but there’s no need to. The FCC has ground through so many rounds of comments on universal service reform that the problems and potential solutions are well-known. At a conference on universal service about five years ago, I recall one speaker commented, “Everything that can be said about universal service has already been said, but not everyone’s had a chance to say it, so that’s why we still have conferences on it.” About a year ago, the FCC almost used a court-imposed deadline as an opportunity to actually reform universal service and intercarrier compensation, but the commissioners failed to reach consensus.

Here are some major problems with the universal service fund, in no particular order:

• It subsidizes voice phone service with built-in incentives for inefficiency on the part of providers.
• It subsidizes wireless voice service without limiting the subsidy to one essential connection per household, so it has effectively created an entitlement to both wired and mobile phone service in rural areas.
• The FCC does not measure or track the outcomes produced by the subsidies to see what they actually accomplish for the public. (Section 201 of the draft Boucher-Terry USF reform bill would require the FCC to adopt outcome-oriented performance measures.)
• The contribution mechanism acts like a percentage tax that discourages use of price-sensitive services like long-distance, wireless voice, and wireless broadband.
• The “death of distance” has slashed long-distance phone charges, which means wireless bears a growing percentage of the burden and the funding mechanism may well be unsustainable.

(For more detail on these issues, read the assortment comments on USF reform by various Mercatus Center colleagues and me here, here, here, here, here, here, here, here, here, and here. BTW, did I mention this issue has been beaten to death?)

So is the FCC jumping the gun, rushing to judgment on universal service before the comments are in?  Heck no. It’s about time.

On this week’s show, we discuss government transparency—a topic a number of us here at the TLF have written about lately.  Among other things, we discuss:

• Why transparency is important
http://digg.com/tools/diggthis.js
• What data the government should provide and how
• Good and bad examples of transparency
• President Obama’s promise to have the most accountable administration in history
• Obama’s plans to appoint a Chief Technology Officer

My guests for this show are:

• TLFer Jerry Brito of the Mercatus Institute, who’s written extensively about transparency and has recently launched an e-Government project called StimulusWatch
• TLFer Jim Harper of the Cato Institute and WashingtonWatch.com, another very successful e-Government project, who’s asked some tough questions about the Administration’s implementation of e-Government thus far and led a great Cato policy forum on this issue (featuring Jerry, among others)
• John Wonderlich of the Sunlight Foundation, the leading e-Government non-profit whose “non-partisan mission [is to use] the revolutionary power of the Internet to make information about Congress and the federal government more meaningfully accessible to citizens”

You can subscribe to our podcast here or through iTunes here.  Or, you can play or download this podcast using the online player below.

[display_podcast]

I can’t believe we’re actually asking whether Obama—the candidate who promised to bring the Federal government (and perhaps everyone else) into the Web 2.0 era whether they like it or not—will have a “personal computer.”

The “webiness” of Obama’s predecessors is just embarrassing:   

Clinton famously sent only two e-mails while he was president, one to test whether he could push the “send” button and one to John Glenn, sent while the former Ohio senator was aboard the space shuttle… During his presidency, George W. Bush didn’t have a personal log-in to the White House Internet server, nor did he have a personal whitehouse.gov e-mail address. (He gave up his private e-mail account, G94B@aol.com, just before his first inauguration.) When he did go online, there were some things he couldn’t access. During Bush’s tenure, the White House’s IT department blocked sites like Facebook, YouTube, Twitter, and most of MySpace. The ability to comment on blogs was blocked, as was certain content that was deemed offensive. According to David Almacy, who served as Bush’s director for Internet and e-communications from 2005-07, only two people had access to the iTunes store during that period: Almacy, who had to upload speeches to the site, and the president’s personal aide, so that he could download songs for Bush’s iPod.

Pipes and tubes, pipes and tubes, my friends…  

If Obama decides not to implement whatever legal or technical changes would be required for him to do something so simple as having a computer on his desk, I suppose we’ll know that he’s not really all that interested—at least on a personal level—in all his rhetoric about the power of the Internet to make government more transparent and accountable.  Let’s hope that doesn’t happen.

In early December, Jerry Brito asked whether Obama’s proposal to create the post of  Chief Technology Officer (CTO) should be feared or welcomed:

I think the question turns on whether this person will be CTO of the United States or CTO of the U.S. Federal Government. While I personally believe the former should be feared, the latter should be welcomed.

I agree completely—and it now seems that this is in fact where the incoming Administration is heading.  BusinessWeek reports that the Obama Administration has narrowed its choices down to two Indian-American CTOs:

• Vivek Kundra, D.C.’s CTO
• Padmasree Warrior, Cisco’s CTO

Judging by BusinessWeek’s short descriptions, both candidates sound terrifically well-qualified to lead implementation of Obama’s oft-repeated promises to bring the United States government into the Web 2.0 era.  More importantly, the fact that the two likely candidates are CTOs—rather than, say, advocates of any particular technology policy agenda—strongly suggests that the Obama administration isn’t contemplating giving the CTO authority to set technology policy outside the Federal government.  

Whomever Obama chooses in the end will have his or her work cut out for them.  While free marketeers may indeed have much to fear from Obama’s technology policy agenda in terms of over-regulation, increased government control and market-distorting subsidies, e-government is one area where we ought to be able to cheer the new President on:   The Federal government could be made much more transparent and democratically accountable if Federal agencies simply adopted some of the tools users take for granted on private websites-such as RSS feeds and standardized data. 

Let’s just hope that Obama makes it very clear in creating the CTO post that its responsibilities are indeed strictly limited directing adoption of information technology inside the Federal government, so that the position doesn’t mushroom into the more powerful “Technology Czar” some rightly fear.

UPDATE: I’ve created a Google Group for this project. I hope you’ll join it and help us build this tool.

Last Thursday I asked for help creating a site that would facilitate crowdsourcing the task of prioritizing the 11,000+ projects proposed in the U.S. Conference of Mayors’ $73 billion “Main Street Economic Recovery” stimulus plan. The point of doing this is to help President-Elect Obama keep his promise that any stimulus spending will be directed at critical infrastructure, and not pork. Roads and bridges and schoolhouses are infrastructure, but dog parks and tennis centers in wealthy neighborhoods probably don’t count.

Software developer Kevin Dwyer stepped up to the plate, took the mayors’ report, and parsed out the projects into an SQLite database. You can find the database here and Kevin’s take on what he did here. Now that we have the data in an easy-to-remix format, I’d like to ask for your help developing the backend for the site.

Going forward I can offer graphic design and copywriting to the project, as well as cat-hearding, which are my comparative advantages. What I don’t have are the technical chops to code the backend. If you are a developer, or know someone who is, and might be willing to help, please read on. The functionality I’d like the site to have is a lot like what WashingtonWatch.com offers. Each proposed project would have its own item page. That item page would list the project name, city and state, cost, and estimated number of jobs it would create, all of which are included in the database. Then each item page would have a wiki section where users could write (hopefully) neutral POV descriptions of the projects to put them in context. Under that there would be a comments section where users could trade their opinions on the merits of the project. (Perhaps these could be threaded, maybe using Disqus.) Finally, and importantly, each item page will have an up-or-down voting mechanism that will let users register whether they think the project is critical infrastructure or not critical infrastructure. This voting is what will let us rank projects from critical to porcine.

(Here is a sketch of the interface with notes. It’s a lot like an individual bill page on Washington Watch.)

Now, apart from search functionality, we would have to offer easy browsing for folks to find projects that interest them. I think the home page should offer a link to search by city and state. Clicking on that link should offer a list of states. Clicking on a state should offer links to all cities in that state, as well as a list of all projects in that state in case a user doesn’t want to drill-down any further. Clicking on a city will display a list of all projects in that city.

Each of these lists I’m describing should be sortable by name, locality, cost, and estimated number of jobs created. That way someone can click on a state then sort by cost so they can see the most costly projects first. On the home page there should also be a way to browse all projects in the country ordered by cost. Another possible sorting option might be how a project is ranked by users.

So what do you think? I’d love to hear any thoughts or criticism you might have on this proposed interface. I’d also love to hear any ideas of the best way to technically implement this (especially if you’d like to volunteer to help out). I’ve been told one way to do this is to use MediaWiki and create a page for each project. That sounds good but I’d like to make sure we have the ability to rank and sort like I’ve described. Is that possible? I’ve also seen Pligg, a Digg clone, which might do the trick, but it while it has commenting and voting, it doesn’t have a wiki component. Finally, we could beg Jim Harper to let us use his Washington Watch software, but it’s custom-made and I think it’d probably be easier to use something off the shelf. I’m sure there are other ways to do it and it would be great if we could hash them out here. Thanks for your time!