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.
After excellent posts on the subject by Adam and Braden, it may seem like piling on, but here’s my own take on the telecom reform draft bill. Bottom line: the rewrite needs a rewrite.
House Telecom Rewrite Needs a Rewrite
September 23, 2005
WebMemo #860
What happened to telecom deregulation? That was the question last week after the House Commerce Committee staff released proposed legislation to reform the nation’s telecommunications laws. The product of months of discussion and negotiation, the draft was billed as an effort to sweep away antiquated rules. “New telecommunications services,” said committee chairman Rep. Joe Barton (R-TX), “shouldn’t be hamstrung by old thinking and outdated regulations.”
Unfortunately, the actual proposal falls far short of this goal. While eliminating many unneeded rules, it also imposes many others. In all, the 77-page draft includes some 80 private-sector mandates and restrictions. Not only would telecommunications firms would remain over-regulated, but new rules would be imposed on previously unregulated Internet services. This attempted rewrite of telecommunications laws needs a rewrite itself.
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Google lately seems to be taking on the world. A year ago it launched Google desktop, putting it in competition with mighty Microsoft. Version 2 was introduced last week. But in the same week, the firm also launched Google Talk — the first venture into communications for Google. Technically, by most accounts, the service isn’t groundbreaking–its a somewhat basic instant messenger service. Economically, however, the move caused some tremors, signalling increased competition in a number of markets.
On the first level, Google Talk pits Google head-to-head with Yahoo and other IM providers. Its hard to believe that only a few years ago policymakers were wringing their hands over a feared AOL monopoly over the market. The Yahoo-Google struggle, being played out in other arenas such as search engines, is particularly worth noting.
Importantly, Google Talk (like most other IM services) now allow voice conversations as well as text. This puts Google squarely in the competition with VoIP providers such as Vonage and Skype. Importantly, Google doesn’t yet allow connections from the Internet to the traditional public switched network, but such a move would be relatively easy for the Googlites. And, with connections to the public switched network, Google becomes a competitor as well to incumbent telephone systems. In other words, Google–which a few years ago was just a good search algorithm, is now (or soon will be) in competition with the likes of Verizon and SBC.
Just one more piece of evidence that telephony is not in Kansas anymore. Competition is here, and more is coming–from increasingly unlikely places.
TechCentralStation.com ran a piece of mine today on the Ensign telecom reform bill. The gist: the proposal is a good step in the right direction. And, importantly, it gets the long-stalled telecom reform show moving. Of course, actually getting reform passed will a lot harder than some thought at the beginning of this year.
Here it is.
There’s been a lull in the indecency wars so far in Chairman Kevin Martin’s short tenure at the FCC–no fines have been assessed this year, compared to $7.9 million in fines in 2004. That may soon change. Mediaweek reports that the FCC has hired Penny Nance, an anti-pornography advocate and founder of the Kids First Coalition, to serve an an advisor on the issue. Nance will work from the FCC’s Office of Strategic Planning and Policy Analysis (an office that historically been focused on economics, and not involved in indecency issues.)
It’s too early to say what the appointment means. There’s some speculation that the Commission is preparing to act on a new set of indecency complaints.
When called by MediaWeek, Nance declined an interview, saying “I can’t talk now.” That leaves open the obvious question: “Who can talk now?” Stay tuned.
The lead sentence of an editorial in this week’s Economist includes five words not normally found in a news magazine (they are *****, *******, ***, *******, and *****) A desperate ploy for circulation? No, the magazine is merely quoting from an FCC decision on what can and can not be said over U.S. airwaves. The article, which argues for scrapping–rather than extending–FCC indecency rules, is worthwhile reading (as is a related analysis). The conclusion:
There is one strong argument against scrapping indecency regulation for television. Kids not lucky enough to have responsible parents might end up being exposed to more adult sex and profanity. But people should weigh the risk of that outcome against the harm of allowing each incoming administration to decide what everyone can and cannot watch. The current government has shown that it can easily broaden the country’s definition of what is indecent. Under pressure from Congress, the FCC has cracked down and has overruled its own precedents. What might future governments do? Technology has offered the chance to scale back censorship and America, long a champion of free speech, should seize it.
Well said.
Cell phones are not nearly as dangerous as people think. There’s no evidence they cause cancer. They do not cause gas pumps to explode. And they are not unsafe on airplanes. (See Adam’s excellent piece on that below). Time and again, wireless telephony, like other new technologies, has been the victim of an overactive culture of fear. Yet, there’s one area where the critics seem to have it right: cellphones and driving don’t mix. New evidence for this came out in an Insurance Institute for Highway Safety study published in the British Medical Journal this week.
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The Economist (subscription) ran a story in its current edition making the case that cell phones–even more than the personal computer–may be key to reducing poverty in the third world. From enabling farmers to check prices in different markets, to making it easier for people to find work, to making it easier to transfer funds, wireless telephony is a boon.
“[M]obile phones are, in short,” says The Economist, “a classic example of technology that helps people help themselves.”
Yet, high costs are impeding the growth of wireless in many areas. And among the culprits are third-world governments themselves. From Turkey to Uganda to Bangladesh and even Aghanistan, governments have imposed high taxes or other costs on wireless services. As the article notes, manufacturers (seeing a market here) are working to reduce their costs “Now governments must do their part, too.” Worth reading.
Anytime you find yourself thinking that regulation in America can’t get any worse, it’s always helpful to take a look at Europe for confirmation that yes, indeed, it can. The Times of London online edition posted a startling story today on a new issue paper on media regulation expected to be released soon in Brussels. The paper is part of an EU effort to update its existing media directive, adopted in 1989. Among its conclusions: “non-linear audio-visual content” (Euro-speak for Internet content) needs to be regulated. According to Times Online, the EU is considering regulating areas such as “taste and decency, accuracy and impartiality for Internet broadcasters.”
Chilling stuff, if true. Of course, it’s hard to predict what, if anything will sprout out of Brussels’ bureaucratic maze. Still, it kind of makes you glad that over here we have that pesky First Amendment to protect us (well, usually) from such regulatory musings.
As they say, the only difference between men and boys is the cost of their toys. For U.S. senators they can be even more costly. National Journal reports that, in a speech yesterday, Sen. Stevens remarked that he was “toying with the idea” of requiring analog TV manufacturers to sell digital converter boxes with their sets.” The idea is ensure that more households can receive TV signals when the transition to digital TV broadcasting is complete. Households that buy analog sets shouldn’t have to cover the cost of converter boxes, he argued, saying “I don’t know why these foreign manufacturers shouldn’t shift over to digital and if they don’t, they should give us a box.”
There may be some flaws in this logic. First, the reason any manufacturer–foreign or not–sells things to American consumers is because American consumers want to buy those things. The reference to foreign interests smacks of political pandering and is entirely unhelpful to the debate. Second, rather than relieve consumers of the cost of converter boxes, a mandate would simply ensure that consumers paid, as manufacturers would certainly pass on the cost to their customers.
There is no easy way out of the digital TV quagmire. The problem was created a decade ago when the government gave broadcasters–for free–the use of additional spectrum to use during the transition from analog transmission. Now (surprise) it is having a devil of a time getting it back. The answer isn’t clear. What is clear is that blaming foreigners and pretending that consumers won’t shoulder the costs of new rules doesn’t help.
In its biggest decision since new chairman Kevin Martin took over, the FCC voted last week to impose federal regulation on Internet telephone service. Specifically, the Commission required VoIP providers to provide 911 connections as a standard feature of their service within 120 days. The decision was not surprising, and is something consumers were demanding in any case. For that reason fellow Techliberation blogger Tim Lee gave the decision positive marks. I’m less sanguine. Not only may the decision chill some competition in VoIP markets, but–perhaps more important–the extent of the ruling doesn’t bode well for the new chairman’s commitment to minimal regulation of new technologies.
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