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Railroading Broadband?

by on February 18, 2010 · 0 comments

FCC Chairman Julius Genachowski’s comparison of broadband with electricity in a speech this week has generated mixed reviews in the blogosphere. Manny Ju says that this shows Genachowski “gets it” — that he understands the transformational power of broadband and how it will come to be regarded as a ubiquitous necessity in the years ahead. Scott Cleland is more alarmed: “The open question here is electricity transmission is regulated as a public utility. Is the FCC Chairman’s new metaphor intended to extend to how broadband should be regulated?”

It may surprise some technophiles, but this kind of discussion even predates electricity. The advent of the railroads in the 19th century brought similar arguments.  Railroads were usually a heck of a lot cheaper way of hauling goods and people across land than the next best alternative at the time: wagons. Railroads were “The Next Big Thing” that no town could do without — especially if the town lacked access to navigable waters. Lawmakers handed out subsidies (often in the form of land grants), then regulated railroads to control perceived abuses, such as discriminatory pricing for different kinds of traffic or traffic between different locations. Henry Carter Adams, the godfather of economic regulation in the U.S., said all shippers deserved “equality before the railroads.” Even today, commentators lament the rural towns that people abandoned because they lacked rail access. Deja vu all over again! 

As long as we’re deja-vuing, let’s remember a few little problems America encountered down the railroad regulatory track:

  1. Subsidies created “excess capacity” — that is, more capacity than customers were willing to pay for. In some cases, subsidies attracted shady operators into the railroad business whose main goal was to get land grants or sell diluted stock offerings to the public, not build and operate railroads. 

  2. Regulation ended up caretlizing railroads and propping up rail rates, which faced downward pressure because of the excess capacity.

  3. When another low-cost, convenient alternative (trucking) came along in the 1930s, truckers got pulled into the cartel when they too were placed under Interstate Commerce Commission regulation to keep them from undercutting rail rates.

  4. Despite cartelization, by the late 1970s, 21 percent of the nation’s railroad track was operated by bankrupt railroads, even though the railroads had shed unprofitable passenger service to Amtrak earlier in the decade. Part of the reason was excessive costs: Because access to freight rail service was still considered a right, regulation prevented railroads from abandoning money-losing lines. Part of the reason was restraints on competition: The regulatory passion for “fair” pricing kept railroads from competing aggressively with each other or with truckers. When the Southern Railway introduced its 100-ton “Big John” grain hopper cars in the 1960s, for example, it couldn’t offer shippers lower rates in exchange for high volume until it appealed an Interstate Commerce Commission all the way to the Supreme Court.

By the late 1970s, a Democratic president, a bipartisan majority in Congress, and economists across the political spectrum agreed that railroad regulation needed a radical overhaul. Regulatory reforms made it easier for railroads to abandon unprofitable service, in many cases turning track over to new, lower-cost short lines and regional railroads. Prices for more than 90 percent of rail traffic were effectively deregulated. At the same time, Congress deregulated rates and entry on interstate trucking routes. This encouraged rail-truck competition and also allowed each mode to specialize in serving those markets it could serve at lowest cost.

Rail rates fell, and railroads came out of bankruptcy. The current system is hardly perfect, but most economic research suggests that most consumers, shippers, and railroads are much better off now than they were under the old regulatory system.  (For reviews of scholarly research on this, check out Clifford Winston’s paper here  or my article here.)

Will we repeat the cycle with broadband? I don’t know, but to this railfan, the current broadband debate is looking soooo retro — as in 19th century!

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FCC’s Genachowski Promises He’s Not Out to Regulate Net, New Media

by on February 10, 2010 · 12 comments

By Berin Szoka & Adam Thierer

We learned from The Wall Street Journal yesterday that “Federal Communications Commission Chairman Julius Genachowski gets a little peeved when people suggests that he wants to regulate the Internet.” He told a group of Journal reporters and editors today that: “I don’t see any circumstances where we’d take steps to regulate the Internet itself,” and “I’ve been clear repeatedly that we’re not going to regulate the Internet.”

We’re thankful to hear Chairman Julius Genachowski to make that promise. We’ll certainly hold him to it. But you will pardon us if we remain skeptical (and, in advance, if you hear a constant stream of “I told you so” from us in the months and years to come). If the Chairman is “peeved” at the suggestion that the FCC might be angling to extend its reach to include the Internet and new media platforms and content, perhaps he should start taking a closer look at what his own agency is doing—and think about the precedents he’s setting for future Chairmen who might not share his professed commitment not to regulate the ‘net. Allow us to cite just a few examples:

Net Neutrality Notice of Proposed Rulemaking

We’re certainly aware of the argument that the FCC’s proposed net neutrality regime is not tantamount to Internet regulation—but we just don’t buy it. Not for one minute.

First, Chairman Genachowski seems to believe that “the Internet” is entirely distinct from the physical infrastructure that brings “cyberspace” to our homes, offices and mobile devices. The WSJ notes, “when pressed, [Genachowski] admitted he was referring to regulating Internet content rather than regulating Internet lines.” OK, so let’s just make sure we have this straight: The FCC is going to enshrine in law the principle that “gatekeepers” that control the “bottleneck” of broadband service can only be checked by having the government enforce “neutrality” principles in the same basic model of “common carrier” regulation that once applied to canals, railroads, the telegraph and telephone. But when it comes to accusations of “gatekeeper” power at the content/services/applications “layers” of the Internet, the FCC is just going to step back and let markets sort things out? Sorry, we’re just not buying it. Continue reading →

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Digital Citizenship, Media Literacy & Child Safety

by on February 9, 2010 · 2 comments

In all my work on online child safety issues, I always try to stress how important education and media literacy efforts are. Indeed, technical parental control tools and methods, while important, should be viewed as just one part of a more holistic approach to encouraging digital literacy and digital citizenship.  In recent years, many scholars and child development experts such as Nancy Willard of the Center for Safe and Responsible Internet Use, Anne Collier and Larry Magid of ConnectSafely.org, Marsali Hancock of iKeepSafe, Common Sense Media, the Family Online Safety Institute, and many others have worked to expand traditional education and media literacy strategies to place the notion of digital citizenship at the core of their lessons and recommendations.

What does it mean? Anne Collier defines digital citizenship as “Critical thinking and ethical choices about the content and impact on oneself, others, and one’s community of what one sees, says, and produces with media, devices, and technologies.” And Common Sense Media defines digital literacy and digital citizenship as follows:

Digital Literacy programs are an essential element of media education and involve basic learning tools and a curriculum in critical thinking and creativity. Digital Citizenship means that kids appreciate their responsibility for their content as well as their actions when using the Internet, cell phones, and other digital media. All of us need to develop and practice safe, legal, and ethical behaviors in the digital media age. Digital Citizenship programs involve educational tools and a basic curriculum for kids, parents, and teachers.

Stephen Balkam, CEO of the Family Online Safety Institute, had an excellent essay in The Huffington Post yesterday on “21st Century Citizenship,” that did a fine job of explaining these concepts in practical terms:

Continue reading →

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Fun Facts from the FCC's 2011 Budget Request

by on February 3, 2010 · 0 comments

The Federal Communications Commission released its 102-page fiscal year 2011 budget request to Congress this week.  Here are some fascinating factoids about the agency that I’ll pass on without commentary, beyond saying that they caught my attention:

  • The FCC has hired “close to 54 data experts, statisticians, econometricians, economists, and other expertise” to help with the National Broadband Plan mandated under the Recovery Act. These are “term employees,” meaning they’re not permanent, but the FCC says it needs more permanent hires to work on broadband after the plan is done. (p. 2)
  • The commission asks for a “budget” of $352.5 million. (p. 1) But its total requested spending actually tops $440 million, because it also asks for authority to spend $85 million of spectrum auction proceeds to cover the cost of auctions. (p. 5)
  • The administration proposes to give the FCC authority to charge user fees for unauctioned spectrum licenses, with projected revenues totaling $4.8 billion through 2020. (p. 6)
  • The FCC commits to 24 “outcome-focused performance goals.”  (pp. 16-29) Most of these goals are phrased as activities, not accomplishments, with lots of verbs like “enact,” “encourage,” “facilitate,” “enforce,” “promote,” “work to,” “foster,” advocate,” and “maintain.” In some cases, one can identify the actual concrete outcome by looking at additional wording or performance targets. It’s clear, for example, that the FCC wants to make sure that all Americans have access to broadband. In other cases, the concrete outcome, or how we would know if it is accomplished, is not clear.  For example, the only targets listed under the goal “Promote access to telecommunications services to all Americans” are targets for enforcement actions rather than measures of whether the FCC has actually accomplished the desired outcome.
  • The FCC has been supported almost entirely by regulatory fees assessed on regulated companies, with virtually no direct appropriations of tax dollars since fiscal year 2003 (p. 31).
  • Spectrum auctions have generated more than  $51.9 billion for the US Ttreasury. (p. 33)

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Are You An Internet Optimist or Pessimist? The Great Debate over Technology’s Impact on Society

by on January 31, 2010 · 194 comments

[I’ve been working on an outline for a book I hope to write surveying technological skepticism throughout history. I first started thinking about this topic two years when I noticed that a great number of recent books about Internet policy could generally be grouped into one of two camps: Internet optimists vs. Internet pessimists. I subsequently penned an essay on the subject that generated a fair bit of attention. So, I figured I must be on to something, and the more Net policy books I read, the more I realized that the divisions between these two camps were growing wider and increasingly heated. Thus, I thought I would share this very rough draft (much of it still in outline form) of the opening chapter of that book I want to write about this great intellectual war over the impact of technology on society. I invite reader input. Update Jan. 2011: I finally published a full-length essay on this topic. You can find it here. ]

__________

The impact of technological change on culture, learning, and morality has long been the subject of intense debate, and every technological revolution brings out a fresh crop of both pessimists and pollyannas. Indeed, a familiar cycle has repeat itself throughout history whenever new modes of production (from mechanized agriculture to assembly-line production), means of transportation (water, rail, road, or air), energy production processes (steam, electric, nuclear), medical breakthroughs (vaccination, surgery, cloning), or communications techniques (telegraph, telephone, radio, television) have appeared on the scene.

The cycle goes something like this. A new technology appears. Those who fear the sweeping changes brought about by this technology see a sky that is about to fall. These “techno-pessimists” predict the death of the old order (which, ironically, is often a previous generation’s hotly-debated technology that others wanted slowed or stopped).  Embracing this new technology, they fear, will result in the overthrow of traditions, beliefs, values, institutions, business models, and much else they hold sacred.

The pollyannas, by contrast, look out at the unfolding landscape and see mostly rainbows in the air. Theirs is a rose-colored world in which the technological revolution du jour is seen as improving the general lot of mankind and bringing about a better order.  If something has to give, then the old ways be damned! For such “techno-optimists,” progress means some norms and institutions must adapt—perhaps even disappear—for society to continue its march forward.

Our current Information Revolution is no different. It too has its share of techno-pessimists and techno-optimists. Indeed, before most of us had even heard of the Internet, people were already fighting about it—or at least debating what the rise of the Information Age meant for our culture, society, and economy. Continue reading →

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Sweden’s Bildt: Tear Down These Virtual Walls

by on January 25, 2010 · 626 comments

Lots of good things in The Washington Post today following up on U.S. Secretary of State Hillary Clinton’s historic address last week about the importance of global Internet freedom. First, The Post has published a powerful supporting statement from Sweden’s Minister of Foreign Affairs, Carl Bildt, entitled, “Tear Down These Virtual Walls.” Bildt notes that:

Two decades ago a wall made of concrete, built to divide the free and unfree, was torn down. Today it is the freedom of cyberspace that is under threat from regimes as keen as dictatorships past to control and limit the possibilities of their citizens. They are trying to build firewalls against freedom.  At the end of the day, I am convinced they are fighting a losing battle — that cyber walls are as certain to fall as the walls of concrete once did.

He then goes on to argue that, following Secretary Clinton’s address last week, “We should now forge a new transatlantic partnership for protecting and promoting the freedoms of cyberspace. Together, we should call for all these walls to be torn down.” He continues:

Much like the way the rule of the law is critical to protecting the freedoms we enjoy as citizens in our societies, and international law protects the peace between our nations, we must seek to shape the rules that will protect the rights and the freedom of cyberspace.

Importantly, The Washington Post itself also editorialized today about “The Internet War.” Continue reading →

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Some Amazing Numbers Re: Growth of Net & Social Media

by on January 24, 2010 · 10 comments

Most of you have probably already seen this but Pingdom recently aggregated and posted some amazing stats about “Internet 2009 In Numbers.”  Worth checking them all out, but here are some highlights:

  • 1.73 billion Internet users worldwide as of Sept 2009; 18% increase in Internet users since previous year.
  • 81.8 million .COM domain names at the end of 2009; 12.3 million .NET & 7.8 million .ORG
  • 234 million websites as of Dec 2009; 47 million were added in 2009.
  • 90 trillion emails sent on the Internet in 2009; 1.4 billion email users worldwide.
  • 26 million blogs on the Internet.
  • 27.3 million tweets on Twitter per day as of Nov 2009.
  • 350 million people on Facebook; 50% of them log in every day; + 500,000 active Facebook applications.
  • 4 billion photos hosted by Flickr as of Oct 2009; 2.5 billion photos uploaded each month to Facebook.
  • 1 billion videos served by YouTube each day; 12.2 billion videos viewed per month; 924 million videos viewed per month on Hulu in the US as of Nov 2009; + the average Internet user in the US watches 182 online videos each month.

And yet some people claim that digital generativity and online innovation are dead!   Things have never been better.

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Hillary Clinton’s Historic Speech on Global Internet Freedom

by on January 21, 2010 · 137 comments

This morning at the Newseum in Washington, DC, U.S. Secretary of State Hillary Rodham Clinton delivered remarks on Internet freedom and the future of global free speech and expression. [Transcript is here + video.] It will go down as a historic speech in the field of Internet policy since she drew a bold line in the cyber-sand regarding exactly where the United States stands on global online freedom. Clinton’s answer was unequivocal: “Both the American people and nations that censor the Internet should understand that our government is committed to helping promote Internet freedom.” “The Internet can serve as a great equalizer,” she argued. “By providing people with access to knowledge and potential markets, networks can create opportunities where none exist.”

Unfortunately, however, “the same networks that help organize movements for freedom… can also be hijacked by governments to crush dissent and deny human rights.”  Echoing Winston Churchill’s famous “iron curtain” speech, Sec. Clinton argued that “With the spread of these restrictive practices, a new information curtain is descending across much of the world.”  She noted that virtual walls are replacing traditional walls in many nations as repressive regimes seek to squash the liberties of their citizenry.  That’s why the Administration’s bold stand in favor of online freedom is so essential.

Importantly, Sec. Clinton made it clear that the Obama Administration is ready to commit significant resources to this effort. She said that, over the next year, the State Department plans to work with others to establish a standing effort to promote technology and will invite technologists to help advance the cause through a new “innovation competition” that will promote circumvention technologies and other technologies of freedom. Sec. Clinton also challenged private companies to stand up to censorship globally and challenge foreign governments when they demand controls on the free flow of information or digital technology.

That is particularly important because Secretary Clinton’s speech comes on the heels of the recent news that Google and at least 30 other Internet companies were the victims of cyberattacks in China, which raises profound questions about the future of online freedom and cybersecurity. Sec. Clinton’s remarks will make it clear to online operators that the U.S. government stands prepared to back them up when they challenge the censorial policies of repressive foreign regimes.

Continue reading →

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Regulatory Whack-A-Mole, Part II

by on January 21, 2010 · 0 comments

Congress and the Federal Communications Commission periodically get upset over wireless phone early termination fees. The latest uproar has occurred during the past couple months in response to Verizon’s doubling of the early termination fee on “smart” devices. The fee falls by $10 per month, leaving s $120 early termination fee in the last month of a two-year contract.

Policymakers still have not gotten the message that they cannot really do much about this “problem” unless they comprehensively regulate wireless rates and terms of service. (I would not recommend this, since a competitive wireless market has brought us rate reductions that even perfectly-functioning regulation would be unlikely to achieve. ) Attempts to poke and prod early termination fees are like the carnival game “whack-a-mole.”  As soon as you whack one mole with a stick, another one pops up out of another hole.

Sen. Amy Klobuchar (D-MN) is taking another whack.  In 2007, she introduced legislation requiring wireless companies to prorate early termination fees “in a manner that reasonably links the fee to recovery of the cost of the device or other legitimate business expenses.”  Coincidentally, the major carriers promised to prorate their fees at about the same time her bill got a hearing.  Then last November, up popped a mole from Verizon’s hole. Early termination fees for smart devices are prorated, but doubled. Now the good senator is whacking away at that mole with legislation that requires wireless companies to prorate early termination fees AND mandates that the early termination fee cannot exceed the size of the subsidy the carrier is giving the consumer on the phone.

Smart whack, huh?  Doesn’t cost-based regulation of early termination fees eliminate the loophole (oops, mole-hole)?

Not necessarily. In the first place, the legislation could create an accounting nightmare with plenty of opportunities for companies to game the system, especially if they offer different subsidies on different phones. Recall that the original impetus for breaking up the old AT&T landline monopoly was that AT&T was gouging consumers by charging them inflated prices to lease equipment manufactured by its subsidiary, Western Electric. With the AT&T breakup, the government essentially gave up on managing that problem and completely prohibited the monopoly local phone companies from manufacuring equipment. I think George Santayana just left me a voice mail. Even if the game board is restricted to early termination fees, we’ll soon see uglier, nastier moles emerge from uglier, nastier holes.

But the wireless phone contract is about more than early termination fees. Even if policymakers succeed in imposing effective,  cost-based regualtion on early termination fees, wireless companies can still change other terms of the contract to compensate for any revenue losses. The law must have a truly long arm to reach the diverse array of rodents that will scurry forth from diverse orifices.

Stay tuned for the next whack.

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Is the FCC Above the Law?

by on January 15, 2010 · 7 comments

Can the Federal Communications Commission (FCC) just do anything it wants? If it wants to bring the entire Internet under its thumb, or regulate any speech uttered over electronic media, can it just do so on a whim? The agency’s recent actions on the Net neutrality and free speech fronts seems to suggest that the agency thinks so.

I don’t need to rehash here what the FCC has been up to on the Net neutrality front.  Most everyone is familiar with how the agency has essentially been trying to invent its authority to regulate out of thin air.  If you want the whole ugly history of how this charade has unfolded over past few years, I encourage you to read these amazing comments filed today in the FCC’s net neutrality NPRM proceeding by my PFF colleague Barbara Esbin.  Barbara simply demolishes the FCC’s argument that it can do anything it wants under the guise of its “ancillary jurisdiction.” As Barbara argues in her comments, the FCC’s position “is akin to saying that the FCC can regulate if its actions are ancillary to its ancillary jurisdiction, and that is one ancillary too many.”  She notes that:

The proposed rules regulating the services and network management practices of broadband Internet providers must rest, if at all, on the Commission‘s implied or ancillary jurisdiction and the NPRM fails to provide a basis upon which the exercise of such jurisdiction can be considered lawful.

She shows how farcical it is for the FCC to concoct its supposed authority to regulate from provisions of the Communications Act that have nothing whatsoever to do with Net neutrality or even expanding regulation in general. Specifically, the agency’s reliance on sections 230(b) and 706(a) of the Telecommunications Act of 1996 is completely outlandish.  Anyone who knows a lick about telecom law and the nature of those two sections understands they were never intended to serve as the basis of an expansive new regulatory regime for the Internet. As Barbara puts it:

This exercise—searching for snippets and threads of regulatory authority over a communications medium as significant as the Internet in multiple, unrelated statutory provisions—should signal to the Commission that no credible source of authority to regulate Internet services exists.

All I have to say is, thank God for checks and balances. I believe the courts will put a stop to this nonsense, but it will take some time.  Until then, I suppose the FCC will continue to act like a rogue agency, hell-bent and tossing the constitution to the wind and concocting asinine theories about why they should be allowed to do anything they want. But there are signs that the courts are ready to start holding the FCC more accountable. Continue reading →

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