Strong IP Rights Add Value to the U.S. Economy

According to a study released this week by the International Intellectual Property Alliance (IIPA), copyright-based industries added an unprecedented $1 trillion to the U.S. economy in 2012, accounting for 6.5% of the total economy. The copyright-based sector of the economy also grew faster than the national economy from 2009 – 2012 at a rate of 4.73% compared to a rate of 2.14% for the rest of the national economy. Nearly 5.4 million people are employed in copyright-based industries, and those employees generally make 33% more than the average annual wage. The main industries that are part of the core copyright industry include computer software, videogames, books, newspapers, periodicals, journals, motion pictures, music, radio, and TV broadcasting.

These impressive statistics indicate the importance of continuing to provide support and incentives in the core copyright-based industries. To do so, it is crucial that copyright law strikes the right balance between protecting property rights and fostering creation. Proper and enforceable intellectual property protection is indispensible to promoting and maintaining a vibrant copyright-driven sector, and a healthy digital age economy as a whole. The author who conducted the study for IIPA, Steven Metalitz of Economists, Inc. stated, “to foster continued growth of this dynamic sector, we need strong and modern copyright laws that take into account changes in technology and the continuing harm caused by copyright piracy, especially as legitimate digital distributors continue to emerge.”

For more on the proper approach to intellectual property protection in a digital age economy, see the series of Perspectives from FSF Scholars by Free State Foundation President Randolph May and Research Fellow Seth Cooper:

•                The Constitutional Foundations of Intellectual Property

•                Reasserting the Property Rights Source of IP

•                Literary Property: Copyright's Constitutional History and Its Meaning for Today

•                The Constitution's Approach to Copyright: Anti-Monopoly and Pro-Intellectual Property Rights

FSF President Randolph May to Participate in "Spectrum Auctions and Band Plans" Webinar November 19

Randolph May, President of the Free State Foundation, will participate in a webinar on November 19 hosted by the Digital Policy Institute (DPI), an interdisciplinary research think tank based at Ball State University. Other panelists joining Mr. May for this webinar, “Spectrum Auctions and Band Plans: Maximizing Auction Revenues and Minimizing Post-Auction Problems,” are Preston Padden, Executive Director of the Broadcaster’s Coalition, and Rick Kaplan, Executive Vice President of Strategic Planning at the National Association of Broadcasters.

Among the many key legal and policy issues the panel will address are: the FCC’s proposed system for broadcasters choosing to relinquish spectrum; whether eligibility restrictions on wireless carriers wanting to bid would reduce the overall auction revenues and, correspondingly, broadcasters’ incentives to cede spectrum; the methods whereby broadcasters not choosing to give up spectrum but are relocated in repacked spectrum will be reimbursed for their costs; and the continued availability of broadcast service for TV viewers.

The webinar, Tuesday, November 19, 2 p.m., EST, will go live here just prior to start time.

 

 

A Message for Susan: Dynamic Markets Make Predictions Hazardous

I was thinking of Susan and her book again this weekend. Yep, that would be Professor Susan Crawford of Benjamin Cardozo School of Law and her book Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age. 

I was thinking of Susan because, in catching up on my stack of weekend reading, I came across this recent Wall Street Journal article, "Cutting the Cable Cord and Getting 'Phone TV'" [subscription required]. I'll get back to the article shortly, but first a word about Captive Audience. 

As you may know, the whole premise of Professor Crawford's book is that Comcast especially, but other cable operators as well, are monopolies and that, therefore, they should be operated as public utilities. Just like the electric utilities – rate regulation, non-discrimination obligations, and all. 

I have discussed Professor Crawford's book in more detail in earlier pieces, including this one, "Captive Audience's Captive Thinking." Please read the entire piece if you haven't done so. But, for my purpose here, I'll just reproduce the way I began the essay: 

"Captive Audience" is flawed because Professor Crawford relies on an incorrect – indeed, a hypothesized – view of the communications and information services marketplace to construct the case for monopoly power. And then she offers anachronistic, legacy regulatory measures to remedy the supposed ills that exist in her hypothesized market. In my view, the book more appropriately might have been titled, "Captive Thinking: Viewing Today's Telecom Industry Through An Analog-Era Lens." 

The book's central thesis is unmistakably clear: Comcast possesses monopoly power with respect both to the provision of broadband services and the provision of video programming. While less clear, at times it appears Professor Crawford may be making the same monopolistic power claim with regard to Time Warner Cable and other cable operators. 

While it doesn't come until the very end of the book, the proposed remedy for this supposed monopolistic power is unmistakably clear as well: "America needs to move to a utility model."

I am confident that if you read, or even skim, Professor Crawford's book, you will see that I have fairly captured the essence of her views. Indeed, on the very first page, she calls Comcast "a monopoly provider of wired high-speed Internet access" and then on page 2 asserts that, as a result of its merger with NBCU, Comcast "would probably make content too expensive for any potential data distributor." By page 53, Professor Crawford has concluded, "cable's advantages eventually became unbeatable." 

End of story! 

Except of course, it is not the end of the story – because Professor Crawford fails to appreciate the ongoing dynamism of today's digital age communications marketplace, and the capacity of this marketplace to foster competition and consumer choice. Simply put, Professor Crawford's hypothesized view of her hypothesized market, dominated by Comcast and other cable operators, has turned out to be wrong, certainly at least for now and for the foreseeable future. 

Recall that Professor Crawford suggests the Comcast – NBCU merger "would probably make content too expensive for any potential competing data distributor." Now back to the WSJ article, "Cutting the Cable Cord and Getting 'Phone TV,'" which begins: "The way things are going 'cable TV' may have to be replaced by 'phone TV.'" It contains lots of figures indicating the extent to which AT&T and Verizon are taking market share away from cable operators against whom they compete. For example, the article reports that, according to recent third quarter results, "[t]he top two cable providers, Comcast Corp. and Time Warner Cable, Inc., shed 435,000 video customers in the quarter, while AT&T and Verizon added 400,000." 

According to analyst Craig Moffett, "[t]he third quarter results are a reminder that the biggest threat facing the cable industry is competition from phone companies…." 

The article reports that cable executives and analysts contend Verizon and AT&T have largely won market share using discounted pricing and promotional packages. This sounds like marketplace competition to me, and competition that is benefitting consumers.

And AT&T CEO Randall Stephenson is quoted to this effect: "It’s going to be a dogfight between us and cable for the next 20 years. They will invest, and they will step up. We will invest. It will go back and forth." This dogfight sounds like marketplace competition to me – indeed, vigorous competition – and competition that is benefitting consumers.

And by the way, in this competitive environment, "they will invest" and "we will invest" are not empty words, but proven reality. According to a recent study by the Progressive Policy Institute, AT&T, Verizon Communications, CenturyLink, Comcast, and Time Warner Cable all ranked in the top twenty of non-financial companies making capital investments in the U.S over the past year. All this investment is the result of marketplace competition, and it is benefitting not only consumers but the nation's economy as well.

Let me be perfectly clear. I don't have a dog in this competitive dogfight. And unlike Professor Crawford, I don't pretend I can predict ultimate winners and losers among the competitors in a dynamic marketplace, or know how the market structure will evolve in the years to come. In any event, it's not my business to predict winners or losers.

But what I do know is this: With the ongoing technological changes and evolving business models and experimentation, the marketplace in which Comcast and other cable providers presently operate is competitive. Of course, by definition, the same is true for the cable operators' competitors, AT&T, Verizon, and all the other broadband providers, including the various wireless and satellite operators.

So, I think it is seriously wrong for Professor Crawford to brand Comcast and other cable operators "monopolies." And it would be a mistake of huge proportions to heed her call to regulate broadband companies as utilities, just like electric power companies, which by and large continue to retain dominant market power. Imposing a utility-like regulatory straight jacket on broadband providers, say, to prohibit experimentation with various usage-based billing plans tailored to the needs of different customers' preferences, is a sure-fire recipe for stifling innovation that benefits consumers and investment that benefits the nation's economy.

I wish I could get Susan to agree that it's no time to let captive thinking premised on a hypothesized market trump the competitive realities of the broadband marketplace. If such thinking ever were to lead to regulating broadband providers as public utilities, rest assured that consumers would be the real losers.

Upcoming Global IP Summit and the Constitutional Foundations of Intellectual Property

This Friday, November 8^th, the U.S. Chamber of Commerce's Global IP Center is hosting a summit focused on the importance of a strong yet balanced intellectual property system. The event will bring together the associations and policymakers who are leading the country in innovation and intellectual property management strategy. I am looking forward to attending the event, and engaging in discussions of the challenging issues facing intellectual property rights law and policy today.

Recognizing the value of protecting intellectual property rights is crucial for the continued growth and development of the economy, and particularly the technology and communications sectors. Free State Foundation scholars Seth Cooper and President Randolph May authored a series of four Perspectives from FSF Scholars, which explore the foundational principles of intellectual property grounded in our constitutional system. If you are not already familiar with these pieces, it is certainly worth reading them to prepare for tomorrow’s exciting Global IP Summit:

• The Constitutional Foundations of Intellectual Property
• Reasserting the Property Rights Source of IP
• Literary Property: Copyright's Constitutional History and Its Meaning for Today
• The Constitution's Approach to Copyright: Anti-Monopoly and Pro-Intellectual Property Rights

FSF President Randolph May to Participate on Panel at Nebraska Law’s 6th Annual Space and Cyber Law Washington, DC Conference

Free State Foundation President Randolph May will participate on a panel at the University of Nebraska Law School’s 6th Annual Space and Cyber Law Washington, DC, Conference at the Willard Hotel, November 5, 2013. The panel, titled "Regulation v. Market Based Mechanisms for The Internet’s Future," discussion is structured around the 100 year anniversary of the Kingsbury Commitment, the first antitrust consent decree relating to the U.S. telecommunications system and arguably the beginning of modern regulation of this system.

Free State Foundation President Randolph May To Participate in Nov. 1 Teleforum Call

Free State Foundation President Randolph May is participating in a Teleforum call on November 1, 2013, at 1 p.m. EDT, on The FCC and the States: A Division of Authority. The call is sponsored by The Federalist Society’s Telecommunications & Electronic Media Practice Group. This Teleforum conference call will examine how the Federal Communications Commission and states can work together to address the transition from circuit-switched to Internet Packet (IP) telecommunications. Other participants include Mr. David W. Danner, Chairman, Washington Utilities and Transportation Commission, and the Hon. Paul Kjellander, President, Idaho Public Utilities Commission. If you would like to join the Teleforum call, the dial-in number is 888.752.3232.

No, the US Is Not Behind Europe!

This is a very well done blog by Richard Bennett responding to arguments that the U.S. is behind other countries with respect to broadband. I won't try to summarize because it's short, but well worth a read.

New Map Shows Europe is Behind in Broadband Progress

A new map shows the shortcomings of broadband in Europe. The data recently released shows that there is wide variation in broadband availability across the continent, with large areas unserved by next generation broadband access services, and some areas lacking access to just average connection speeds.

Source: BCE 2012, Point Topic, TechPolicyDaily.com

The map shows that there are some countries in Europe that are standouts in broadband, offering superfast speeds and boasting high rates of adoption. Denmark is one example of an EU broadband leader. However, such success is certainly not the norm in Europe.

The European Commission updated its Digital Agenda Scoreboard this summer, and also found that the EU still has a lot of work to do to meet the Commission’s “Connected Continent” goals. The update showed that in some countries, only about half of the population has access to average connection speeds, and other countries suffer from low broadband adoption. In France, Ireland, Greece, Croatia and Italy, less than 25% of households had access to high-speed services of at least 30 Mbps; these speeds were only available to 53.8% of households at the end of 2012. In Italy, 30% of citizens do not use the Internet at all and lack digital literacy skills.

Especially compared with the U.S., these reports are troubling for Europe. At the end of last year, 95% of Americans had access to high speed broadband from multiple networks. For the small percentage of Americans that dwell in mountainous areas, satellite broadband is available, as it is to 99% of Americans. As one report stated, “This is the envy of Europe.”

As I have noted previously, the data shows that the U.S. leads Europe in broadband speeds, connectivity, and value, and EU leaders are now acknowledging that Europe lags behind the U.S. in broadband progress. EU Commissioner and Digital Agenda Leader Neelie Kroes has urged European policy makers to look to the U.S. as an example of success in the ICT sector.

This latest map provides another indication of – and a way to visually grasp – the harms resulting from overregulation in Europe. In order to remain a world leader in broadband, the U.S. must continue to support innovation and growth by removing unnecessary regulatory barriers to network development and build-out. 

Congressman Latta Delivers Keynote Remarks at FSF Event

We were pleased to have Congressman Bob Latta deliver keynote remarks at the Free State Foundation’s event last week, “A New FCC or the Same Old, Same Old.” Congressman Latta recognized the efforts of the Free State Foundation and of FSF President Randolph May in the areas of FCC reform and advocacy of free market-oriented communications policies. Congressman Latta then discussed the dramatic innovation in the Internet ecosystem over the past thirty years, and urged Congress to review laws and regulations to ensure that they reflect current marketplace realities, and that they do not impede further advancements in communications and other sectors of the economy.

In particular, Congressman Latta advocated for comprehensive review of the “outmoded”1996 Act. He also argued for reform of the FCC’s operations and role in the communications sector through his FCC ‘ABCs’ Act. He stated reform is necessary “to ensure that outdated and unnecessary legacy-era regulations don’t stifle current and future investment, innovation, economic growth and consumer choice in the digital age” and to make “a pro-investment, pro-competition, and, most importantly, pro-consumer framework a reality.” 

Parents Can Take Common-Sense Steps to Make Kids’ Screen Time Beneficial

On October 17, The Tennessean published a piece by Deborah Taylor Tate, a former FCC Commissioner, Distinguished Adjunct Senior Fellow at the Free State Foundation, the ITU’s Special Envoy for Child Online Protection and a board member of Common Sense Media. The article discussed the role of technology in childrens’ lives today and how parents can promote the best uses of these new learning, entertainment, and communications devices.

In her article, Ms. Tate encouraged parents to utilize the resources and advice provided by Common Sense Media. The organization helps parents set limits on screen time, facilitates discussions about online issues, from cyber-bullying to good digital citizenship, and promotes parental participation in the technology that is transforming the lives of both children and their parents today. 

FSF President Randolph May Testifies in House Hearing on the Evolution of Wired Communications Networks

 Yesterday, Free State Foundation President Randolph J. May testified before the House Subcommittee on Communications and Technology. The topic of the Subcommittee hearing was “The Evolution of Wired Communications Networks,” and the object of the session was to discuss proposals on how to best facilitate and complete the transition from copper-based time-division multiplexed ("TDM") services to digital broadband Internet Protocol (“IP”) services. Mr. May testified in favor of a free-market oriented approach to the transition, which would promote continued investment in the new networks, and remove unnecessary roadblocks to development and build-out. Mr. May testified that the FCC should not apply the out-dated public utility-style common carrier model to new IP-based networks: “The FCC and Congress should not look at the inevitable IP-transition just as an opportunity to implement a new free market-oriented regime fit for the digital age. Given the stakes, implementing such a new paradigm should be viewed as a necessity.”

A New FCC or Same Old, Same Old Week - In Spades

Since the founding of the Free State Foundation in 2006, a primary focus of our think tank has been advocating FCC reform, or to put it another way, advocating that the FCC, within the confines of its statutory authority, reorient its mission and its methods.

What do I mean by reorienting its mission and its methods?

I mean that, in light of the dramatic communications marketplace changes that have occurred in the past decade and a half, attributable in substantial part to technological advances associated with the transition from narrowband services to digital broadband services, the FCC needs to change its regulatory mindset from one grounded in traditional public utility-style and common carrier principles to one grounded in free market-oriented principles.

The FCC needs to implement this reorientation of its regulatory framework because the clear result of the dramatic marketplace changes referred to above – all part of what is often referred to today as the "IP transition" or Internet world – is increasing competition and consumer choice in all the now-converging market segments under the Commission's jurisdiction. And increasing competition and consumer choice means that, putting aside certain public safety and universal service concerns, the agency generally should not intervene in the marketplace absent demonstrable evidence of market failure and consumer harm.

Well, this is all just a brief preface to saying, that even though we focus on reforming communications policy on a day-to-day basis here at FSF, this week is going to be an especially busy one in that regard. Call it the "A New FCC or Same Old, Same Old Week – In Spades."

On Wednesday, I am testifying at the House Subcommittee on Communications and Technology hearing on "The Evolution of Wired Communications Networks." It would not have been a stretch to title the hearing "The Revolution in Wired Communications Networks." Titles aside, there is no doubt that the ongoing IP transition, long in process, not only is changing the technologies employed by communications networks, but, more importantly, also the marketplace structure and the choices available to consumers.

I am sure the hearing will provide a good forum for focusing on the regulatory framework changes that should accompany the IP transition, and I commend Chairman Walden and the committee for holding the hearing.

As I write this, I am drafting my testimony with my other hand. Neat trick! I haven't finished and, in any event, I wouldn't want to give away my testimony here. But I know one thing I will say goes like this: The FCC and Congress should not look at the IP-transition that is inexorably moving forward just as an opportunity to implement a new regulatory model fit for the digital age. Given the stakes, it should be viewed as a necessity.

On Thursday, FSF is holding a lunch seminar at the National Press Club titled, "A New FCC or Same Old, Same Old." Congressman Bob Latta, Vice Chair of the House Subcommittee on Communications and Technology, a leader of communications policy reform efforts, will deliver opening remarks. He will be followed by a session with a diverse panel of industry and academic experts.

With Tom Wheeler and Michael O'Rielly expected to arrive shortly as the new FCC Chairman and Commissioner, the FCC will be back to its full five-member complement.  So, it's a perfect time, especially a day after the important House hearing, to further explore whether we can expect "A New FCC or Same Old, Same Old."

I'm confident we'll have an informed, interesting, and lively discussion, and, as always at Free State Foundation events, we will make sure we have some time for questions and comments.

If you wish to attend Thursday's lunch seminar, registration is complimentary. But you must register to attend. If you haven't done so already, you can register here.

Anyway, it's "A New FCC or Same Old, Same Old Week – In Spades." So, let's get down to work.

Neelie Kroes, EU Digital Agenda Leader: Europe is Behind

At Hubforum in Paris last week, Neelie Kroes, Vice President of the European Commission and Digital Agenda Leader, advocated for reform of Europe’s digital economy. Ms. Kroes stated, “Europe can't afford to fall behind [in the information and communications technologies sector]. But we are.” 

Ms. Kroes has been a vocal advocate for reform of Europe’s digital environment, and she has highlighted the negative effects the current regulatory scheme on broadband deployment, investment, information sharing, and innovation. In August, she stated, "today’s guidance to regulators just doesn’t give businesses – old or new – the certainty they need to make investments. It’s time to change." She advocated for widespread reform in order to keep Europe from “losing the global race to build fast fixed broadband connections.”

Ms. Kroes has acknowledged the “regulatory mess” in Europe, and urged reform based on the triumphs of the telecommunications and technology industries in the U.S. She cited Google, Apple, Facebook, and Amazon as exemplars of success in innovation and business, and noted that there are no European companies among the global leaders of the digital marketplace. She stated, “I don't want us to be the US . . . But I do think we could learn from them, celebrate risk and support innovation.”

Free State Foundation scholars have previously reported that Europe lags behind the U.S. in the telecommunications and technology sector, and FSF has endorsed the benefits of deregulatory policies in the U.S. compared to overregulation in countries like France. 

While the U.S. certainly has more work in this regard to do itself, regulatory reform is in order for Europe, since reports project that its telecom sector will suffer a 10% revenue dip in the decade from 2006–2016. In contrast, the telecom sector in the U.S. is projected to grow by 35% over the same period.

Last week Ms. Kroes announced that European Union leaders plan to meet later in the month to discuss reform of Europe’s digital marketplace. Some items on the agenda are whether and how to harmonize telecommunications standards in Europe, and how to promote innovation that starts and stays in the EU.

Europe is right to look to reducing regulation to resolve these issues and to foster growth and innovation in business and broadband development as well as investment in the ICT sector. Hopefully, Ms. Kroes can lead the EU to become a “connected continent” by bringing EU policies more in line with less regulatory policies that prevail in nations like the U.S.

Congratulations to CenturyLink

Happy to see CenturyLink's announcement that it will bringing 1-gigabit service to Las Vegas. This is another in a recent string of announcements by private sector telecom companies that they are investing huge sums of money to bring high-capacity, super-fast broadband to America's cities.

CenturyLink should be commended for the making the investment. 

The story in Bloomberg Businessweek News is here. The first two paragraphs follow.  

"Las Vegas residents will soon have access to Internet connections 100 times faster than the average broadband system.

CenturyLink announced Wednesday that it would bring 1-gigabit Internet service to the northwestern neighborhoods of Las Vegas before the end of the year. The company plans to expand it even further in 2014."

Free Market Royalty Act Would Make Copyrighted Music Market More Free

A market is truly free when creators and producers can choose whether or not to sell their services or products and can set thesale prices they believe will give them a sufficient return. In a free market, government doesn't tell creators and producers that they must sell their services or products. Nor does government tell creators and producers the prices they must charge for their products or services.

When it comes to copyrighted music, the market isn't that free. Forced access mandates and rate controls are imposed on music composers and performers. Government regulations require copyrighted music be made available for sale. And in many instances, government sets the backstop royalty price that commercial music service providers can pay in order to transmit copyrighted music.

A bill just introduced in Congress would bring some needed free market reforms to federal policy regarding royalties for copyrighted music. H.R. 3219, "The Free Market Royalty Act," removes government forced access mandates and rate controls. Introduced by Rep. Melvin Watts, H.R. 3219 would make the market for copyrighted music more free. Congress should consider this bill or similar bills favorably.

I summarized the case against compulsory licensing and rate controls in my blog post, "Congress Should Make Way for a Free and Disruptive Digital Music Market." There I explained:

[T]he current compulsory licensing and ratemaking regulation for digital music content regulation tends to foster a market environment that is inhospitable to experimentation and to further waves of innovation. Government-prescribed rules constrain or even displace the risk-taking and knowledge-based decisions of diverse market providers. The difficulty is that when regulation prompts providers to forego promising innovations, the opportunity costs to consumer welfare are impossible to measure.

Forced access and rate regulations of digital music are particularly unjustifiable in light of today's market conditions. Long gone are the days when radio and cassette tapes were the only ways to access music. CDs and vinyl are still widely available for music aficionados, along with broadcast radio. But consumers now have ample choice among cable music services, satellite radio, online on-demand services, as well as webcasting services relying on ad-based or subscription models.

A most welcome provision of H.R. 3219 would put an end to Copyright Act Section 114's compulsory licensing. Under the bill, music copyright holders would no longer be required to license their copyrighted music for public performances by commercial music services providers.

H.R. 3219 would also end over-the-air broadcasters' privileged position vis-à-viscommercial music service providers that use different transmission technologies and business models. Current law allows broadcasts of copyrighted music content without any need for copyright holders' mutual agreement.

Instead, H.R. 3219 would authorize broadcasters and non-interactive music services to collectively negotiate with SoundExchange – a common agent for copyright holders – for licenses to perform copyrighted music content. SoundExchange would serve – or rather would continue its existing service – as the collector of negotiated royalties and distributor of payments to copyright holders, featured performing artists and non-featured performing artists. Under the bill, where public radio fails to obtain licensing through negotiation, it would have opportunity to petition the Copyright Royalty Board for a rate proceeding under the "willing buyer/willing seller" standard contained in existing copyright law.

From a free market perspective, one may legitimately question H.R. 3219's provision expressly recognizing SoundExchange as the entity for collective negotiations between music copyright holders and music service providers. One might also question the bill's provision dividing up royalty receipts between copyright holders, featured performing artists, and non-featured performing artists. Keep in mind, however, that in these respects H.R. 3219 carries forward existing law. On balance, the bill is deregulatory in thrust. Where it changes the law, it ultimately does so in a free market direction.

One can hypothesize a future free market reform that goes a step beyond H.R. 3219 and simply allows for collective negotiation by interested parties but stops there. Yet even if H.R. 3219 leaves further reform work to be done, Rep. Watt's bill deserves praise forthe progress it would make towards realizing a truly free market for copyrighted music.

As I wrote in my Perspectives from FSF Scholars paper, "Putting Music Copyright Policy on a Free Market Footing":

Part and parcel of any legislative deliberations regarding reform to the existing music copyright royalties system should be concrete steps to eliminate compulsory licensing and ratemaking in order to finally transition to a free market for music in which copyright holders and users are all treated equally, regardless of the underlying technology involved.

H.R. 3219 succeeds by these standards. It would eliminate compulsory licensing and rate controls for public performances of copyrighted music content by commercial music service providers. And the bill would treat all music services equally.

H.R. 3219 – The Free Market Royalty Act – takes aconcrete step towards the realization of a truly free market for copyrighted music and Congress should carefully consider this reform measure.

Maryland’s Tax Climate Still Needs Improvement

The Tax Foundation just released its 2013 State Business Tax Climate Index. The Index considers over 100 variables in state tax systems which affect the competitiveness of a state’s business environment. Unfortunately, Maryland was named among the 10 worst states with respect to its business tax climate, ranking 41st. This is a clear indication that there is significant room for improvement in Maryland's tax policies. 

The Tax Climate Index describes some of the factors that contributed to Maryland’s consistently low rank. Problem sources include the individual income tax base, where statutory local rates in Maryland are often around 3 percent, while the effective local tax rate is approximately 1.5 percent. Other areas where Maryland’s tax structure ranked among the worst of the states are its property tax base and its unemployment insurance tax.

Maryland’s closest neighbors' business tax climates ranked much more favorably. Virginia ranked 26st, West Virginia ranked 23rd, Pennsylvania ranked 24th, and Delaware just missed the top ten by ranking 13th.

The Department of Labor reports that most mass job relocations are from one U.S. state to another, rather than to a foreign location. As such, if Maryland doesn't want to continue to lose private sector jobs to its neighbors, Maryland needs to remain competitive with its neighboring states and states in the same region that have more favorable tax climates.

Taxes are just one factor businesses consider when determining where to locate, and some give little weight to the impact of a state’s tax system on business success. However, states with tax systems that foster business competition also tend to attract new businesses, which generate economic and employment growth. Changes to the tax code can quickly improve a state’s business climate.

It would be wise for Maryland to consider the success of other states, particularly its high-ranking neighbors, and to implement changes which establish a climate that is more conducive to attracting and retaining private sector businesses.

Going "Behind the Scenes" with Google Fiber

I was pleased to see Derek Slater's blog initiating a series of pieces on the progress of the Google Fiber projects in the Kansas City, Austin, and Provo (Utah) areas, and hopefully elsewhere too. This first piece in this new "Going Behind the Scenes" series is about how Google is trying to work with municipal governments to get the fiber deployments underway without unnecessary delay. As Mr. Slater explains -- and he is someone who knows the challenges -- the main areas of discussion with the cities involve access to existing infrastructure, access to existing infrastructure maps, and expediting construction permits.

The country can benefit from more, faster deployment of high-capacity broadband facilities, and the municipalities need to do their part by streamlining and expediting their legacy processes, wherever possible, to expedite such deployment.

From my perspective Google's entry into the broadband provider marketplace is positive -- as long as other similarly situated broadband providers, such as Time Warner Cable and Verizon and all the rest, can avail themselves of the same local streamlined, expedited processes available to Google.

I think more competition is better, so I'm glad Google is building out high-capacity broadband infrastructure. And Derek Slater and the Google Fiber team deserve credit for leading the way in getting some local governments to reform their processes and for sharing what they are learning the rest of us.

WSJ's Holman Jenkins: FCC Should Take "Yes" for an Answer

The Wall Street Journal's Holman Jenkins has a nice piece in today's paper, "Saying 'Yes' to Broadband," [subscription required] which provides an enlightening look -- for those who are not already familiar -- at the increasingly competitive environment for high-speed broadband. Mr. Jenkins chronicles the competition that is taking place across platforms, technologies, and companies.

The column is well worth reading, but here is the conclusion for those who can't read the whole piece. 

"Verizon, AT&T and Sprint-Softbank are all heralding a reality that has hardly yet entered the FCC's thinking—when mobile and fixed converge, becoming practical substitutes for each other. Verizon and AT&T not only are talking up the capacity of their 4G (and someday 5G) networks to carry high-def video in and out of the home. Both plan to devote swaths of spectrum to replicating in some fashion the broadcast TV business model. How this might work is far from clear, but a factor is the FCC sitting on the existing broadcast TV business, with its vast spectrum holdings, preventing it from finding its own place in the digital landscape.

All this renders even more quaint the scrap over 'net neutrality.' Verizon is battling in a U.S. appeals court the FCC's effort to impose this regulatory conceit on the broadband industry—with certain bloggers insisting that if Verizon wins, it will represent 'the end of the Internet,' because, you know, there's not enough competition to make sure broadband operators don't 'censor' the Internet in their own interest by blocking access to websites that compete with their own services.

Uh huh. The truth is, competition has been more than adequate so far to police the Internet, and now competition is getting jacked up a serious notch as the video explosion stimulates a deluge of new investment. Now if the regulatory establishment would just take 'yes' for an answer.

BTW, I have been urging the FCC to take "yes" for an answer for answer for well over a decade now.