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.


“The Carnage of the Past Six Years”: Consumer Groups on Telecom Mergers

by on May 13, 2005

The dog-bites-man story of the past week was no doubt a petition filed at the FCC by the Consumer Federation of America, Consumers Union and US PIRG urging rejection of Verizon’s acquisition of MCI. The petition (virtually a carbon-copy of a filing by the same groups on the SBC-AT&T deal) was rather breathless in tone–warning of all kinds of consequences should the merger go through–destroyed competition, higher prices, bad breath, and so on. The chicken little claims are groundless–as discussed here and here both mergers are the natural consequence of the decline of the long-distance industry, and are a sign of a healthy, not a troubled industry. But what got my attention was an “I told you so” reference, arguing that the FCC made a mistake in OKing previous Bell mergers in 1999-2000, specifically SBC-Ameritech and the Bell Atlantic-GTE merger which formed Verizon. Specifically, they say:

“The Commission simply cannot look back on the carnage of the past six years and conclude that its decision to allow a handful of incumbents to dominate the local telecommunications market has served the public interest.”

What in heaven’s name are they talking about?

Continue reading →

SHARE:

Cherchez le Web

by on May 12, 2005 · 2 comments

The Wall Street Journal today reports on France’s efforts to create a competitor to Google. As described in an earlier post, France’s ever-vigilent culture wardens see Google as a threat. Specifically they find galling (pun intended) Google’s initiative to scan millions of books from US and UK libraries into its database. This, says French President Chirac, presents “immense danger” of “cultural standardization.” France has managed to get the EU on its side in fighting the threat, with some $77 million committed to an EU book-scanning project, and $46 million toward other projects, including development of a EuroGoogle. All this despite the fact that Google seems perfectly willing to scan European volumes as part of its own project.

Strangely enough, despite the concerns of the French government, the French themselves seem unperturbed by Google–it has a higher share of the search engine market (66%) in France than it does in America (47%). No doubt French websurfers are busy Googling the address of their nearest McDonald’s.

SHARE: 2 comments

Boomerang Politics: Cable Industry Fights for Regulation

by on April 15, 2005

Kyle McSlarrow is, by all accounts, a good guy. I even voted for him when he ran unsuccessfully for Congress in my district a few years ago. It was a tough district, against a tough incumbent. That political challenge, however, was nothing compared to the challenges he now faces as cable’s man in Washington. The industry is threatened with regulation on numerous fronts–local governments are fighting for the right to regulate its Internet and telephone services, the new FCC chairman is talking of regulating cable tiering, and Congress is pushing to extend indecency censorship to cable.

Faced with these threats, McSlarrow–in his opening speech at NCTA’s recent annual convention–argued favor of regulation. Moments after making the case for minimal regulation of cable as it moves into the telephony business, saying that “we must avoid reflexively applying the traditional rules of the road” to this new service, he turned around and called for reflexively applying the traditional rules of the road to telephone companies who want to provide video. Specifically, he said, should be “required to make service available to all residents.” NCTA’s VP was even more direct, saying providers “must abide by certain social obligations, including building out entire communities, and not red-lining or cream-skimming.” (Reported in Tech Daily, April 13).

Such requirements, of course, have long discouraged new entrants into cable, and could end prospects for telco’s to provide video. Since telco franchise areas don’t track cable franchise areas, imposing these requirements could add billions to the cost of telco video, making it cost-prohibitive.

NCTA of course, knows that. But the strategy will likely boomerang. By arguing for regulation in this case, it will only encourage politicians to wield a stronger regulatory hand in other areas too–to cable’s detriment. Moreover, if potential competition to cable is thwarted, cable loses its best substantive argument against regulation of its business.

Of course, NCTA’s inconsistency is nothing new in Washington. As anyone who’s followed telecom lobbying for more than a week or so knows, industry lobbyists routinely argue for policies that help them gain a “fair advantage” over their rivals. It’s probably too much to expect industries to support free-markets policies (however rational) when it conflicts with their self-interest. But it is puzzling to see them supporting policies that will end up hurting them.

SHARE:

What’s on the phone tonight?: Ad agency say mobile phones may overtake TV

by on April 8, 2005

Who competes with whom in today’s communications world? Most policymakers today are just now coming to grips with the fact than old-fashioned wired telephones compete with wireless telephony, and that broadcast TV stations compete with cable and satellite providers. But maybe they should be thinking even more broadly. As reported Wednesday’s Financial Times, BBDO–the world’s third largest ad agency–says that cellphones and other wireless devices may soon overtake television as the biggest advertising medium. Andrew Robertson, BBDO’s CEO, says that the increasing ability of consumers to avoid TV commercials–combined with the tremendous growth of wireless–makes the shift likely. Just one more bit of evidence convergence is real, and that choice and competition is coming from more quarters than we imagine. The development should put paid to any notion that there is any undue market power wielded broadcasters in advertising, and eliminate that as an argument for ownership controls. On the glass-half empty side, it could lead Congress to include cellphones in its ever-expanding plans for indecency restrictions. Stay tuned, this should be fun.

SHARE:

A Gaullist Google?

by on April 5, 2005

They are at it again. Last year, I posted a comment on the French government’s attempt to create a worldwide competitor to CNN–which would be in French only, but not available in France). With that success under its cultural belt, the French are now exploring a new challenge: creating a French competitor to Google.

Continue reading →

SHARE:

The MCI Foodfight: Shareholders, Not Regulators, Should Decide

by on March 11, 2005

Competition is heating up in the telecom industry, and not just for customers. Verizon’s bid for MCI–once thought a done deal — is being aggressively challenged by Qwest. After MCI’s board accepted Verizon’s $6.7 billion bid on Valentine’s Day, Qwest sweetened its own bid, offering some $8 billion. MCI’s board met this week to consider the offer, with a decision expected next week. This intra-Bell food fight should put paid to any notion that Bells are too monolithic to ever challenge one another. And it’s a good thing for investors–not least those with MCI stock.

The problem is that both sides are now making this a political issue. Qwest struck first and hardest, with high-profile statements by CEO Dick Notebaert that a Verizon-MCI merger would dangerously increase concentration and threaten competition in telecom. A media and lobbying campaign has followed–urging regulators to scrutinize the deal. Verizon has been much more restrained, although it too has played the political card, arguing that–because Quest owns an Internet backbone already–its deal could decrease competition.

Continue reading →

SHARE:

An Indecent Proposal: Expanding FCC Speech Controls to Cable

by on March 2, 2005

Ten years ago, when the GOP first took control of Congress, there was much excited talk about abolishing the FCC. Its days were numbered, many thought.

Ten years later, those numbers look pretty large. Rather than talk of shrinking the FCC, two key GOP leaders yesterday said they would expand it. Sen. Ted Stevens–chair of the Senate Commerce Committee–told a group of broadcasters that he wanted to extend the agency’s control over “indecent” speech to cable and satellite television. Rep. Joe Barton–his House counterpart, agreed.

Continue reading →

SHARE:

First Thing We Do Let’s Fire All The Lawyers

by on March 2, 2005

No one ever said there wouldn’t be losers from the planned MCI-Verizon merger. Among the most hard-hit, apparently, will be lawyers. The Legal Times reported recently that the merged firm is expected to “slash” its legal team, which includes 357 in-house attorneys, plus countless others in outside firms. The carnage might not stop there, as the Times quotes one lawyer saying: “Every firm that has a telecom practice is going to get squeezed.”

One problem is that, in addition to the normal sort of legal work any firm has, telecom companies have long devoted enormous resources litigating and lobbying against each other. MCI has been especially lawyer-dependent, with much of its business plan since 1996 dependent upon regulatory largesse. With this year’s mergers, that industry civil war may be be over, or at least be less intense. That’s good news for consumers–as the industry may actually be able to focus on serving customers rather than legal papers.

The heart breaks, however, for the JD’s that might be left behind. Perhaps an EsquireAid concert could be organized…

SHARE:

Broadcast Indecency: More Regulation Not the Answer

by on February 16, 2005

Congress is voting this week on increasing penalties for indecency on the airwaves. Heritage has just released this paper on why its a bad idea.

The conclusion: “Ultimately, the solution to offensive programming lies not with policymakers but with individual consumers and families. Parents and others unhappy with what they see on the television have available to them weapons more powerful than has any congressman. Like other businesses, broadcasters respond to their customers. Complaints to broadcasters and to the advertisers that support them can be effective. But the most powerful weapons consumers wield are their own remote controls. As conservatives know well, the best regulation comes not from government but from individuals making choices for themselves. Rather than look to Washington for answers, we should look to our own thumbs.”

SHARE:

What’s a Landline, Professor?

by on February 15, 2005

On Capitol Hill and at the FCC’s headquarters in SW Washington, a debate is still going on as to whether cell phones are a substitute for old-fashioned landline service. But at American University in NW Washington that debate is just about over: the university has announced that there would be no landlines in dorm rooms starting this fall. The Washington Post has a good story on this, detailing the triumph of wireless at AU and other college campuses around the country. AU’s experience also says a lot about why AT&T and MCI are being folded up. According the the Post story, while AU made hundreds of thousands on long-distance service five years ago, the school last semester made… $1,109.

SHARE:

← Previous Entries

Next Entries →