Independence Day 2012

A Washington Post story a couple of weeks ago reported that Chen Guangcheng, the blind Chinese legal activist, newly arrived in America, has been using the Declaration of Independence as a makeshift textbook. As the Post story put it: "The 236-yesr-old document can make for difficult reading, but for a man who spent most of the past decade imprisoned in China while fighting for the rights of his fellow villagers, it resonates deeply." 

What a marvelous text for an English vocabulary lesson! "Equal" and "Truths" and "Liberty" and "Consent of the Governed" and "Unalienable Rights." (Yes, it is "unalienable," not "inalienable," in the Declaration's text.)

At a time when, according to a Boston Globe story, a third of American citizens don't know when the Declaration of Independence was signed, perhaps we can take some comfort – as well as some inspiration – from the fact that Chen is drawn to the Declaration as his vocabulary textbook. 

Chen is quoted as stating that "China is on a march toward rule of law and democracy," and when that time comes, concepts like those proclaimed in the Declaration of Independence "will play a vital role." 

The Free State Foundation's website proclaims one of our purposes is to promote understanding of "rule of law" principles. The "rule of law" is a term often bandied about, but sometimes little understood. So, with Chen's hard-won freedom in mind, it is appropriate to examine what the "rule of law," properly understood, means. 

While there are some variations in formulation, for most commentators, crucial elements of a rule of law regime are: (1) fidelity to rules, (2) of principled predictability, (3) embodied in valid authority, (4) that is external to individual government decisionmakers. Putting these elements together somewhat less formally, in his book The Rule of Law in America, Ronald Cass explains that the rule of law "pulls society in the direction of knowable, predictable, rule-based decision making, toward the alignment of power with legitimacy." 

I don't know for sure, of course. But I suspect that Chen, here in America celebrating his first Independence Day on our shores, will probably take time from his English lessons to reflect on how the Declaration of Independence proclaims principles consistent with the promotion of the Rule of Law, and how our Constitution, properly understood, secures our rights and protects our liberty under such a rule of law regime. 

It would not be a bad thing for us to pause and reflect along with Chen. 

And my very best wishes to all for a celebratory, as well as reflective, Independence Day. 

PS – Previous Independence Day messages are here: 2007; 2008; 2009; 2010; and 2011.      

It's Not For Free Press To Decide

Today's Communications Daily [subscription required] has a story concerning News Corp.'s plan to separate its publishing businesses from its entertainment assets. Not surprisingly, the story's focus is on the impact that the News Corp. decision may have on consideration of the FCC's decades-old newspaper-broadcast cross-ownership ban. 

In my opinion, in light of all new media outlets and diversity of information sources that characterize today's media marketplace, the newspaper-broadcast cross-ownership ban is one of the most obsolete regulations (and there are many) that the agency just can't seem to get off its rule books. 

But do not fear. I am not going to recite the tortured history of efforts to relax or eliminate the FCC's media ownership rules on a hot summer Friday afternoon. I am not even going to explain, as I have done many times before, why the rules should be relaxed or eliminated.

What I want to do is pretty simple. And that is to show how the mindset of the self-denominated public interest groups that oppose all efforts to relax existing media ownership restrictions is so fundamentally at odds with sound principles. 

According to Communications Daily, while acknowledging that media companies are increasingly separating their assets, here is what Free Press Senior Policy Counsel Corey Wright had to say: 

“Media companies are recognizing in fact that cross-ownership of TV stations and newspapers is not necessarily the best for their bottom line. Why should we bother to allow increased cross-ownership when it is not really good for anyone?” 

Please let this sink in: What Ms. Wright is saying, in no uncertain terms, is that Free Press knows that cross-ownership is not really good for the firms that would prefer to adopt (perhaps to their subsequent regret) that business model. And that it is Free Press's prerogative, with the FCC's help, to save these firms from themselves by not allowing increased cross-ownership. 

This is not the way our American free enterprise system is supposed to work, of course. In competitive markets – and this now includes the markets in which the newspaper-broadcast cross-ownership ban operates – firms should be allowed to organize themselves in the manner that they discern will be most efficient, economical, and productive. This marketplace freedom ultimately enhances consumer welfare – and by this I mean to include consumers who are readers, viewers, and listeners as well. 

Some firms will decide, as News Corp. apparently has decided, to separate assets and de-consolidate. Others will decide to integrate assets and consolidate. Some will succeed in their strategies, and others will fail. Remember AOL-Time Warner merger that caused the public interest advocates to go apocalyptic with their doomsday scenarios? 

Well, it's never doomsday for me on a Friday afternoon. But I don't want to head into the weekend with you thinking, along with Ms. Wright, that a proper reason for the FCC to retain the media ownership restrictions is to protect media companies from themselves. It is not. 

News Corp.'s apparent deconsolidation decision ought to cause the FCC to think hard about the rationale for retaining outdated media ownership rules on its books. 

And, as importantly, the rationale offered for such retention by one of the most vocal advocates for status quo regulation should cause the FCC to ponder hard whether its own mindset has been unduly, and wrongly, affected such misguided thinking.

WCIT – A Hot Topic

Free State Foundation President Randolph May will participate as a panelist, Thursday, June 28, 2012, at the Federal Communications Bar Association’s program, “The 2012 WCIT: Crafting International Telecommunication Regulations for the Twenty-First Century.” The program focuses on the upcoming World Conference on International Telecommunications (WCIT), at which Internet governance issues will be addressed. 

The Free State Foundation recently held a standing-room-only seminar at the National Press Club on the December 2012 WCIT conference taking place in Dubai. The FSF program was broadcast live on C-SPAN. 

You can also read Mr. May’s blogs on the WCIT conference here, here, and here.

A Good Spectrum Deal for Consumers

It's worth taking special note of the spectrum swap deal announced on Monday by T-Mobile and Verizon Wireless because it is a positive development. Here is an AP story on the deal that explains what each provider is getting and giving up. 

When the deal was announced, here is a statement I gave to the press:

"Foremost, the spectrum swap announcement by Verizon and T-Mobile is good for consumers because it should result in getting additional spectrum in use for 4G broadband services sooner rather than later. It paves the way for T-Mobile to become a stronger competitor, which is a positive for consumers. And it ought to mean the Commission acts with dispatch to approve the Verizon-SpectrumCo transaction." 

If the FCC approves the transaction, T-Mobile will be able to be a stronger competitor in the wireless broadband marketplace and this is good for consumers. 

And it is also good for consumers when marketplace participants are allowed to negotiate spectrum swaps in the secondary market without having the FCC dictate its own preferred market outcomes. 

With no one seriously disputing the looming spectrum crunch, for the sake of meeting the rapidly growing consumer demand for wireless broadband services, the FCC needs to make it a priority to approve promptly both the Verizon Wireless-SpectrumCo and T-Mobile-Verizon Wireless spectrum transactions.

More Reforms Needed to Relieve Maryland's Pension Liability Problems

The Pew Center On States' June 2012 Issue Brief, "
Widening the Gap Update" spotlights the problem of states' unfunded liabilities for public sector pensions and retiree health care. According to the Issue Brief:

In fiscal year 2010, the gap between states' assets and their obligations for public sector retirement benefits was $1.38 trillion, up nearly 9 percent from fiscal year 2009. Of that figure, $757 billion was for pension promises, and $627 billion was for retiree health care. 

Count Maryland among the many states whose irresponsibility in state budgeting practices puts them into pension liability predicaments. The Pew Center's
Fact Sheet on Maryland points out that Maryland has failed to pay in full its annual pension contributions since 2005. As of fiscal year 2010, Maryland's pension deficit was $20 billion, and the state had only funded 1 percent of its $16 billion obligation for retiree health care.

Also count Maryland among those states that have recently undertaken a number of reforms to shore up their pension and health care funding shortfalls. As the Fact Sheet explains:

Maryland lawmakers approved pension cuts in 2011, including increasing contributions from current and future employees and reducing annual cost-of-living increases for retirees. Lawmakers also reduced retiree health care benefits by requiring higher co-payments for prescription drugs.

But like many other states, Maryland has more reforming work to do. As the Issue Brief puts it, "continued fiscal discipline and additional reforms will be needed to put states back on a firm footing."

Next steps for Maryland to shore up its unfunded obligations should include:

• Adjusting its annual return on investment assumptions. Maryland's pension system assumes a rosy 7.75 percent annual return on investment. True, investments enjoyed high returns over the last two fiscal years. But with stocks tumbling in 2008 and 2009, that same investment return assumption is responsible for significant funding shortfalls. A May 27 New York Times article, for instance, cites a National Association of State Retirement Administrators' finding of an average 5.7 percent return for state pensions over the last ten years.
• Increasing and meeting its annual pension contribution amount. As explained in a June 20 MarylandReporter.com article, Maryland continues to rely on the "corridor methodology" as a means of avoiding full pension funding for each year. Under this method, the state can make annual pension contributions equal to the prior year's contributions plus 20% of the difference between the prior year's contributions and what it otherwise would have had to contribute in the current year. By eliminating the corridor method and increasing its annual payments, Maryland should meet its obligations in full, every year.
• Transitioning to a defined contribution or hybrid plan. As we've explained in prior blog posts, Maryland should transition future employees from a defined benefit pension (where benefits are determined by a set formula) to a defined contribution pension (where benefits are determined by investment returns). The Issue Brief points out that thirteen states have hybrid plans, with neighboring Virginia adopting a hybrid plan in 2012. Such plans combine features of defined benefit and defined contribution plans. A transition to a defined contribution or hybrid plan would more closely tie benefits to market performance, reducing the state's obligation to provide additional pension funding when markets experience economic downturn.

Further delay by Maryland in reforming its pension system will make it that much harder to achieve fiscal responsibility. 

Blair Levin's Big Bandwidth Vision

I want to commend to you a recent speech by my long-time friend Blair Levin, the former head of the FCC's National Broadband Plan task force and now the head of a project (of which he is the prime mover) called Gig.U. At the time of Gig.U's launch in August 2011, I said in a blog post: "All in all, it looks like a very worthwhile venture, one that, if successful, could bring many benefits, not only to the university communities involved but to the nation at large." 

Blair's speech has a mouthful of a title, "Upgrading America: Achieving a Strategic Bandwidth Advantage and a Psychology of Bandwidth Abundance to Drive High-Performance Knowledge Exchange." A big title – but a speech with a big idea, consistent with the large ambition of the Gig.U project. 

At the outset of the speech, Blair states: "What I want to do today, however, is to argue that over the next few years, the prime mission of communications policy ought to be to eliminate bandwidth as a constraint on innovation and productivity." In the remainder of the address, he does an admirable job of arguing that bringing "hubs of huge bandwidth" to places – like university and research communities – where such "excessive bandwidth" will be utilized in ways that optimize productivity and creativity for all, is an important goal. 

While I may not agree with every aspect of Blair's address, I do readily commend the vision he articulates and the seriousness of thought – and the passion – that he brings to the subject. 

Blair acknowledges forthrightly that the purpose of the speech is not to catalog policies, but rather "to sell the primacy of the mission." That's fair enough. 

But, of course, the policies ultimately matter. Towards the very end of the speech, Blair says: "We can, like Korea, mandate spending billions to upgrade everywhere to drive more effective use of the network, or we can upgrade in those places we know we have, and are likely to do so in the future, create the kinds of improvements that scale everywhere and create new market forces that incent the private sector to invest in a broader upgrade." 

In my view, reliance on market forces will provide the incentives for the private sector to get most of the way, if not all of the way, towards building out the infrastructure that is necessary to achieve of Blair's big bandwidth vision. Government possibly may have a test-bed-like role to play, but, if so, that role should be carefully defined and limited. Reliance on market forces, not government strictures, are much more likely to provide for the flexibility and responsiveness upon which creativity and innovation rest. 

So, the policy discussion is always relevant, and it matters. But, for now, it is enough to commend to you Blair's speech as he goes about trying "to sell the primacy of the mission." It's well worth reading, and thinking about.