Should an Independent Regulatory Agency Head Be Visiting the White House This Often?

by on November 29, 2009 · 22 comments

by Adam Thierer & Berin Szoka

Move over, health care reform, climate change, and the economy. Judging by White House visits by various government agency heads, the Obama administration instead appears preoccupied with the re-regulation of communications, media, and the Internet. The Administration has just released logs of all visitors to the White House and Executive Office Buildings from Obama’s inauguration through August—including a staggering 47 visits by Federal Communications Commission (FCC) Chairman Julius Genachowski. By contrast, no other major agency head logged more than five visits.  Chairman Genachowski obviously has an audience with those at the highest levels of power, including the President himself, but this raises questions about just how “independent” this particular regulator and his agency really are.

Genachowski visits to White House

Unprecedented Transparency by White House

The Administration deserves credit for releasing these visitor logs, which offer unprecedented transparency into the White House’s workings.  Unfortunately, the logs lack visitors’ affiliation and title, making it difficult to discern subtle patterns.  Furthermore, each entry indicates only one “visitee” and the total number of people involved.  Full disclosure requires identifying all meeting participants. Nonetheless, President Obama’s gesture is a great first step toward improved government accountability.

This openness allows us to ask questions we couldn’t pose for previous administrations—such as why the FCC head seems to have unparalleled access to the White House.  Lacking data from previous administrations, it’s difficult to make direct comparisons with previous FCC Chairmen, but the sheer number of visits by Chairman Genachowski leaves no doubt about his uniquely close involvement with the White House. Continue reading →

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Gordon Crovitz: Creative Destruction Obviates Antitrust Laws

by on August 3, 2009 · 10 comments

The recently proposed Microsoft-Yahoo deal has rekindled the debate over what role, if any, antitrust regulators should play in the high-tech sector. Adam and Berin have argued that decades-old (sometimes centuries-old) antitrust laws simply cannot keep pace with the relentlessly fast-moving digital economy. And Farhad Manjoo of Slate has concluded that antitrust action against tech companies does more harm than good — even when the facts favor government intervention.

For more on this, check out this excellent column on the future of antitrust enforcement by L. Gordon Crovitz in today’s The Wall Street Journal which quotes my colleague (and fellow TLFer) Wayne Crews:

Markets were so much simpler in the 1890s, when Sen. John Sherman got almost unanimous support in Congress to go after the Standard Oil Co. of Ohio. The Sherman Act and later antitrust laws were supposed to protect consumer interests. That’s not so easy when regulators have to deal with industries as different as oil, with its cartels and long product cycles, and technology, where fast change is a constant necessity for survival…

The bottom line is that by the time regulators can assess a technology market, the market has often moved on. Not long ago, Google was the upstart and the search leaders included names like AltaVista and Excite. “Regulatory intervention in the high-tech sector thwarts the natural evolution of the market,” argues Wayne Crews of the Competitive Enterprise Institute. “Worse, it distorts the response of competitors. Antitrust investigations steer the market in unnatural directions, creating instabilities in entire industry sectors.”

Read the rest here.

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Avoiding an Internet Sales Tax Cartel: Why Congress Must Protect Interstate Commerce & Reject the SSTP

by on April 21, 2009 · 26 comments

There’s a movement afoot in Congress to advance legislation that would eviscerate the Commerce Clause of the Constitution, empower a state-based tax cartel, and potentially decimate the Internet economy in the process.  Business Week has the details:

In the next week, legislators are expected to introduce bills in the House and Senate promising to do away with the “physical presence” requirement. If a bill passes — and that’s a big “if” — it would require all online retailers, except for the tiniest companies, to collect sales taxes in the 23 states that are part of the Streamlined Sales Tax Project. The states would compensate the retailers for the trouble, while promising not to sue them for tax collection mistakes that are made.

The Streamlined Sales Tax Project, or “SSTP”, sounds good in theory but would be disastrous in practice.   Michael Graham of the Boston Herald penned an editorial about the SSTP today and he does a nice job pointing out why, when it comes to “tax simplification,” the devil is always in the details and those details are typically anything but “simple” (or taxpayer-friendly for that matter).

The real danger of the SSTP, however, is what it means for the Constitution and tax competition among the states.  In this 2003 paper I penned with Veronique de Rugy for the Cato Institute, we showed why the SSTP would not only fail to simplify the sales tax code, but would actually cede dangerous taxing powers to state and local governments over the interstate marketplace.  In the process, Veronique and I argued, a multi-state sales tax cartel would be spawned: Continue reading →

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Sirius XM Bankruptcy: Thank Washington for the Delay

by on February 10, 2009 · 34 comments

Sirius XM Satellite Radio—the company born from the merger of Sirius Satelllite Radio and XM Satellite Radio—has “been working with advisers to prepare for a possible bankruptcy filing,” according to the New York Times.

Some may say that Sirius XM was never a fit business to begin with—many of their new subscribers came from the bundling of  subscriptions into the sale of new automobiles—but it’s hard to say what might have been had federal regulators not delayed the merger for 18 months and then added insult to injury by subjecting them to seemingly arbitrary restrictions.

My colleagues Wayne Crews and Ryan Young wrote about this last year at Real Clear Markets noting the conditions that the merged company had to adhere to:

One condition of appeasement for the Sirius-XM merger is that they hand over 8 percent of their channels to noncommercial and “public service” programming. Internet radio does not face this requirement.

Another condition is that they freeze their prices for three years. Meanwhile, their competitors are still free to set their own prices to reflect changing market conditions.

A third condition is that XM-Sirius must introduce á-la-carte subscription models. If this were economical, they would have done this already.

The motivation for these conditions was just as absurd as the conditions themselves—regulators worried that the combined company might overcharge and otherwise abuse consumers.  That’s right, regulators actually believed that consumers would just pay and pay for satellite radio if the prices were raised, rather than abandon the fledgling technology for competing technologies.  Regulators thought this despite the fact that we have no shortage of alternatives.  Traditional radio, iPods, streaming music on our cell phones, Pandora, Last.fm, CDs, MP3s, and the hundreds of other ways that music and talk entertainment can enter our ears.

Continue reading →

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More FCC Cable-Related Regulatory Shenanigans

by on November 20, 2008 · 4 comments

I need not remind anyone here about FCC Chairman Kevin Martin’s ongoing “war on cable.” Even if you hate the cable industry or capitalism in general, there’s just no way I can see how anyone who believes in the rule of law and good government can support Martin’s incessant abuse of power in his Moby Dick-like crusade against the cable industry. A crusade, incidentally, which happens to be motivated by Chairman Ahab’s desire to control speech on cable television, as I’ll note below.

Anyway, the latest chapter in this miserable saga of government-gone-mad is Martin’s recent effort to begin a far-ranging data gathering effort concerning cable prices and analog-to-digital channel movements under the guise of individual complaint enforcement. In a new paper entitled “Der Undue Prozess at the FCC: Part Deux,” my PFF colleague Barbara Esbin shows, once again, how the FCC’s regular processes and procedures are being perverted by Martin to achieve ends not within the agency’s delegated authority. And the results, in this case, will be profoundly anti-consumer.

Esbin documents the four flaws in the FCC’s investigation as follows:

Continue reading →

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Of “Cartels” and Price Wars

by on September 2, 2008 · 10 comments

So, if Tim Wu’s thesis is correct that the broadband marketplace is “a cartel,” should we be reading headlines in today’s Wall Street Journal and CNET News.com like this: “Price War Erupts For High-Speed Internet Service” and “Broadband Price War Brews“? From the WSJ story:

The battle between cable and phone companies to sign up new customers for high-speed Internet service is heating up, creating fresh opportunities for consumers to cut their bills. […] While the most generous offers are coming from the phone companies, some analysts expect cable companies will also become more aggressive in their own promotions as they compete to retain customers.

Geez, if that’s a cartel, give me more of them!

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Bandwidth Cartels, Public and Private

by on August 1, 2008 · 24 comments

[A guest post from Tim Wu]

Well its always fun to have two people you respect read your work and such is the case with Tim and Adam, though to be honest I probably enjoyed Tim’s analysis a little more.

Adam’s reaction is too strong, and doesn’t really get at the main points in the op-ed. The main point was this: that bandwidth has become an essential input in an economy that depends heavily on moving information. For that reason we must gain a sensitivity to the issues of supply and demand surrounding it. If anyone disagrees with that, I’d love to hear why.

I use the comparison to gas and energy because we all know that when gas prices go up or down, large parts of the economy are affected, from tourism through, say, bowling alleys. What I am saying is that bandwidth may have a similar nature: that if prices are high, it effects all of the information-related markets in interesting ways, from startup video services through google. It is still early in the age of the internet economy, so this may be less obvious at this point.

If you agree with this, you must care about industry structure and government’s role in suppressing or helping competition in that market.

Meanwhile, while the OPEC example may be a tad dramatic, harping on the fact that OPEC is comprised of nation-states, as opposed to firms, is a mistake. From an economic perspective, why do we care if it is, say, a worldwide private conspiracy setting prices as opposed to a conspiracy of nation states? The effect on prices is the same whether its four firms setting food prices (like in the 1990s, with the Archer-Daniel Midlands price-setting cases), as opposed to four foreign governments. It is harder to stop the governments, because they rarely respond to lawsuits — but the economic consequences, so long as the price-fixing conspiracy lasts, is no different.

A point made in the comments is also true – which is that telecom tends to be in the realm of state-supported or regulated monopoly, and so there is some confusion as to whether what we are talking about are really private actors in a pure sense. This is a point Hayek made quite well. If government helps create a monopoly, as it has in cable and telephone markets – then being concerned about the consequences of that monopoly makes much sense.

Finally, on Tim Lee’s post – I take much less issue. I’d just like to point out that I am also an advocate of greater propertization as well as more dedication to the commons—its the stuff in the middle I don’t care for. For example, as Tim knows, I would like to see the development of ways for people to own their own fiber connections (homes with Tails). I also believe that, in broad spectrum reform, there should be more propertization of the airwaves. The only silly position, it seems to me, is to maintain on principle that either a commons or private property is of no use whatsoever.

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Tim Wu’s “Mother-May-I” World of Net Neutrality Regulation

by on July 30, 2008 · 21 comments

Tim Wu has an absurd piece in today’s New York Times comparing America’s broadband marketplace to OPEC. This really is quite outrageous, beginning with the fact that OPEC is a GOVERNMENT-RUN cartel. Wu also had a comment in the Washington Post today saying that he didn’t think broadband metering was an outrage. Well, that’s nice. I’m happy that we have Tim’s permission to experiment with new business models for financing broadband networks going forward!

This is indicative of what we can expect in the future once Net neutrality laws get on the books: A world of incessant “Mother may I?” permission-based forms of preemptive Internet regulation. Tim and his radical band of regulatory advocates over at Free Press will incessantly petition the FCC to review each and every business model decision and encourage the unelected bureaucrats at the agency to manage the Internet to their heart’s content.

And what does Tim offer for an alternative vision of the way the world should work since he doesn’t believe private markets can handle the job? Well, it’s back to the Big Government drawing board for more tax-spend-and-subsidize solutions! “Amsterdam and some cities in Utah have deployed their own fiber to carry bandwidth as a public utility,” he says. Yeah, that’s the promised land. After all, it’s working out soooooo well at the municipal level. Please.

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XM-Sirius, regulatory blackmail, and diversity

by on June 17, 2008 · 6 comments

XMSirius As James Gattuso noted last week, the XM-Sirius merger review has now entered the realm of the theater of the absurd. It’s not just that the FCC has lapped its 180-day merger review shot clock two-and-half times already (we’re over 450 days into the proposed merger, after all), but it’s the fact that there seems to be no end to the list of conditions that some regulatory advocates or policymakers want to extort out of the firms. After all, according to the latest press reports, the FCC has already managed to extract the following “voluntary” concessions out of them: a price cap on programming for potentially 3 years; a la carte programming requirements; new interoperability standards for satellite radio receivers; capacity set asides of something like 4 percent of their spectrum capacity (apparently about 12 channels) for non-commercial educational programming; and potentially the lease of another 4 percent of capacity to minority or women-owned enterprises.

These are astonishing concessions, and one is forced to wonder if the merger was really worth it and whether the merged firm will really be able to survive the intensely competitive media landscape it finds itself in with such constraints in place. Let’s not forget, although both firms have grown their subscriber rolls, they have NEVER found a way to turn a profit! And new audio options continue to pop up seemingly every week and bombard our ears with evermore news, information and entertainment.

Alas, all those concessions appear not to be enough to satisfy some on Capitol Hill. According to today’s Washington Post:

Continue reading →

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Larry Lessig, Demagogue?

by on April 30, 2008 · 92 comments

Tom Sydnor and Richard Bennett have both made a big deal of the fact that Larry Lessig is purportedly a demogogue. Richard, for example, says:

It’s an error to consider Lessig a serious scholar with serious views about serious issues. He’s a performer/demagogue who will latch onto any issue that he can use to promote the Lessig brand.

At the Stanford FCC hearing, he portrayed capitalism as a law of the jungle, in pictures of tigers eating prey. What intellectual critique if appropriate to refute that point of view, a picture of George Soros writing a fat check to Free Press so they can bus partisans to the hearing?

Now as it happens, I watched Lessig’s Stanford presentation, so I know what Richard is referring to here. And while this characterization is not wrong, exactly, it’s certainly not a fair summary of Lessig’s point. Here’s what he actually said:

If we had right policy, I don’t think that we would be talking about questions of trust. I don’t think the Department of Justice after the IBM case was talking about whether we trust IBM, or trust Microsoft, or trust Google. We don’t talk about trusting a company just like you don’t talk about trusting a tiger, even though the brand management for tigers has very cute images that they try to sell you on how beautiful and wonderful the tiger is.

If you looked at that picture and you thought to yourself the great thing for my child to do would be to play with that tiger you’d be a fool because a tiger has a nature. The nature is not one you trust with your child. And likewise, a company has a nature, and thank god it does. Its nature is to produce economic value and wealth for its shareholders. We don’t trust it to follow good public policy. We trust it to follow that objective. Public policy is designed to make it profitable for them to behave in a way that serves the objectives of public policy, in this case the objective of an open, neutral network. It makes it more profitable for them to behave than to misbehave.

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