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.
Great article this week in the Financial Times by Tom Hazlett of George Mason University. Keying off from the Google-YouTube deal, Hazlett–a former FCC chief economist–writes that the Internet has never been as “open” as net neutrality fans say, and that’s no bad thing:
…the capitalist engine that powers the internet demands something completely different, as Google’s acquisition of YouTube makes clear. That strategy is to integrate Google’s search and advertising sales with YouTube’s users, which could potentially impede access to one of the hottest technologies by other service providers…
The internet lurches forward in spasms of business model discovery, as when Google figured out how to auction off search-targeted advertising slots, leaving banner advertisements behind. Today, Google’s absorption of its little video cousin is part of this jockeying for positions of competitive superiority. The internet really is not open–if, as Google hopes, it is doing it right.
Google has been doing it flawlessly–forging exclusive bargains nonpareil. Mr Vise declares the watershed business event in the company’s history to have occurred on May 1 2002 when its search engine was licensed to AOL. “Web properties that connected more than 34m subscribers had a small search box on every page that said, ‘Search Powered by Google.'” To land this deal, Google extended to “AOL a very large financial guarantee”, including stock options. An ISP getting paid to feature a favoured search engine? What net neutrality would presumably end is what helped launch Google.
Worth reading.
The Economist has an interesting editorial and feature article this week on the online gambling bill passed by Congress recently. The article makes the case–also made here–that the bill will do little to stop online gambling. It goes on, startlingly, to argue that the law could actually make legalization of online gaming more likely. The logic is that the bill has depressed the value of British online gaming firms, thereby making them more vulnerable to takeovers by their American cousins. The feature article concludes:
If such acquisitions come to pass, it seems more than likely that American online gambling firms would begin to lobby American politicians to legalise online gambling. Thus, America’s prohibition may ultimately have the unexpected consequence of moving the country one step closer to legalising online gambling.
I’m not sure this is a likely outcome, but it’s an interesting take nonetheless. Worth reading.
Posting on Verizon’s newly-launched blog, VP for Internet and Technology Link Hoewing makes the case that the U.S. isn’t doing as badly on broadband deployment as advertised. Says Hoewing:
Lots of attention has been paid recently to announcements that a French company is planning to test a fiber network soon that will supposedly run at speeds far surpassing virtually anything in the U. S. The implication some are drawing? Yet more evidence that America is falling farther behind in the race to build better broadband networks.
But the violins are not playing yet and Rome is not burning. The reality is that fiber to the home networks are growing faster in the U. S. than any place else in the world.
An interesting, and encouraging perspective. And a good start to Verizon’s new blog, which promises to be more than your typical corporate mouthpiece. Don’t expect Bell lobbyists to start working from home in their pajamas anytime soon. But with contributions from folks from Hoewing–who I’ve known for over 20 years as an insightful and candid observer of technology trends–it promises to be a valuable contribution to the blogosphere.
If you lose a battle, sometimes the best thing you can do is make it sound like a victory. That’s seems to be the only explanation for a truly bizarre article that appeared on Salon.com yesterday regarding the net neutrality battle. The lead in to the story sets the tone:
“In the Capitol Hill battle over Net neutrality, a ragtag army of grass-roots Internet groups, armed with low-budget videos, music parodies and petitions, have the corporate telecoms, and their allies in Congress, on the run.”
Good lead. Too bad it’s almost entirely fiction. To start with, it is beyond belief that anyone is still peddling this as a David v. Goliath story. The pro-regulation camp a rag-tag army? How ragtag can you be when you count some of the largest corporations on Planet Earth– including both Google and Microsoft–on your side? In fact, the combined market cap of the major “pro-regulation” firms actually exceeds that of their major opponents. (The article does acknowledge the presence of these corporate giants in the pro-reg camp, conceding “[t[hey’ve spent millions to slug it out with the telecom companies,” but dismisses this with the non-sequiterish statement: “they’ve yet to land a knockout blow.”)
But wait, there’s more. Daniel Reilly, the author of the piece, trots out Sergey Brin–the co-founder of Google–as further proof of the ragtag nature of this battle, colorfully pointing out that Brin showed up to lobby on Capitol Hill “wearing jeans, a T-shirt and sneakers.” Well, there’s a real grassroot for you. Of course, he doesn’t mention that poor Brin is the 12th richest man in America, with a net worth of $14.1 billion dollars, according to Forbes.
Continue reading →
Remember the digital TV converter box subsidy? Last July, the Department of Commerce released for comment some fairly sensible rules for administering the program, given the constraints set out by Congress.
The deadline for public comments was this Monday, and–to no one’s surprise–quite a few commenters wanted more money. The broadcasters and TV manufacturers, for instance, complained that the program would be limited to households that do not have cable TV. “No television left behind,” was the unstated theme, as they expressed concern over disconnected televisions in basements across America.
A coalition of retailers–including firms such as Wal-Mart, Best Buy and Circuit City–supported this position. They argued for “leaving such issues to the marketplace, by letting those citizens who believe that they need a Converter apply for a coupon to get one…” This is indeed a novel reading of Adam Smith. Everyone who wants a subsidy should get one. It’s a variant of the invisible hand: outstretched and palm up.
But the retail stores didn’t stop there. They also argued that they should be directly compensated for accepting converter box coupons. The “investments, expenses, and risks,” they maintained, should not be placed “solely on the backs of retail vendors who come forward to participate in this program.”
Let’s recap. The DTV program will cause millions of consumers to drive over to their local Circuit City or Best Buy or Wal-Mart, coupon in hand, to buy converter boxes. The stores can charge whatever they want for these boxes. They will also be reimbursed by the government for the face value of the coupons. A fair number of these consumers–once in the able hands of the store sales staff, will no doubt end up buying brand-new digital televisions from the retailer instead of a puny converter box. And the stores want to be paid for the burden of handling all this additional business?
Nice try. But the argument is utter nonsense. The retail industry lobbyists should be congratulated for their creativity–and perhaps nominated for some lobbying chutzpah award. And then sent away empty-handed.
Forget missing laptops. The hot issue in the computer world lately is burning laptops. That’s right: while thousands of government laptops have gone astray, some of the rest have burst aflame. The most recent incident was about a week ago, when a Lenovo Thinkpad at Los Angeles International Airport spontaneously caught fire, leading several airlines to–at least temporarily–ban them from flights. The month before, a house burned down in Florida after a laptop sitting on a couch lit up. It appears that bad batteries are to blame, and have been recalled by several manufacturers.
Now here’s where the story gets odd. Two days after LAX fire, Greenpeace issued a report on laptops, urging manufacturers to “ditch” the fire retardants used in their products. Yes, that’s right. Two days after news of another laptop fire, Greenpeace urged less–not more–use of fire retardants.
To be fair, the Greenpeace report only scored use of a certain compound, a type of “brominated fire retardant,” which it says can be harmful in the waste stream. But there’s little evidence that the compound presents a significant risk. It can, however, save lives. Writes Dana Joel Gattuso, an adjunct analyst with the Competitive Enterprise Institute (and, for full disclosure, also my spouse):
:according to a growing body of research, the risks to human
health and the environment are far greater in the absence of brominated
flame retardants due to the increased chance of fire. A study by the Swedish
National Testing and Research Institute compared the outbreak of fires in
TV sets in Europe, where restrictions in the use of deca-bde has already
greatly limited its use on TVs produced and sold in Europe, to those
manufactured in the United States, where there were no limits to its use at
the time of the study. Using conservative estimates, the study found that
16 people die each year from TV fires in Europe, while in the U.S. there is
no record of fatalities from TV fires.
Did these retardants make a difference in the recent laptop fires? I don’t know the answer. But, on the whole, chemicals like these do have a safety impact, and incidents like these help remind us why they are there. It all makes you wonder what Greenpeace would have said if laptops weren’t catching fire.
Supporters of free markets and free speech in communications lost a friend this past week with the passing of Sol Schildhause at the age of 89. While perhaps not well-known to many today, Sol was for decades a fixture in the world of cable TV, serving as the first head of the FCC’s cable bureau from 1966 to 1974–where he fought against rules that protected broadcasters from cable TV competition–and later as an attorney and chairman of the Media Institute, where he worked tirelessly for competition in cable TV itself. He was particularly instrumental in the effort to end exclusive cable franchising on the grounds that it was an unconstitutional violation of free speech. The Supreme Court decision that resulted from those efforts established that cable television firms’ were entitled to First Amendment protection, although it stopped short of banning exclusive local franchising.
Schildhause always seemed the maverick in his work, a happy warrior fighting against the status quo. This was evident even during his years at the FCC, where he was far from your typical bureaucrat. Sometimes this caused difficulties, as related by Tom Hazlett (now of George Mason University) in a 1998 article for Reason Magazine entitled “Busy Work”:
Continue reading →
Supporters of neutrality regulation often claim the mantle of defenders of free speech. Even the pending Senate telecom bill–which largely avoids comprehensive neutrality rules–includes a section on “Application of the First Amendment,” stating that no ISP may limit content based on “religious views, political views, or any other views expressed in such content.”
The problem, however, is that the First Amendment covers governmental, not private restrictions on speech. Moreover, as Randy May of Maryland’s Free State Foundation argues this week in Broadcasting and Cable magazine, such limits may violate–rather than further–First Amendment principles. As he points out:
Under traditional First Amendment jurisprudence, it is as much a free-speech infringement to compel an entity to convey messages it does not wish to convey as it is to prevent it from conveying messages it wishes to convey.
Going farther, he says that:
….When you think about it, laws imposing “neutrality” are eerily reminiscent of the defunct Fairness Doctrine that required broadcasters to present a balanced view of controversial issues.
The last point is particularly interesting. Given that a fair number of neutrality regulation proponents have also argued for the Fairness Doctrine, one wonders if they would disagree with the comparison.
A fuller version of May’s argument was published by the Free State Foundation here. Worth reading.
More bad news for Sen. Steven’s struggling telecom bill this week, as the Congressional Budget Office toted up the price tag for the 200+ page measure: $5.2 billion over the next ten years. That’s worth saying again. $5.2 billion. That’s billion. With a “b”.
Most of the cost comes from extending communications subsidies to broadband. CBO pegs the cost of the proposed new “Broadband Service Fund” at nearly $4.5 billion. Other provisions–such as permanently exempting the Universal Service Fund from the Anti-deficiency Act (allowing grants to exceed fund revenue)–expansion of rural health care spending, among others–make up the rest of the new spending. (Among the others are, presumably, the provision expanding subsidies to “States that are comprised entirely of islands”. See this post.)
Continue reading →
The FCC’s localism report has attracted massive controversy as to whether it was inappropriately scotched by the FCC. By contrast, there has been remarkably little attention on its substance. “Do Local Owners Deliver More Localism?: Some Evidence From Local Broadcast News,” was written in 2004, apparently by FCC staffers Peter Alexander and Keith Brown. Using a 1998 database from the University of Delaware, the authors looked at how the ownership of television stations affects the amount of news they deliver. The headline finding was that stations that are locally-owned have some 5.5 minutes more of local news on their half-hour news programs, and over 3 minutes more of local on-location news. Because of this finding–which points to a possible downside to national chains of TV stations– the FCC allegedly killed the study.
But, as Matthew Laser–an author and former Pacifica Radio reporter–argued today, the report is actually much more complicated than the headlines suggest. He points out that several aspects of this study undercut the advocates of strict ownership limits. The study found that television stations that also own a radio station in the same market provide more news than those without such cross-ownership. It also found that television station/newspaper cross-ownership was not found to be a significant factor in the amount of local news provided.
Perhaps most striking, the report concedes that more local news may not always be a good thing. “For example,” it suggests, “if the local [television] owners also develops real estate locally, they may cover the local zoning board in a way that favors the owners’s real estate interests.”
In fact, the report does not address perhaps the biggest question: do viewers actually want more local content? This issue is addressed only in a footnote of the study, which simply states that “non-local content may be more appealing to viewers than local content.”
In this regard, the study tracks much of the current debate: policymakers determine what content is preferred, with only occasional nods to whether consumers object. Its a topsy-turvy analysis: instead of defining success, consumer preferences are seen as potential obstacles to it. This really is more complicated than it seems.
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.