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.


France Gets Tough on (Documenting) Violence

by on March 7, 2007 · 18 comments

Last Friday, France’s Constitutional Court approved a law cracking down on violence — well, at least documenting it. According to IDG News Service, the new law “criminalized the filming or broadcasting of acts of violence by people other than professional journalists.”

The law was — apparently — spurred by disturbing stories of people being assaulted randomly solely for the purpose of recording it for entertainment value (a practice known as “happy slapping.”) But the legislation’s reach goes far beyond that — broadly criminalizing the filming of violence by eyewitnesses.

In an unfortunate irony, the decision approving the law was published on the anniversary of the amateur videotaping of the beating of Rodney King by LAPD officers in 1991. Unless the cameraman were a professional journalist, such recording would now be illegal in the French Republic. The penalty, according to IDG: up to five years in prison, “potentially a harsher sentence than that for the committing the violent act” itself.

It gets worse. Since professional journalists are exempted from the ban, the government has “proposed a certification system for Web sites, blog hosters, mobile-phone operators and Internet service providers, identifying them as government-approved sources of information if they adhere to certain rules.”

No word yet on the criteria to be used to get France’s approval to report news.

(Thanks to Declan McCullough for the heads up on this.)

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Google Joins the FTC Bandwagon on Neutrality Regulation

by on February 28, 2007 · 10 comments

Should the FCC enforce net neutrality rules? No, says Google’s top policy executive. According to Andrew McLaughlin, the firm’s global public policy head: “Cutting the FCC out of the picture would be a smart move.”

The comments were made yesterday at the Tech Policy Summit in San Jose. As reported in Tech Daily and Communications Daily, McLaughlin argued that neutrality should be thought of as “an attorney general or FTC problem.”

This is a surprising statement from Google, which has lead the fight for neutrality regulation for over a year. Most proposals for neutrality regulation have put the FCC in charge–including the S. 215, by Sen. Olympia Snowe and Byron Dorgan.

Its also a sensible idea–one that many of us have long advocated. (See, for instance, this statement by the Progress and Freedom Foundation’s DACA working group.) At its heart, the net neutrality debate is over competition: how much is there, is it enough, and what to do if it is not. Such issues are the bread and butter of the FTC–which has close to a hundred years experience dealing with them.

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From our Don’t-Shoot-the-Messenger Department: More on Public TV and Choice

by on February 27, 2007

Joe over at TechDirt today commented on my post yesterday about public television DTV worries. “James Gattuso,” he writes, “sees a possible sinister motive in the move” to get DTV converters distributed. Joe dismisses the idea that public television stations would try to keep the on-the-air viewers away from cable and satellite, where they may find other things to watch besides PBS. It just wouldn’t make sense, he says: “If this were indeed the intention, then the move would be shortsighted, since these stations would be better off making their content more appealing rather than hoping to limit viewer choice”.

But the idea didn’t come from me–it came from public TV executives, at least according to Communications Daily, which wrote:

“Station executives estimate that public TV could lose 10%-15% of its membership if their “loyal” viewers switch to cable or DBS because of a mismanaged transition. That’s because viewers would have more channel choices and less disposable income to contribute, they said. To head off problems, stations are proposing to distribute converter boxes as gifts for pledge contributions or membership incentives, they said.”

Joe perhaps is right that the issue will be insignificant because so few viewers are affected. But that’s not what station execs are saying. Of course, the execs may be wrong. But either way, it hardly inspires confidence in public television management.

As I said yesterday, it’s all very strange.

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Public TVs Digital Worry: Too Much Viewer Choice

by on February 26, 2007

Communications Daily reports today that public TV stations are thinking about taking a direct role in distributing DTV converter boxes for their viewers–either by negotiating alliances with retailers, or distributing the devices themselves–perhaps as gifts during pledge drives. Nothing wrong with that–in fact its refreshing to see anyone doing something on the DTV transition without asking more subsidies. And a converter box during pledge week would certainly be nice change of pace from the usual menu of Ken Burns DVDs.

But why are the stations so concerned about getting converter boxes to their viewers? The fear is that without easy access to converters during the DTV transition, viewers would flock to cable TV from over-the-air broadcasting. And although public TV is carried on cable, the stations –according to Comm Daily — are concerned that a shift away from over-the-air viewing would lead (among other things) to “more channel choices” for consumers, less viewship, and fewer contributions to public TV stations.

The key words here: “More channel choices.” There’s something that certainly must be stopped.

When Congress started funding public TV, the rationale was that, because television channels were scarce, viewers didn’t have adequate programming choices. Now, some 40 years later, the concern is there are too many television channels, and public TV is actively working to discourage viewers from obtaining those choices.

The public TV stations’ concern is understandable. They are no doubt right that more viewer choice will reduce their own viewership (and membership). And the stations are reacting the way most businesses would react–by trying to limit that choice. But why should federal taxpayers give them subsidies as they do it?

Very strange.

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Skype Gripes: Cellphones, Carterfones, and 1968

by on February 21, 2007

Don’t look now, but it may be time to dig out those old bell bottoms and love beads from your closet. The calendar may say its 2007, but in Washington regulatory circles it may soon be 1968 all over again. You may remember 1968 as a year of turmoil–with anti-war protests, assassinations, and the election of Richard Nixon. Forget all that. At the FCC, it was the year of the Carterfone decision, in which the Bell System was banned from restricting equipment consumers could put on their phone lines. The same year, the Commission allocated the first frequencies for cell phone service.

Both decisions revolutioned the communications world: Carterphone opened the first crack in the previously iron-clad, legally-protected Bell System monopoly to competition, and the cell phone allocation planting the seed for today’s wireless services, which shattered the idea of telephone monopolies at its root.

These two regulatory threads of 1968 are now on a collision course. Yesterday, Skype –the Internet phone company now owned by eBay– petitioned the FCC to apply the Carterfone decision to wireless carriers (see Adam’s excellent post on this.) The filing follows by less than a week a paper by Tim Wu, father of the term “net neutrality”, endorsing the same idea (discussed here, here, here, here and here.)

Skype–whose founders weren’t even born in 1968–see Carterfone in grand Jeffersonian terms, using the word “right” some 35 times. One practically expects to read of the right to life, liberty, and the right to use non-harmful devices and software on telecommunications networks. Carterfone, however, did not create a right. It created a regulation. A regulation that was justifed in the face of a legally-protected, comprehensive, vertically-integrated old-fashioned monopoly, but a regulation nonetheless. It makes no sense to saddle today’s competitive, innovative and growing cell phone market with the same regulation.

The battle over regulation of wireless networks promises to be a divisive one–in effect a new front in the larger war over neutrality regulation that has been raging for over a year At its heart are two vastly different visions of how best to create competition: one based on forced access and restrictions mandated by government, the other based on reducing barriers to the creation of alternative networks, with consumers–through the marketplace–deciding how they should best be run. Network managers throughout the economy–and consumers as well–should be watching this debate with interest.

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May on Wu: No to 1968

by on February 14, 2007

At the risk of making TLF the “All Wu All the TIme” blog, I wanted to pass on Randy May’s just-released commentary on Tim Wu’s wireless paper. May–president of the Free State Foundation in Maryland–focuses particularly on Wu’s support of a “Carterfone” rule for wireless. May’s reaction to this? “Back to 1968, No Way!”. (Bringing to mind mental images of Chicago police rounding up protesting free-market economists on the street…)

May provides some valuable perspective, contrasting the static Bell System monopoly that spawned Carterfone and the constantly-changing wireless industry of today:

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Wireless, Wu, and Wallstein Too

by on February 13, 2007

Adding to the general clamor, Scott Wallstein of the Progress and Freedom Foundation has released an analysis of TIm Wu’s study endorsing neutrality regulation of wireless networks. Among other things, he points out that the history of the kind of access regulations Wu endorses is not a happy one, pointing to the UNE fiasco. He also raises a good point regarding Wu’s call for carriers to work together to create clear unified standards–arguing that getting acceptable standards is harder than Wu implies. In fact, Wallstein points out, Wu decries one of the leading standards that has been developed, WAP.

Overall, Wallstein concludes that competition in this market is healthy, stating that “the wireless industry is robustly competitive and exhibits scant evidence of a market failure. Consumers consistently benefit from increasingly lower prices and more features.”

Worth reading.

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Playing Chicken With Consumers: Wu Calls for Cellphone Regulation

by on February 12, 2007 · 4 comments

Last year, as the net neutrality wars raged, the wireless industry by and large stayed out of the line of fire. It firmly opposed regulation, no question of that, but the debate almost exclusively focused on telephone companies and cable company broadband services. Now here comes Tim Wu–a prof at Columbia University and father of the term “net neutrality”–with a paper (to be presented this week to the FTC) arguing that wireless telephone service should be comprehensively regulated under net neutrality principles based on those applied the old Bell System.

This is a major escalation of the neutrality war, promising to change the character and dynamics of the entire debate.

I have always thought that one of the weak points of the argument for network neutrality last year was its over breadth. At its core, the argument for neutrality regulation boils down to a claim that broadband markets are not competitive. Yet, proposals for regulation virtually–no, skip the virtually, they never made exceptions for competitive elements of this market–such as wireless broadband.

Certainly, I thought, it wouldn’t be too long before someone proposed carving out wireless from regulation, so as to focus public attention away from this innovative and fast-growing market. Instead, Wu’s paper goes in the opposite direction–arguing that the wireless industry is in dire need of regulation.

It’s a bold argument. But completely wrong. And, it the end, one that may hurt the entire neutrality regulation effort, by showing how–once unleashed–few will be safe from its reach.

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Cyren Call Goes Flat at Senate Hearing

by on February 9, 2007 · 4 comments

The siren call of Cyren Call seems to have gone a bit flat yesterday. Morgan O’Brien, the company’s founder, testified Thursday to the Senate Commerce Committee on his plan to give 30 MHz of spectrum to public safety agencies, rather than go through with a planned auction. According to Anne Veigle in Communications Daily (subscription), senators were less than impressed. “This is creating a new FCC, isn’t it?” asked Vice-chair Ted Stevens (one FCC presumably being more than enough). Former FCC chair Michael Powell, in a letter to Stevens, was even harsher. “Follow the money,” Powell wrote: “Who is going to benefit the most, those in uniform who are sworn to serve or those in suits who are set to profit?” The theme was picked up by Senator McCaskill of Missouri. “I’m assuming that this proposal is predicated on the idea that it will make a profit,” she said to O’Brien. That probably wasn’t the aspect of the plan the telecom entrepreneur wanted to stress. All in all, it doesn’t sound like it was a good day for Cyren Call.

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No Television Left Behind: Will Washington Subsidize Your Basement TV?

by on February 8, 2007

While debate rages over what to do with the frequencies soon to be vacated by broadcasters (see the last post), another debate is raging over what to do about those using them now. At issue: whether to subsidize converter boxes for millions of old TVs in basements and kitchens that will be made obsolete by the February 2009 analog cut-off.

In late 2005, Congress authorized up to $1.5 billion for such converter boxes. Last year, the Department of Commerce proposed rules for the program, concluding that households with cable TV should not be eligible for assistance (on the sensible ground that they will not lose access to TV). Now there’s word that the Department of Commerce is planning to reverse itself, and let cable households get in on the program. The rationale: many of these households have third and fourth television sets that are not hooked up to cable.

Commerce has been under pressure from–among other places–Congress to include these forgotten basement televisions in the program. In particular, a November letter from John Dingell and 19 other members positively waxed poetic about the issue: stating that millions of consumers would be “disenfranchised” and that the original Commerce plan “disadvantages the poor, the elderly, minority groups, and those with multiple analog television sets in their home.”

Maybe it’s just me, but I had never thought of “those with multiple television sets in their home,” as an oppressed minority. And “disenfranchise”? This isn’t voting rights, it’s television. In fact, its not even that–its the right to a third TV in your basement. In fact, its the right not to have to pay $50 (the expected price of a converter box) to get that third TV in your basement to work.

This is the sort of thing that gives Washington a bad name. I fulminate more on this in a just-released Heritage paper.

Stay tuned (well, at least until February 2009).

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