Still Seeking Advantageous Regulation in Telecom

by on July 9, 2012 · 2 comments

One of the most egregious examples of special interest pleading before the Federal Communications Commission and now possibly before Congress involves the pricing of “special access,” a private line service that high-volume customers purchase from telecommunications providers such as AT&T and Verizon.  Sprint, for example, purchases these services to connect its cell towers.

Sprint has been seeking government-mandated discounts in the prices charged by AT&T, Verizon and other incumbent local exchange carriers for years.  Although Sprint has failed to
make a remotely plausible case for re-regulation, fuzzy-headed policymakers are considering using taxpayer’s money in an attempt to gather potentially useless data on Sprint’s behalf.

Sprint is trying to undo a regulatory policy adopted by the FCC during the Clinton era.  The commission ordered pricing flexibility for special access in 1999 as a result of massive investment in fiber optic networks.  Price caps, the commission explained, were designed to act as a “transitional regulatory scheme until actual competition makes price cap regulation
unnecessary.”  The commission rejected proposals to grant pricing flexibility in geographic areas smaller than Metropolitan Statistical Areas, noting that

because regulation is not an exact science, we cannot time the grant of regulatory relief to coincide precisely with the advent of competitive alternatives for access to each individual end  user. We conclude that the costs of delaying regulatory relief outweigh the potential costs of granting it before [interexchange carriers] have a competitive alternative for each and every  end user. The Commission has determined on several occasions that retaining regulations longer than necessary is contrary to the public interest. Almost 20 years ago, the Commission determined that regulation imposes costs on common carriers and the public, and that a regulation should be eliminated when its costs outweigh its benefits. (footnotes omitted.)

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On Fast Firms, Slow Regulators, Antitrust & the Digital Economy

by on July 6, 2012 · 4 comments

I liked the title of this new Cecilia Kang article in the Washington Post: “In Silicon Valley, Fast Firms and Slow Regulators.” Kang notes:

As federal regulators launch fresh ­investigations into Silicon Valley, their history of drawn-out cases has companies on edge. In taking on an industry that moves at lightening speed, federal officials risk actions that could appear to be too heavy-handed or embarrassingly outdated, some analysts and antitrust experts say.

For example, she cites ongoing regulatory oversight of Microsoft and MySpace, even though both companies have fallen from the earlier King of the Hill status in their respective fields. Kang notes that some “want the government to aggressively pursue abusive practices but question whether antitrust laws are too dated to rein in firms that are continually redefining themselves and using their dominance in one arena to press into others.”

Simply put, antitrust can’t keep up with an economy built on Moore’s Law, which refers to the rule of thumb that the processing power of computers doubles roughly every 18 months while prices remain fairly constant. This issue has been the topic of several of my Forbes columns over the past year, as well as several other essays I’ve written here and elsewhere. [See the list at bottom of this essay.]  Moore’s Law has been a relentless regulator of markets and has helped keep the power of “tech titans” in check better than any Beltway regulator ever could. As I noted here before in my essay, “Antitrust & Innovation in the New Economy: The Problem with the Static Equilibrium Mindset“: Continue reading →

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SCOTUS Healthcare Decision Indicates FCC Interoperability Mandate Unconstitutional

by on July 3, 2012 · 4 comments

The Communications Liberty and Innovation Project (CLIP) recently filed comments at the Federal Communications Commission (FCC) opposing an interoperability mandate in the 700 MHz band. CLIP argued that the proposed interoperability mandate would be manifestly unjust. The Supreme Court’s holding in the healthcare opinion issued last week indicates that the mandate could be more than merely unjust: it might be unconstitutional. Continue reading →

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A Victory for Liberty: Healthcare Ruling Shines Spotlight on Lack of Transparency in World of Regulation and Taxation

by on July 2, 2012 · 2 comments

In his reaction to the U.S. Supreme Court’s decision upholding healthcare legislation, Virginia Attorney General Ken Cuccinelli said, “On the liberty side, we won.” I couldn’t agree more. Continue reading →

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The Problem with the “Declaration of Internet Freedom” & the “Digital Bill of Rights”

by on July 2, 2012 · 12 comments

We live in an entitlement era, when rights are seemingly invented out of whole-cloth. It should come as no surprise, therefore, that a bit of “rights inflation” is creeping into debates about Internet policy. Today, for example, a coalition of groups and individuals (many of which typically advocate greater government activism), have floated a “Declaration of Internet Freedom.”  My concern with their brief manifesto is that is seems to based on a confused interpretation of the word “freedom,” which many of the groups behind the effort take to mean freedom for the government to reorder the affairs of cyberspace to achieve values they hold dear.

The manifesto begins with the assertion that “We stand for a free and open Internet,” and then says “We support transparent and participatory processes for making Internet policy and the establishment of five basic principles:”

  1. Expression: Don’t censor the Internet.
  2. Access: Promote universal access to fast and affordable networks.
  3. Openness: Keep the Internet an open network where everyone is free to connect, communicate, write, read, watch, speak, listen, learn, create and innovate.
  4. Innovation: Protect the freedom to innovate and create without permission. Don’t block new technologies, and don’t punish innovators for their users actions.
  5. Privacy: Protect privacy and defend everyone’s ability to control how their data and devices are used.

This effort follows close on the heels of a proposal from Rep. Darrell Issa (R-CA) and Sen. Ron Wyden (D-OR) to craft a “Digital Bill of Rights” that, not to be outdone, includes ten principles. They are: Continue reading →

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SB 1161 Promotes California’s Internet Innovation and Economic Growth

by on July 2, 2012 · 0 comments

California is recognized as a world leader in Internet technologies and services. It is the home of companies, like Apple, Google, and Cisco, whose innovations are driving economic recovery in California and Internet innovation around the world. The success of these and many other California technology companies has been driven by the decentralized and largely unregulated Internet, which provides them with the ability to market their products and services globally.

California’s success is also its biggest threat. The economic growth, individual empowerment, and entrepreneurialism driven by Internet innovation in California have made it the envy of the world. As a result, local and international governments are increasingly proposing new regulations that would favor their own companies – and cripple California’s economy. A current example is the upcoming World Conference on International Telecommunications, which will consider proposals to impose price regulations on the Internet through an agency of the United Nations. Continue reading →

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Four Ways the Internet Changed Poker

by on June 29, 2012 · 1 comment

Delaware looks ready to become the second state after Nevada to authorize Internet poker as a gambling bill was approved this week by the state senate 14-6 with one senator abstaining.

In the wake of the Department of Justice’s Dec. 23, 2011 memo that for all intents and purposes said there were no federal statutes prohibiting intrastate online wagering on anything save sports, several states. Including Iowa, New Jersey and California, have started moving on legislation that would permit Internet poker, other casino games, and online purchasing of lottery tickets for residents and visitors inside their borders.

Poker players across the country would welcome the chance to play online once more. The Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006 did not make Internet poker illegal outright, but by prohibiting U.S. banks from conducting transactions with off-shore gaming sites, made it extremely difficult for U.S. players to open or maintain accounts with legitimate sites such as Bovada, Bodog and PartyPoker.

With legislation moving along, most gaming industry analysts see Internet poker becoming a reality in at least one or two states by the end of this year.

While the topic of online gambling is still controversial, poker is just one more place where the Internet has had an impact. Before the World Wide Web, you either had to live in Nevada or New Jersey (even in states that had casino gambling, not every casino had a card room) to play regularly. For most who did play, poker was a friendly diversion within a family or social circle.

In broadening poker’s appeal, the Internet also changed the nature of the game. These changes fully manifested themselves when Chris Moneymaker won the main event of World Series of Poker (WSOP) in 2003. Moneymaker was the first world champion to have qualified for the tournament at on line site. The WSOP was the first major live tournament he played. The bulk of his experience and expertise was acquired through online play.

In honor of developments in Delaware and elsewhere, and keeping in mind that the main event of the 2012 World Series of Poker begins July 7, and because it’s Friday afternoon, let’s look at four ways the Internet has changed poker significantly from the game your parents knew. For our purposes here, we will keep things in the context of Texas Hold ‘Em, today’s most popular poker game.

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FCC Commish Robert McDowell on Regulatory Failure & “Regulate My Rival” Politics

by on June 28, 2012 · 3 comments

This may be the best speech by a regulator that you will read in your entire life. Federal Communications Commission (FCC) Commissioner Robert McDowell delivered an address in Rome today entitled, “The Siren Call of “Please Regulate My Rival”: A Recipe for Regulatory Failure.” I highly recommend it (and not just because I’m cited in it!) It is infused with important insights about the ugly downsides of excessive regulation of technology markets.

McDowell is an astute student of regulatory history and he documents how, despite the best of intentions, economic regulation has often been turned into a tool that industry exploits for their own narrow interests. Sadly, examples of such “regulatory capture” are rampant, as I have documented here before. McDowell notes that many telecom and media companies “suffer from the ‘please regulate my rival’ malady of an industry that has been regulated too much and for too long.  History is replete with such scenarios,” he says, “and the desire for more regulation for competitors always ends badly for the incumbent regulated industry in the form of unintended and harmful consequences.” That is exactly right.

I strongly encourage you to read the entire speech, but if you only have time to read one thing, make it the powerful and poetic closing paragraphs, which I have reprinted below:

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Short Memories When It Comes to TV Progress

by on June 27, 2012 · 3 comments

So, as I write this, I’m watching a House Commerce “Future of Video” hearing and I am trying to figure out if I’m the only person who was alive and watching television in the 1970s. I mean, come on, doesn’t anyone else remember the era of the Big 3 and meager viewing options?! Well, for those who forget, here were some of your TV viewing options this day in history, June 27, 1972. Read it and weep (and then celebrate the cornucopia of viewing riches we enjoy today in a world of over 900 video channels + the Internet).

 

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Yes, Anyone Can Be a Reporter

by on June 26, 2012 · 0 comments

In his syndicated column yesterday, Leonard Pitts, Jr. bemoaned the decision by the New Orleans Times-Picayune to cut back its print edition to three days a week, and attacked the sentiment, most recently expressed by former Alaska Gov. Sarah Palin, who might herself been quoting Matt Drudge, that the Internet allows “every citizen to be a reporter and take on the powers that be.”

Pitts immediately attacks the comment on the basis of its source, Palin. Then he wanders further from the point by conjuring the truly unpleasant conditions under which reporters, Picayune staffers no doubt among them, labored to ensure news got out in the weeks following Hurricane Katrina’s devastation of the Gulf Coast.

One night I had the distinct honor of sleeping in an RV in the parking lot of the Sun Herald in Gulfport, Miss., part of an army of journalists who had descended on the beleaguered city to help its reporters get this story told. The locals wore donated clothes and subsisted on snack food. They worked from a broken building in a broken city where the rotten egg smell of natural gas lingered in the air and homes had been reduced to debris fields, to produce their paper. Shattered, cut off from the rest of the world, people in the Biloxi-Gulfport region received those jerry-rigged newspapers, those bulletins from the outside world, the way a starving man receives food.

Yet nothing in this rather self-important prose tells us what’s so irreplaceable about printed newspapers as a platform for news delivery. Instead, we get a straw man.

Palin’s sin–and she is hardly alone in this–is to consider professional reporters easily replaceable by so-called citizen journalists like Drudge. Granted, bloggers occasionally originate news. Still, I can’t envision Matt Drudge standing his ground in a flooded city to report and inform.

One can say the same thing about Bill Maher, Keith Olbermann or Wolf Blitzer. Yet, come the next disaster, there’s no reason not to expect the same dedication from a handful of individuals who are driven to place themselves in the middle of an adverse, if not outright dangerous, event just to document first-hand what is happening. Only this time they have the cheap video cameras, battery operated laptops and cellphones with wireless Internet connections. The news will get out.

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