Thursday, February 28, 2013

Report Evaluates FCC's Increasingly Expensive Regulations

CEI's February 21 Regulatory Report Card on the Federal Communications Commission offers a concise overview of the costliness of complying with FCC regulations. Anyone who follows FCC policy and takes an interest in regulatory reform should keep a copy of this publication handy for reference.

Authored by Ryan Young, CEI Fellow in Regulatory Affairs, the Regulatory Report Card puts the cost of FCC regulations "at $142 billion per year, making it the third most expensive branch of regulation." Also, the number of new regulations the FCC imposes annually is staggering. To wit, "Federal agencies published a total of 3,706 final rules in 2012. Of those, 108 came from the FCC, for an average of one new final FCC rule every 2.3 working days." Moreover:
The fall 2012 Unified Agenda lists 86 rules from the FCC in various stages of the regulatory pipeline. Seven of them are "economically significant," meaning they impose at least $100 million in economic impact in a given year.
For more facts and figures revealing the FCC's trend of increasing regulation despite the growth of competitive market conditions, see the Regulatory Report Card

Friday, February 22, 2013

Number-Crunching Study Supports Additional Spectrum Availability

Spectrum is a key input for commercial wireless broadband services. The FCC has acknowledged there is a shortage of this valuable resource or "spectrum crunch." This has made federal spectrum policy a matter of critical importance.

A paper published in January by Technology Policy Institute's Scott Wallsten's offers insights into the dynamics of spectrum value that should inform any policy regarding spectrum allocation and use. It's titled "Is There Really a Spectrum Crisis? Quantifying the Factors Affecting Spectrum License Value."

In the paper, Wallsten lists four categories of factors impacting the value of spectrum, namely:
  • Characteristics of the spectrum license itself, including the geography and population it covers and its frequency;
  • Underlying demand for wireless services, for which spectrum is an input;
  • Institutional factors including the rules governing each license, such bandwidth size and usage rules; and
  • How technological change and innovation affect the extent to which spectrum is a substitute or a complement for other inputs into wireless service provision, such as cell splitting and spectrum sharing.
While institutional factors are the direct result of spectrum policymaking, sound policy must also reflect the realities of the other factors. Of critical importance with respect to institutional factors are findings yielded by Wallsten's economic analysis. Those include:
  • [L]icenses with paired spectrum are more valuable than those without, all else equal.
  • [U]sage rules affect the value of licenses... Licenses that allow broadband — especially the Broadband-Fixed Wireless combination — are the most valuable. The least valuable are licenses that allow only television broadcasting, followed by licenses that allow only paging. These results are sensible — as services are increasingly all digital and delivered over IP network it makes increasingly less sense to have spectrum devoted to specific (and dying) services.
  • [F]lexibility is generally valuable. Licenses that allow broadband are generally flexible —every license (in this database) that allows broadband also allows at least one other use.
Wallsten also finds evidence regarding increasing spectrum prices supports the now widely-held view that more commercial spectrum needs to be made available. He concludes: "The FCC and NTIA should continue to move spectrum into the market and ensure that spectrumalready available be able to move smoothly and efficiently through secondary transactions."

Thursday, February 21, 2013

The Oldest Government-Owned Telecom Network Wants to Privatize

At the same time that FCC Chairman Julius Genachowski is once again advocating that local governments consider building their own telecom networks, the well-established Iowa government network has just announced that it wants to sell itself off. The Iowa state government released a detailed request for proposals (RFP) this month for the sale or lease of thousands of miles of the Iowa Communications Network (ICN).
The Iowa network is one of the oldest government telecom networks in existence, but it now seems that the debt it has accrued over its history has rendered the system unsustainable. The ICN was created more than 25 years ago, in 1989, and currently includes an estimated 3,400 miles of state-owned fiber and 5,261 miles of leased fiber connections. The network offers video, voice, data, and Internet services to approximately 1,200 customers.
Despite the many advantages the network has enjoyed through government subsidies, investment, and special allowances, the ICN has operated at a loss for years. As a government entity, the network currently pays no income or property taxes, and it received a $16.2 million broadband stimulus grant through NTIA’s Broadband Technology Opportunities Program in 2010 to build out 1Gbps service. Still, the network ran at a deficit from 2007 to 2012. In fiscal year 2012, the network’s revenue was $31.66 million and operating expenses were $41.49 million. 
Given these failures, the RFP offers the ICN for sale or lease to the private sector. Notably, the RFP conditions any sale or lease on the ability of a buyer or lessee to provide services to customers at a lower, overall long-term cost than the state could offer. This indicates that the Iowa state government acknowledges that the private sector could, and likely will, provide service more efficiently to consumers than the government system can.  
The RFP states that if the Iowa state government is able to lease or sell its network (in whole or in part) “the ICN has additional potential . . . as a privatized entity.” Some benefits of privatizing the network include allowing the ICN to offer a greater variety of new services to existing customers and to generate new subscribers.
Although a few government telecom networks have had some limited success, overall these systems increase the financial burden on taxpayers without providing commensurate benefits. As Free State Foundation scholars have observed in the context of Utah’s UTOPIA network, the Mooresville and Davidson, NC MI-Connection, and the Chattanooga, TN EPB network, most government-owned and operated communications networks fall short of the benefits local governments promise. (For a full audit of the UTOPIA network’s financial failings, see “Report to the Utah Legislature”).
For example, as of December 2012, Chattanooga’s municipal smart grid and broadband initiatives run by EPB’s Fiber Optic Division had reportedly cost approximately $390 million, funded by $229 million in local revenue bonds, $111 million from federal stimulus grants, and $50 million in loans from EPB’s municipality electric division (to establish the fiber optic division). In other words, EPB’s electric customers have been responsible for financing a $160 million loan to the EPB telecom wing, and federal taxpayers provided the $111 million in “stimulus” funds. The final $29 million will be borne by EPB’s new Internet and cable television customers.
In addition to the inefficient use of stimulus funds, the financial structure of the Chattanooga system possibly violates state law. One report found that EPB issued bonds for $219.8 million to finance the construction of a fiber optic broadband network; however, only $48 million of that debt was allocated to the communications business unit. According to University of Denver professor Ronald Rizzuto, this violates the Tennessee law that says: “A municipal electric system providing any of the services authorized by this part shall establish and charge rates that cover all costs related to the provision of such services.” Tenn. Code Ann. § 7-52-603 (2013). The allocation of capital costs to the electric utility to foot the bill for the communications business is likely not uncommon among municipal networks nationwide. Running a telecom network is a complicated, capital-intensive, and risk-laden venture that should be left to the private sector.
Municipal or state governments should consider undertaking the construction and operation of a telecom network only if customers are not adequately served by the private sector. Allowing the marketplace to drive private sector innovation and build-out of broadband networks will avoid the unnecessary loss of taxpayer dollars, and it will better enable local governments to better perform their traditional, core public services. Government-run telecom networks should be considered only if local providers do not currently offer service to, or have the intention of offering service to, the same customer base the government system would serve.
Broadband investment has overwhelmingly come from the private sector, and it will continue to do so if the proper policies are promoted. It is vital to continue to focus on policies to incentivize private investment and remove barriers to broadband build-out, as Chairman Genachowski properly acknowledged. Government-operated networks are not the solution, as the widespread failure of these ventures nationwide shows.

Tuesday, February 19, 2013

The Court Should Call A Double Fault

On February 25, the D.C. Circuit Court of Appeals will hear oral argument in Comcast Cable Communications v. FCC. This is the case in which the FCC, with Commissioners Robert McDowell and Ajit Pai dissenting, held that Comcast unlawfully discriminated against the Tennis Channel by refusing to accede to the Tennis Channel's request  – right in the middle of a contract term – that it be moved to a program tier with broader distribution than the one on which it was carried. 
After all is said and done, the court should call the FCC for a clear double fault. First, based on the facts of the case, the FCC should not have found that Comcast committed a statutory violation. Second, if it reaches the constitutional claim, the court should find that the FCC's decision violates Comcast's First Amendment rights. 
The FCC's Tennis Channel ruling is a clear case of agency regulatory overreach. Hopefully, the D.C. Circuit court will vacate the agency's decision. This will not only right a wrong, but it will also send a message to the agency that such regulatory zealotry is out of bounds. 
The basic facts of the case are really not in dispute. In the middle of a negotiated contract term, the Tennis Channel requested that Comcast move it from its current program neighborhood to the more broadly distributed tier on which two Comcast-affiliated networks – the Golf Channel and Versus (now called the NBC Sports Network) – were located. When Comcast refused, the FCC determined Comcast violated Section 616 of the Communications Act and the agency's regulations issued thereunder. Section 616 and the agency's implementing rules prohibit multichannel video program distributors ("MVPDs") from acting to "unreasonably restrain" unaffiliated program vendors from "compet[ing] fairly by discriminating in video programming distribution" on the basis of affiliation. 
The FCC determined that Comcast "discriminated" against the Tennis Channel in violation of Section 616 and the Commission's regulations despite the fact that, at the time of the ruling, six of the 20 largest MVPDs did not carry the Tennis Channel at all. And despite the fact that at the time the complaint was filed, every major MVPD that did carry the channel distributed the Golf Channel and Versus more broadly than the Tennis Channel. And, significantly, despite the fact that the FCC's ruling required Comcast to carry the Tennis Channel on a tier that would distribute the channel more broadly than it is distributed by its two owners – satellite operators DISH and DIRECTV – who happen to be Comcast's vigorous competitors in the multichannel program distribution market. The Commission ordered Comcast to move the channel to a different program tier. 
I initially addressed the problematic nature of this case in a blog back in December 2011 when an agency Administrative Law Judge ruled in the Tennis Channel's favor, a ruling the Commission affirmed in July 2012, essentially adopting the ALJ's reasoning. 
Without repeating everything I said in that December 2011 piece, I just want to make these points in advance of the upcoming oral argument. Even granting that the "discrimination" standard, with its competing "fairly" and "unreasonably" restrain language, is inherently somewhat vague and malleable, under the facts of this case, the agency's finding of discrimination on the basis of affiliation is unsupportable. Comcast was carrying the Tennis Channel in accordance with an agreement negotiated by the parties, and no other major MVPD was distributing the Tennis Channel in a manner more broadly than Comcast. When the complaint was filed, many large MVPDs did not carry the Tennis Channel at all, and all the major MVPDs that did carry it were distributing Versus and the Golf Channel more broadly. 
The Commission erred in finding "discrimination" under Section 616 just because the Tennis Channel was not treated in exactly the same manner as Comcast's affiliated sports channels. The statute does not require "equal treatment." Rather, it prohibits discrimination that is proven to be based on affiliation, a showing that, under the circumstances, could not be made. 
In my view, the Commission's action in the Tennis Channel case likely is inconsistent with the First Amendment as well. If Comcast is required to move the Tennis Channel from its present location, as the Commission ordered, it almost certainly will be required, due to channel capacity limitations, to displace another program channel that Comcast has determined either is more popular with its customers, or one that deserves an opportunity to try to build audience support. The decision to carry a channel, and where to place the channel, involves editorial discretion on the part of the cable operator that implicates free speech interests.

Moreover, in rendering its "discrimination" decision, the Commission was required to make determinations concerning the similarity of the programming among program channels. It may be true that tennis and golf are both "sports." But to make the type of determination rendered in this instance, the FCC necessarily examined the nuances of program genres, program ratings, target audiences, and the like. This type of detailed examination into programming decisions raises obvious free speech concerns regarding the violation of Comcast's First Amendment rights.

Indeed, while the Commission's Tennis Channel order in any event should be vacated, in light of today's competitive video marketplace environment, it is time for Congress to consider jettisoning the entire program carriage regime, especially as implemented by an overreaching agency. When Congress adopted Section 616 as part of the Cable Act of 1992, cable operators arguably possessed dominant market power in the multichannel video distribution marketplace. Now, more than two decades later, the marketplace environment is vastly different. With two satellite television operators competing, along with the "telephone" companies, cable's share of the MVPD market has dropped from 98% in 1992 to less than 60% today.

As the D.C. Circuit stated in 2009 in vacating in the FCC's rule limiting the number of subscribers a single cable operator could serve:
"First, the record is replete with evidence of ever increasing competition among video providers: Satellite and fiber optic video providers have entered the market and grown in market share since the Congress passed the 1992 Act, and particularly in recent years. Cable operators, therefore, no longer have the bottleneck power over programming that concerned the Congress in 1992. Second, over the same period there has been a dramatic increase both in the number of cable networks and in the programming available to subscribers." Comcast Corp. v. FCC [Lexis subscription required].
So, while the facts alone of the Tennis Channel case warrant reversal of the discrimination finding, if the court considers the First Amendment claim, it certainly should have in mind the present competitive multichannel video marketplace – which is more competitive now than in 2009.

And Congress should have the changed marketplace in mind as well when it revisits the current outdated provisions of the Communications Act.

Thursday, February 14, 2013

Cisco, FCC Reports Demonstrate Continued Broadband Progress

On February 6, Cisco released its Global Mobile Data Traffic Forecast Update, 2012 - 2017. This year the release of the report seems to have received less attention than in previous years. However, the report deserves just as much, if not more, attention as previous reports, especially in light of the tremendous growth it indicates with respect to mobile broadband subscribers and data usage over the past year.
The progress report documents the remarkable success of a marketplace where rapid innovation is both fueled by, and then rewarded with, swift consumer adoption of innovative new products.
According to Cisco’s latest Visual Networking Index, the number of mobile users will grow from 4.3 billion to 5.2 billion mobile users and more than 10 billion mobile connections, 45 percent of which will be through 4G networks, connected at speeds seven times faster than the current average.
Correspondingly, global mobile data traffic will grow 13-fold by 2017 to a rate of 11.2 exabytes consumed globally per month, totaling 134 exabytes annually. The 2012 monthly rate was 0.9 exabytes of mobile data traffic; still, this was nearly double the data usage average in 2011.
In each month of 2012, the average mobile consumer used data for one hour of video, two hours of audio, at least one video call, and one downloaded app per month. By 2017, each month consumers will use 2 gigabytes of data, including 10 hours of video and 15 hours of audio, 5 video calls, and 15 app downloads. In other words, during each month of 2017, mobile users are expected to view 30 trillion images, 10 a day for each person on Earth, or 3 trillion video clips, one video clip per day per person on Earth.
This projection means that Cisco estimates consumers will be using 46 times the total amount of mobile IP traffic in 2017 than they were in 2010, and specifically using 40 times the data across just high-speed 4G networks.
North American consumers currently use by far the most data per month: 752 megabytes compared to 491 in the next closest global region, Western Europe. In 2017, North Americans are projected to continue leading mobile data usage, averaging 6,171 MB, compared to 3,343 MB in Western Europe.
The FCC also recently released its Internet Access Services report, which provides data on Internet access connections through December 31, 2011, for the United States. Notable developments in the report include growth across all Internet connections; the number of connections over 200 kbps in at least one direction increased by 27% to 230 million. Mobile Internet subscriptions saw particularly large growth, with mobile subscriptions increasing to 142 million – a 46% increase from December 2010. Both fixed and mobile services shifted to higher speeds, with particularly notable growth in high-speed wireless broadband: the share of mobile wireless subscriptions with download speeds at or above 3 mbps increased from 11% to 22%.
For this exponential increase in traffic, Cisco credits laptops, but also the proliferation and rapid adoption of mobile devices like smartphones and tablets, which will drive 93 percent of global mobile traffic by 2017, as well as the use of multiple connected devices by single users. Today 45% of American adults own smartphones, 31% of American adults own a tablet computer, and more than 57% own a laptop.
Clearly, the rapid rise of mobile broadband is giving consumers another attractive option for connecting to the Internet. Because of the proliferation of wireless connections, the Pew Research Center reports that groups that have traditionally been on the other side of the digital divide are going online faster. The Internet access gap that is closing most rapidly is that between whites and minorities. Having broadband strongly affects how one uses the Internet. The Pew report called this the “mobile difference,” finding that “once someone has a wireless device she becomes much more active in how she uses the Internet . . . [and is more likely] to go online not just to find information but to share what they find and even create new content,” and become a participant in today’s digital dialogue.
As the Cisco and FCC reports make clear, exponential increases in high-speed mobile connections and usage occurred last year and are projected to continue at the same or greater rates through 2017. We should not take for granted the incredible progress made and the way in which this progress has empowered consumers by virtue of another means of Internet access.
This impressive progress should be allowed to continue unhindered by unnecessary regulations or other government mandates that ultimately increase costs that are passed along to the consumer.

Wednesday, February 13, 2013

Is Agency Ancillary Power an Unsound Doctrine?

The possibility of seeing increased judicial scrutiny of agency ancillary power claims was the subject of my Perspectives essay, "A Recent Appeals Court Ruling on Ancillary Power Limits Could Curb Regulatory Overreach." That essay focused on the ruling of the U.S. Court of Appeals for the D.C. Circuit in Echostar v. FCC (2013). But also pointed ahead to Verizon v. FCC, the pending legal challenge to the FCC's network neutrality regulations.
My Perspectives essay addressed certain limits to agency ancillary power. But a case can be made that the entire ancillary power doctrine rests on false foundations. In August, the Free State Foundation filed a joint amicus curiae brief in Verizon v. FCC, offering a brief but important critique of the ancillary power doctrine.
The relevant section quotes Senior Judge Raymond Randolph's remark during oral arguments in Comcast v. FCC (2010) that the ancillary power doctrine is "out of step with contemporary Supreme Court jurisprudence" that limits an agency's regulatory authority to explicit Congressional delegations. 
The amicus brief continues:
Allowing an agency that derives its regulatory authority solely from congressional delegation to claim ancillary authority beyond that grant of power violates basic administrative-law principles.  Properly understood, "[t]he Commission 'has no constitutional or common law existence or authority, but only those authorities conferred upon it by Congress.'" Am. Library Ass'n v. FCC, 406 F.3d 689, 698 (D.C. Cir. 2005) (quoting Michigan v. EPA, 268 F.3d 1075, 1081 (D.C. Cir. 2001)).  But, by invoking its ancillary authority, the FCC grasps beyond the regulatory powers that Congress actually gave it.  Cf. ACLU v. FCC, 823 F.2d 1554, 1567 n.32 (D.C. Cir. 1987) ("[I]t seems highly unlikely that a responsible Congress would implicitly delegate to an agency the power to define the scope of its own power."). 
The Supreme Court precedents supporting the FCC’s ancillary-authority claims predate the seminal decision in Chevron, see Comcast, 600 F.3d at 646 (collecting authorities).  The FCC's claims more closely resemble the discarded notion of "implied rights of action" than Chevron and its progeny.  Tr. of Oral Argument 20, Comcast v. FCC, No. 08-1291, Jan. 8, 2010 (Randolph, J.).  Underscoring how anomalous ancillary agency authority really is, the FCC is one of the few agencies that still invokes the concept as grounds for greater regulatory reach.  Cf. CFTC v. Schor, 478 U.S. 833, 852 (1986) (noting that the "wholesale importation of ancillary jurisdiction into the agency context" has the potential to "create great[] constitutional difficulties").
The constitutional and administrative law principles underlying the frontal challenge to the doctrine deserves serious attention. That said, it might take a U.S. Supreme Court case to ultimately address the viability of the ancillary power doctrine in light of recent high court jurisprudence.

Friday, February 08, 2013

FSF's Randolph May Applauds Introduction of Sunshine Act Reform Bill

On February 7th, FSF's Randolph May issued a media advisory concerning the bills introduced to implement Sunshine Act reforms. Here is his statement: 
"As a very longstanding advocate of reforming the Sunshine Act, and one who has written often about the need to change it, I applaud the introduction of the proposed "FCC Collaboration Act" by Reps. Eshoo, Shimkus, and Doyle, and Senators Heller and Klobuchar. And I am pleased the bill has bipartisan sponsorship.
By allowing more than two of the five FCC members to meet together to discuss agency business, the bill, if adopted, would facilitate more collaboration and a franker exchange of views among the FCC commissioners. And it would also enable the Commission to accomplish its work more efficiently because the exchange of views can take place directly, rather than through a series of one-on-one "round robin" discussions or through various staff intermediaries shuttling between the commissioners' offices. The current Sunshine Act restrictions are fundamentally at odds with the very rationale for the establishment of multi-member commissions and with notions concerning how they can most effectively function.
While I applaud the reintroduction of the bill, I do wish to state my preference would be for the Sunshine Act reform to be incorporated into a bill encompassing a broader range of necessary reforms. Indeed, the "FCC Reform Act of 2011," which contained a number of other desirable FCC process reforms, such as cost-benefit analysis requirements and shot clocks, included the same Sunshine Act proposal now introduced separately. I testified last year at a hearing on the "FCC Reform Act" and supported adoption of many of its provisions. And the House of Representatives ultimately adopted the bill.
So, while I support adoption of the FCC Collaboration Act, I'd like to see it adopted in conjunction with some other process reforms that warrant bipartisan support as well."

Tuesday, February 05, 2013

Unwashed Rental Cars and Spectrum Policy

There's an old saying: "Nobody ever washed a rental car."
Have you?
This adage comes to mind as I read some of the reactions and comments to Cecilia Kang's curious front page Washington Post story strongly suggesting that the FCC has a plan for the government to build "Super Wi-Fi" networks across the country using unlicensed spectrum. Access to these airwaves "which the FCC officials want to hand over to the public" would be free of charge.
And according to Kang, “if all goes as planned, free access to the Web would be available in just about every metropolitan area and in many rural areas.”
As George Will would say: "Well."
After a flurry of initial breathless stories repeating and building on the "free Wi-Fi for all" mantra, the Washington Post story now has been pretty much debunked. For a good account of the debunking, see Jon Brodkin's "No Free Wi-Fi Isn't Coming to Every U.S. City" in Ars Technica. Another good debunking piece is Jerry Brito's "All You Need to Know About 'Super Wi-Fi' in One Tweet," on Technology Liberation Front.
I don't want to repeat what Jon Brodkin, Jerry Brito, and others already have said concerning the problems with the Washington Post and follow-on stories. I'll just note that there is a lot of justifiable confusion, chronicled in Jerry's piece, concerning what spectrum bands – guard bands or white spaces from the forthcoming incentive auction, or some other "white spaces" spectrum – Cecilia Kang had in mind in suggesting the FCC has a "Super Wi-Fi" plan.
For my purposes, it doesn't matter. Instead, while people are thinking about the subject of using unlicensed spectrum versus licensed spectrum, I want to take advantage of the "teachable moment" to emphasize a couple of points – fundamental principles, really – that haven't been addressed sufficiently thus far.
They relate back to the unwashed rental car phenomenon.
When the FCC licenses spectrum awarded through an auction process, it creates (to a greater or lesser extent, depending on whether the agency imposes extraneous conditions) a property-like right in the licensee. This property-like right provides an incentive for the licensee to develop the spectrum to its highest and best use. In other words, the licensee, having paid for the spectrum, has an incentive to develop and fully utilize it in a way that will maximize the return on its investment.
This economic incentive created by a property rights regime is the opposite of the disincentive that exists to wash a rental car, or change its oil.
It is true that FCC Chairman Julius Genachowski (and others) are fond of touting the innovations that may take place in unlicensed wireless spectrum bands. Garage door openers are most commonly mentioned by way of example of these innovations. And I like garage door openers too. But much less is usually said by these touters of unlicensed spectrum by way of acknowledging the tremendous innovations – and investments – that occur by virtue of the use of licensed spectrum. For instance, just think about all the innovative ways you use your smartphone, the ongoing development of which has been dependent on the availability of licensed spectrum services. Or your cable, satellite, and broadcasting services. Or wireless medical telemetry services. Or aeronautical navigation and flight testing services. And so on – all of which use licensed spectrum.
This is not to say the FCC should have gone through the process of allocating licensed spectrum to create a "Garage Door Opener Radio Service" instead of allowing garage door openers to be developed, tested, certified, and marketed using unlicensed spectrum under the agency "Part 15 rules." But it is to say it by no means follows that garage door openers would not have been developed and marketed in a licensed spectrum band. And this is especially true to the extent the FCC allows flexible use of spectrum licenses. Indeed, the agency should further reform its spectrum policies to allow considerably more flexible use in the spectrum bands it allocates for licensed use.
In a regime in which license holders win their licenses in unencumbered auctions – and in which the FCC allows licenses to be used flexibly without imposing unnecessary command-and-control-style use restrictions -- licensees will have every incentive to develop their spectrum to its highest and best use, whether such use happens to be, say, for new super-duper garage door openers or for super-duper Wi-Fi applications.
I do not mean to say there is not any role for unlicensed spectrum or that there have not been innovations on unlicensed spectrum, for example, including Wi-Fi mesh networks. And, in any event, current congressional policy favors the FCC setting aside some amount of spectrum recovered through the upcoming incentive auctions for unlicensed use.
But it is important from a public policy perspective, when considering the amount of unlicensed spectrum the Commission ought to set aside in one situation or another, for there to be an appreciation of the trade-offs inherent in the licensed/unlicensed equation. Otherwise, all the loose talk about "free" spectrum access and "free" networks obscures an understanding of the real costs associated with the government setting aside spectrum for unlicensed use.
And speaking of costs, you will find precious little in the stories touting a tilt towards unlicensed spectrum concerning the many billions of dollars of revenue foregone to the U.S. Treasury from failing to auction spectrum for licensed use. This is a real tangible cost to American taxpayers that ought not to be lost in the talk about "free" this and that.
With a nod to Bruce Owen, a member of FSF's Board of Academic Advisors, for driving this home to me, one final related point: The use of unlicensed spectrum has an "opportunity cost" which is the value that would be generated and which would flow through to consumers if the same spectrum were licensed. So, for example, the cost of the spectrum used by garage door openers is the opportunity cost to consumers of foregoing whatever would have been developed for use in that spectrum if it were subject to licensing in a property rights regime.
If the proper policy presumption is that generally private property rights and free markets should govern spectrum use – and, in my view, this is the preferred policy presumption – this does not prevent the government, if it decides that some service should be provided at public expense, from acquiring the necessary spectrum rights in the market and providing a “free” service.
Of course, such service wouldn't really be "free." No government services provided for "free" really are.

Monday, February 04, 2013

Making the Internet Access Tax Moratorium Permanent

On January 22, Sen. Kelly Ayotte introduced S.31, the "Permanent Internet Tax Freedom Act of 2013." Sen. Dean Heller is the co-sponsor. As the bill's title suggests, the legislation would make permanent the federal ban on Internet access taxes. The current federal ban on such taxes is set to expire on November 1, 2014. The Internet Tax Freedom Act also contains an oft-overlooked prohibition on taxes that discriminate against e-commerce. So adoption of S.31 would make that tax ban permanent as well. S.31 will certainly be a bill to watch in the 113th Congress.