Tribal Company

A few weeks ago, shortly after the FCC released its most recent report on TV violence, I wrote an essay arguing that any government-mandated a la carte regime imposed on cable and satellite operators as a means of addressing the violence issue almost certainly would violate the First Amendment. The piece, "The Constitution, A La Carte," was published on CNET on May 22.



On June 26 Harvard Law School professor Laurence Tribe testified at the Senate Commerce Committee's hearing on TV violence. Tribe, one of the country's foremost constitutional law scholars, retained in connection with his testimony by various media entities, concluded that all the proposals put forward by the FCC as a means of protecting children from exposure to violent programming --time channeling, a government-mandated ratings system, and mandatory a la carte unbundling--would contravene the First Amendment. You can find Professor Tribe's complete testimony here.



Having just written on the a la carte issue in my CNET essay, and given Professor Tribe's reputation, I was especially interested in his First Amendment analysis. Albeit at much greater length, and in more scholarly fashion, Professor's Tribe's constitutional analysis of the mandatory unbundling issue is fully consistent with my CNET piece. You can find the section on mandatory unbundling at pages 58-68. I was pleased --maybe, even relieved-- to find myself in good company.



Anyone interested in First Amendment jurisprudence, and especially its relationship to the TV violence issue, should read Tribe's entire paper. But here are a couple of salient quotes concerning the unconstitutionality of mandatory unbundling that mirror the views I expressed earlier:

• "It is tempting to think of any unbundling requirement as a purely economic restriction not based on speech, but that view is flatly incorrect. Any unbundling requirement would be a speech-based and even a content-based regulation subject to strict scrutiny. The Supreme Court has recognized that “[c]able programmers and cable operators engage in and transmit speech, and they are entitled to the protection of the speech and press provisions of the First Amendment.” Turner Broadcasting Sys., Inc. v. FCC, 512 U.S. 622, 636 (1994)."

• "[C]able/satellite providers are no different from other speakers. A decision to combine or package expressive materials is a speech act distinct from the decisions to distribute its individual components, separately considered."

• "Mandatory unbundling, however, raises distinct concerns because it directly intrudes on a cable operator's speech by precluding speech achievable only by combining channels. For example, a cable operator may wish to provide a public service by bundling C-SPAN or local public access channels with more popular fare such as ESPN. Similarly, a cable operator's decision to include adult channels--as much as another operator's decision to exclude those channels--is an exercise of core editorial discretion."

• "Proponents of mandatory unbundling have at times suggested that unbundling can avoid strict scrutiny so long as it is only focused on the compensation that cable/satellite operators hope to receive, rather than the content that they are empowered to convey....Such a proposal cannot escape strict scrutiny. The freedom to speak is inseparable from the freedom to decide what to charge for that speech, or, instead, to distribute it without financial remuneration."

Upholding the First Amendment's free speech principles does not, and need not, imply endorsement of "violent" --or for that matter, "indecent" or any other-- programming that appears on television. In my view, there is much programming aired that is inappropriate for viewing by children. But government-imposed mandates that do violence to free speech principles are not the answer. Much more parental responsibility is.

As I wrote here last week, and as Professor Tribe too emphasizes, easy-to-use filtering tools are now available that allow parents to take control of what their children watch. To be sure, these tools may not be absolutely perfect or fail-safe in every situation, even as they are constantly being improved. But in First Amendment parlance, there surely are a "less restrictive means" of achieving whatever legitimate interest the government has in protecting children than those means inconsistent with free speech values.

Parental Controls: Tools and Methods

With ever-present concerns about the exposure of children to indecent and violent television programming and online material, I have used this space before to tout the tools available to parents to filter material that they deem inappropriate for their children's consumption. Due to technological advances and industry efforts, these filtering and screening tools are getting easier and easier for parents to access and use, if only parents will spend a bit of time familiarizing themselves with them.

In that vein, I recently called attention to the cable industry's new "Point Smart. Click Safe" campaign. This is an effort by cable operators to further educate parents concerning the tools available to keep their children safe online. You can access information about the safety tools available directly from the National Cable & Telecommunications Association's special "Point Smart" website.

Now comes PFF's Adam Thierer's just-released new special report entitled "Parental Controls & Online Child Protection: A Survey of Tools and Methods." This report is a very broad--and parent-friendly--guide to all of the tools available today that can help parents manage media content in all its manifestations in today's multi-media environment. Adam covers broadcast television, cable and satellite TV, music devices, mobile phones, the Internet, video game consoles, and more. (Hmmmm....just reciting the list of the various types of media has to make you wonder about those who still chomp at the bit for more restrictive ownership regulations....another subject I have discussed many times that will have to await another day.)

In recommending Adam's new report, I readily acknowledge Adam is a friend of mine. More significantly, with the release of his new "Tools and Methods" report, Adam is a friend to all parents who are willing to invest a little time in protecting their children from exposure to material to which they would rather not have their children exposed. It's up to parents to take responsibility to use the tools.

Point Smart. Click Safe.

I have written a lot in this space, and others as well, about why it would be wrong as a matter of policy for the government to mandate an a la carte regime for cable operators as a means of protecting children from indecent or violent content, and why, if the government did so, a mandatory regime almost certainly would violate the First Amendment. I addressed the First Amendment argument most recently in "The Constitution, A La Carte."

The policy and constitutional arguments against a la carte have much to do with the fact that, for some time, parents have been able to block any channel that they wish to block. Cable operators already have spent much time and money educating parents concerning the blocking and other screening tools that are available on their cable systems.

Now, to its credit, the cable industry has just embarked on a new campaign to educate parents about online safety for children. A new website sponsored by the National Cable & Telecommunications called "Point Smart. Click Safe." contains much useful information regarding tips and tools for promoting safe Intenret usage for children. Check it out.

It is far better for the government to rely on ongoing voluntary educational efforts such as the new cable intitiative than to adopt new, constitutionally dubious regulations that infringe free speech rights.

Maine Resolves to Monitor

Earlier I had heard some reports that the Maine legislature was considering passing a state net neutrality law containing a nondiscrimination mandate. So I was pleased to learn--maybe relieved to learn puts it more accurately--that what ultimately was adopted yesterday by the legislature was a resolution directing the Public Advocate to monitor state and federal actions, including the FCC's notice of inquiry, regarding Internet regulatory developments. Presumably the Public Advocate would have undertaken such monitoring without the legislature having to resolve that he or she do so.

The truth is the pro-regulatory net neutrality crowd was pushing to have a bill adopted that would have established a strict net neutrality regulatory regime in Maine. A bill to this effect was introduced by Sen. Ethan Strimling and went nowhere. And the further truth is there was nowhere for the bill to go. Because any state law purporting to mandate net neutrality almost certainly will be preempted by federal law. Why this is so was explained in Jim Speta's Free State Foundation paper entitled "Net Neutrality Is A Federal Issue."

So, now, the legislature has resolved that Internet access regulatory developments should be monitored. While there seems to be little harm in this, who would have thought a resolution to this effect even would have been necessary. Happy monitoring, Maine!

Spending Transparency and Accountability

It's no secret that Maryland faces a looming $1.5 billion structural deficit that will require some tough decisions from Governor Martin O'Malley and our legislature. What is too often secretive, or at least not easily obtainable in a timely fashion, is basic information about how our tax dollars are being spent. That's why during the past legislative session the Free State Foundation championed the adoption by Maryland of a single Google-like Internet search engine that would enable citizens at no cost easily to track state spending.

You can find op-eds published in the Baltimore Sun and the Washington Examiner by Free State Foundation President Randolph May and Research Associate Trevor Bothwell here and here urging the legislature to enact a bill to establish such a single searchable spending website. To their credit, Delegate Warren Miller and Senator Alex Mooney introduced the "Maryland Funding Accountability and Transparency Act" to do just that. Unfortunately, the bill had no support from General Assembly Democrats, and it did not go anywhere in the past session.

Now comes word that Minnesota has just enacted a law like the one embodied in the Miller-Mooney proposal establishing a public website to track state spending. This follows on the heels of similar action earlier this year by Kansas. You can read about the Minnesota and Kansas laws at a special "Show Me the Spending" site dedicated to fostering transparency in state spending. In addition to containing much useful information, such as model legislation, the site tracks information concerning the status of efforts in the states to implement searchable spending websites.

This brings me back to Maryland's projected $1.5 billion deficit. While citizens should be able to easily track state spending in good times and bad--after all, that is simple matter of fostering good government through accountability--the need to be able to do so arguably is even greater in an environment in which there already are calls to raise taxes substantially to cover state spending.

There is some talk that the legislature will meet this fall to begin to deal with the deficit. If it does, one of the first orders of business ought to be adopting the "Maryland Funding Accountability and Transparency Act" introduced by Delegate Miller and Senator Mooney in the last session. The rallying cry should be: "Accountability and Transparency First!"

The Realities of Cable A La Carte

Forrester Research has released a new report entitled, "Cable A La Carte Pricing Creates More Problems Than It Solves." The entire report may be purchased here --on an a la carte basis--for a price of $279.

An excerpt from the report posted on NCTA's website, consistent with all the trade press reports I have read, is to the following effect:

In our research, we simply asked cable viewers to consider how much they would pay, if anything, to subscribe to any of 46 top cable channels, up to $10 a channel per month. Viewers chose a simulated bundle with an average of 26 channels, but were only willing to spend $24.08 a month, less than $1 a channel, half of what they pay now. Given the 8 hours of TV that US households watch daily, that’s about $0.10 per hour, compared with the $2.00 per hour we pay to rent a new release on DVD. In contrast, an hour of prime time costs advertisers $0.60 per head. At $0.10 per hour, à la carte pricing would never work: Producers and cable companies wouldn’t get paid enough to survive, and consumers would lose desired content.

I have not reviewed the entire Forrester report. But the research does seem to confirm what to me has seemed intuitive: Under an a la carte regime, subscriber's expectations about what they think they "ought" to pay or would "like" to pay for only their individual selections would not cover the costs of the programs and cable service. Thus, the significance of the last sentence above.

I do not know whether the producers and cable companies would, in fact, "survive" in the sense of not shuttering the windows ands closing the doors. Many surely would survive in one form or another. But there is little doubt that those cable companies that do survive under government-mandated a la carte will eliminate some networks or alter other programming within networks. This is the key to the argument I made in my recent piece, "The Constitution, A La Carte". Absent a compelling justification that cannot be met with less restrictive speech restrictions, a government mandate that causes a cable operator to eliminate or alter the programming almost certainly constitutes an infringement of the operators' free speech rights under the First Amendment.

Indeed, the likely constitutional infirmity of a la carte became even clearer only yesterday when a federal appeals court issued a decision vacating FCC orders imposing fines on Fox for allegedly indecent broadcast programming. Although the court did not base its decision on First Amendment grounds, it did say in a pointed aside: “Nevertheless, we would be remiss not to observe that it is increasingly difficult to describe the broadcast media as uniquely pervasive and uniquely accessible to children.” Of course, it is even more difficult to describe cable service as "uniquely pervasive" and "uniquely accessible to children." Not only do parents have to make an affirmative decision to subscribe to the service, they have to decide they don't want to use the readily available tools that allow blocking of any individual channel. It is not very likely that an a la carte mandate would find much in the way of support from the "uniquely pervasive rationale" in the 1970s Pacifica case involving an over-the-air radio broadcast.

The Executive Summary of the Forrester report concludes: "To satisfy the FCC and avoid legislation that would disorient consumers, cable operators should offer the benefits of a la carte pricing through smarter bundling of family, sports, or news programming in addition to the traditional tiered packages." I am not smart enough to know what, if any, degree of smarter bundling would satisfy the FCC and avoid legislation. But I do know that the video marketplace is sufficiently competitive that cable executives, who get paid big bucks to do their jobs, will do better at figuring out which business models meet consumers' needs than the folks at the FCC or on the Hill. And speaking of disorientation, I get disoriented just thinking about why the government would want to tread on such constitutionally suspect ground.

Memorial Day 2007: A Baby Boomer's Appreciation 1995

I published the piece below in the Baltimore Sun almost twelve years ago now. I hadn't re-read it for many years, but when I did so today as I was contemplating the upcoming Memorial Day, it seemed to have some relevance for those of us living in America in 2007. Because it is a bit personal, maybe it reasonates just with me. It is not the usual fare found in this space. But, as a matter of personal privilege, I decided to share it anyway.

The Baltimore Sun

June 20, 1995

A Baby Boomer's Appreciation

BYLINE: Randolph J. May

FOR THE World War II generation, this year's series of 50th anniversary commemorations compellingly evoke memories of bloody battles fought in faraway places -- and of lives lost and lives spared. For that generation, the anniversaries and the names associated with these commemorations -- Pearl Harbor, D-Day, the Battle of the Bulge, Midway, Okinawa, etc. -- call to mind times of supreme triumph and tragedy. They recall countless heroic and selfless individual acts of courage and sacrifice, even in the face of likely death, by ordinary men who were fighting for a cause in which they believed.

This is not to say that everyone who went to war in that generation was courageous and selfless. Human nature is not such. But it is true that an extraordinary number of ordinary men and women willingly volunteered in service to their country -- and thereby volunteered to die -- in a war they believed had to be won to preserve freedom and certain universal values. Whether volunteers or draftees, most of them performed in the same courageous way.

With that in mind, the 50th anniversary commemorations provide the nation with an opportunity to say thank-you to those who won the war and to pay homage to those who did not return.

For the baby boomers, these commemorations stir deep emotions that we don't often express. These emotions relate to our own war, which though not as costly in terms of lives lost, was costly enough, with over 58,000 American deaths. Like World War II, Vietnam certainly produced its own share of heroism and courage on the battlefields. But if the threat to America's vital interests in our fathers' war was as stark as black and white, Vietnam was nothing if not multiple shades of gray. The national interest in fighting the Vietnam War with American combat troops was not so apparent or readily agreed-upon, particularly by those called upon to do the fighting. And even many people who asserted that the United States indeed did have vital interests at stake in Vietnam disagreed about strategy and tactics.

The debate about whether Vietnam was the wrong war, at the wrong place, at the wrong time rages to this day, 20 years after the last helicopter departed from the last Saigon rooftop. Former Secretary of Defense Robert McNamara's new book "In Retrospect: The Tragedy and Lessons of Vietnam," in which he now states that the Vietnam War was "terribly wrong" and that he and other senior officials knew it early on, provides new fodder for the Vietnam debate. History ultimately instructs, and Mr. McNamara's book no doubt will become another important component of history's instruction materials.

Regardless, however, of anyone's opinions today -- in retrospect -- about the wisdom of the objectives or conduct of the Vietnam War, there is no gain saying that many young Americans of my generation were confronted with painful choices: some volunteered to fight because they believed duty called; many were drafted and served honorably; many accepted various student and other deferments; some fled to Canada before being drafted or after being inducted; others went to prison proclaiming their convictions, rather than be drafted. Many, like me, joined the Army Reserve, where we served out our six-year commitments, but never got closer to anything resembling the fighting in Vietnam than fighting the mosquitoes and snakes in the swamps at Fort Polk, La.

Even if there were now widespread agreement in hindsight that our mission in Vietnam was ill-conceived and wrong (I'm not suggesting there is or ought to be such agreement), I believe that many of my generation who did not serve in Vietnam still harbor doubts about the individual choices we made at the time, despite what we may say publicly, or even privately. I believe many of us wonder whether our individual actions really reflected strongly held views about the rightness or wrongness of the war and its moral implications, as many proclaimed, or did such choices instead reflect a lack of personal courage on our part? We now wonder how readily we would have marched off to war like our fathers, if the rightness of our country's cause had been less ambiguous? How much less ambiguous? Finally, we question whether we should have said to the less fortunate (i.e. deferment-less) members of our generation: "Well, if you have to go, then so should I."

Being deprived of the moral clarity which confronted our fathers in their war, we were left to grapple with profound "what-ifs" about how we would have responded in less ambiguous circumstances. We can never answer definitively these nagging "what-ifs." I doubt if Mr. McNamara's book will provide the necessary cover to resolve our doubts. We can only live life on a going-forward basis -- which brings me back to this year's 50th anniversary commemorations.

These solemn commemorations give my Baby Boomer generation the opportunity to show our respect and, above all, gratitude, for the sacrifices of the war generation. When my father came home from the war after serving in Europe, he stowed away his Army uniforms, patches and other war paraphernalia. For many years, he was not much interested in talking about the war and the horrors he witnessed. Now he and some of his fellow soldiers are passing on their physical and mental remembrances.

But beyond the opportunity for final thank-yous, this season of commemoration is also a time when we baby boomers are of an age to understand that no two generations face the same challenges. While we can never know how each of us would have responded to the particular challenges and circumstances confronted by our fathers -- including being called upon to fight a war that had to be won for the country's sake -- that is not really what matters now. We can honor the war generation best by drawing inspiration from all that its members accomplished. That should help us understand that opportunities to display courage and leadership in the service of our country may take different forms in each generation. Then, not only will we honor these of the war generation, but also we will honor those of our own generation, especially those who gave their lives in Vietnam.

Randolph J. May is a Washington lawyer.



I was indeed a Washington lawyer at the time I wrote this in 1995. That has changed. But on this Memorial Day 2007, the sentiment I expressed then has not: "These solemn commemorations give my Baby Boomer generation the opportunity to show our respect and above all, gratitude, for the sacrifices of the war generation." This Memorial Day we are fighting another war in a distant place, and American soldiers are dying even as I write in Iraq and Afghanistan in the belief they are fighting to preserve the liberties we enjoy here at home. Regardless of any differences we may have about the justness of the cause--or the way it is being waged--we owe those in uniform on this Memorial Day weekend, and everyday, our highest respect and deepest gratitude.

A Case of Farsightedness

National Cable & Telecommunications President and CEO Kyle McSlarrow spoke yesterday at the Media Institute, and his speech represented a fairly rare phenomenon here in Washington among leaders among major trade associations: It was farsighted in looking past current disputes to suggest major fundamental change in communications law and policy that would better reflect the new competitive marketplace realities than does the current regime. And the speech was devoid of a lot of the special pleading that one often hears in major addresses from industry trade association leaders.

The essence of McSlarrow's speech was a call for a communications paradigm that replaces the current technology-based silo approach to regulation with a competition-based model that would rely much more heavily on ex post adjudication rather than ex ante rulemaking to remedy any real marketplace abuses. That way the focus would be on a concrete complaint in the context of a specific marketplace situation. And McSlarrow called for structural reform of the FCC as well.

McSlarrow candidly acknowledged that many of his ideas were taken from the work of PFF's Digital Age Communications Act (DACA) reform project (so, as they say in the standard disclaimers, I am not an uninterested bystander here because I played a lead role in the work of the DACA project, along with Ray Gifford, Kyle Dixon, and other of my former PFF colleagues.) And McSlarrow appropriately credited Verizon's Executive Vice President Tom Tauke's "New Wires, New Rules" speech of five years ago with spurring the debate about the need for a new communications paradigm. And Senator Jim DeMint, of course, was credited for taking the DACA model and embodying it his "Digital Age Communications Act" bill, S. 2113, introduced in December 2005.

I remain convinced that the competition-based DACA approach is the correct model for the reforming our nation's communications laws. I also understand that fundamental change such as that embodied in DACA does not happen overnight in Washington, nor as a rule, should it. There is necessarily a gestation period for the bold ideas of farsighted leaders to take hold.

Kyle McSlarrow's speech at the Media Institute yesterday was in the best tradition of a leader with a case of farsightedness, a leader looking over the horizon at the road ahead, not at the present waystation. Senator DeMint has a good case of farsightedness as well. He needs for more of his congressional colleagues to share his vision.

A final but key thought: McSlarrow highlighted some of the steps that past FCC Chairmen have taken in adapting the then-current regulatory regime to changing technological and marketplace developments, starting with Dick Wiley. Current Chairman Kevin Martin has played a significant role in solidifying and extending the regime of minimal regulating broadband, and for this he deserves credit and kudos. But, frankly, I would like to see him (and whichever of his FCC colleagues are willing to go along) start using their bully pulpits and their positions as the nation's communications policy experts to articulate more forcefully and clearly the need for the fundamental paradigm change that Kyle McSlarrow articulated yesterday. Not only is there nothing improper about the Chairman and his colleagues advocating such substantive reform--while implementing and enforcing the current law--in my view it is their responsibility to do so. In the language of a bygone era, such public education and advocacy is on their "job sheets."

Back in the 1970s, CAB Chairman Alfred Kahn--who knows more than a bit about communications too--became the nation's leading advocate of deregulation of the nation's airlines, explaining to Congress and the American public why deregulation was needed and why it would serve the interests of consumer, even though there would be dislocations in particular situations.

One of the admitted difficulties of serving as an FCC Chairman or a Commissioner is that it is understandably easy to be preoccupied with today's pressing issues. The "items" just keep coming at you. In the hurly-burly of today, the natural tendency is to take a rather static or even backwards-looking view of the world. How much market share does X have right now compared with Y? How have we handled this situation in the past? But one of the characteristics of a leader is always to be looking ahead at what's over the horizon, like the scouts sent ahead of a trailing wagon train. I'd like to see Kevin Martin and his colleagues take a good look at DACA as a model for the future. I would like them to catch a good case of farsightedness.

The Right Way to Regulate Violent TV

My former colleague Adam Thierer, a Senior Fellow with the Progress and Freedom Foundation, has just issued a marvelous paper, The Right Way to Regulate Violent TV. Adam's paper contains a wealth of information concerning the availability of technical controls such as the V-Chip and set-top box blocking features that can be used to filter television content. The paper contains a very useful discussion as well of non-technical controls such as informal household media rules.

Anyone interested in the debate concerning whether we need new laws or regulations dealing with TV violence should read Adam's paper. As importantly, parents concerned with understanding the tools available to "regulate" their children's TV viewing should read the paper. If they do--and if they take seriously their parental responsibilities--there would be far fewer calls for the government to do for them what they can and ought to do for themselves.

Net Neutrality: Of Chickens and Eggs

Yesterday Mark Cuban, who owns the high-def TV network HDNet, along with other enterprises too numerous to mention, told the House Energy and Commerce Committee that unless there is significant continued investment in broadband infrastructure, further technological and economic advancements will be hampered. According to a Technology Daily report [subscription required], Cuban said "net neutrality" is an example of how constrained bandwidth creates conflict between consumer and broadband provider interests. Cuban said of net neutrality: "The issue goes away completely if bandwidth constraints go away."

This is probably true (for all but the hard-core net neut enthusiasts for whom the issue is never likely to go away). But it begs, or at least avoids, the important question: If net neutrality mandates were adopted, would they be more or less likely to cause bandwidth constraints to "go away"? (Because all goods are scarce in the sense that economists understand scarcity, I don't expect that bandwidth constraints will ever entirely go away.) But I am sure that bandwidth constraints are less likely to become an inhibition on Internet infrastructure growth if net neutrality mandates are not adopted. This is because these mandates prohibiting differential treatment by broadband providers of unaffiliated entities--in other words, the imposition of common carrier regulation--will inhibit the very investment and innovation that is needed to counteract bandwidth constraints.

So, if you think of a world without any bandwidth constraints as the "chicken," then Mr. Cuban is correct that you are likely not to ever see the net neutrality "egg." On the other hand, if you think of net neutrality mandates that are implemented as the "chicken," you likely would see as the "egg" a world of real and increasing bandwidth constraints.

I suspect that Mr. Cuban, being the astute billionaire businessman that he is, understands chickens and eggs in a real world practical sense. Or to put the matter another way, I suspect that Mr. Cuban understands that net neutrality mandates, if adopted, would constrain the development of consumer-friendly business models as the Internet continues to evolve, thereby dampening investment and innovation incentives--and thereby killing the chicken that is laying the golden egg.

Siriusly. Are The English Really That Different?

The NAB and other opponents of the Sirius-XM satellite merger contend that satellite radio constitutes a separate market for purposes of competitive analysis. Under this theory, the Sirius-XM merger can be charaterized, as former FTC Chairman Jim Miller did yesterday in a Washington Times piece, as "a two-down-to-one merger." Case closed if you define the market in such a narrow, static fashion.

In my essay published on CNET a couple of weeks ago, I explained why, especially in light of the dynamism in the communications marktplace, the relevant market for purposes of assessing the competitive impact of the proposed Sirius-XM merger ought not to be the narrow satellite radio market, but rather a broader audio information and communications marketplace. I won't repeat that here.

In his Washington Times piece, Miller asks: Would the "threat of switching to broadcast radio or listening an iPod really restrain the merged company from raising its prices?" I fail to understand why Miller and other merger opponents presume that America's satellite radio subscribers are so peculiar as to be immune to the effect of price hikes in the face of substitutes. And it is on this question of substitutes that a smallish item in today's Communications Daily [subscription required] caught my eye. The item reports that a new study sponsored by Sony indicates that one in three Britons listens to radio via the Internet. The study indicates "that new technology is changing listening habits." According to Sony's UK Managing Director: "Internet radio is no longer the preserve of technology enthusiasts. This research shows that it is hugely popular among millions of people from a wide range of ages."

Now Miller does not mention Internet radio as an alternative to satellite. But why not? Are the English really that different from us? I know they are peculiar in some ways. They still have a queen, for instance. But even if we suppose on this side of the pond Americans are not presently tuning in to Internet radio at quite the same one-in-three rate as the Brits, to me, it is fanciful to ignore the impact of Internet radio. And absent fundamental changes in the laws of economics, not to mention human nature, it is fanciful to think that a price hike by satellite radio would have no impact on the habits of audio consumers.

The "Talking Broadband Down" Crowd

The predictable laments from those who cite the latest OECD broadband penetration statistics are getting tiresome. Quite simply, those here in the U.S. who continue to talk down this country's broadband achievements clearly have a policy agenda in mind. The agenda is to impose net neutrality (read: common carrier regulation) on broadband providers on the perverse theory that somehow consumers will take more broadband if all the providers are required to offer exactly the same service--just as in the good ol' days of Ma Bell.

Today's Communications Daily [subscription required] refers to a letter David Gross, U.S. Coordinator for International Communications and Information Policy, sent to the OCED pointing out the flaws in the OECD's broadband statistics. Gross explained that the OECD reports rely too heavily on counting mere subscriptions as a measure of broadband use (this ignores, for example, the fact that most colleges today have campus-wide WiFi access where thousands of students have high-speed access but no "subscriptions," that millions of others use thousands of WiFi hot spots throughout the country, and that many businesses obtain broadband through high-capacity special access facilities that are not even counted as "subscriptions" in the OECD reports). OECD also ignores important factors such as geographic diversity and population density differences that impact broadband penetration.

The plain fact of the matter is that the U.S. has more broadband subscribers--64 million as of June 2006--than any country in the world. And the most recent FCC report, encouragingly, showed that the largest increase in the number of broadband subscribers occurred in the wireless segment. From June 2005 to June 2006, the number of broadband wireless subscriptions increased exponentially from 380,000 to 11 million.

Rather than celebrating this good news, which is at least partly attributable to the FCC's deregulatory broadband policies under the leadership of FCC Chairmen Michael Powell and Kevin Martin, the "talking broadband down" crowd continues to relish trotting out the flawed OECD statistics to advance a pro-regulatory agenda. FCC Commissioner Michael Copps is a leader of this choir. A prominent member of the chorus is Ben Scott, policy director of the Free Press organization. Again, according to today's Communications Daily, Mr. Scott is quoted as telling a Senate Committee yesterday: "Roughly 10% of the households still do not have a wireless broadband provider. The market is not competitive. It remains a rigid duopoly at the residential level."

Recall that it was only a short while ago that the "talking broadband down" crowd claimed that most Americans had a choice of only one broadband provider. Now we have a "rigid" duopoly because 10% of American households do not have a wireless provider. This is silly. It is plain for all to see that the U.S. broadband marketplace is highly dynamic and increasingly competitive. Compared to most all other countries around the globe, it is hyper-dynamic and competitive.

In somewhat contradictory fashion, Mr. Scott goes on to say: "It's not that broadband isn't available to most Americans--we're just not buying it...We need more competitive, affordable services with attractive features to make it worth the family's hard earned dollars." What Mr. Scott is really saying is that the "attractive feature" he would like to see is for the government to mandate "neutrality" by regulating the Internet in the same way he wants the government to mandate the "fairness" of broadcast content. I think Americans would prefer to see their "hard earned" tax dollars used in other ways.

As I have written many times before (see here and here), apart from the deleterious impact on new investment and innovation caused by implementing the pro-regulation policies advocated by the "talking broadband down" crowd, laws and regulations mandating "neutrality" and "fairness" in content carried raise very serious First Amendment issues in today's digital environment, whether we are talking about broadband Internet providers or other communications providers. More about the First Amendment interests at stake regarding the net neutrality issue and other current communications issues in the coming weeks.

The Media Cornucopia

My former colleague, Adam Thierer, has a new article in the City Journal entitled, "The Media Cornucopia." Adam is one of the most knowledgeable and articulate voices on issues relating to government regulation of media content and government media ownership rules.

Anyone interested in really understanding the law and public policy issues relating to the government's regulation of the media should not only read Adam's City Journal article, but his excellent book, Media Myths, as well. Adam supplies the facts and figures that separate myth from reality.

"Digital Distribution of Channels for Media to Explode"

According to Communications Daily [subscription required], Hewlett Packard CTO Shane Robison told the National Association of Broadcasters convention on Monday that the media industry will see an explosion of digital distribution channels this year. With respect to distribution channels, he is reported to have said: "We're at a crucial turning point right now where hype turns into reality...The tire-kicking phase is over...In the next year [the current handful of distribution channels is] going to explode to 10, 20, or more... "

How ironic that Mr. Robison was speaking to NAB convention attendees. While he is there, maybe he should kick some...tires! The NAB has been leading the charge trying to convince Congress, the Department of Justice, and the FCC that satellite radio constitutes its own separate product market on the basis that audio services delivered from the sky are uniquely different from audio services delivered over terrestrial or HD radios or iPods or the Internet or wireless devices and so forth. In an essay published yesterday on CNET, I suggested that, in today's digital environment, "there are a number of alternatives in the audio services marketplace that consumers may substitute for satellite radio, especially in the face of any price hike."

In the CNET essay, I urged: "What is most important now for sound communications policy is to move beyond classifying and regulating services based on the technology or slice of spectrum used for distributing the service. Whether evaluating the competitive impact of a particular merger or deciding whether to jettison archaic, unduly burdensome regulations devised during an earlier, generally monopolistic analog era, the important question should be: do consumers have reasonable alternative choices in the marketplace?"

I don't have the engineering and technology credentials of someone like a Shane Robison. But I have observed the changes in technology and communications markets for over thirty years now in various professional capacities, and I have a high degree of confidence in my CNET conclusion that, at this stage of the transformative digital revolution: "Increasing consumer choice depends on robust investment and innovation in new products and services. And robust investment and innovation ultimately depend on government officials appreciating that they should be wary of intervening in today's dynamic, increasingly competitive communications marketplace."

PS--There is a price to be paid, of course, whenever companies and trade associations look to the government to intervene in the marketplace to give them the proverbial "level playing field." And it is this: As quoted in a separate piece in today's Communication's Daily, NAB President David Rehr says the NAB hopes "to make sure that everything we do, everything we say, we say and do with an eye toward the Congress." Perhaps this statement was quoted out of context. But, if not, coming from the head of the association that represents the nation's broadcasters, it is more than a little chilling to think that the association, which ought to be mightily concerned with protecting the First Amendment free speech rights of its members against government interference, is rather more concerned with ensuring that everything that the broadcasters say and do is "with an eye toward Congress."

Maryland Misses Spending Transparency Opportunity

Here at the Free State Foundation, we were touting the notion of Maryland creating an easily searchable Internet website to track state spending even before Maryland legislators Warren Miller and Alex Mooney introduced a bill to do just that. You can see some of our early writing on the subject and Del. Miller's and Sen. Mooney's "Maryland Funding Accountability and Transparency Act" bill collected here. You would think that in the Internet age this would be pretty much of a no-brainer, unless the majority of our legislators don't want to make it easier to track state spending.

The Examiner newspaper has done a terrific job of covering and editorializing on this issue. In today's Examiner there is a column describing how other states are moving forward to put their spending information on the web. Too bad that Maryland's legislature thinks it is more important to spend time figuring out how to rework the Constitution's electoral college than enacting legislation that would give citizens an effective tool to better understand how their taxpayer dollars.

Well, there's always next year, as they say. And with the looming budget deficit, and talk of tax increases in the air, by all rights there ought to be increased pressure on the legislature, and Governor O'Malley too, to "show us the money"!

Thinking "Siriusly" About Satellite Radio Competition

If you harbor an unshakeable belief that satellite radio service constitutes a separate market for audio entertainment and information, you may also believe—and might try to convince me—that the eggs used in yesterday’s White House egg hunt were left by the Easter Bunny late Saturday night.

But I’m not going to be easily convinced. Indeed, if the National Association of Broadcasters and its terrestrial broadcaster allies are able to persuade the Department of Justice and the FCC to prevent the Sirius/XM merger on the basis that satellite radio constitutes a discrete product market, well then, maybe I’ll become a believer in the Easter Bunny too.

I’ve been reflecting on the proposed merger since it was announced. And at least at this point, the notion that satellite radio constitutes a discrete market for purposes of assessing the merger’s competitive impact seems problematical—and to defy common sense. As UBS put it in a February 20 investment research report: “The combination of an enhanced programming lineup with improved programming lineup with improved technology, distribution and financials will better position satellite radio to compete for consumers’ attention and entertainment dollars against a host of products and services in the highly competitive and rapidly evolving audio entertainment marketplace: including free “over the air” AM and FM radio, iPods, mobile phone streaming, HD Radio, Internet Radio, and next generation wireless technologies.”

Merrill Lynch had this to say on the same day: “The merged company could ultimately deliver greater content choice (more niche channels given greater bandwidth), offer improved technology (radio receivers and traffic/data products), realize cost synergies and help satellite radio remain competitive in the evolving audio entertainment landscape as it competes with terrestrial radio, Internet audio media, HD radio and portable music players.”

Each year the FCC issues a report examining the status of video competition. As the Commission stated in its 2006 report: “The market for the delivery of video programming services is served by a number of operators using a wide range of distribution technologies.” The agency included in its competitive examination cable operators, direct broadcast satellite operators, broadband service providers and other wireline video providers, wireless cable operators, Internet-based video services, and DVDs and videocassettes. It would be difficult to understand why, in assessing competition in the audio market, the full range of distribution technologies similarly would not be considered. More pointedly, the Commission doesn’t ignore DBS satellite television in assessing competition in the video market, and neither do courts reviewing FCC media ownership decisions. Nor should they.

For my own part, I am not sure that the appropriate product market with respect to assessing the competitive impact of the XM/Sirius merger is not somewhat broader than strictly audio entertainment and information. Consider that both cable and DBS “multichannel video programming distributors” offer many different channels of audio only programming. In today’s fast-changing technological and marketplace environment, perhaps the relevant market is the audio and video information and entertainment market.

With my free market-orientation, I confess to being a bit baffled by some of the comments I have read from those who often share my market-orientation. For example, my friend Scott Cleland has a blog entry in which he opposes the Sirius/XM merger as anti-competitive. Cutting through the heated rhetoric, at bottom his objection seems to be that XM and Sirius are operating on government-licensed spectrum. Scott claims “that spectrum grant alone makes satellite radio a separate and distinct market for antitrust purposes.”

This “spectrum alone” contention simply can’t be right. While there may be certain aspects of the spectrum license grant and accompanying conditions that are relevant for assessing competitive impacts, the use of a certain block of frequencies alone cannot be determinative for purposes of defining a relevant product market. Terrestrial radio and television broadcasters use spectrum too. So do DBS operators and wireless cable operators. Even cable and other multichannel video operators often use spectrum, say, cable relay frequencies and satellite earth stations, as part of their network configurations to deliver their audio and video services. The use of different spectrum blocks does not mean that these various forms of media do not compete with each other.

From my free market perspective, what seems crucially important for communications policy is to move beyond classifying and regulating services based on the technology used, or, to the same effect, based on whether a particular slice of the spectrum is used. You can read my views on this point at greater length in my Federal Communications Law Journal article, “Why Stovepipe Regulation No Longer Works: An Essay on the Need for a New Market-Oriented Communications Policy.” What’s important, whether for purposes of assessing the competitive impact of a particular merger or, more often, for purposes of deciding whether it is time to jettison or relax outdated and unduly burdensome technology-based regulations--say, media ownership regulations--is whether consumers have alternatives in the marketplace for the service or application in question.

My interest in the Sirius/XM merger has little or nothing to do with concern about whether either one of the two money-losing companies, or the merged company if the merger is approved, will be around in five or ten years. The same goes for terrestrial broadcasters, Apple’s iPod, mobile streamers, a particular cable or telephone company, and so on. Frankly, the way technologies and consumer tastes evolve so rapidly in today's dynamic environment, I wouldn’t feel comfortable betting $10 on any one or the other of them surviving that long.

My main interest is that consumers continue to benefit from the array of information and entertainment choices that the digital revolution enables. Consumer welfare ultimately depends on continued long-run investment and innovation in the marketplace, with providers seeking competitive advantage by responding to consumer demands. And continued investment and innovation depend on regulators at DOJ and the FCC not taking such a constrained, static view of marketplace competition that they end up maintaining in place or adopting new regulations, or preventing market-driven mergers, which have such investment and innovation-stifling effects.

Maryland Lags on Spending Transparency

As a bastion of "liberal" thinking, Maryland's legislature--presumably with the support of the majority of Maryland's voter's--is certainly a liberal spender of the public's tax money. So much so that Maryland faces a structural budget deficit of over 6 billion dollars in the next five years. Too bad the Democrat-controlled legislature doesn't display such liberality in wanting to allow the taxpayers to easily determine how state funds are being spent.

The Internet, of course, provides a means which would allow such spending information to be made available to the public in an easily retrievable manner and at relatively little cost to the state. That's why it is so disappointing that the "Maryland Funding Accountability and Transparency Act" introduced by Delegate Warren Miller and Senator Alex Mooney and several Republican colleagues went nowhere this legislative session. The Accountability and Transparency bill would require Maryland to establish a "single, searchable website, accessible to the public at no cost," that allows Maryland citizens to easily track state funding of grants, loans, awards, and other forms of limited assistance.

There is an editorial in today's Examiner newspaper that explains why the new database established by OMB is a "giant step forward" in enabling the public to track the federal earmarks that did so much under Republican rule of the Congress to lead to bloated spending. As the Examiner editorial explains, "the OMB Earmarks Database offers details on 13,496 earmarks totaling more than $19 billion that were contained in fiscal year 2005 appropriations."

The Examiner deserves much credit for urging Maryland to adopt legislation along the lines of the Miller-Mooney bill and for spotlighting the legislators' position on this openess issue. See here and here.

If the Bush Administration can get the searchable OMB database up and running fairly quickly to provide some much-needed transparency regarding federal spending, you would think that Maryland's government could do the same. Unless the legislature and the governor really don't want to make it easy to "show me the money." Liberal spending should be accompanied by liberal disclosure.

Riding the Back of the Net Neutrality Tiger

There was a time when I knew JFK's 1960 Inaugural Address by heart. Well, most of it anyway. In reading the interview in the April 9 edition of Business Week with Goggle's CEO Eric Schmidt, I was reminded of one of JFK's many memorable lines: "In the past, those who foolishly sought power by riding the back of the tiger ended up inside."

President Kennedy was referring to countries, not Google. But Google's market cap of approximately $146 billion (give or take a few billion) now exceeds the annual Gross National Product of more than 70% of the world's countries. Small wonder that the BW article was entitled, "Is Google Too Powerful?"

The tiger I have in mind that Google is riding is net neutrality, of course. In the Eric Schmidt interview, curiously net neutrality didn't come up. But it was on my mind at a couple of points in the Q&A. Schmidt was asked: "As Google passes 50% and rising of search market share, will that dominance change the way Google operates?" Answer: "I'm not sure I agree with the word dominance. Dominance is defined not by majority market share but what you do with it." Now I know that Google preaches, as Schmidt said during the interview, that "we would never try to violate people's trust." But I am wondering why Google is so sure--sure enough, apparently, to seek new laws and regulations--that broadband providers will adopt practices that harm consumers, at the same time that it asks lawmakers, policymakers, and the rest of us to accept that it would never try to violate our trust. And if the important question in Google's mind in assessing market power is "what you do with it," surely broadband Internet consumers to date have not experienced demonstrable harms sounding in net neutrality justifying new, broad anticipatory laws and regulations.

Another Q: " Some people think that Google has not been as transparent as it should be in areas such as click fraud, use of data, and its intentions in various markets....[D]o you think that Google needs to be more open?" A: "There's a real tradeoff between the sort of secret sauce, the special knowledge that Google has, and our business policies. An example would be that a lot of people are very interested in how our data centers work. But we've decided not to talk about that, because we don't see any end-user benefit for knowing how the data centers work and it would simply change the competitive landscape if we did."

Well, it's nice to know that, at least when it comes to its own business policies, Google understands that there are real trade-offs between sharing the "secret sauce" and changing the competitive landscape. In other words, I think Schmidt is saying that if new laws or regulations mandated that Google must be "transparent" and "open," like it is lobbying to have the government mandate openness for broadband providers, its own competitive position might suffer. So Schmidt would prefer not have the government mandate such transparency for Google's data centers or otherwise.

Now, I happen to believe that even with Google's position as the dominant search engine, there is no present need for new government mandates to regulate its business practices at its data centers or otherwise. Trust me. This is not because Google says that ""we would never try to violate people's trust." It is because I think, especially in light of the technological dynamism in Google's market, and in light of the existing competition, and the potential competition, consumers will be protected adequately without the tangible and intangible costs imposed by new regulations that likely would chill innovation and investment. And I think the same is true in the broadband Internet market.

I just wish, in pursuing its net neutrality lobbying strategy, Google would remember JFK's admonition: "In the past, those who foolishly sought power by riding the back of the tiger ended up inside."

Markey's Timely Universal Service Reminder

The FCC recently announced that the surcharge on interstate communications services to support universal service programs has reached an all-time high of 11.7%. This additional tax on communications ain't peanuts, and, regardless of your views on smoking, taxing communications has very different economic and societal impacts than taxing cigarettes.

On April 2, Ed Markey, Chairman of the House Telecom Subcommittee sent a letter to FCC Chairman Kevin Martin asking a series of questions concerning universal service policy. To my mind, on the whole, Markey's questions are pertinent and important ones. You can read Chairman Markey's entire letter here.

But apart from the individual questions, some of Chairman Markey's prefatory comments are particularly worth noting, and encouraging, if they can be fairly taken as an indication of an inclination for trying to achieve meaningful reform of the bloated--and still "bloating" as I write--univeral service regime. Referring to the 1996 Telecommunications Act, Markey said: "Congress anticipated that competition would promote consumer welfare, even in many high cost areas where universal service support was needed to keep rates affordable, by lowering the cost of universal service as providers competed for the universal service subsidy. Further, advances in technology were expected to make networks deliver supported services more efficiently, not in a more costly manner."

What is also especially noteworthy about Markey's letter is his citation to the 1996 Act's congressional reports as support for the above propositions. From House Report No. 104-204 (I): "Over time, [the Congressional Budget Office] expects the operating costs of telephone companies would tend to fall as a result of competitive pressures and the total amount of subsidies necessary would decline." From Senate Report No. 104-23: "[C]ompetition and new technologies will greatly reduce the actual cost of providing universal service over time, thus reducing or eliminating the need for universal service support mechanisms as actual costs drop to a level that is at or below the affordable rate for such service in an area." [The emphasis is all mine.]

Universal service subsidies have done nothing but balloon since the program's inception, leading to today's 11.7% USF tax. I am sure that Chairman Markey and I probably differ concerning how, how much, and how fast we would reform the program. But his USF letter indicates that he may be inclined to push for meaningful reform to reduce the size of the USF subsidies. If so, he should be commended. And by recalling the legislative history acompanying the 1996 Act, Markey has reminded us that Congress understood then that new competition and new technologies--which certainly rapidly proliferated since 1996--should have let to a decline in subsidies, not ever increasing ones.

Remember When Cellphones Were Just for Calling

The "unbundle everything" crowd has made the highly successful competitive wireless industry its latest target. Before anyone at the FCC joins in the unbundling chorus for wireless, they should read the Wall Street Journal's March 26 Special Technology Report, "What's New in Wireless." [subscription required].

Here are the just first few paragraphs from the WSJ report:

Remember when cellphones were just for calling?

Over the past few years, cellphones have evolved from simple communication devices into multimedia powerhouses. First came cameras, then Web surfing, then music players. Now, get ready for a host of new features.

In the next two to three years, consumers will be able to get TV broadcasts on their cellphones with better picture quality than current video offerings -- and a greater range of live programming from major networks like NBC, FOX, ABC and Comedy Central.

Users will also get sophisticated software applications for surfing the mobile Web, and more services to connect with friends, share videos and exchange photos. And they'll likely see mobile devices that can roam seamlessly across Wi-Fi hot spots, cellular networks and new high-speed data networks, bringing a much faster and smoother surfing experience.

Does this sound like a market that needs more government regulation in order to give consumers the services and applications they want? Can the unbundling crowd really say with a straight face that there has been a lack of innovation and investment by the industry in the absence of public utility regulation? Before long the "cellphone" will be able to do everything but put on your pajamas and put you to bed. And if there is demand for that...well, who knows?

Yesterday, I wrote in "Net Neutrality, the NOI, and Unbundling" about how Commissioner Copps, guided by his own strong pro-regulatory instincts, is right in tying together the unbundling issue that lies at the heart of the net neutrality debate with the unbundling issues that are at the core of other of today's most important communications policy issues. The unbundling crowd knows that "unbundling" and enforcement of "non-discrimination" mandates ultimately leads to common carrier regulation because it will always be necessary, in order to determine whether alleged discrimination has occurred, for the regulators to finely parse sometimes subtle differences in the price of various kinds of offerings.

If you haven't read it, you should read Bruce Owen's FSF paper, The Net Neutrality Debate: Twenty Five Years after United States v. AT&T and 120 Years after the Act to Regulate Commerce. Oliver Wendell Holmes said: "When I want to understand what's happening today, to decide what to do tommorrow, I look back." Professor Owen's paper examines a lot of history concerning regulatory failures over the last hundred years. His paper ought to be required reading for today's policymakers.

In the case of wireless, and broadband more generally, unless regulators can identify specific instances of non-transitory market failures causing demonstrable consumer harm, they should rely on marketplace competition to continue to deliver the types of innovative communications and information services and applications we witness everyday when we turn on our "cellphones."