Friday, October 30, 2015

A "Shot Clock" Would Streamline Broadband Deployment on Federal Land

On October 28, 2015, the Subcommittee on Communications and Technology within the House Committee on Energy and Commerce held a hearing titled “Breaking Down Barriers to Broadband Infrastructure Deployment.” The hearing focused on six different proposals, which are all summarized in the hearing’s background memo. These six drafts represent a positive step towards reducing regulatory barriers and incentivizing more broadband deployment.
One of the big issues that is addressed in several of the discussion drafts is the costly approval process of deploying broadband infrastructure on federal land. Scott Bergmann, VP of Regulatory Affairs at CTIA - The Wireless Association, said in his written testimony that 28 percent of land in the United States is held by the federal government, along with thousands of federal buildings across the country. But he said the approval process to install broadband infrastructure on federal property can take many years.
Chairman Walden gave an example from his district. The town of Mitchell, Oregon has waited two and a half years for permission from the Bureau of Land Management to deploy four power poles so the town can have three-phase electric power. If it takes that long for permission to build electrical infrastructure, it probably takes even longer for permission to build broadband infrastructure.
While the draft legislation would help streamline federal permitting processes, it would not implement a “shot clock” for the review process. Mr. Bergmann said that this simple change would streamline deployment tremendously and has helped broadband providers at local levels. In 2009, the FCC initiated rules which require municipalities to respond to broadband deployment applications within 90 or 150 days, depending on the type of request. In 2012 as part of the Middle Class Tax Relief and Job Creation Act, Congress required states and municipalities to allow any “modification of an existing wireless tower or base station that does not substantially change the physical dimensions of such tower or base station.”
Mr. Bergmann asked Congress to adopt legislation that would create deadlines for federal agencies to respond to requests to deploy on federal lands, buildings, or other properties. Sometimes the only way to reach rural consumers is through federal property. Without undermining national security or other important federal projects, this small change would have very large effects. Not only would this increase revenue for the federal government because providers would pay for access, but it would increase the quality of Internet access for military bases, tribal lands, and other remote areas.
Mr. Bergmann stated that “sound infrastructure policy is a necessary complement to good spectrum policy.” Of course, more spectrum is needed in order to keep up with projected mobile demand. But, in the meantime, reducing infrastructure barriers is a technology-neutral government action. Implementing a “dig once” policy (proposed in one piece of draft legislation) would lower the construction costs of broadband deployment for all broadband technologies, and implementing a shot clock for federal agencies would lower administrative costs, helping wireless and wireline providers reach underserved areas.
In general, it is an important and positive step to see draft legislation that would reduce infrastructure barriers because such legislation would avail resources that providers can use to better serve consumers.

Thursday, October 29, 2015

D.C. Circuit Panel Set for Open Internet Case

The U.S. Court of Appeals for the D.C. Circuit announced its three-judge panel to review the important case regarding the FCC’s Open Internet order. The FCC’s reclassification of broadband as a telecommunication service will be a focus of the case. The panel, which includes Judge David Tatel, Judge Sri Srinivasan, and Judge Stephen Williams, is scheduled to hear arguments on the order’s legality on December 4, 2015. 

Tuesday, October 27, 2015

A "Dig Once" Policy Lowers the Costs of Broadband Deployment

On Wednesday October 28, 2015, the Subcommittee on Communications and Technology within the House Energy and Commerce Committee will hold a hearing on “Breaking Down Barriers to Broadband Infrastructure Deployment.” The hearing will focus on the bipartisan draft legislation introduced by Chairman Greg Walden (R-OR) and Ranking Member Anna Eshoo (D-CA) entitled “The Broadband Conduit Deployment Act of 2015.”
The proposal would require State governments to evaluate the need for broadband conduit with respect to covered highway construction projects. If there is any anticipated need in the next 15 years, the legislation would implement a so-called “dig once” policy. Along highways where conduit is needed, the Department of Transportation will install “an appropriate number of broadband conduits” at a size that is “consistent with industry best practices and is sufficient to accommodate potential demand.” With this legislation, the construction costs of digging up hard surfaces along highways to install conduit will only be incurred once.
If adopted, this proposal should increase broadband deployment, investment, and innovation, and consumers will reap the benefits. In Ranking Member Eshoo’s press release, she cited a GAO report which found that “dig once” policies save roughly 25 to 33 percent in construction costs in urban areas and roughly 16 percent in rural areas. By reducing the costs of broadband deployment for ISPs, this legislation will avail resources for other innovative services.
Additionally, this legislation could play a key role in providing next-generation broadband access to rural areas and ending or reducing a “digital divide” between rural and non-rural areas. Because this proposal would lower the costs of deploying Internet access, broadband providers will be more inclined to invest in small towns and upgrade old networks. This legislation will also pave the way for more cell towers in remote areas to deliver faster mobile broadband to the consumers who depend on it. To the extent there are any legitimate federalism concerns, they should be resolved as the legislation moves forward.
This legislation is important to spur even further broadband deployment in the United States and has been on the table for several years. Ranking Member Eshoo deserves credit for her determination. She introduced similar legislation in 2009 and 2011, but hopefully this will be the bill that gets through Congress with the support of Chairman Walden. By lowering the costs to broadband providers, consumers will enjoy more competition, better service quality, and lower prices.

Friday, October 23, 2015

FCC's Internet Privacy Power Grab Unsupported by Law

The Federal Communications Commission is trying to deputize itself as the nation’s Internet data privacy cop. An October 9 letter by Rep. Marsha Blackburn and 13 other members of Congress calls out the Commission's aspirations to become the federal privacy regulator for the Internet. Indeed, Congress never gave the FCC such broad powers. 
This absence of legal authority makes the FCC the rogue cop of data privacy. The FCC’s unauthorized foray into data privacy poses a real rule of law problem. In fact, it's a problem that is snowballing: The FCC asserts data privacy authority through its Open Internet Order (2015); its TerraCom Order (2015) proposed  $10 million in data privacy fines against two telecommunications providers despite the lack of any rules on the books; and a recent Lifeline order imposes data privacy mandates. The FCC's overreach also encroaches on the jurisdiction of the Federal Trade Commission (FTC), an agency with a broader expertise in addressing consumer privacy issues.
Congress is responsible for reining in the FCC and keeping it within the limits of its delegated powers. It is also Congress's responsibility to make sure that clear jurisdictional lines separate the FCC and the FTC. It should be the duty of Congress to decide which agency, if any, has jurisdiction over data privacy. Indeed, if new data privacy authority is contemplated, the FTC should be the common enforcer of simple, clear standards to be consistently applied to all digital platforms.
The FCC bases its claims of authority over data privacy on Section 222. In its Open Internet Order (2015), the FCC reclassified broadband Internet services as Title II common carrier telecommunications services. (This reclassification of broadband is now being challenged in court.) Under that Order, the FCC now applies Section 222 to broadband Internet service providers.
On May 20, 2015, the FCC issued an enforcement advisory on data privacy. The agency has also invoked its self-proclaimed powers over digital privacy in other orders. Its TerraCom Order proposed a hefty $10 million in fines against TeraCom, Inc. and YourTel America, for a data breach involving personal identifiable information (PII). And in the universal service context, FCC insisted in its Lifeline Modernization Order (2015) that subscriber PII falls within its enforcement jurisdiction. The Commission is now weighing a petition seeking reconsideration of that order's data privacy mandates.
Data breaches are very serious, but so are limits on agency jurisdiction. Over the last several years, numerous data breach laws have been passed by state legislatures. And many data breach bills have been introduced and been the subject of hearings in Congress. It strains credulity to believe that the lawmaking process can be so easily short-circuited by a sector-specific agency like the FCC claiming to have possessed such broad data privacy powers all this while.
By its terms, Section 222 is limited to customer proprietary network information (CPNI) in the voice communications context. Specifically, CPNI addresses telecommunications providers' collection and use of individualized consumer data regarding the time and length of calls, phone numbers called, and consumer voice billing. (FCC jurisdiction with respect to cable subscriber privacy and DBS subscriber privacy are also circumscribed under Section 551 and Section 338 of the Satellite Home Viewing Improvement Act, respectively.) CPNI is a different and narrower category than PII.
Aside from questions about over-reaching its Commission’s legal authority, applying Section 222 to broadband Internet service providers is bad policy. As FSF President Randolph May and I have previously explained, "Any New Privacy Regime Should Mean An End To FCC Privacy Powers." If a new federal privacy regime is really called for, it should be up to Congress to make that call. And if Congress so decides, transferring all privacy jurisdiction over communications and information services from the FCC to the FTC is the much preferred policy course.
The old lines differentiating products, services, and provider roles make little sense in today's digital, IP-based converging communications market. And it's unreasonable to think consumers expect privacy protections that differ when data is handled by a mobile broadband service provider or a media content company or applications provider. Transferring all privacy jurisdiction over CPNI from the FCC to the FTC would give consumers a simpler set of privacy expectations.
Making the FTC the common enforcer of common standards would also make compliance easier for providers or companies handling data. It would reduce the likelihood that certain types of information collectors would be unfairly disadvantaged without good cause by being subject to different privacy requirements.

Any data privacy policy change by Congress would be far down the road. The immediate rule of law issue is the FCC effectively changing data privacy policy by administrative fiat. Absent Congress keeping the FCC within bounds of its limited authority over CPNI data, federal courts will have to hold the agency to the rule of law.

* Information concerning the fine proposals and number of providers involved has been corrected (7:20AM 10/23/15)

Monday, October 19, 2015

Zero-Rating Is Not A Human Rights Violation

So read the headline for a story in the October 16, 2015, edition of Communications Daily [subscription required].
This one really caught my eye.
The story reported on a panel discussion last week at George Washington University Law School. According to the report, Josh Levy, Access advocacy director, stated zero-rating can lead to human rights violations.
If you have been more concerned with widespread, notorious abuses of human rights around the world such as, for example, beheadings of innocents by religious extremists, jailing of journalists and peaceful protesters by ruthless dictators, harsh subjugation or trafficking of women, or merciless persecution of religious minorities, then perhaps you might not even know what “zero-rating” means.
In short, “zero-rating” refers to certain plans by broadband providers that allow consumers to choose to access selected websites on a free or discounted basis. For example, here in the United States, T-Mobile and Sprint currently offer plans that provide wireless customers access to designated music streaming websites without incurring data charges or access to a limited number of popular websites, such as Facebook or Twitter, at deeply discounted rates.
Or in developing countries in Africa, for example, Facebook offers its now rebranded “Free Basics by Facebook” application that allows consumers – the vast majority of whom previously lacked any access to the Internet at all – to access designated sites, including Facebook, of course, without data charges.
In a January 7, 2015, piece on the Medium website, Professor Susan Crawford, a leading apostle of the most stringent version of net neutrality regulation, called zero-rating plans “pernicious,” “dangerous,” and “malignant.” She acknowledged that while some countries have prohibited the practice, most OECD countries “have some flavor of zero rating in place.”
Perhaps it should not be surprising that, with Professor Crawford calling zero-rating pernicious, dangerous, and malignant, some “experts” at last week’s GWU panel discussion would follow suit. But with all due respect to all concerned, in my view, suggesting that zero-rating may constitute a human rights violation diminishes the cause of human rights. And it diminishes the honor, and in the case of death, the memory, of those who are subjected to, and who endure, real violations of human rights such as those listed above.
To me, a private Internet service provider restricting access to the entire Internet in exchange for free or reduced price service is not denial of a fundamental human right. A government’s denial of a woman’s right to an education simply because she is a woman, or a denial of a man’s right to speak freely without being thrown in jail or shot, well, those are true human rights violations.
I understand that Professor Crawford and those that would call zero-rating a human rights violation assert that all broadband providers should be required to provide access to all subscribers to all websites at all times. Well, if we lived in an ideal world – a world in which all goods and services magically were made available without regard to costs – then I would too. But that is not the real world in which we live.
I’ve written often in the past about why zero-rating plans should not be prohibited, in fact, why they generally are pro-consumer, certainly when consumers have a choice of broadband providers as they do in the U.S. And, of course, it goes without saying that such plans may be most attractive to low-income consumers who otherwise would find Internet access unaffordable or less affordable.
I responded to Professor Crawford in this January 13, 2015, piece entitled, “It’s the Consumer, Stupid – Part III”, which itself contains links to many earlier pieces addressing zero-rated plans.  In the January 2015 piece I wrote: “Professor Crawford’s opposition to any form of ‘zero-rating’ serves to illustrate how, in her view, the absolutist objective of total access uniformity must prevail over any other business model that consumers might find attractive, however slightly such model may diverge from Professor Crawford’s notion of total access uniformity.”
Such ideal-world absolutism with regard to “net neutrality” regulation leads to a zealousness that makes it easy to disregard such real-world matters as the costs of constructing and operating networks, the demand that may (or may not) exists at various price points for different service offerings, the extent of competition and consumer choice available in particular markets, and so forth.
And, more to the point for now, such absolutism makes it easy to inhabit a world in which it is suggested that zero-rating plans may constitute human rights violations, even though, for so many, they may offer a more affordable means to gain Internet access.

Thursday, October 15, 2015

The Adverse Impact of Internet Regulation on Broadband Investment

In August 2015, Hal Singer, the Progressive Policy Institute economist, released a Forbes article showing the correlation between the FCC’s 2015 Open Internet proceeding and a $3.3 billion decline in broadband infrastructure investment from the first half of 2014 to the first half of 2015. The article received a lot of press attention from both proponents and opponents of the FCC’s 2015 Open Internet order. After reviewing the rebuttals to Mr. Singer’s analysis, his explanation that the recent Open Internet proceeding and order likely had a negative effect on broadband investment is probably correct.
Free State Foundation President Randolph May also released a pair of follow-up blogs in response to Mr. Singer’s analysis. The first blog entitled “We Told You So: Title II Regulation Harms Investment” recites the many times FSF scholars have warned the FCC about how Internet regulations can stifle broadband investment. The second blog entitled “All the Investment We Cannot See” discusses the unseen investment loss that is likely to result from the FCC’s Open Internet order. Mr. May declares that infrastructure investment will be less going forward than it otherwise would be absent the FCC’s new Internet regulations.
Proponents of Title II regulations have raised concerns about the validity of Mr. Singer’s analysis. Free Press released a fact sheet reciting its concerns. It claims that the decline in broadband investment is because AT&T’s capital expenditures returned to “normal levels” after recently finishing Project VIP, which the company had announced would happen back in 2012. This seemingly is a fair point considering that AT&T had the largest decline of all the providers in Mr. Singer’s sample. However, Mr. Singer responded to this in a follow-up blog. He stated that AT&T itself (in the same 2012 announcement) projected it would invest $22 billion annually through November 2015, yet the company is currently on track for roughly $18 billion in 2015. He also added that “normal levels” of investment for AT&T prior to Project VIP (in years 2010 to 2012) averaged $20.5 billion annually, not $18 billion.
Free Press also claims that Mr. Singer should have compared the second quarters of each year, as opposed to the first halves of each year, because the second quarter of 2015 was the first full quarter after the FCC’s Open Internet order was adopted. Free Press says that if Mr. Singer did this he would see that investment has actually increased. But Mr. Singer said that the “writing has been on the wall” since President Obama announced his support for Title II reclassification back in November 2014, giving ISPs plenty of time to react to the regulations before they were even adopted. Mr. Singer added that AT&T CEO Randall Stephenson specifically announced that such uncertainty from the Open Internet proceeding makes it “prudent to pause” broadband investment.
FSF scholars have submitted comments to the FCC in the past explaining that merely proposing Internet regulations by the FCC can cause uncertainty and stifle investment from ISPs. In February 2008, President Randolph May submitted comments in the matter of “Broadband Industry Practices,” responding to petitions from Free Press and other organizations asking the Commission to initiate a rulemaking to clarify what constitutes “reasonable network management” for broadband network operators. Mr. May wrote that “the uncertainty created by the mere initiation of a rulemaking proceeding that likely would result in overly broad prohibitions will chill necessary new network investment.” With this perspective, it seems reasonable for Mr. Singer to have used the first half of each year in his sample, as opposed to the second quarter of each year.
In a September 2015 Forbes article, Harold Furchtgott-Roth tackled the FCC’s recent court brief in which the agency uses data from 2011 to 2013 to suggest that the FCC’s 2010 Open Internet order had a positive effect on broadband investment -- thus implying that the 2015 order will also have a positive effect. But Mr. Furchtgott-Roth explained that the correlation of investment increasing over a period of time does not necessarily mean that the 2010 order caused a positive effect. He said that while capital expenditures in the information economy grew by 8.2 percent annually from 2010 to 2013, capital expenditures in the remainder of the economy grew by 10.7 percent.
This is why Randolph May’s recent blog is very important to consider. Sure, broadband investment may grow over the next few years, but that does not mean it is growing as quickly as it would grow absent the new public utility-like regulation of Internet providers. The requirements of the FCC’s Open Internet order certainly disincentivize (on the margin) ISPs from expanding, upgrading, and developing new networks. And Mr. Furchtgott-Roth stated that in the information economy that margin can be worth billions of dollars annually in terms investment, innovation, and consumer welfare.
Chief economic strategist at the Progressive Policy Institute Michael Mandel released a September 2015 report entitled “U.S. Investment Heroes of 2015: Why Innovation Drives Investment,” which ranks the top 25 companies by their estimated domestic investment in their most recent fiscal year. Seven of the top 25 are classified in the information economy, four of which were in Mr. Singer’s broadband investment sample. Two of them (AT&T and Verizon) decreased investment in the first half of 2015 as compared to the first half of 2014. The four companies in Mr. Singer’s sample invested almost $50 billion into the U.S. economy last fiscal year. But how much more investment would we see without the FCC’s costly new Internet regulations? If Internet regulations are harming the broadband market’s largest participants, they are almost surely harming the smallest ones.
Mr. Singer’s Forbes article is simply an analysis of correlation between the FCC’s 2015 Open Internet order’s imposition of public utility style regulation and broadband investment. It will likely be several years before there is enough data in the sample to truly estimate the causal effect of Title II regulations on broadband investment. But, for now, there is enough in the way of correlation to worry about the absolute loss to the economy of “all the investment we cannot see.”

Thursday, October 08, 2015

D.C. Council Shouldn't Regulate Airbnb

In late September 2015, two proposals, which would to add excessive regulations onto roomsharing applications such as Airbnb, were proposed to the D.C. Council. Airbnb has been under scrutiny in the past, but it is often because states and municipalities, sometimes wrongly, claim they are not receiving tax revenue from Airbnb transactions. However, in the District, Airbnb has already agreed to collect and remit the full tourist tax levied on short-term rentals.
It’s pretty clear that these two proposals have been initiated by the hotel industry and its employees in an effort to restrict competition in the marketplace. One proposal has been supported by Unite-Here Local 25, a union that represents 6,500 hotel employees in the D.C. area, and the other proposal was drafted by a coalition of large hotels located in the D.C. area.
The D.C. government requires individuals who share spaces for less than 30 days to obtain a business license, but both of the draft ordinances would limit what the license holder can do with his or her property. For example, the proposal backed by Unite-Here only allows a host to share one space at a time and requires that the owner/tenant be present while the rental occurs. The D.C. hotel industry’s draft legislation allows a host to share up to five units at a time but has strict requirements on the number of guests and the length of their stay. The Unite-Here proposal allows for food and alcohol sales if the host is properly licensed, but the hotel industry’s proposal prohibits such sales.
Public safety, consumer protection, and food and health standards are often appropriate, even necessary, regulations for state and local governments. But both of these proposals go beyond simple standards and instead create costs that ultimately will restrict competition from roomsharing applications and benefit the hotel industry and its workers.
In a Perspectives from FSF Scholars entitled “Eight Takeaway from the FTC’s Sharing Economy Workshop,” I said that reputational feedback mechanisms, which are inherent in roomsharing applications, enable trust between trading partners and filter out harmful economic actors:
On Airbnb, hosts will use reputational feedback to filter through strangers in order to find guests responsible enough to share a living space with. Yet guests are just as likely to rely on this reputational feedback mechanism to avoid unsafe or unhealthy living spaces. The transparency provided by competitors’ ratings and reviews allows hosts and guests to easily compare the trustworthiness of respective counterparts. Additionally, even if a host or guest is a first time user, the accountability provided by reputational feedback mechanisms incentivizes the user to be as responsible as possible.
Reputational feedback mechanisms produce a self-regulating marketplace, so additional government regulations would only levy unnecessary costs on consumers. In comments submitted to the FTC in May 2015, FSF scholars discussed the importance of policymakers to focus on consumer welfare, rather than the welfare of specific competitors:
It is also critical that federal, state, and local governing authorities alike remain closely attuned to concerns over consumer welfare, rather than competitor welfare. Special or partial laws and regulations designed to protect incumbent competitors from new sources of competition, even if undertaken under the pretense of protecting competition, are unjustifiable and will harm consumers. Hopefully, market incumbents opposed to the proliferation of innovative and disruptive new Internet services and applications will less frequently succeed in manipulating laws and regulations to stifle sharing economy services merely because they possibly may adversely impact preexisting businesses.
In the same Perspectives from FSF Scholars, I discussed why “deregulating down” is a more efficient way for governments to establish the proverbial “level playing field” between incumbent actors and new entrants:
Indeed, regulations and taxes should not be levied on businesses differentially without legitimate reasons. As I wrote about in a blog earlier in June 2015, David Hantman, Head of Global Public Policy for Airbnb, and the FSF scholars agree on that principle. However, subjecting new entities, like Airbnb, to old regulations lessens the competitiveness of the market because smaller firms and/or emerging firms are often not well-established enough or profitable enough to cover the costs of such unnecessary burdensome regulations.
To the extent there are concerns about the impact of differential regulations not based on legitimate reasons, equity should be accomplished by deregulating down, not by regulating up. Deregulating down gives consumers the freedom to choose which businesses provide the most value. As FTC Commissioner Maureen Ohlhausen stated during the workshop’s opening keynote address, “it is not for us in government to pick the winners and losers in the marketplace.”
The restrictions in these proposals make no sense when the impact they would have on the local community is analyzed. They create costs that impede the ability of local residents to act as entrepreneurs and provide more choices to lodging consumers. For example, the hotel industry’s draft legislation says “a property may not be rented out on a short-term basis if the owner has received affordable housing funds or if the property is rent controlled.” This requirement does not benefit the public or consumers; it simply eliminates less costly lodging options, which only favors local hotels. If anything, roomsharing should be embraced in these circumstances in order to reduce or offset the fluctuation in housing investment that rent controls and subsidies can exacerbate. Additionally, roomsharing allows poor residents to earn extra income.
It is important that the D.C. Council not adopt either of the proposals. These proposals create unnecessary costs for local residents and entrepreneurs. If adopted, they will reduce lodging competition, lower income for residents, and raise prices for consumers. 

Wednesday, October 07, 2015

Sprint's Spectrum Spectacle

As most readers of this space know, on September 28, Sprint released this statement: “After thorough analysis…it will not participate in the 600 MHz incentive auction.” The statement went on to say: “ Sprint has concluded that its rich spectrum holdings are sufficient to provide its current and future customers great network coverage and be able to provide the consistent reliability, capacity, and speed that its customers demand.”

As my mother used to say: “Now you tell me!”

I say this because, again, as most readers know, Sprint spent much time and money lobbying furiously to establish, maintain, and, if possible, expand the reserve spectrum the FCC set-aside to provide Sprint, T-Mobile, and others favored bidding treatment in the 600 MHz auction. If you peruse the relevant dockets (AU Docket No. 14-252 and GN Docket No. 12-268), you will find at least a couple dozen comments and ex partes to this effect. Of course, Sprint is perfectly free to spend its lobbying resources as it pleases. But, unfortunately, its extraordinary efforts to preserve and expand the reserve set-aside, although it was not alone, required others parties – and the Commission’s own staff – to expend extra resources as well responding to its pleas.

And, after all that, Sprint announces that its rich spectrum holdings are sufficient to provide its current and future customers great coverage network coverage.

There are some important lessons here that go way beyond lamenting the expenditure of time and resources.

The foremost lesson is one I have tried to hammer home for many years. Absent a true market failure – and there is not one with respect to the marketplace for broadband services, including wireless services, the Commission needs to quit trying to manage competition. While FCC Chairman Tom Wheeler and his colleagues may not accept the characterization, what else, but “managing competition,” to call the establishment of bidding set-asides designed to favor certain market participants in an auction?

And this is even more the case when the spectrum set-asides are intended to favor well-capitalized firms like T-Mobile and Sprint. I have never argued against foreign ownership of carriers participating in the mobile marketplace, and I don’t intend to do so now. Generally, the infusion of foreign capital into the U.S. from major corporations like Deutsche Telekom (T-Mobile) and Softbank (Sprint) is a net positive. But I see no reason why such foreign ownership should be favored as a matter of regulatory policy in the context of a spectrum auction or otherwise.

Here’s another problem, much documented in the “public choice” literature, with the Commission’s “managing competition” approach. It encourages even more special pleading in the future because all parties know the Commission’s door – its mindset, really – is receptive to accepting such entreaties. For example, in this case, a focal point all along of the special pleading regarding the 600MHz reserved spectrum has been that Verizon and AT&T already possess “too much” low-band spectrum relative to their competitors.

The notion of the Commission trying to assess the precise differences in the various spectrum bands relative to their marketplace value is highly dubious. In any event, isn’t it clear, now that the Commission has established the precedent of jiggering the auction on this basis, that Sprint will be enticed in the future to once again argue it needs some form of favored treatment because it lacks sufficient spectrum? This, even though Sprint decided not to bid on low-band spectrum in a special set-aside in the upcoming auction because “its rich spectrum holdings are sufficient to provide its current and future customers great network coverage.”

The Commission invitation to even more special pleading would be farcical if it weren’t sad.

Now, I appreciate that constructing and implementing the forthcoming 600 MHz auction is a very complex undertaking. I recognize that Chairman Wheeler and his fellow commissioners are working hard to try to ensure the auction is successful. I especially appreciate the dedication, hard work, and good faith of Gary Epstein, Howard Symons, Roger Sherman, and others on the Commission’s staff, as they put in long hours with the aim of conducting a successful auction.

But this too must be said. Whether through ingrained regulatory hubris, or through a more conscious determination not to relinquish any regulatory control, the Commission continues to try to “manage competition” in far too many instances when it should, instead, simply step away and rely on market forces.

Sprint’s spectrum spectacle presents just one more example.

Monday, October 05, 2015

Reforming Maryland Business Licensing Regime

Since taking office, Maryland Governor Larry Hogan has taken some important steps to make good on his pledge to promote Maryland’s economic growth. These steps include restraining government spending through a proposed 2% cut in the state’s budget, reducing fees paid by Maryland’s citizens to state agencies for various services by $10 million a year, and focusing attention on regulatory reform. 
These are commendable steps in the right direction.

But I don’t doubt that Governor Hogan knows there is more that can be done in each of these areas.

For example, in a blog published in August, Maryland Needs to Improve Its Regulatory Climate – Part II, I offered some specific suggestions for improving the state’s regulatory review process that would provide a more rigorous analysis of the costs and benefits of regulations and assessment of their ongoing effectiveness.

In a July piece, Maryland’s Occupational Licensing Regime Hurts the Poor, my colleague, Free State Foundation Research Associate Michael Horney, explained how overly broad occupational licensing requirements limit economic opportunities for Maryland citizens. As he pointed out, “because consumers ultimately pay higher prices as a result of the restricted competition, the increase in prices is disproportionately harmful to the poorest consumers.”

Another area deserving attention for potential reform relates to business licensing, a close cousin to occupational licensing, but nevertheless distinct. There are literally more than 1000 state licenses that must be obtained in order to start various types of businesses in Maryland. Of course, local governments have their own licensing requirements that apply on top of the state requirements.

The statewide business licenses requirements, administered by the newly named Department of Commerce, are arrayed in 19 different categories, ranging from “Accommodation and Food Services” to “Waste Management and Remediation Services.” I invite you to click on any one of the 19 categories and see how many different licenses are required for various subcategories and sub-subcategories. You will see why the overall number of licenses associated with various businesses exceeds 1000.

Just by way of example, in order to start and operate a race track in Maryland, there are 18 different required licenses. For a restaurant, the number is up to 9; for a landscaping business up to 13; and for a lemonade and baked goods stand up to 3.

I am not suggesting that many of the licenses required are not warranted in order to protect consumers and workers from potential health and safety hazards. But I do suggest that a serious review of the licensing requirements would reveal that it is overbroad and that many of the current license requirements could be eliminated or consolidated.

Simplification and rationalization of the licensing regime will make it easier – and less costly – to start and operate a business in Maryland. In line with other of Governor Hogan's initiatives, this would be another important pro-growth measure that would benefit Maryland’s economy and improve its business climate.

Now that the Department of Commerce has changed its name, perhaps, with assistance from the Maryland Economic Development and Business Climate Commission, it can undertake the important work of reforming the state’s business licensing regime.