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.
Good discussion-starter, Braden. Both these bills bring up some genuinely tough questions. Here’s what is clear (at least to me)…
One: the spyware problem–broadly defined to include all sorts of Internet pests, ranging from drive-by downloads of funky, unwanted toolbars to stealing your home phone number–is a serious one. People are frustrated. It is, for instance, the number one source of tech support calls to Dell. It’s also the source of quite a few calls to MacAfee, largely from my own household.
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The U.S. isn’t the only country struggling with decisions on how (or whether?) to regulate VOiP. Internet Daily reports today that OfCom, Britain’s telecom regulator, opened an inquiry on the subject Monday. It’s “initial views” are that the service needs a light touch. It argued against requiring standard service features, saying consumers should be able to make informed decisions for themselves about what they want. Perhaps surprisingly, it even argued against mandated “999” service (that’s British for “911”). Seems like good news from old Europe.
FYI, Heritage last week released a new report by Norbert Michel on the effects of file-sharing on music sales. His conclusion:
Despite both sides’ positions, the research thus far does not show a clear effect on record sales from file sharing. Does this mean that P2P is harmless? Not necessarily. There are many reasons why P2P’s impact may not have appeared in empirical data, and there are valid reasons why P2P remains a threat to the music industry.
Michel goes on to discuss the shortcomings of the existing data on the issue. He, by the way, is a research analyst with Heritage’s Center for Data Analysis, and wrote his PHD dissertation on the file-sharing issue.
The other day in my post on the rising cable viewship for political conventions, I cited figures showing cable viewership at about half that of the b-cast networks. I thought that was a lot. Last night, however, Fox news actually beat all three b-cast networks, scoring over 5 million viewers for the GOP convention. Perhaps it was Zell Miller, who knows? Just one more milestone in the ever shrinking influence of broadcast TV in America.
Rudy Giuliani gave a pretty good speech last night, IMHO. But, alas for the GOP, the speech got cold-shouldered from the broadcast networks. Flipping around the bacast dial during the speech, I found Monday night football, a local weather report, and one local broadcast report from the convention floor–but even that didn’t show the speech. Time to take up arms against networks disregard of the body politic? No.
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An interesting contrast to Tom Hazlett’s excellent article on Korean broadband (see Adam’s post below), comes from this week’s Economist magazine. “Europe’s coming leader in broadband is France,” the article proclaims, pointing out that French broadband growth was the highest in Europe last year. The piece credits France’s extensive unbundling regime (it has the second-largest number of unbundled loops in Europe). It doesn’t mention however, that France’s penetration rates have been well below most others in Europe, never mind Korea. Despite the Economist’s breathless support of French policy (unusual for this London-based magazine), I still wouldn’t bet on the land of the Minitel becoming the broadband leader anytime soon.
There’s a whiff of the bizarre in the FCC’s new unbundling decision (see Wayne’s excellent post below). Let’s recap: in 1999, the Supreme Court threw out the FCC’s first stab at unbundling rules. The Commission changed them slightly, but the DC Circuit threw these out in 2002. The FCC’s third try was also thrown out in March. A clearly agitated court gave the FCC a deadline: 60 days to fix the problems, or the rules are gone. That seemed pretty clear. But the process goes on!
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Those of you who know the musical “1776” will remember John Adam’s complaint about the Continental Congress–“Piddle, twiddle and resolve, not one damn thing do they solve.” Seems that might apply to the 21st century FCC as well. The FCC is now in the process of considering reconsideration (awkward, but true), of its decision to require “line-sharing,” i.e. requiring telcos to allow competitors to lease certain frequencies of a single wire. This requirement was to be dropped according to last year’s unbundling order, and was upheld by the D.C. circuit earlier this year. Issue settled? No, Chairman Powell is reported now to be pushing to put line-sharing back into effect, or more precisely reverse the decision to eliminate the rule. (Still with me?) One can only assume the guiding maxim at the FCC seems to be “no decision left behind,” and that the goal is maximum uncertainty in telecom markets. More important, the rule isn’t needed, with competition in telecom going full steam. Stay tuned for the musical version of this FCC folly.
A few weeks ago, perhaps upset that the broadcast networks didn’t feel compelled to offer gavel-to-gavel coverage of the Democratic convention, John Kerry stated his opposition to media consolidation, supporting stronger ownership rules. A threat then, to the big media companies? They don’t seem to think so. According to figures from the Center for Responsive Politics (as reported in today’s Internet Daily), Kerry has received far more in cash from media companies than President Bush–beating him $1.9 million to $1.1 million. Overall, some 2/3 of media dollars this cycle has gone to Dems, with Time Warner giving 72% and Viacom 74% to the Democrats. So much for the Left’s claim that big media corporations are part of the vast right-wing conspiracy. If only they were. Instead, they are more influenced by their Hollywood roots than Washington battles. Combine that with the general masochistic tendency of U.S. corporations to support their own detractors, and the CRP figures may not be that surprising.
An eclectic group of telecom companies yesterday unveiled a long-awaited plan for revamping intercarrier compensation. Everyone knows the current system for compensating firms for carrying one another’s traffic is a mess. Rates vary wildly based on how each carrier is defined by regulators: long-distance firms, LEC, ISPs all pay different rates, with differences based on long-obsolete technologies and regulatory schemes. Worse, the system masks a sizable subsidy program, largely to the benefit of rural telcos and their customers. And the whole creaky mechanism is being undercut by the emergence of VOIP, which is less firmly in its clutches.
Yesterday’s announcement was the result of a year-long negotiation among a good part of the telecom world–and was backed by SBC, AT&T, MCI, Level3 and others not normally seen on the same press release. And it includes a lot of sensible and overdue reforms: a uniform compensation rate, putting them on a flat (rather than per-minute) basis, and encouraging private negotiation of compensation. For this the plan deserves kudos. But there are problems with this bandwagon as well. Among other things it would shore up universal service subsidies by making cable and VOIP phone consumers pony up contributions for the first time. That seems a lost opportunity: yes, these services present a challenge to the whole subsidy system. But rather than protect the subsidies from that challenge, why not use it to to gain more substantial reform of the whole subsidy system?
This, by the way, may be one reason why many major telecom players stayed away from this proposal–three of the Bell companies sat it out, as did the cable industry. (This in itself is an interesting development. For decades, the battlelines in telecom have been boringly predictable–LD firms on one side, Bells on the other. Now, those lines are mixing.) Stay tuned for a long-running battle at the FCC and the states–and within the telcom industry itself–on this issue.
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.