Articles by James Gattuso

James Gattuso is a Senior Research Fellow in Regulatory Policy in the Roe Institute for Economic Policy Studies at The Heritage Foundation. Gattuso also leads the Enterprise and Free Markets Initiative at Heritage, with responsiblity for a range of regulatory and market issues. Prior to joining Heritage, he served as Vice President for Policy at the Competitive Enterprise Institute and also as Vice President for Policy Development with Citizens for a Sound Economy (CSE). From 1990 to 1993, he was Deputy Chief of the Office of Plans and Policy at the Federal Communications Commission. From May 1991 to June 1992, he was detailed from the FCC to the office of Vice President Dan Quayle, where he served as Associate Director of the President's Council on Competitiveness. He lives in Alexandria, Virginia with his wife Dana, 8 year-old son, Peter (whom he relies upon to operate his VCR), and his four year-old daughter Lindsey (who does the DVD player.) He has no known hobbies, but is not nearly as boring as he seems.


Given the sudden rush of interest on patent reform, with two excellent pieces today referencing Irwin Jacobs’ recent talk here at Heritage, I thought I’d provide a link so you can see it for yourself.

Enjoy.

TLF’s Adam Thierer yesterday posted about the “Other America” — the part that just doesn’t give a hoot about broadband. But get ready for another shocker: there are also some that don’t care about over-the-air television.

This was pointed out by the ever-quotable Gary Shapiro — chief of the Consumers Electronics Association — at a DC policy forum yesterday. Citing a CEA survey on how people will handle the DTV transition, he argued that consumers would make informed decisions about the DTV transition, with some buying new sets, some getting converter boxes.

“Others”, he added, “frankly, don’t care. You know, not everyone really wants free over-the-air broadcasting in their home,” Shapiro said. Its not just that 85 percent of viewers have cable or satellite service. Quite a few are quite happy with video games and DVDs, he explained. (according to Communications Daily).

Leave it to Shapiro to point out that the Emperor has no rabbit ears. In Washington circles, over-the-air TV is treated like a basic human need, like air itself. For weeks now, policymakers have been in a tizzy over the potential public reaction when analog signals are turned off in February 2009. (With the NAB even fretting over “disenfranchised” television sets.)

Certainly some people will care when the transition takes place — but the reaction will likely be less than the DC echo-chamber expects.

“There is fear-mongering going on and, frankly, this has become a political issue,” Shapiro said. “It is easy to go to government and say, ‘We need more money for something’. But the question is, is it really needed?”

It may be time to stop pushing that DTV panic button. And to put down that shovelful of money.

Drew Clark is hard to beat to the punch on anything. By the time I had finished reading Google’s lastest explanation of its position on net neutrality, he was up and posted with an excellent commentary on its meaning. Now that’s competition.

As Drew reported, Google’s new Washington Telecom and Media Counsel Rick Whitt, tried to clarify Google’s net neutrality position yesterday, which had been muddled after comments by his Google colleague Andy McLaughlin. Whitt explained that nothing had changed. Yes, the issue will ultimately be solved by competition, but that’s a long-run solution, maybe 20 years out. Until then, strong rules are needed.

But Google’s support of net neutrality rules was never in doubt. What I find more interesting is what Whitt did not address: Andy McLaughlin’s statement that the FCC should not be have a role in enforcing any such regulations, and that this should be seen as “an attorney general or FTC problem.” That would be a significant shift, putting Google at odds with most of its colleagues on the net neutrality bandwagon, as well as the leading bills on the subject.

I have some sympathy for Rick Whitt’s complaint that it’s hard to have a debate when anything that’s slightly off-message becomes an ad in the Wall Street Journal. (If there’s any concern on this point, I’ll promise not to run a Wall Street Journal ad on any this). But Whitt’s statement still leaves open more questions than answers. And nothing has been heard of late from McLaughlin himself to explain all this.

In any case, welcome to Google, Rick. You’ve joined the company at an interesting time.

Do television sets have rights? Apparently so, according to the National Association of Broadcasters. Communications Daily, reporting today on the planned subsidy for analog televisions, quotes a broadcast industry spokesman as saying” [O]ur priority is that no TV set and no consumer gets disenfranchised.” Let’s read that again. “[O]ur priority is that no TV set and no consumer gets disenfranchised.”

It’s odd enough to say to talk about consumers being “disenfranchised” due to the digital transition. But TV sets? Can TV sets be “disenfranchised”? Somehow I missed the provision in the Constitution granting rights to televisions, or any electronic appliances for that matter. I’m not even sure how such rights would be defined. Would only analog televisions be protected? Perhaps any device with a cathode ray tube? What about computer monitors? Are they entitled to equal protection under the law?

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Proponents of neutrality regulation have been touting a new study by three economists at the University of Florida on the effects of net neutrality. Photo Sharing and Video Hosting at PhotobucketThe study looks at two questions: who would be the winners and losers if broadband service providers offered premium service for content delivery for a fee?, and 2) would the use of such fees increase the incentive of broadband service providers to expand capacity?

The authors conclude first that broadband service providers would benefit, and content providers would be worse off, and second, that there would be no increased incentive for expanding networks. Regulation advocates have grasped this report as confirmation of their case for mandated net neutrality. “The Internet with Net Neutrality is unequivocally better for consumers,” exclaimed SaveTheInternet.com in a post on the report.

The problem is that the study says no such thing.

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This Thursday, March 22, The Heritage Foundation will be hosting Dr. Irwin Jacobs, the founder of QUALCOMM at its DC digs for a discussion entitled “Not Patently Obvious: An Innovator’s Perspective on Patent Reform. I’ve alway found Jacobs life story to be a fascinating one — starting out as an assistant professor of electrical engineering with some ideas on wireless signals, he ended up developing some of the key technologies behind the cell phone revolution, and founding one of America’s most sucessful firms. He is worried about the direction of patent reform in the Congress, however — fearing that proposed reforms will undercut the incentives for innovators in the future.

Please join us for what should be a fascinating discussion at 10 am Thursday. RSVP here.

Very good piece today by Peter Suderman, managing editor at National Review Online, on Timothy Wu and regulation of wireless. His conclusion:

Over the last two decades, wireless phones have morphed from awkward, brick-sized contraptions with laughably poor reception into slim, sleek fashion accessories with impressive feature sets. Meanwhile, wireless service has gone from novelty to convenience to necessity. Society may not always love the cell-phone industry, but consumers have integrated its products into daily life to a remarkable degree. If these trends are any indication, the wireless industry will continue to adapt to the demands of consumers all on its own — somewhat fitfully and frustratingly for sure — but without any need for government meddling, no matter how well intentioned.

Exactly.

Over the past few days there’s been some lively blogosphere speculation going on regarding Google’s position on net neutrality. A few weeks ago, I noted that Andrew McLaughlin, Google’s top policy guy, had argued against an FCC role in net neutrality, saying that neutrality should be thought of as “an attorney general or FTC problem.” Earlier this week, TLF’s Drew Clark, writing on GigaOm.com, made the case that an even more extensive re-think is going on in Mountain View. Clark pointed out that McLaughlin, in addition to distancing Google from the FCC, also opened the door a crack to charges for quality-of-service guarantees, saying “[t]here is a pragmatic view that it is OK as long as it is done in a non-discriminatory way.”

None of this means Google is about to join the free-market camp (though we’d love to have them). It does put a lot of distance, however, between them and their allies. According to Clark, this has caused “a fair bit of angst” within Google and among those allies.

Clark’s piece spurred an almost immediate rebuttal from Tim Karr of Free Press, one of the leading non-profit groups in the pro-regulation camp. Writing in the Huffington Post, Karr denied that Google was going wobbly. His evidence? Well, he asked them, and they denied it. “Google’s position on Net Neutrality has not changed one bit,” he quotes a Google spokesman as saying.

Well, that certainly settles the matter, doesn’t it? I mean, if Google was shifting its position, it would say so, wouldn’t it? One can just see the statement: “We regret any inconvenience but we now realize what we were saying last year was just plain wrong. Lord knows what we were thinking. Never mind.”

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The Commerce Department today issued its long-awaited final rules on the new federal subsidy program for digital converter boxes. As expected, the program was expanded include households that have cable TV subscriptions, but want to keep using those non-cable TV’s in the basement or kitchen. In a nod to fiscal responsibility, however, the expansion came with one caveat: these “basement TVs” would be eligible only until the first batch of program funding ($990 million) runs out. The second batch (up to $500 million more has conveniently already been provided for by Congress) would be reserved for households that don’t have cable service.

In other words, the cash till will be wide open until the first billion or so is spent. Only when the money starts running low will sensible limits be applied.

Why the two-part process? After all, Commerce’s initial call was the right one: if subsidies go to anybody, they should go only to those who actually would lose TV service in 2009, when the analog lights go out. In addition to being good policy, excluding cable households made fiscal sense too: no one knows how many cable households would apply for benefits, and total spending could easily go over the total authorized by Congress.

Yet, however sensible Commerce’s initial decision, Capitol Hill didn’t like it. Fearing a public backlash when analog signals are discontinued, members of Congress pushed the agency to expand eligibility. Thus the compromise: spending will only be constrained once the money starts to run out.
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Anyone who wants to know how Washington works should look to an article buried in today’s Communications Daily (sorry, it’s by subscription) on a House Small Business Committee hearing. The committee had brought together representatives from various communications industry segments to talk about the “innovation agenda, ” focusing on the growth of broadband.

The good news: “All witnesses opposed an Internet tax and supported extending the moratorium” on federal taxation. Easy enough. But wait a second: many of the same witnesses also supported extending universal service subsidies to broadband, presumably applying universal service fund fees to broadband access bills (right now they only are imposed on telephone bills). Isn’t that a tax? No, said the Shirley Broomfield, representing rural telephone firms, who would benefit from extended subsidies. It depends on how it’s implemented, said Earl Comstock from the competitive carriers, whose customers already pay the “fee.” Only one witness — Richard Cimerman from the cable industry, whose customers would have to pay the tax/fee — said yes.

So much for the united front against taxation.

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