Blog - Page 63

How can the cost of Universal Service double while technology is driving down costs?

The FCC took comments Friday on what to do about an enormous rate of growth in the demand for Universal Service subsidies. The High Cost Fund has almost doubled in size since 1999. Part of the growth is attributable to a variety of familiar problems. For example, support for rural carriers is still determined using a rate-of-return methodology despite the fact that price-cap regulation has proven to be far more effective in controlling costs. And rural carriers can choose to be subsidized not on the basis of their own actual costs, but according to an “average” cost incurred by many carriers. So it doesn’t matter that some rural carriers contend with mountains, deserts, lakes and rivers while there are others Read More ›

Coast to Coast

Ten Days of Quantum Science and Supply-side Economics With our annual Telecosm conference in Lake Tahoe sandwiched by two trips to Washington, D.C., it was a whirlwind two weeks. Seeing old friends and meeting new ones from the Telecosm Lounge ( is always a great part of Telecosm. It was no different this year, as we had enough EZchip (LNOP) owners to convene a significant shareholders meeting with CEO Eli Fruchter at lunch on Wednesday even though the company’s official annual meeting was taking place that very day in Israel. “No one comes to our official meeting,” Eli said. He was amazed that Glen had memorized every word of every press release of the last five years and that West Read More ›

Net Testimony in Hoosierland

On Monday morning I testified before the Indiana Joint Committe on Regulatory Flexibility. Sexy, I know. I was joined by Ray Gifford and John Rutledge of the Progress and Freedom Foundation. Some 30 legislators listened as Rutledge expertly surveyed the global economic scene, with emphasis on energy, telecom, and Asian growth. I described the American technology scene and tried to show how a number of recent events — eBay’s purchase of voice-over-IP provider Skype, Google’s entry into VoIP and even wireless infrastructure, Yahoo!’s invasion of Hollywood, and the CableCos’ and TelCos’ invasions of each other’s businesses — make our already antiquated telecom laws and regulations more useless than ever. Ray Gifford then offered a cogent history of telecom law at Read More ›

Malpass or Manny?

The Wall Street Journal reports this morning that the White House may be looking beyond the presumed “list of four” (Lindsey, Bernanke, G. Hubbard, Feldstein) to fill Alan Greenspan’s chair at the Fed. This is great news, as it may open the door for monetary stalwarts like David Malpass of Bear Stearns, or, as Cesar Conda suggests on the Journal’s editorial page, Manuel Johnson, who in 1996 wrote one of the very best books on monetary policy. Malpass and Johnson are supply-siders who favor a price-rule to maintain a stable value of the dollar and who deeply understand the global nature of all economic policy. Columbia’s Glenn Hubbard, who was President Bush’s CEA chair in charge of the excellent 2003 Read More ›

Dark side of municipal networks

What happens when a municipal broadband network fails to cover its costs? The costs get shifted. Residents of Ashland, Oregon will see a monthly surcharge of $7.50 on their electricity bills. Ashland’s cable rate payers will also get hit with a surcharge. (See the article from the Ashland Daily Tidings.) The fact that Ashland’s fiber network is not profitable, that Ashland cross-subsidizes it and that Ashland’s taxpayers/captive rate payers will foot the bill for a bailout proves what many of us have been saying about municipal networks: (1) Cities lack the expertise to successfully build and operate broadband networks, (2) Cities will discriminate in favor of their own network ventures and (3) Cities are unprepared to continually modernize the networks Read More ›

House telecom proposal a wake up call

The reaction to the draft broadband proposal in the House reminds me of the horror and/or ridicule that greeted each one of the many drafts of what became the Telecommunications Act of 1996. A proposal that is designed to hopefully have a chance of being enacted is always a disappointment (see House telecom proposal opens new frontiers for regulation). Its also not a bad indication where the process would ultimately lead if nothing is done to educate the public about the benefits of deregulation. The problem is a lack of faith in free markets and a skepticism that deregulation works. Even supporters of deregulation fret over whether there is a right way and a wrong way to do it — Read More ›

The Other Gulf Green Zone

President Bush has proposed another Green Zone for the Gulf. This one is not a fortress in Baghdad, however, but a greenlined “opportunity zone” in Louisiana, Mississippi, and Alabama. Although I share concerns that Washington will shovel money South indiscriminately, the free zone portion of the proposal is just the right strategic approach. Not just because of what it might do for New Orleans and the Gulf region but for its potential follow-on effects across the nation. China has already shown us the way. In the late 1970s, Deng Xiaoping established four Special Economic Zones in Shenzhen, Fujian, and Shanghai, where tax rates and regulations were low or non-existent. Financial and human capital poured into the zones, and they became Read More ›

Philly update

Philadelphia’s city-run Wi-Fi project seems to be in trouble before it begins. Mike Langberg of the San Jose Mercury News says the city is realizing initial cost projections were way too low and expections were way too high. I said a year ago the $10 million cost figure was “implausible” and that the number of required network nodes would explode from the original projection of 1,000. PFF also questioned Philly’s plan and recaps the story here. I may have been wrong, however, to suggest last year that Philly’s project wouldn’t fail: “I doubt any municipal wireless project has failed, or ever will,” I wrote. “Have you ever heard of a government program that failed? This is the fundamental failure of Read More ›

Draft broadband legislation circulates in House Energy and Commerce Committee

Kudos to the House Energy & Commerce Committee for circulating a bipartisan draft broadband legislative proposal. Broadband Internet transmission services (BITS), Voice over Internet Protocol (VoIP) and Broadband Video Services (BVS) would be subject to exclusive Federal jurisdiction and would be free from any regulation of rates, charges, terms or conditions. A streamlined franchise process would let a BVS provider commence service within 15 days, and preferential treatment of broadband networks that are owned or controlled by cities would be prohibited. These provisions, if enacted, would provide clarity and certainty that are badly needed to attract investment. Some things about the proposal that are less than perfect. For example, the term “repeal” is never used. The FCC will likely grow Read More ›

Hu’s Trade Gap?

President Bush’s meeting with Chinese President Hu Jintao today in New York and their newly agreed-to meeting in November in China suggest China is on the White House radar, as it should be. Asian economic policy should be right at the top of the Washington’s policy list (there’s also this small matter of potential North Korean nukes). But why is the White House still obsessing over the “trade gap” with China, browbeating assurances out of Hu to reduce the trade gap by buying more American goods? Where to start? First, the trade gap is an accounting identity and implies a capital surplus. We buy lots of stuff from China, send it dollars, and China invests in American assets. The American Read More ›