Blog - Page 59

As we approach a new year, many economic commentators are spreading fear about the flat, or even inverted, yield curve. They claim it’s a sign of recession just ahead. The yield curve is a graphical depiction of interest rates on bonds of different maturities. Normally, longer-term bonds have higher yields than short-term debt instruments because of inflationary expectations and because more risk and uncertainty are to be found over longer periods of time. It’s true, an inverted yield curve often is a warning sign of recession. But only when other real-time market indicators, like commodity prices, confirm it. In the late 1990s and early 00s, the yield curve was for long stretches inverted — higher short term rates than long Read More ›

Last Friday the Indiana Utility Regulatory Commission issued a ruling, following more than two years of study, describing the competitive landscape of telecom in the state and modifying rules for both incumbent and competitive service providers. The Commission’s broad stated goal for the ruling was “regulatory parity.” But the kind of parity it delivered serves the interests of only one group: the regulators themselves. After mildly lowering some of the price floors currently imposed on Indiana’s incumbent telecom companies, the Commission then inexplicably imposed those same price floors and cost reporting requirements on the previously unregulated competitive carriers, the CLECs. Clearly imposing price floors across the entire industry does not help consumers. Isn’t the theory that competition is supposed to Read More ›

My colleague Hance Haney mentions below a new IRS regulation that kicks in this month that will subject small start-up companies to specific accounting rules for stock options that could reduce the use of these important employee incentives. We should also call attention to new SEC regulations, initially meant for hedge funds, that could impose new reporting requirements and potentially even onerous investment clamps on venture capital and private equity. John Berlau of CEI has the story here… -Bret Swanson

Senator James DeMint (R-SC) has introduced the Digital Age Communications Act which was developed by a group of scholars led by the Progress & Freedom Foundation’s Randolph J. May and Professor James B. Speta of the Northwestern University School of Law. PFF’s Adam Thierer identified the basic problem best when he observed that “although the communications / broadband marketplace is becoming one giant fruit salad of services and providers, regulators are still separating out the apples, oranges, and bananas and regulating them differently.” The proposal introduced by Senator DeMint would solve this problem by regulating services which are alike from a consumer perspective similarly. A second problem is that the FCC has been governed by a completely vague “public interest” Read More ›

Some people think we can protect shareowners, prevent corporate malfeasance and rein in lavish compensation of corporate CEOs by requiring companies to expense the value of employee stock options. Of course, the issue is a surrogate for many of the more fundamental problems of corporate governance. Burton Malkiel, professor of economics at Princeton, and William Baumol, professor of economics at New York University, wrote in the Wall Street Journal in April 2002 that “there is no way to measure the ‘cost’ – the value of the options at the time they are granted – with reasonable precision.” But bad policy is not a compliance problem for public companies, who can easily assign a value to the options they issue because Read More ›

A first-rate report describing the shortcomings of Universal Service and suggesting several options for reform has been issued by the Progress & Freedom Foundation. The report is timely because a lot of service providers support a “numbers-based” contribution mechanism designed to spread the cost of Universal Service to include any service that connects to the telephone network and uses an assigned number. Overall, the report confirmed by own impression that Universal Service is a classic example of “regulatory capture,” the theory that regulation can be manipulated by regulated firms to bring them unwarranted profits and thus actually harm the consumers (through artificially higher prices) that it purports to serve. The report doesn’t state this conclusion quite so candidly, though. It Read More ›

At a Congressional staff briefing this week, the Chief Technology Officer of BellSouth referenced an agreement between BellSouth and Movielink in which BellSouth receives a fee to ensure that Movielink’s customers can download movies quickly — even if they have a slow Internet connection. In today’s Washington Post, Gigi Sohn — an advocate of “network neutrality” — ridiculed the arrangement with this clever comment: “If we want to ruin the Internet, we’ll turn it into a cable TV system.” I would actually hate to see the Internet turn into either a cable TV system or a telephone network. That’s the problem with Sohn’s proposal. Sohn’s proposal would turn the Internet into a wasteland where transport providers can’t make any money. Read More ›

I agree, as usual, with my colleague Bret Swanson that regulating cable pricing is an awful idea and that the debate over à la carte is moot in any event. Chairman Kevin Martin isn’t proposing to require à la carte programming, but he is impatient with the cable industry for not doing enough, as he put it, to give parents more tools to navigate coarse programming. Re-regulating cable would be a disaster. Just remember back to 1992 when Congress and the FCC tried to regulate cable rates and almost bankrupted the industry. There are many smart people at the FCC, but the effort to protect consumers from cable rate hikes proved to be too complicated and Congress had to repeal Read More ›

Yesterday at a Senate hearing on media decency FCC Chairman Kevin Martin announced his support for “a la carte” cable TV pricing. In other words, pay for and receive only those channels you watch. Don’t waste money on unwatched content. Choose only family-friendly channels and block violence and sex. Or vice versa, for some, I suppose. Who could oppose such common sense? Martin’s a la carte endorsement reverses former chairman Michael Powell’s view that a la carte pricing economics wouldn’t work for cable TV companies and that it might actually hurt consumers by raising their cable bills. Martin, previewing a new, revised FCC study, offers some compelling evidence that last year’s FCC study was wrong about the economics and the Read More ›

The Senate Commerce Committee has announced an ambitious set of hearings which will delve into every imaginable aspect of telecom reform — beginning in January with Internet porn and ending in mid March assuming everything goes as planned. Let’s see. 2006 is an election year, so there will be a desire to adjourn early and to focus on a limited number of issues with voter appeal. Uh oh. There will be new members in 2007 and a need to get organized and to refresh the record. Assuming there is agreement that telecom reform should be on the short list of major action items for the new Congress and considering that telecom reform usually has to be bipartisan (since, amazingly, Republicans Read More ›