Telecom & Cable Regulation

New Hampshire to Telcos: Just Say “No” to Competition

by on March 13, 2008 · 0 comments

Prohibit competition? It seems hard to believe, but according to a report today in Communications Daily, that’s exactly what a New Hampshire Senate committee has voted to do. A bill — SB-386 — approved by the Energy, Environment and Economic Development Committee would largely ban incumbent telephone companies with more than 25,000 lines from competing in the territory of telephone companies with less than 25,000 lines.

The bill is almost commendable for its anti-competitive candor. For the past generation, there has been a consensus in the telecom policy world in favor of competition. It has uniformly, and justifiably, been considered a positive good. Debates have largely been over how to further competition, not whether it should be furthered. Even those trying to stifle competition have struggled to frame their positions in pro-competitive terms.

Not so the New Hampshire Senate. In the blunt Granite State tradition, there’s little fiddle-faddling in this bill. The message is clear: Competing with small phone companies is bad. Don’t do it.

Never mind whether competition might be good for those companies’ customers. Or whether Fairpoint Communications — which will be the biggest phone company in New Hampshire once its purchase of Verizon’s assets is completed — is itself a “little guy”. Or whether things like this led Verizon to sell to Fairpoint to start with.

New Hampshire’s straightforward talk is refreshing. But Granite State consumers may find the actual policy rather stale and stifling.

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Internet Expert Andrew Odlyzko at George Mason Law

by on March 13, 2008 · 2 comments

Is increasing use of video likely to cause Internet delays? The New York Times today floats the theory that it might be.

But at least the article generously quotes a leading skeptic: Andrew Odlyzko, a Professor of Mathematics and Director of the Digital Technology Center and the Minnesota Supercomputing Institute at the University of Minnesota.

[Odlyzko] estimates that digital traffic on the global network is growing about 50 percent a year, in line with a recent analysis by Cisco Systems, the big network equipment maker.

That sounds like a daunting rate of growth. Yet the technology for handling Internet traffic is advancing at an impressive pace as well. The router computers for relaying data get faster, fiber optic transmission gets better and software for juggling data packets gets smarter.

“The 50 percent growth is high. It’s huge, but it basically corresponds to the improvements that technology is giving us,” said Professor Odlyzko, a former AT&T Labs researcher. Demand is not likely to overwhelm the Internet, he said.

Odlyzko will be in Arlington, Va., next Tuesday, March 18, giving a “Big Ideas About Information” lecture at the Information Economy Project at the George Mason University School of Law.

Back in 1999, when everyone was saying that the Internet was doubling every three months, or 1500 percent annual growth, Odlyzko was the voice of reason: the Internet was only growing at 100 percent per year.

In his “Big Ideas about Information” lecture next Tuesday, Professor Odlyzko will compare the Internet bubble of the turn of the century with the British Railway Mania of the 1840s, the greatest technology mania in history – up until the Dot.com bubble. In both cases, clear evidence indicated that financial instruments would crash.

The event, at 4 p.m., is the latest in a series sponsored by IEP, which is directed by Professor Tom Hazlett. (I serve as Assistant Director of the project.) Can’t make it to Arlington, Va., for the “Big Ideas” lecture? Join us remotely, by Webcast, or over the phone, at TalkShoe.

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USA Today’s story about the Martin FCC

by on March 11, 2008 · 0 comments

Paul Davidson of the USA Today called me last week seeing comment for a story he said he was putting together on the legacy of Kevin Martin’s FCC. I spent roughly 30 minutes on the phone with Davidson and went through a litany of policy issues with him itemizing the “assets and liabilities,” if you will, of the Martin regime, as viewed from the perspective of someone who cares deeply about free markets and property rights. I did not hold back during the interview. I told Davidson in no uncertain terms that Chairman Martin had gone far off the free-market reservation on a great number policy issues.

Anyway, Davidson’s story appeared today and is entitled “FCC Chief Martin Hasn’t Lost Focus on Cable.” It mentions how Chairman Martin has managed to alienate a good portion of the the free-market movement by straying far off the reservation on a great many issues, but it never really gets into the details. To get the complete story, I encourage you to read this editorial that James Gattuso and I penned for National Review as well as an editorial by the magazine’s editorial board that appeared the following day entitled, “Pulling the Cable on Martin’s Crusade.”

And those essays just cover the economic policy failings of the current FCC. To see what has been proposed on the social / speech side of things, see my essay, “FCC Violence Report Concludes that Parenting Doesn’t Work” and “The FCC’s Indecency Bomb.”

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Defending America Through Telephone Subsidies

by on March 10, 2008 · 2 comments

They teach you in law school to make all possible arguments in favor of your client’s position, no matter how far-fetched, since you never know which one will stick. The lawyers for Hawaiian Telcom evidently have taken that advice to heart in making the case that it should be eligible for subsidies from the FCC’s high-cost support mechanism under the Universal Service Fund. In January, the firm asked the FCC for a special waiver from the normal eligibility for payments from the fund, which subsidizes phone service costly areas. Under current rules, a telephone company’s eligibility for payments depends upon its statewide cost average. Hawaiian Telcom is asking that its eligibility be determined on a more specific, wire center by wire center, basis.

It may sound like a technical distinction, but – because many parts of Hawaii have costs far above the statewide average – it is significant, and could mean some $24 million per year in subsidies for the firm, which until a few years ago was owned by Verizon.

It’s not unusual for Hawaii to ask for special dispensation in such matters – in 2006, for instance, the Senate telecom reform bill had a provision creating special telecom subsidy rules for states “comprised entirely of islands.”

In this case, however, the lawyers for Hawaiian Telcom outdid themselves, arguing that the subsidies aren’t just a matter of getting cheaper phone service for Hawaiians, but that they are necessary to national defense. Hawaii, they say, is of “strategic importance” to the U.S., making a well-funded telecommunications system essential.

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Lessig on “blowing up the FCC”

by on March 10, 2008 · 0 comments

Well I think many of us here can appreciate Lawrence Lessig’s call to “blow up the FCC,” as he suggested in an interview with National Review this week. But I wonder, who, then, would be left to enforce his beloved net neutrality mandates and the media ownership rules he favors? He’s advocated regulation on both those fronts, but it ain’t gunna happen without some bureaucrats around to fill out the details and enforce all the red tape.

Regardless, I whole-hearted endorse his call for sweeping change. Here’s what he told National Review:

One of the biggest targets of reform that we should be thinking about is how to blow up the FCC. The FCC was set up to protect business and to protect the dominant industries of communication at the time, and its history has been a history of protectionism — protecting the dominant industry against new forms of competition—and it continues to have that effect today. It becomes a sort of short circuit for lobbyists; you only have to convince a small number of commissioners, as opposed to convincing all of Congress. So I think there are a lot of places we have to think about radically changing the scope and footprint of government.

Amen, brother. If he’s serious about this call, then I encourage Prof. Lessig to check out the “Digital Age Communications Act” project that over 50 respected, bipartisan economists and legal scholars penned together to start moving us down this path.

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Google offering free phone numbers & voice mail to homeless

by on March 4, 2008 · 4 comments

This story from the SF Chronicle is interesting in a number of ways. First, what does this baby step by Google into phone services mean in the long run? I’m not sure if the phone companies ever tried anything like this before (if you know, pls comment), but if they haven’t, it makes them look bad and reinforces the left’s “big, bad, telecoms” paranoia. Second, it is shocking to see Google working with Gavin Newsom again after the WiFi fiasco that ended SF’s attempt to provide “free” (read: government-controlled) WiFi and demonstrated how difficult it is to partner with SF’s local officials.

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Broadband For The People

by on February 26, 2008 · 4 comments

The Federal Communications Commission conducted a public hearing this week on network management before a group of law students – as opposed to, say, engineering students who are the ones who study network management – where lead witness Rep. Ed Markey (D-MA) declared

[T]he Internet is as much mine and yours as it is Verizon’s, AT&T’s or Comcast’s. Please keep front and center in your examination the needs and wishes of the community of users rather than a small coterie of carriers.

As a matter of law, Markey would have flunked if that were an exam question. But of course the government has a right to try to control whatever it wishes one way or another.

The interesting and relevant question is whether and to what degree it’s possible to proscribe network management practices which most reasonable people would consider inappropriate without unintentionally preventing network providers from trying to improve their services while earning a competitive return on their investment.

“[C]learly, complicated network architectures, Internet viruses, and capacity limitations raise real-world, complex and valid questions, conceded FCC Commissioner Michael J. Copps. “Our job is to figure out when and where you draw the line between discrimination and reasonable network management.”

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(Telephone) Welfare As We Know It

by on January 31, 2008 · 6 comments

Reforming the system of heavy subsidies for rural telephone service, which dates back to the Great Depression, has long been a topic of discussion for telecom policy wonks. The Universal Service program is proof-positive that subsidies grow like weeds. Universal Service has spawned a constituency of more than 1,000 small telephone companies who’ve waged a Jihad to preserve their entitlement.

Politicians have always found it expedient to look the other way. This may be changing. In recent years, wireless companies have set up shop in rural areas. Although their costs are generally far less than those of the incumbent wireline providers, one of the FCC’s brilliant “pro-competitive” policies bestows a subsidy for wireless service which is identical to the subsidy for wireline service that’s more expensive to provide. Cable companies who provide telephone service are also entitled to identical support. So guess what? As competing providers have demanded their fair share, the overall cost of Universal Service has exploded. Even some politicians are finding the size of the fund harder to ignore.

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A La Carte Mandates & Price Controls

by on January 31, 2008 · 14 comments

FCC Chairman Kevin Martin’s desire to impose a la carte mandates on cable operators is well-known. But his advocacy has always lacked specifics regarding how such regulation of the multi-channel video world would work in practice.

Ted Hearn of Multichannel News points to this fact in his article today, “FCC Chairman Vague On Capping A La Carte Prices: Martin Has Yet To Spell Out How Mandate Would Work.” Ted notes that, “At least in theory, programmers could set a la carte prices so high that the only rational option would be the purchase of the bundle.” Thus, Ted wants to know “how so-called wholesale a la carte mandates would be effective if the FCC won’t police the per-channel rates being sought”?

Excellent question, Ted, and one that all analysts who follow this issue want the Chairman to answer. After all, almost all the serious economists and Wall Street analysts who have studied this issue have reached a consistent conclusion: Unless you only subscribe to a few channels, your bill will likely go UP, not down, under a la carte regulation. [Here’s a concise explanation of why that will be the case.] So, what’s the FCC going to do if those prices start going up once their plan backfires?

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for Tim’s reading list about the early telephone system…

by on January 23, 2008 · 8 comments

Tim… You should quit reading that crap by John Brooks and read the authoritative history of the issue, you know, the one I wrote for the Cato Journal 14 years ago!…

“Unnatural Monopoly: Critics Moments in the Development of the Bell System Monopoly,” Cato Journal, Vol. 14, No. 2, Fall 1994.

(P.S… I still have all the files I used to prepare that article, so if you need anything that appears in my bibliography, let me know. Most of it is not available online. What are you working on, anyway?)

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