Yesterday a federal court ruled that the Federal Election Commission erred in ruling that the Wisconsin Right to Life organization could be barred from running issue ads before an election that advocated stopping filibusters against President Bush's judicial nominees. Because Senator Russ Feingold was running for reelection at the time the ad ran and had opposed some of Bush's judicial nominees, the FEC had held the ads fell within the ban on "electioneering communications" which is part of the McCain-Feingold campaign finance regulation law. The court held that, as applied to these ads, which did not expressly advocate Senator Feingold's defeat, the FEC's ruling was an unconstitutional restriction on Wisconsin Right to Life's free speech.
The court struck a welcome blow for the First Amendment and against the speech regulation regime established by McCain-Feingold. But here is what struck me about the Washington Post report on the case: It says the ruling creates a "loophole" in the McCain-Feingold law. And it quotes a law professor opining that the ruling could "create a major loophole in which all groups have to do is say they are running advocacy-issue ads and they can avoid the statute."
Don't these people understand that the real "loophole" we're talking about here is the one created in the First Amendment by the McCain-Feingold law? The Supreme Court 's First Amendment campaign finance jurisprudence in the face of the free speech restrictions embodied in McCain-Feingold-type regulatory regimes has been disappointing to say the least. Muddle through McConnell v. FEC if you need convincing.
There is a good chance that the Wisconsin Right to Life case or a similar one will eventually make it to the Supreme Court for a ruling on the constitutionality of the FEC's application of the pre-election "electioneering communication" ban to issue ads that don't expressly advocate the election or defeat of a candidate. If the Supreme Court happens to uphold the right of groups to broadcast issue ads before an election that urge a position at odds with a candidate, wouldn't it be nice to see a headline, or even a storyline, to the effect that a "loophole" in the First Amendment opened by McCain-Feingold had been closed.
That would be "loophole" closing story of major import.
Friday, December 22, 2006
Monday, December 18, 2006
Robert McDowell and the Public Interest Standard
FCC Commissioner Robert McDowell has decided, based upon the terms of his Ethics Agreement, the independent view of the Office of Government Ethics, the Virginia State Bar ethics counsel and, most importantly, his "own personal sense of ethics," that he cannot participate in the consideration of the AT&T-BellSouth merger application. In the face of a present 2-2 deadlock among the remaining four commissioners concerning the merger, the FCC's General Counsel last week had authorized, but not required, McDowell's participation to break the current stalemate.
I happen to believe the merger should be approved promptly without resort to conditions, such as imposition of net neutrality mandates that have nothing to do with competitive concerns raised specifically by the merger. As I have written many times before, it is only because the Commission considers mergers under the indeterminate "public interest" standard that commissioners are able to range far afield from concerns related uniquely to the merger and consider matters much more appropriately considered in an industry-wide generic rulemaking. The Commission's handling of this case is Exhibit A (or more correctly probably X, Y, or Z) as to why the merger review process needs to be reformed.
While the public interest standard as a delegation of congressional authority to guide FCC decisionmaking is highly problematical, the public's interest in having public officials guided by the highest ethical standards ought always to be of paramount concern. Even though another individual in good conscience and good faith might well have reached the opposite determination, in its thoughtfulness and eloquence, Commissioner McDowell's statement explaining his decision to remain recused from participating in the AT&T-BellSouth merger decision is a shining example of the proper way for a public servant to approach public service.
Long past when this specific merger, as important as it is, is decided one way or the other, Robert McDowell's example will remain a public interest standard that ought to be embraced by all.
I happen to believe the merger should be approved promptly without resort to conditions, such as imposition of net neutrality mandates that have nothing to do with competitive concerns raised specifically by the merger. As I have written many times before, it is only because the Commission considers mergers under the indeterminate "public interest" standard that commissioners are able to range far afield from concerns related uniquely to the merger and consider matters much more appropriately considered in an industry-wide generic rulemaking. The Commission's handling of this case is Exhibit A (or more correctly probably X, Y, or Z) as to why the merger review process needs to be reformed.
While the public interest standard as a delegation of congressional authority to guide FCC decisionmaking is highly problematical, the public's interest in having public officials guided by the highest ethical standards ought always to be of paramount concern. Even though another individual in good conscience and good faith might well have reached the opposite determination, in its thoughtfulness and eloquence, Commissioner McDowell's statement explaining his decision to remain recused from participating in the AT&T-BellSouth merger decision is a shining example of the proper way for a public servant to approach public service.
Long past when this specific merger, as important as it is, is decided one way or the other, Robert McDowell's example will remain a public interest standard that ought to be embraced by all.
Friday, December 15, 2006
The 10% Telephone Tax
Each quarter the FCC recalculates the amount that consumers are taxed to support the "universal service fund". The FCC's most recent calculation shows the federal tax for the next three months will be 9.7% on every interstate and international call. (Yes, I know that, strictly speaking, this tax is called a "contribution" by the feds, but if it walks like a duck, and quacks like....well, you know. And I know this amount does not even include local telecom taxes imposed by many jurisdictions.)
USF funds are disbursed to subsidize communications service to school and libraries, "high-cost" areas, and low-income persons. Over the years the subsidies, especially those to high-cost areas, have grown exponentially, because there are no incentives built into the system to avoid wasteful expenditures or to use newer, more efficient, less costly technologies. In fact, under the current USF regime, the incentives are just the opposite.
This is not to say that the entire USF concept should be gutted. For example, there is widespread support for subsidies to low-income persons truly in need of discounted communications services. But it is to say the USF is in need of substantial reform. Congress passed up on the opportunity to make any progress on USF reform last year. But because new Internet-based communications services are disrupting the marketplace and do not fit comfortably with the existing USF scheme, the program is going to need to be reformed sooner rahter than later. And that reform, one way or the other, should include a substantial reduction in the total amount of subsidies disbursed each year and then a cap on any further growth from the reduced level.
A 10% telecommunications tax just doesn't make sense in today's communications-dependent environment.
USF funds are disbursed to subsidize communications service to school and libraries, "high-cost" areas, and low-income persons. Over the years the subsidies, especially those to high-cost areas, have grown exponentially, because there are no incentives built into the system to avoid wasteful expenditures or to use newer, more efficient, less costly technologies. In fact, under the current USF regime, the incentives are just the opposite.
This is not to say that the entire USF concept should be gutted. For example, there is widespread support for subsidies to low-income persons truly in need of discounted communications services. But it is to say the USF is in need of substantial reform. Congress passed up on the opportunity to make any progress on USF reform last year. But because new Internet-based communications services are disrupting the marketplace and do not fit comfortably with the existing USF scheme, the program is going to need to be reformed sooner rahter than later. And that reform, one way or the other, should include a substantial reduction in the total amount of subsidies disbursed each year and then a cap on any further growth from the reduced level.
A 10% telecommunications tax just doesn't make sense in today's communications-dependent environment.
Thursday, December 14, 2006
Video Franchise Reform, Net Neutrality, and a Dear Larry Letter
Michigan’s Governor Jennifer Granholm is poised to sign a new video franchise reform law just passed by the legislature. By establishing uniform requirements for local franchises, the new regime presumably will speed up the ability of telephone companies like AT&T and Verizon to obtain the authorization they need to begin offering video services in competition with cable and satellite operators. More competition is good for consumers. And the bill apparently allows incumbent cable providers to opt into the new, less burdensome regime. That makes sense as well. In today’s ever-more competitive broadband environment, as a matter of equity, cable operators should not be subjected to disparate regulatory burdens.
It is encouraging that Michigan is now the 11th state to enact a statewide video franchise reform law designed in one way or another to speed up the franchise process so that local authorities are not roadblocks to competition. Michigan joins Texas, Virginia, Indiana, Kansas, Oklahoma, Connecticut, South Carolina, North Carolina, New Jersey, and California. While I have advocated in congressional testimony adoption of federal legislation to amend the Communications Act to establish a national franchising regime as a means of reforming the franchising process, the prospects for such legislation now seem dim. So it is welcome news that the states have become leaders in this reform effort. As more states pass video reform legislation, the pressure will grow on still others to follow suit, so as not to be left behind. The laggards will be leery of losing out on the telcos’ investment—and the jobs that accompany the investment—in new networks in states where the opportunities for quick, less burdensome marketplace entry are most promising.
Now to the Dear Larry letter. Google and its allies attempted to use Michigan’s video franchise reform bill as a vehicle for adding net neutrality mandates to Michigan’s statue books. In a “Dear Larry” letter dated December 11, Governor Granholm thanks Larry Page, Google’s co-founder and president, for “all the expertise Google has brought to Michigan on the issue of net neutrality.” If only she had stopped with the thanks. Instead, there’s this: “I believe it may be more desirable to pursue stand-alone legislation to further extend consumer protections by enacting net neutrality next year, rather than as an amendment to this year’s legislation.”
So it is almost certain that Michigan will be a net neutrality battleground in 2007. Other states likely will be NN battlegrounds as well if Google comes paging. This is too bad, because even if these efforts to impose Internet regulation are repelled, as they should be, there will be a significant expenditure of time and resources dedicated to fights around the country. The time and resources could be put to more productive use by broadband ISPs—like building out new networks and developing innovative new services and applications.
If states do adopt net neutrality mandates that purport to regulate the rates, terms or conditions on which Internet access is offered by broadband Internet service providers, the FCC should be ready with an order specifically preempting such state actions. Such an order would follow along the lines of the Pulver Declaratory Ruling preempting state regulation of VoIP services, but would more broadly extend to all IP-enabled services. The FCC already has compiled a record to support such action in its long-pending IP-Enabled Services rulemaking proceeding. Without rehearsing here all of the preemption jurisprudence (which, by the way, will be done at a later date), there is a clearly-expressed national policy against regulation of Internet services by the federal government and the states as well. Section 230 of the 1996 Telecom Act states this plainly: “It is the policy of the United States…to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or state regulation.” This deregulatory national policy for Internet access service now has been embodied in the FCC’s broadband proceedings and affirmed by the Supreme Court in the landmark Brand X case. If exercised properly, the FCC possesses authority to preempt state net neutrality laws or regulations. In essence, imposing non-discrimination obligations, and the rate regulation that inevitably accompanies non-discrimination regulation, contravene clearly expressed national policy.
A final thought: From all of the above, and from my congressional testimony earlier this year, it ought to be clear that I am sympathetic to FCC Chairman Kevin Martin’s decision to explore whether the Communications Act, as it presently stands, authorizes the agency to promulgate federal rules that would ease telco entry into the video marketplace by imposing some form of national franchising standards. In light of the explicit role Title VI of the Communications Act gives the state and local franchising authorities in awarding cable franchises, along with the act’s provision of a judicial remedy for resolving claims that a franchising authority has denied an additional competitive franchise, the Commission’s authority to adopt national franchising rules is not as clear as the agency’s authority to preempt state-imposed Internet regulation. In any event, if the FCC does go forward and adopt national franchising rules, it is likely that the question of the extent of the agency’s authority under Section 621 will end up being resolved by the Supreme Court several years from now.
That’s why it is important, in the meantime, for more states to join Michigan and the other ten that have already enacted video franchise reform laws --for them to do so without adopting net neutrality mandates that regulate the Internet.
It is encouraging that Michigan is now the 11th state to enact a statewide video franchise reform law designed in one way or another to speed up the franchise process so that local authorities are not roadblocks to competition. Michigan joins Texas, Virginia, Indiana, Kansas, Oklahoma, Connecticut, South Carolina, North Carolina, New Jersey, and California. While I have advocated in congressional testimony adoption of federal legislation to amend the Communications Act to establish a national franchising regime as a means of reforming the franchising process, the prospects for such legislation now seem dim. So it is welcome news that the states have become leaders in this reform effort. As more states pass video reform legislation, the pressure will grow on still others to follow suit, so as not to be left behind. The laggards will be leery of losing out on the telcos’ investment—and the jobs that accompany the investment—in new networks in states where the opportunities for quick, less burdensome marketplace entry are most promising.
Now to the Dear Larry letter. Google and its allies attempted to use Michigan’s video franchise reform bill as a vehicle for adding net neutrality mandates to Michigan’s statue books. In a “Dear Larry” letter dated December 11, Governor Granholm thanks Larry Page, Google’s co-founder and president, for “all the expertise Google has brought to Michigan on the issue of net neutrality.” If only she had stopped with the thanks. Instead, there’s this: “I believe it may be more desirable to pursue stand-alone legislation to further extend consumer protections by enacting net neutrality next year, rather than as an amendment to this year’s legislation.”
So it is almost certain that Michigan will be a net neutrality battleground in 2007. Other states likely will be NN battlegrounds as well if Google comes paging. This is too bad, because even if these efforts to impose Internet regulation are repelled, as they should be, there will be a significant expenditure of time and resources dedicated to fights around the country. The time and resources could be put to more productive use by broadband ISPs—like building out new networks and developing innovative new services and applications.
If states do adopt net neutrality mandates that purport to regulate the rates, terms or conditions on which Internet access is offered by broadband Internet service providers, the FCC should be ready with an order specifically preempting such state actions. Such an order would follow along the lines of the Pulver Declaratory Ruling preempting state regulation of VoIP services, but would more broadly extend to all IP-enabled services. The FCC already has compiled a record to support such action in its long-pending IP-Enabled Services rulemaking proceeding. Without rehearsing here all of the preemption jurisprudence (which, by the way, will be done at a later date), there is a clearly-expressed national policy against regulation of Internet services by the federal government and the states as well. Section 230 of the 1996 Telecom Act states this plainly: “It is the policy of the United States…to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or state regulation.” This deregulatory national policy for Internet access service now has been embodied in the FCC’s broadband proceedings and affirmed by the Supreme Court in the landmark Brand X case. If exercised properly, the FCC possesses authority to preempt state net neutrality laws or regulations. In essence, imposing non-discrimination obligations, and the rate regulation that inevitably accompanies non-discrimination regulation, contravene clearly expressed national policy.
A final thought: From all of the above, and from my congressional testimony earlier this year, it ought to be clear that I am sympathetic to FCC Chairman Kevin Martin’s decision to explore whether the Communications Act, as it presently stands, authorizes the agency to promulgate federal rules that would ease telco entry into the video marketplace by imposing some form of national franchising standards. In light of the explicit role Title VI of the Communications Act gives the state and local franchising authorities in awarding cable franchises, along with the act’s provision of a judicial remedy for resolving claims that a franchising authority has denied an additional competitive franchise, the Commission’s authority to adopt national franchising rules is not as clear as the agency’s authority to preempt state-imposed Internet regulation. In any event, if the FCC does go forward and adopt national franchising rules, it is likely that the question of the extent of the agency’s authority under Section 621 will end up being resolved by the Supreme Court several years from now.
That’s why it is important, in the meantime, for more states to join Michigan and the other ten that have already enacted video franchise reform laws --for them to do so without adopting net neutrality mandates that regulate the Internet.
Wednesday, December 13, 2006
Video Reform Spurs Fiber to the Home Growth
There is a new study out commissioned by the Fiber to the Home Council indicating that since the passage of the Texas video franchise reform law last year video-enabled fiber to the home (FTTH) has grown faster in Texas than in other parts of the country. This should not be surprising. The report attributes the faster FTTH growth rate to "perceptions that the new law, by ending time-consuming and expensive negotiations with municipalities for franchises, is substantially decreasing the costs of entry and operation, by eliminating unreasonable and unrelated requests during negotiations, and lowering ongoing costs to administer franchise agreements."
The FCC is about to act in its proceeding considering measures it can take to speed up the local franchise process. The new report from the FTTH Council shows why the FCC's efforts in this regard are important, and why the states, in this digital era of broadband competition, should continue their own efforts to reform the franchising process.
The FCC is about to act in its proceeding considering measures it can take to speed up the local franchise process. The new report from the FTTH Council shows why the FCC's efforts in this regard are important, and why the states, in this digital era of broadband competition, should continue their own efforts to reform the franchising process.
Friday, December 08, 2006
Real Property and Real Competition
Two recent items got me thinking about buildings--real property--and telecom competition, and, ultimately, about how respect for private property rights ought to inform telecom policy.
First item: I've just skimmed the recently issued GAO report on so-called "special access" services, those high-capacity dedicated circuits used by large volume corporate business users and "non-incumbent" carriers to transport high volumes of communications traffic. These are not the circuits used by residential users or small "Mom and Pop" businesses, so for some number of years it has baffled me that the FCC has had to spend so much time and energy defending the regulatory flexibility it thus far has granted the LECs for these circuits subject to the most competitive pressures.
But here's what's bugging me: Running through the GAO report, and, frankly, some of the FCC's UNE orders of three or four years ago, seems to be the notion that special access competition should be assessed on a commercial building-by-building basis. The report presents extensive data on the number of buildings that have more than one provider of special access. This is an exceedingly narrow--and inappropriate--measure of the telecom marketplace. If there is demand to warrant, with the various technological platforms available and competitive providers ready to snatch business, it is economically feasible in many, if not most, commercial areas for a new entrant to put in its own dedicated circuit from a nearby collocation office to a building. The competitive provider may have existing facilities down the block or around the corner that could be connected to a building assuming demand for such a connection. Making every building its own market just doesn't make economic sense.
Second item: In FCC Chairman Martin's December 6 speech at the Phoenix Center conference, he made a number of points concerning broadband deployment and video competition, and some of them, especially those concerning reform of the local franchise process made eminent good sense. If the Commission has the authority to do so under the 1992 Cable Act, some of the remedies the Commission is contemplating, such as imposing deadlines for action by local franchise authorities and caps on franchise fees, would speed up the introduction of additional video competition to the benefit consumers. But one of the items Chairman Martin says he is asking the FCC staff to look at is whether new entrants are being "unreasonably foreclosed" from providing service to consumers living in apartments and, if so, what can be done about it.
So both GAO's assessment of special access competitiveness and Chairman Martin's focus on the video marketplace spotlight the actions of particular building owners. That being so, it is useful to remember that there may be many reasons, from avoidance of disruption to the building's physical plant to the desire of the building owner to reap certain benefits in exchange for exclusivity, for the building not to allow multiple providers access to its building. But one reason is surely not to displease the building's tenants, who after all are free to relocate if they prefer a location with more choice in communications providers. If enough tenants value more communications choices above whatever other combination of price and amenities brought them to the building in the first place, they will move--and the building owner will get the message.
I understand that GAO did not suggest in its report that the government should mandate access to buildings in contravention to a building owners wishes. Neither did Chairman Martin in his speech. But with the focus on particular buildings, it is probably useful to remember that both instances represent cases in which respect for the right of a property owner to manage and use its real property as it pleases almost certainly outweigh any countervailing government interest in interfering with the owner's choices. This is especially so in an environment in which, due to technological and marketplace developments, consumers are steadily being treated to more communications choices.
First item: I've just skimmed the recently issued GAO report on so-called "special access" services, those high-capacity dedicated circuits used by large volume corporate business users and "non-incumbent" carriers to transport high volumes of communications traffic. These are not the circuits used by residential users or small "Mom and Pop" businesses, so for some number of years it has baffled me that the FCC has had to spend so much time and energy defending the regulatory flexibility it thus far has granted the LECs for these circuits subject to the most competitive pressures.
But here's what's bugging me: Running through the GAO report, and, frankly, some of the FCC's UNE orders of three or four years ago, seems to be the notion that special access competition should be assessed on a commercial building-by-building basis. The report presents extensive data on the number of buildings that have more than one provider of special access. This is an exceedingly narrow--and inappropriate--measure of the telecom marketplace. If there is demand to warrant, with the various technological platforms available and competitive providers ready to snatch business, it is economically feasible in many, if not most, commercial areas for a new entrant to put in its own dedicated circuit from a nearby collocation office to a building. The competitive provider may have existing facilities down the block or around the corner that could be connected to a building assuming demand for such a connection. Making every building its own market just doesn't make economic sense.
Second item: In FCC Chairman Martin's December 6 speech at the Phoenix Center conference, he made a number of points concerning broadband deployment and video competition, and some of them, especially those concerning reform of the local franchise process made eminent good sense. If the Commission has the authority to do so under the 1992 Cable Act, some of the remedies the Commission is contemplating, such as imposing deadlines for action by local franchise authorities and caps on franchise fees, would speed up the introduction of additional video competition to the benefit consumers. But one of the items Chairman Martin says he is asking the FCC staff to look at is whether new entrants are being "unreasonably foreclosed" from providing service to consumers living in apartments and, if so, what can be done about it.
So both GAO's assessment of special access competitiveness and Chairman Martin's focus on the video marketplace spotlight the actions of particular building owners. That being so, it is useful to remember that there may be many reasons, from avoidance of disruption to the building's physical plant to the desire of the building owner to reap certain benefits in exchange for exclusivity, for the building not to allow multiple providers access to its building. But one reason is surely not to displease the building's tenants, who after all are free to relocate if they prefer a location with more choice in communications providers. If enough tenants value more communications choices above whatever other combination of price and amenities brought them to the building in the first place, they will move--and the building owner will get the message.
I understand that GAO did not suggest in its report that the government should mandate access to buildings in contravention to a building owners wishes. Neither did Chairman Martin in his speech. But with the focus on particular buildings, it is probably useful to remember that both instances represent cases in which respect for the right of a property owner to manage and use its real property as it pleases almost certainly outweigh any countervailing government interest in interfering with the owner's choices. This is especially so in an environment in which, due to technological and marketplace developments, consumers are steadily being treated to more communications choices.
Tuesday, December 05, 2006
From Cellphones to TV: This Convergence Thing Ain't No Joke
Yesterday's Wall Street Journal had a story about Comedy Central's plans to air on prime time TV a show first produced by start-up wireless carrier Amp'd Mobile Inc. Supposedly this is the first time a show originally produced for cellphone distribution will be aired on broadcast television. If you are a WSJ subscriber, you can read "Comedy Central Thinks Show Produced First for Phones Is Ready for Prime Time" here. Of course, it's common now for shows originally produced for broadcast TV to be "broadcast" soon thereafter on cell networks. The latest I read about is the hit "Ugly Betty". I understand on a cellphone Betty looks more like one of the "Desperate Housewives," another cellphone network TV favorite. But who even knew there were shows originally produced for cellphones?
As Richard Nixon was wont to say: "Let me be abundantly clear": Isn't it time to recognize that we live in an age of video abundance? Isn't it time to stop applying different regulatory regimes to different technological platforms based on the name we give the platform over which the video is delivered or the screen on which we watch the content? More abundantly clearly: Isn't it time to get rid of all the regulations applicable to video content and delivery that were developed in an age when consumers had much less choice?
Here's just one paragraph from the WSJ article: "The Comedy Central deal raises to a new level the nascent business of developing TV shows for cellphones, demonstrating that it has potential to become a breeding ground for TV content. It's the latest case of cross-pollination between technologies, with other examples being videogames morphing into movies, like "Lara Croft: Tomb Raider" and Internet videos winding up on cable networks like Current."
The import of this "cross-pollination between technologies" is that the American people have available an ever-increasing amount of content from an ever-increasing number of diverse sources to view or access whenever and wherever they wish on whatever screen they prefer. (Did you hear the one with the punch line, "You can call me 'TV', you can call me 'cable', you can call me 'the Internet', you can call me 'IPTV, or you can call me 'cellphone-cellvideo-cellweb' or 'VOPL-video over powerline' or whatever....? Just don't call the FCC!")
The reality of what's happening in the marketplace today, largely due to rapid technological advances in digital broadband networks and applications, ought to convince policymakers and regulators that media ownership and other remaining video regulations devised in the analog era are woefully outdated. With competition among broadband platform providers for delivery of differentiated content and applications, policymakers ought to understand that so-called "network neutrality" mandates, intended to prohibit differentiation, are completely unnecessary and very counter-productive. Consumers will vote with their eyeballs, eardrums, and mouse clicks when they are dissatisfied.
If the policymakers and regulators don't understand this marketplace reality at a time when content, such as that produced by Comedy Central, jumps quickly from cellphone to TV to the web to cable to satellite and back, the joke will be on us, and the First Amendment too.
As Richard Nixon was wont to say: "Let me be abundantly clear": Isn't it time to recognize that we live in an age of video abundance? Isn't it time to stop applying different regulatory regimes to different technological platforms based on the name we give the platform over which the video is delivered or the screen on which we watch the content? More abundantly clearly: Isn't it time to get rid of all the regulations applicable to video content and delivery that were developed in an age when consumers had much less choice?
Here's just one paragraph from the WSJ article: "The Comedy Central deal raises to a new level the nascent business of developing TV shows for cellphones, demonstrating that it has potential to become a breeding ground for TV content. It's the latest case of cross-pollination between technologies, with other examples being videogames morphing into movies, like "Lara Croft: Tomb Raider" and Internet videos winding up on cable networks like Current."
The import of this "cross-pollination between technologies" is that the American people have available an ever-increasing amount of content from an ever-increasing number of diverse sources to view or access whenever and wherever they wish on whatever screen they prefer. (Did you hear the one with the punch line, "You can call me 'TV', you can call me 'cable', you can call me 'the Internet', you can call me 'IPTV, or you can call me 'cellphone-cellvideo-cellweb' or 'VOPL-video over powerline' or whatever....? Just don't call the FCC!")
The reality of what's happening in the marketplace today, largely due to rapid technological advances in digital broadband networks and applications, ought to convince policymakers and regulators that media ownership and other remaining video regulations devised in the analog era are woefully outdated. With competition among broadband platform providers for delivery of differentiated content and applications, policymakers ought to understand that so-called "network neutrality" mandates, intended to prohibit differentiation, are completely unnecessary and very counter-productive. Consumers will vote with their eyeballs, eardrums, and mouse clicks when they are dissatisfied.
If the policymakers and regulators don't understand this marketplace reality at a time when content, such as that produced by Comedy Central, jumps quickly from cellphone to TV to the web to cable to satellite and back, the joke will be on us, and the First Amendment too.
Thursday, November 16, 2006
Argumentation by Adjective
A group of self-described consumer groups has submitted a letter to the FCC opposing a delay in the July 2007 scheduled implementation date of the set-top box integration ban. I disagree. I've explained in an essay on CNET and in a longer paper why the implementation date should be deferred, so I won't repeat those arguments here. I will just emphasize, as I did in my papers, that this is a case in which the FCC's authority to grant common sense regulatory relief is very clear. While the self-identified consumer groups refer to the provision in the 1996 Act requiring the FCC to adopt set-top box regulations, they fail to mention that in the very same provision Congress gave the FCC authority to waive or even sunset whatever regulations it adopted. This is rare in the Communications Act and, indeed, in most statutes delegating authority to administrative agencies. I think that even the Congress that included the set-top provision thought that technology and marketplace developments might well outrun any regulatory mandates the FCC might devise. With downloadable security and the DTV transition on the horizon, it would be unwise for this Commission to enforce a regulatory mandate whose near-term costs to consumers outweigh any benefits. This Commission should have a market-oriented majority sympathetic to avoiding unnecessary regulatory mandates,
What really struck me about the group letter, though, is that it is replete with argumentation by adjective. The groups go on about the "the onerous costs of the cable monopoly"; the "excessive monthly rental costs for cable distributor boxes"; "the costly programming packages offered by cable". There's more of this adjectival arguefying, including the usual: "consumers are already suffering from exorbitant cable price hikes."
Yes, it would be nice if multi-hundred channel cable service, with all the new on-demand programming and other digital service features, was less costly. But by what measure do the consumer groups charge that the price of the service is "onerous", "costly", or "excessive". I confess I would be pleased if the price of telephone service, cable service, the Washington Post and Communications Daily, and most certainly Consumer Reports was less rather than more. But, of course, I might not have them at all if they were forced to be priced at some less "onerous", less "costly", or less "excessive" price that I or the authors of the consumer letter prefer. I would prefer that the marketplace rahter than the consumer groups or the government establish the "right" price. In the same vein, I would prefer that policy not be based on overheated rhetoric about "costly" services.
Finally, don't get me wrong: I want to see still more competition in the video marketplace from the "telephone" companies and others. It's coming, and consumers will benefit from that. But the competitive landscape of the broadband marketplace already is such that a forward-looking, market-oriented FCC should be initiating a proceeding to sunset the set-top rules, not just waive them.
What really struck me about the group letter, though, is that it is replete with argumentation by adjective. The groups go on about the "the onerous costs of the cable monopoly"; the "excessive monthly rental costs for cable distributor boxes"; "the costly programming packages offered by cable". There's more of this adjectival arguefying, including the usual: "consumers are already suffering from exorbitant cable price hikes."
Yes, it would be nice if multi-hundred channel cable service, with all the new on-demand programming and other digital service features, was less costly. But by what measure do the consumer groups charge that the price of the service is "onerous", "costly", or "excessive". I confess I would be pleased if the price of telephone service, cable service, the Washington Post and Communications Daily, and most certainly Consumer Reports was less rather than more. But, of course, I might not have them at all if they were forced to be priced at some less "onerous", less "costly", or less "excessive" price that I or the authors of the consumer letter prefer. I would prefer that the marketplace rahter than the consumer groups or the government establish the "right" price. In the same vein, I would prefer that policy not be based on overheated rhetoric about "costly" services.
Finally, don't get me wrong: I want to see still more competition in the video marketplace from the "telephone" companies and others. It's coming, and consumers will benefit from that. But the competitive landscape of the broadband marketplace already is such that a forward-looking, market-oriented FCC should be initiating a proceeding to sunset the set-top rules, not just waive them.
Sunday, November 12, 2006
The Maryland PSC and Regulatory First Principles
A story in the November 11 edition Saturday's Washington Post begins: "The Maryland Public Service Commission could be on their way out when a new governor and legislature take office...." The import of the story is that new governor-elect Martin O'Malley and the Democrat-controlled legislature will resume the campaign to oust all of the current members of the PSC and replace them with regulators more to their liking.
This is not a good idea for several reasons, which I have testified and written about here, here, and here. Now that the political season is over--and, really, were electricity rates and replacing the PSC big political issues anyway?--calmer heads should prevail. Before taking any rash actions the new governor and the legislature should hold balanced hearings which will provide a basis to carefully consider the following:
This is not a good idea for several reasons, which I have testified and written about here, here, and here. Now that the political season is over--and, really, were electricity rates and replacing the PSC big political issues anyway?--calmer heads should prevail. Before taking any rash actions the new governor and the legislature should hold balanced hearings which will provide a basis to carefully consider the following:
- Legislative action to force the resignation of all members of a regulatory body because of disagreement with a particular regulatory action or actions is virtually unprecedented in American regulatory history. There is a reason why this is so. Commissions like the PSC were established with the idea that they would bring specialized technical and economic expertise to the complexities of utility ratemaking. And they were also established in a way that would allow them to do their work largely free from overt day-to-day political interference. If the legislature decides to fire all the PSC commissioners because it doesn't like a decision, the notion that the commission's decisions will be based upon the application of specialized administrative expertise rather than politics will be severely compromised.
- The stability that is a necessary hallmark of any principled rule-of-law regime also will be compromised by precipitous legislative action dismissing the entire group of PSC commissioners. Without a certain degree of confidence in the stability of the legal regime that governs utilities subject to the PSC's jurisdiction, these regulated companies will be reluctant to undertake the investments and pursue the innovations necessary to meet future demand while maintaining high levels of service quality.
- It is important for the governor and legislature to have in mind that before the recent sizeable BG&E&E and Pepco rate increases electricity rates had been frozen since 1993. That is a very long time with stable rates. Under the electricity restructuring plan adopted by the legislature in 1999, BG&E, for example, could not raise retail rates at all until this year, even as wholesale energy prices were rapidly rising. What the new governor and legislature need to consider is not how much rates have gone up in absolute terms under the 1999 restructuring plan which introduced a measure of competition into the electricity marketplace, but rather how much in relative terms rates would have gone up under the displaced regulatory regime. The displaced rate-of-return regime was viewed by most respected regulatory economists as one that created incentives for wasteful investments and expenditures by utilities that were simply passed on automatically to utility consumers.
If done thoughtfully and deliberately, a review of the organization and structure of PSC is appropriate and useful. Indeed, in my pieces referenced above, I have suggested that a greater degree of political control of the agency may be desirable. But the way to do that, if the legislature decides to go in that direction, would be to allow the governor to remove PSC commissioners before the expiration of their terms, a power that he now probably lacks. This is more consistent with our traditional notions of separation of powers than legislative hiring and firing of regulatory agency personnel.
By the same token, it is always appropriate, of course, for the legislature to review and adopt policies to guide the PSC in its ratemaking activities. But in doing so, it won't do anyone any good--especially the consumers in whose interests it purports to be acting--if the legislature ignores the economic fact-of-life that ultimately utilities subject to the PSC's jurisdiction must recover their costs of producing their services. If they aren't allowed to remain financially healthy enterprises, all of Maryland's residential and business consumers who depend on them will suffer.
Wednesday, November 01, 2006
The Integration Ban and Integrating DTV Transition Policy
NCTA President Kyle McSlarrow has sent a letter dated October 31 to the leadership of the Commerce Department and the FCC Chairman and Commissioners explaining--again--why postponement of the implementation of the FCC's Integration Ban is necessary to facilitate the DTV transition in the least costly and most economically efficient way. McSlarrow's letter is here and it speaks for itself. His main point is that, if implemented, the integration ban will add $2-3 to the monthly price of a converter box that if leased by a cable consumer will avoid the need for payment of the DTV "over the air" subsidy. In other words, unless the integration ban is postponed, different parts of the government will be working at cross-purposes.
Recently I published a CNET commentary and also a longer scholarly paper urging the FCC, at a minimum, to postpone the implementation of the integration ban. As I explain in those two pieces, unlike the case with some issues where the FCC's authority to grant regulatory relief is less clear, in this instance the agency's authority is crystal clear. This is a case in which you would hope that the Commission--or at least a Commission majority--attuned to removing and relieving unnecessary regulatory burdens in a fast-changing communications environment would want to act quickly to show its seriousness of purpose.
Recently I published a CNET commentary and also a longer scholarly paper urging the FCC, at a minimum, to postpone the implementation of the integration ban. As I explain in those two pieces, unlike the case with some issues where the FCC's authority to grant regulatory relief is less clear, in this instance the agency's authority is crystal clear. This is a case in which you would hope that the Commission--or at least a Commission majority--attuned to removing and relieving unnecessary regulatory burdens in a fast-changing communications environment would want to act quickly to show its seriousness of purpose.
Monday, October 30, 2006
Kevin Martin on Regulatory Modesty
FCC Chairman Kevin Martin gave an interesting, thoughtful talk last Thursday as the featured speaker at a program sponsored by the American Bar Association's Administrative Law & Regulatory Practice Section. His prepared remarks are posted on his FCC website.
Before an audience of administrative law afficianados, including me, Chairman Martin explained why we should want to be cautious, in our system of democratic governance, about giving administrative agencies too much unbridled discretion, even as he acknowledged the FCC may use such discretion to achieve sound policy results. An example of employing the FCC's discretion, reinforced with a good dose of Chevron deference, in the interest of sound policymaking is the FCC's deregulatory action in the broadband proceedings that led to the Supreme Court's affirmance in the Brand X decision.
In his address, Chairman Martin cited as worthy of concern the breadth of judicial deference to agency decisions under Chevron and the FCC's broad discretion, as interpreted by the D.C. Circuit, to implement the biennial regulatory review requirement. On the latter, he pointed out that the D.C. Circuit, over his dissent, had interpreted the Communications Act's Section 11 directive to the agency to repeal rules that are "no longer necessary in the public interest as a result of meaningful economic competition" as giving the agency more discretion to leave outdated rules in place than, to his mind, Congress had intended.
Regarding judicial deference to an agency's decisions, I have recently suggested that it would be more consistent with the political accountability and separation of powers rationale upon which the Chevron decision is premised, and, indeed, the separation of powers at the heart of our tripartite constitutional scheme, for independent agencies like the FCC to receive a lesser measure of Chevron deference than Executive Branch agencies. You will find my whole argument set forth in my Spring 2006 Administrative Law Review article entitled, "Defining Deference Down: Independent Agencies and Chevron Deference."
I suspect that Kevin Martin might not go as far as I go in my law review piece, and, in any event, in his speech to the Ad Law group he was articulating prudential concerns, rather than laying out a legal or constitutional argument. But anytime the head of a regulatory agency expresses caution about the exercise of whatever broad discretion he or she may possess, such self-abnegation is to be applauded. Regulatory modesty is often in short supply, and it is becoming.
Before an audience of administrative law afficianados, including me, Chairman Martin explained why we should want to be cautious, in our system of democratic governance, about giving administrative agencies too much unbridled discretion, even as he acknowledged the FCC may use such discretion to achieve sound policy results. An example of employing the FCC's discretion, reinforced with a good dose of Chevron deference, in the interest of sound policymaking is the FCC's deregulatory action in the broadband proceedings that led to the Supreme Court's affirmance in the Brand X decision.
In his address, Chairman Martin cited as worthy of concern the breadth of judicial deference to agency decisions under Chevron and the FCC's broad discretion, as interpreted by the D.C. Circuit, to implement the biennial regulatory review requirement. On the latter, he pointed out that the D.C. Circuit, over his dissent, had interpreted the Communications Act's Section 11 directive to the agency to repeal rules that are "no longer necessary in the public interest as a result of meaningful economic competition" as giving the agency more discretion to leave outdated rules in place than, to his mind, Congress had intended.
Regarding judicial deference to an agency's decisions, I have recently suggested that it would be more consistent with the political accountability and separation of powers rationale upon which the Chevron decision is premised, and, indeed, the separation of powers at the heart of our tripartite constitutional scheme, for independent agencies like the FCC to receive a lesser measure of Chevron deference than Executive Branch agencies. You will find my whole argument set forth in my Spring 2006 Administrative Law Review article entitled, "Defining Deference Down: Independent Agencies and Chevron Deference."
I suspect that Kevin Martin might not go as far as I go in my law review piece, and, in any event, in his speech to the Ad Law group he was articulating prudential concerns, rather than laying out a legal or constitutional argument. But anytime the head of a regulatory agency expresses caution about the exercise of whatever broad discretion he or she may possess, such self-abnegation is to be applauded. Regulatory modesty is often in short supply, and it is becoming.
Microsoft Softens on Net Neutrality
As a company with a touch of market power itself, perhaps Microsoft has a special sensitivity to the potential for abuse of the FCC's merger review process as a means of singling out specific companies for more onerous regulatory treatment than accorded other similarly-situated companies. In any event, for whatever reason, according to the Broadcasting and Cable report, MS has issued the following statement: "Microsoft has withdrawn its name from It's Our Net website for the pendency of the AT&T-BellSouth merger proceeding based on a company decision not to engage in the proceeding." The company added: "[W]e continue to support and will pursue other opportunities to obtain meaningful Network Neutrality policies."
The world would be a better place--or, more modestly, at least communications policy would be in a better place--if MS would grab the whole ball of wax and rethink its support of net neutrality mandates. Nevertheless, it is heartening to see the company apparently recognize the unsoundness of using the merger review process to impose conditions--such as the so-called Fifth NN principle--that would uniquely burden only the merger applicants and not other industry participants. The proposed condition pushed by the remainder of the MS's "It's Our Net" cohorts would essentially reimpose public utility-style common carrier regulation on AT&T's and BellSouth's broadband services. In my view, that would be a terribly backward and counterproductive step to take in today's competitive environment if applied to all broadband providers in the context of a generic rulemaking proceeding. But it would be especially egregious for the FCC to contemplate taking such a radical regulatory action in the context of a merger proceeding that singles out specific companies to bear significant regulatory burdens not shared by competitors. In that case, uniquely inequitable treatment would compound singularly unsound policy. I've written about the abuse of "regulation by condition" many times. Here's a recent one.
We don't know exactly why Microsoft decided not to participate in the merger proceeding. But taking the liberty of presuming that it shares some of my qualms about the use and abuse of the FCC's merger review process, it deserves some credit. Maybe it can use its "withdrawal period" to reconsider it general support for net neutrality regulation.
The world would be a better place--or, more modestly, at least communications policy would be in a better place--if MS would grab the whole ball of wax and rethink its support of net neutrality mandates. Nevertheless, it is heartening to see the company apparently recognize the unsoundness of using the merger review process to impose conditions--such as the so-called Fifth NN principle--that would uniquely burden only the merger applicants and not other industry participants. The proposed condition pushed by the remainder of the MS's "It's Our Net" cohorts would essentially reimpose public utility-style common carrier regulation on AT&T's and BellSouth's broadband services. In my view, that would be a terribly backward and counterproductive step to take in today's competitive environment if applied to all broadband providers in the context of a generic rulemaking proceeding. But it would be especially egregious for the FCC to contemplate taking such a radical regulatory action in the context of a merger proceeding that singles out specific companies to bear significant regulatory burdens not shared by competitors. In that case, uniquely inequitable treatment would compound singularly unsound policy. I've written about the abuse of "regulation by condition" many times. Here's a recent one.
We don't know exactly why Microsoft decided not to participate in the merger proceeding. But taking the liberty of presuming that it shares some of my qualms about the use and abuse of the FCC's merger review process, it deserves some credit. Maybe it can use its "withdrawal period" to reconsider it general support for net neutrality regulation.
Saturday, October 21, 2006
The Good Doctor's Prescription
When he was at the FCC heading up the agency's policy shop, where he served with distinction for so many years, Dr. Robert Pepper was known as one of the most knowledgeable and astute senior officials. He kept especially close tabs all those years in government service on the development of competition in various telecom markets, and he always seem to have in his briefcase the latest color-coded chart chronicling "on the ground" competitive developments.
In other words, Pepper (as he is wont to call himself) has been around long enough to have witnessed telecom markets that lacked effective competition and, therefore, needed some measure of regulatory intervention to protect consumers. And, conversely, he understands that regulatory intervention when it is unnecessary to protect competition imposes real costs on consumer welfare.
And I've been around long enough too to pay attention when Pepper speaks. So it catches my eye when I see in the October 23rd edition of Communications Daily [subscription required] that Pepper, now now a senior managing director at Cisco, is reported to have said at the recent CITI conference that net neutrality is really not about neutrality, but rather about some people's views of the government's role in business deals. And more specifically, according to Comm Daily, he said that "while network management technology can be used to create very competitive access environments...over-regulation can completely stifle it."
I don't think Dr. Pepper has any particular axe to grind as a senior Cisco official other than promoting a healthy a vigorously competitive broadband market that will be good for the country and, coincidentally, consume more and more Cisco equipment. When he speaks out in the net neutrality debate, it's worth paying attention to his diagnosis and prescription.
In other words, Pepper (as he is wont to call himself) has been around long enough to have witnessed telecom markets that lacked effective competition and, therefore, needed some measure of regulatory intervention to protect consumers. And, conversely, he understands that regulatory intervention when it is unnecessary to protect competition imposes real costs on consumer welfare.
And I've been around long enough too to pay attention when Pepper speaks. So it catches my eye when I see in the October 23rd edition of Communications Daily [subscription required] that Pepper, now now a senior managing director at Cisco, is reported to have said at the recent CITI conference that net neutrality is really not about neutrality, but rather about some people's views of the government's role in business deals. And more specifically, according to Comm Daily, he said that "while network management technology can be used to create very competitive access environments...over-regulation can completely stifle it."
I don't think Dr. Pepper has any particular axe to grind as a senior Cisco official other than promoting a healthy a vigorously competitive broadband market that will be good for the country and, coincidentally, consume more and more Cisco equipment. When he speaks out in the net neutrality debate, it's worth paying attention to his diagnosis and prescription.
Friday, October 20, 2006
NBCU Version 2.0 and the FCC's Media Ownership Rules
The FCC is once again taking comments in its various media ownership dockets. (Note right at the outset that the open dockets reach back to include the multiple ownership of radio stations proceeding opened in 2000 and the cross-ownership of broadcast stations and newspapers opened in 2001). Just contemplating on a Friday afternoon the tortured history of efforts to relax or eliminate these outdated rules in the face of the new media realities is enough to dampen an upcoming weekend.
Take the lead in today's story in the Washington Post on the NBC Universal restructuring and job cuts: "NBC Universal announced sweeping cuts to its television operations yesterday demonstrating just how far a once-unrivaled network must now go to stay competitive with YouTube, social networks, video games, and other upstart media." NBC refers to the restructuring as the NBCU 2.0 plan. The Post's story is headlined: "NBC Takes a Big Step Back from Television." This in and of itself should be enough to get the pro-media ownership control crowd to acknowledge how much the world has already changed and continues to change as the various ownership dockets drone on at the Commission and bounce up and down between the agency and the courts. Every new day brings more fresh news about the woes of the old media as the new media garner more and more eyeballs and eardrums.
The past few weeks have brought a spate of stories about the financial pressures on most of the country's newspapers as they continue to lose readership --and ad dollars--to new media outlets. The newspaper/broadcast cross-ownership prohibition, one of the media ownership rules under review, was adopted in 1975 when most people still relied on their local newspaper or broadcast station for news and information. Regardless of whether it made sense then, and there is a lot of evidence that shows that commonly-owned media properties often publish and broadcast diverse views, the rule was adopted before the advent of hundreds of cable channels, before satellite TV and radio, before the Internet, before DVDs, before I-Pods and podcasts, and so on and so forth. Today, about 90% of Americans subscribe to multichannel cable and satellite television and the vast majority are online.
With print newspapers fighting for survival and local broadcast stations in a tough fight to retain viewers and listeners, who really thinks that the newspaper/broadcast ownership prohibition is necessary to promote "diversity" of opinion? To the contrary, in many communities, such a combination may be the only way to allow both types of outlets to remain financially viable through the realization of operating efficiencies.
I think NBC was trying to send a clear signal by calling its restructuring plan "NBCU 2.0". The signal has a lot to do with what the Internet is doing to disrupt the old media marketplace and the way people get news and information. The FCC needs to repeal or substantially relax its media ownership rules, and fast.
Take the lead in today's story in the Washington Post on the NBC Universal restructuring and job cuts: "NBC Universal announced sweeping cuts to its television operations yesterday demonstrating just how far a once-unrivaled network must now go to stay competitive with YouTube, social networks, video games, and other upstart media." NBC refers to the restructuring as the NBCU 2.0 plan. The Post's story is headlined: "NBC Takes a Big Step Back from Television." This in and of itself should be enough to get the pro-media ownership control crowd to acknowledge how much the world has already changed and continues to change as the various ownership dockets drone on at the Commission and bounce up and down between the agency and the courts. Every new day brings more fresh news about the woes of the old media as the new media garner more and more eyeballs and eardrums.
The past few weeks have brought a spate of stories about the financial pressures on most of the country's newspapers as they continue to lose readership --and ad dollars--to new media outlets. The newspaper/broadcast cross-ownership prohibition, one of the media ownership rules under review, was adopted in 1975 when most people still relied on their local newspaper or broadcast station for news and information. Regardless of whether it made sense then, and there is a lot of evidence that shows that commonly-owned media properties often publish and broadcast diverse views, the rule was adopted before the advent of hundreds of cable channels, before satellite TV and radio, before the Internet, before DVDs, before I-Pods and podcasts, and so on and so forth. Today, about 90% of Americans subscribe to multichannel cable and satellite television and the vast majority are online.
With print newspapers fighting for survival and local broadcast stations in a tough fight to retain viewers and listeners, who really thinks that the newspaper/broadcast ownership prohibition is necessary to promote "diversity" of opinion? To the contrary, in many communities, such a combination may be the only way to allow both types of outlets to remain financially viable through the realization of operating efficiencies.
I think NBC was trying to send a clear signal by calling its restructuring plan "NBCU 2.0". The signal has a lot to do with what the Internet is doing to disrupt the old media marketplace and the way people get news and information. The FCC needs to repeal or substantially relax its media ownership rules, and fast.
Monday, October 16, 2006
Unfair Allegations Against DOJ
In their October 13 letter to FCC Chairman Kevin Martin asking that the vote on the AT&T/BellSouth merger be postponed, Democratic commissioners Michael Copps and Jonathan Adelstein assert that further review is important "because the Department of Justice approved this combination with little substantive analysis...." In the next sentence, they characterize DOJ's effort as a "limited analysis."
This characterization of DOJ's work is unfair. In its official statement regarding the closing of its investigation, DOJ refers to its "extensive investigation" before it determined that the proposed merger is not likely to impair competition. It says it reviewed "extensive information" obtained from the merging parties and competitors and customers of the merging parties. It says it "thoroughly examined" all areas in which the two companies compete--residential local and long distance, telcom services provided to business customers, and Internet services, along with the impact on wireless broadband services. DOJ says it also evaluated the cost savings and efficiencies claimed on behalf of the merger, and found the documentation submitted in support of the claimed efficiencies likely to be realized. The closing statement contains a summary of DOJ's conclusions regarding each of these areas.
I happen to agree with DOJ's assessment that the merger does not appear likely to lessen competition, especially in light of the existence of competitors using alternative technological platforms and the technological dynamism that characterizes today's communications marketplace. Not to mention further potential competition lurking on the sidelines from entrants using still other technological platforms. I recognize that others, including Commissioners Copps and Adelstein, may have a different lens through which they view potential competitive impacts and the state of competition in the communications marketplace. But that is an entirely different matter from denigrating DOJ's investigation that lasted over half a year.
Commissioners Copps and Adelstein appear to wish that DOJ would have written an FCC-style 200-pager in concluding its investigation without imposing any conditions. But that misconstrues DOJ's role as chief law enforcer of the nation's antitrust laws. As DOJ says, in accordance with long-standing policy, the closing statement "is limited by the Division's obligation to protect the confidentiality of certain information obtained in its investigations." In the AT&T/BellSouth investigation, as in most, Justice says that its evaluation has been "high fact-specific," with much of the relevant information, understandably in today's competitive environment, not public.
I understand that the FCC may have broader authority under the indeterminate public interest standard than does DOJ in reviewing mergers. For reasons I have stated many times, reviewing mergers under the vague public interest stand is problematical, because it gives the FCC almost unbridled authority to extract so-called "voluntary" concessions from the merger applicants. See these Legal Times and this National Law Journal pieces for why this is so and for previous examples of abuse. In any event, whatever the FCC's approach, there is no justification for mischaracterizing or misunderstanding the effort of DOJ or the work the antitrust agency has done. Instead, the FCC should rely heavily on that work in getting on with the job of voting on the AT&T/BellSouth transaction.
This characterization of DOJ's work is unfair. In its official statement regarding the closing of its investigation, DOJ refers to its "extensive investigation" before it determined that the proposed merger is not likely to impair competition. It says it reviewed "extensive information" obtained from the merging parties and competitors and customers of the merging parties. It says it "thoroughly examined" all areas in which the two companies compete--residential local and long distance, telcom services provided to business customers, and Internet services, along with the impact on wireless broadband services. DOJ says it also evaluated the cost savings and efficiencies claimed on behalf of the merger, and found the documentation submitted in support of the claimed efficiencies likely to be realized. The closing statement contains a summary of DOJ's conclusions regarding each of these areas.
I happen to agree with DOJ's assessment that the merger does not appear likely to lessen competition, especially in light of the existence of competitors using alternative technological platforms and the technological dynamism that characterizes today's communications marketplace. Not to mention further potential competition lurking on the sidelines from entrants using still other technological platforms. I recognize that others, including Commissioners Copps and Adelstein, may have a different lens through which they view potential competitive impacts and the state of competition in the communications marketplace. But that is an entirely different matter from denigrating DOJ's investigation that lasted over half a year.
Commissioners Copps and Adelstein appear to wish that DOJ would have written an FCC-style 200-pager in concluding its investigation without imposing any conditions. But that misconstrues DOJ's role as chief law enforcer of the nation's antitrust laws. As DOJ says, in accordance with long-standing policy, the closing statement "is limited by the Division's obligation to protect the confidentiality of certain information obtained in its investigations." In the AT&T/BellSouth investigation, as in most, Justice says that its evaluation has been "high fact-specific," with much of the relevant information, understandably in today's competitive environment, not public.
I understand that the FCC may have broader authority under the indeterminate public interest standard than does DOJ in reviewing mergers. For reasons I have stated many times, reviewing mergers under the vague public interest stand is problematical, because it gives the FCC almost unbridled authority to extract so-called "voluntary" concessions from the merger applicants. See these Legal Times and this National Law Journal pieces for why this is so and for previous examples of abuse. In any event, whatever the FCC's approach, there is no justification for mischaracterizing or misunderstanding the effort of DOJ or the work the antitrust agency has done. Instead, the FCC should rely heavily on that work in getting on with the job of voting on the AT&T/BellSouth transaction.
Thursday, October 12, 2006
Of You Tube, Media Ownership Mandates, and the First Amendment
The news about Google's proposed acquisition of You Tube for $1.6 billion (no, you can't write about this without also including a reference to the price tag!) made me recall the FCC media ownership hearings a week ago in LA. Remember, the five FCC commissioners trucked out to the Left Coast to hear the assembled crowd decry the concentration of control in the media that, in their view, has stifled the free flow of information.
So, I pulled out my press accounts of the hearing. Communications Daily reported in its October 5 edition that the vice-president of the Directors Guild of America told the FCC: "The robust independent production community that existed a decade ago has been destroyed. The pool of entities producing content today, a diversity of source, is almost non-existent." Much of the testimony was of this tenor.
Of course, with self-publishing, video-producing and sharing, and social networking Internet sites such as You Tube and My Space wildly popular, and receiving millions of hits a day, it is hard to know what to make of an assertion that "the pool of entities producing content today... is almost non-existent." To state the obvious: The pool of entities producing content has never been greater. We all know that, more and more, programming content put up on You Tube or Google Video or My Space or --yikes!--the FSF Blog may be viewed in a short time by millions of viewers around the world.
Maybe Mr. Hackford meant to say there is much less content being produced by members of the Directors Guild of America. Or much less content being produced by "directors" that live in California. Or much less content of the type that he prefers. Or that the proportion of programming now viewed on what he calls "television" screens is diminishing everyday compared to that viewed on what I call computer "monitors". Or whatever.
Mr. Hackford proposed--quite predictably--that the government should mandate that at least 25% of primetime programs be produced by firms not owned by networks or Hollywood studios. Ummm...I assume, in order to satisfy his union constituency, for purposes of calculating the 25% mandate, the Directors Guild wants to ignore video programming on sites like You Tube and Google and hundreds of others that appears screens that we don't call TVs and is available 24/7, not just in primetime. This is silly in today's world.
But in today's diverse media environment the argument that the media ownership control crowd is making is more than silly. It is constitutionally offensive. Government mandates on the amounts and the types of programming that media outlets can carry are inconsistent with core First Amendment values. This isn't the pre-cable, pre-satellite, pre-Internet 1960s or 1970s anymore when three broadcast networks dominated primetime. It ought to be primetime for the free speech values embodied in the First Amendment.
So, I pulled out my press accounts of the hearing. Communications Daily reported in its October 5 edition that the vice-president of the Directors Guild of America told the FCC: "The robust independent production community that existed a decade ago has been destroyed. The pool of entities producing content today, a diversity of source, is almost non-existent." Much of the testimony was of this tenor.
Of course, with self-publishing, video-producing and sharing, and social networking Internet sites such as You Tube and My Space wildly popular, and receiving millions of hits a day, it is hard to know what to make of an assertion that "the pool of entities producing content today... is almost non-existent." To state the obvious: The pool of entities producing content has never been greater. We all know that, more and more, programming content put up on You Tube or Google Video or My Space or --yikes!--the FSF Blog may be viewed in a short time by millions of viewers around the world.
Maybe Mr. Hackford meant to say there is much less content being produced by members of the Directors Guild of America. Or much less content being produced by "directors" that live in California. Or much less content of the type that he prefers. Or that the proportion of programming now viewed on what he calls "television" screens is diminishing everyday compared to that viewed on what I call computer "monitors". Or whatever.
Mr. Hackford proposed--quite predictably--that the government should mandate that at least 25% of primetime programs be produced by firms not owned by networks or Hollywood studios. Ummm...I assume, in order to satisfy his union constituency, for purposes of calculating the 25% mandate, the Directors Guild wants to ignore video programming on sites like You Tube and Google and hundreds of others that appears screens that we don't call TVs and is available 24/7, not just in primetime. This is silly in today's world.
But in today's diverse media environment the argument that the media ownership control crowd is making is more than silly. It is constitutionally offensive. Government mandates on the amounts and the types of programming that media outlets can carry are inconsistent with core First Amendment values. This isn't the pre-cable, pre-satellite, pre-Internet 1960s or 1970s anymore when three broadcast networks dominated primetime. It ought to be primetime for the free speech values embodied in the First Amendment.
Wednesday, October 11, 2006
Maryland's Business Tax Climate Ranking
Each year the Tax Foundation releases a report detailing how states stack up under its State Business Tax Climate Index (SBTCI). The bottom line: This year Maryland slipped to 29th place in the SBTCI ranking from 25th place last year. In other words, Maryland's lawmakers, media, and citizens should take note: There is a lot of room for improvement.
The Tax Foundation's new release is here and the study's Executive Summary is here.
The overall business tax climate index ranking is composed of scores in five sub-indices: Corporate Tax (7); Individual Income Tax (35); Sales Tax(8); Unemployment Tax(30); and Property Tax(41). So it is really in the individual, property, and unemployment tax areas that Maryland falls way short.
As the Executive Summary says: "Good state tax systems levy low, flat rates on the broadest bases possible, and they treat all taxpayers the same. Variation in the tax treatment of different industries favors one economic activity or decision over another. The more riddled a tax system is with these politically motivated preferences the less likely it is that business decisions will be made in response to market forces."
It ought to go without saying that business decisions which respond to market forces--rather than decisions responding to political preferences--will lead to a sounder, more robust economy that enhances overall consumer welfare for all of Maryland's citizens.
The Tax Foundation's new release is here and the study's Executive Summary is here.
The overall business tax climate index ranking is composed of scores in five sub-indices: Corporate Tax (7); Individual Income Tax (35); Sales Tax(8); Unemployment Tax(30); and Property Tax(41). So it is really in the individual, property, and unemployment tax areas that Maryland falls way short.
As the Executive Summary says: "Good state tax systems levy low, flat rates on the broadest bases possible, and they treat all taxpayers the same. Variation in the tax treatment of different industries favors one economic activity or decision over another. The more riddled a tax system is with these politically motivated preferences the less likely it is that business decisions will be made in response to market forces."
It ought to go without saying that business decisions which respond to market forces--rather than decisions responding to political preferences--will lead to a sounder, more robust economy that enhances overall consumer welfare for all of Maryland's citizens.
Friday, October 06, 2006
The Skunk in the Fiber
In an October 5 piece in Communications Daily [subscription required], entitled "FiOS Big on User Content, Wary of Offending Subscribers," Verizon's Joseph Ambeault, director of interactive services, worries that user-created content that offends some subscribers might prevent Verizon's FiOS service from becoming a mass-market product. He see two potential solutions to address this concern about offensive content: "Make new content providers take editorial responsibility by contract, as programming providers do, or reserve earlier hours of the day for 'family entertainment' and loosening up later at night."
The article never mentions net neutrality. But, speaking of giving offense, NN seems to me to be the proverbial skunk in the fiber. I fail to see its irrelevance to dealing with the concerns expressed by Mr. Ambeault. Indeed, net neutrality mandates, such as those contained in the current version of the Senate bill, could make it difficult (that is, legally dicey) to implement solutions such as the perfectly logical ones suggested by Mr. Ambeault. Remember that the Senate bill (and similar proposals) provides that each Internet service provider must allow each subscriber to "access and post any lawful content of that subscriber's choosing" and "access any web page of that subscriber's choosing." It doesn't say anything, at least very clearly, about allowing "family entertainment" hours before loosening up later at night or allowing ISPs to negate the access rights by requiring content providers through contract to assume editorial responsibility.
Much of the discussion about net neutrality has focused on whether NN prohibitions are needed to ban the potential "discrimination" of two-tiered (what about three or four-tiered?) pricing. For reasons I've explained many times elsewhere, in today's competitive marketplace, they are not.
But apart from sound economic principles, I've also been arguing in recent months in different venues that net neutrality mandates are inconsistent with the First Amendment rights of the broadband ISPs. In other words, there is more at stake than just maintaining the freedom of the ISPs to differentiate and price their services in ways that respond to marketplace needs. Also at stake is the freedom of speech of the ISPs to decide how to "program" their networks. See here (National Law Journal), here (Perspective of FSF Scholars), and here (Broadcasting & Cable) for my recent pieces explaining why net neutrality mandates infringe on First Amendment rights.
The concerns of Verizon's Mr. Ambeault about dealing with "offensiveness" while trying to develop a mass market service are instructive. They show that NN is about more than the freedom to price to market. According to Comm Daily, Mr. Ambeault says Verizon has to get ahead of the problems and can't rely on taking down content as complaints arise. Assuming the offensive content is lawful, and most of what may offend is, with access and posting rights enshrined in federal law, NN might well prevent such takedowns by Verizon and other ISPs. At that point, like the newspapers, magazines, broadcasters, cablecasters before them, broadband ISPs may be left with no choice but to fight for their free speech rights.
The article never mentions net neutrality. But, speaking of giving offense, NN seems to me to be the proverbial skunk in the fiber. I fail to see its irrelevance to dealing with the concerns expressed by Mr. Ambeault. Indeed, net neutrality mandates, such as those contained in the current version of the Senate bill, could make it difficult (that is, legally dicey) to implement solutions such as the perfectly logical ones suggested by Mr. Ambeault. Remember that the Senate bill (and similar proposals) provides that each Internet service provider must allow each subscriber to "access and post any lawful content of that subscriber's choosing" and "access any web page of that subscriber's choosing." It doesn't say anything, at least very clearly, about allowing "family entertainment" hours before loosening up later at night or allowing ISPs to negate the access rights by requiring content providers through contract to assume editorial responsibility.
Much of the discussion about net neutrality has focused on whether NN prohibitions are needed to ban the potential "discrimination" of two-tiered (what about three or four-tiered?) pricing. For reasons I've explained many times elsewhere, in today's competitive marketplace, they are not.
But apart from sound economic principles, I've also been arguing in recent months in different venues that net neutrality mandates are inconsistent with the First Amendment rights of the broadband ISPs. In other words, there is more at stake than just maintaining the freedom of the ISPs to differentiate and price their services in ways that respond to marketplace needs. Also at stake is the freedom of speech of the ISPs to decide how to "program" their networks. See here (National Law Journal), here (Perspective of FSF Scholars), and here (Broadcasting & Cable) for my recent pieces explaining why net neutrality mandates infringe on First Amendment rights.
The concerns of Verizon's Mr. Ambeault about dealing with "offensiveness" while trying to develop a mass market service are instructive. They show that NN is about more than the freedom to price to market. According to Comm Daily, Mr. Ambeault says Verizon has to get ahead of the problems and can't rely on taking down content as complaints arise. Assuming the offensive content is lawful, and most of what may offend is, with access and posting rights enshrined in federal law, NN might well prevent such takedowns by Verizon and other ISPs. At that point, like the newspapers, magazines, broadcasters, cablecasters before them, broadband ISPs may be left with no choice but to fight for their free speech rights.
Thursday, September 28, 2006
Deregulation Works
Deregulation works! That is not a headline you are likely to see in any major newspaper. Well, maybe the WSJ would be an exception. But it would be an apt headline for a story recounting the FCC's release of its 11th annual report on the state of competition in the wireless industry.
Since 1993, when Congress largely eliminated federal and state economic regulation of the wireless industry, the American consumer has been served very well by the competition that has been unleashed. The FCC's news release recites the mind-boggling statistics concerning subscriber growth, time spent talking on our cell phones and the number of text messages, and decline (yes, decline) in the per-minute price, and the like. At the end of 2005, there were 213 million subscribers, 50 or so million more than the number of landline subscribers. You can read the statistics in the news release. Or you can just walk outside of your home or office anywhere in America and see people using their mobile devices everywhere--even where you wish they weren't!
FCC Chairman Kevin Martin points out in his statement that 98% of the total U.S. population lives in counties with 3 or more mobile service operators. There is no doubt the competition is robust, and mobile services will increasingly compete with other broadband platforms in the video and Internet market segments.
The mobile services market is a good case study concerning how a technologically-dynamic marketplace can flourish when lawmakers and regulators allow competition to substitute for regulation. All the more reason why it is important not to allow states, as some have been wont to do, to establish a patchwork of different regulations that, in effect, chip away at the 1993 deregulation mandate. In this light, the provision of Senate Commerce Committee bill establishing a national framework that preempts state wireless regulation represents sound communications policy.
Since 1993, when Congress largely eliminated federal and state economic regulation of the wireless industry, the American consumer has been served very well by the competition that has been unleashed. The FCC's news release recites the mind-boggling statistics concerning subscriber growth, time spent talking on our cell phones and the number of text messages, and decline (yes, decline) in the per-minute price, and the like. At the end of 2005, there were 213 million subscribers, 50 or so million more than the number of landline subscribers. You can read the statistics in the news release. Or you can just walk outside of your home or office anywhere in America and see people using their mobile devices everywhere--even where you wish they weren't!
FCC Chairman Kevin Martin points out in his statement that 98% of the total U.S. population lives in counties with 3 or more mobile service operators. There is no doubt the competition is robust, and mobile services will increasingly compete with other broadband platforms in the video and Internet market segments.
The mobile services market is a good case study concerning how a technologically-dynamic marketplace can flourish when lawmakers and regulators allow competition to substitute for regulation. All the more reason why it is important not to allow states, as some have been wont to do, to establish a patchwork of different regulations that, in effect, chip away at the 1993 deregulation mandate. In this light, the provision of Senate Commerce Committee bill establishing a national framework that preempts state wireless regulation represents sound communications policy.
Monday, September 25, 2006
Maryland's Economic Freedom Ranking
Today the National Center for Policy Analysis and Canada's Fraser Institute, two well-respected non-partisan public policy research organizations, released their annual report that attempts to quantify each state's economic freedom and examines what this means for economic growth. As the news release accompanying the report aptly states: "States that have lower taxes, smaller government and flexible labor markets tend to have comparatively more economic growth." The full study may be found here.
The rankings are based on data only for the period from 2000-2003, so they should not necessarily be taken as an accurate reflection of the current reality. Nevertheless, the study provides useful information and benchmarks. Among the states, Maryland's economic freedom score ranks it in 36th place, an improvement from 39th in 2000. The study's summary for Maryland states:
[O]verall numbers both show modest improvement from three years ago, the all-government ranking moving from 39th in 2000 to 36th in 2003 and the subnational from 24th to 15th. The same three-year improvement holds for government size (42nd to 32nd all-government, 27th to 20th subnational). Changes in the other two major areas were less dramatic. All-government takings and taxation actually dropped two places to 39th while the state and local stayed at 23rd. Labor market freedom all-government also went down slightly from 31st to 33rd, while the subnational ranking, the state’s best-performing measurement over the last decade, went from 14th to 12th. Maryland once hovered around the national average for combined state and local tax burden but has now exceeded it at 10.2%, placing Maryland at 11th highest. The state is even higher—No. 4—on the overall tax list after the federal burden is folded in. Its various alcohol taxes are at or below average, especially beer at 9¢. [Page 57].
Despite Maryland's modest improvement, there is obviously a lot of room for further progress, especially regarding taxes, regulation, and labor flexibility. Legislative actions, for example, such as singling out Wal-Mart for the imposition of government-dictated levels of health care spending and local ordinances purporting to dictate a "living wage" are the antithesis of the freedom we should expect in a market-oriented economy. And these measures have the unfortunate effect, as shown in the NCPA-Fraser Institute report, of repressing economic growth.
New Hampshirites take special pride in their state's motto: "Live Free or Die." Marylanders should take special pride in their state's nickname: "The Free State." And they should do all they can to help Maryland live up to its name!
The rankings are based on data only for the period from 2000-2003, so they should not necessarily be taken as an accurate reflection of the current reality. Nevertheless, the study provides useful information and benchmarks. Among the states, Maryland's economic freedom score ranks it in 36th place, an improvement from 39th in 2000. The study's summary for Maryland states:
[O]verall numbers both show modest improvement from three years ago, the all-government ranking moving from 39th in 2000 to 36th in 2003 and the subnational from 24th to 15th. The same three-year improvement holds for government size (42nd to 32nd all-government, 27th to 20th subnational). Changes in the other two major areas were less dramatic. All-government takings and taxation actually dropped two places to 39th while the state and local stayed at 23rd. Labor market freedom all-government also went down slightly from 31st to 33rd, while the subnational ranking, the state’s best-performing measurement over the last decade, went from 14th to 12th. Maryland once hovered around the national average for combined state and local tax burden but has now exceeded it at 10.2%, placing Maryland at 11th highest. The state is even higher—No. 4—on the overall tax list after the federal burden is folded in. Its various alcohol taxes are at or below average, especially beer at 9¢. [Page 57].
Despite Maryland's modest improvement, there is obviously a lot of room for further progress, especially regarding taxes, regulation, and labor flexibility. Legislative actions, for example, such as singling out Wal-Mart for the imposition of government-dictated levels of health care spending and local ordinances purporting to dictate a "living wage" are the antithesis of the freedom we should expect in a market-oriented economy. And these measures have the unfortunate effect, as shown in the NCPA-Fraser Institute report, of repressing economic growth.
New Hampshirites take special pride in their state's motto: "Live Free or Die." Marylanders should take special pride in their state's nickname: "The Free State." And they should do all they can to help Maryland live up to its name!
Subscribe to:
Posts (Atom)
Posts
