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A hearing tomorrow in the House Subcommittee on Rural Development, Research, Biotechnology, and Foreign Agriculture will examine duplicative rural development programs. The subcommittee should pay particular attention to the Broadband Loan Program administered by the Rural Utilities Service of the Department of Agriculture. Audits have uncovered serious shortcomings and the agency has resisted needed reforms for years. The time has come for lawmakers to brush aside rosy assurances from agency officials and wind the program down. Testifying in February of last year, the Department of Agriculture’s Inspector General briefly summarized a shocking set of audit findings from 2005 that included waste, fraud and abuse, and noted that most of the issues had still not been resolved satisfactorily . Of the Read More ›

Legislators in Kentucky are considering a bill for modernizing Chapter 278, sections 541-544 of the Kentucky Revised Statutes relating to the jurisdiction of the Public Service Commission (Senate Bill 135).
States including Alabama, Florida, Georgia, Indiana, Illinois, North Carolina, Ohio, Tennessee and Wisconsin have all recently revamped their telecommunications statutes, and Mississippi is in the process of considering similar legislation. SB 135 would put Kentucky in a strong position relative to these nearby states in terms of creating a favorable business climate for private investment in advanced networks.
Rates for basic local exchange service would be market-based and not subject to commission jurisdiction beginning 60 months after a telephone utility elects (or has already elected) to adopt price cap regulation. The requirement to file tariffs would be eliminated at that time.

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Proposed House Bill 825 would update the regulation of telecommunications services in Mississippi. Effective July 1, 2012, the Public Service Commission would no longer be authorized to regulate the rates, terms and conditions of single-line flat rate voice communication service, nor impose other regulation. The bill also clarifies that nothing in Title 77, Chapter 3 (Regulation of Public Utilities) of the Mississippi Code may be construed to apply to video services, voice over Internet protocol services (“VoIP”), commercial mobile services, Internet protocol (“IP”) enabled services, in addition to broadband services. The commission would continue to regulate intrastate switched access service, as well as arbitrate and enforce interconnection agreements between telecommunication providers. Providers of intrastate access and unbundled network elements would Read More ›

Congress is considering a bill which would authorize the Federal Communications Commission to reassign certain electromagnetic spectrum for mobile broadband services through “voluntary incentive auctions.” Speaking at a trade show earlier this month, FCC Chairman Julius Genachowski was critical of provisions in the “Jumpstarting Opportunity with Broadband Spectrum Act” (H.R. 3630, Title IV) limiting the FCC’s power to impose conditions on successful bidders that have nothing to do with maximizing revenue for the Treasury.
One provision would prohibit the commission from unreasonably restricting who can participate in a spectrum auction, such as large firms. Another provision in the JOBS Act would prevent the FCC from requiring a successful bidder to sell access to its network on a wholesale basis.
“It’s a mistake,” according to Genachowski, “because it preempts an expert agency process that’s fact-based, data-driven and informed by a broad range of economists, technologists and stakeholders on an open record.”
Genachowski’s old boss, former FCC Chairman Reed E. Hundt, reportedly criticized the proposals during a Capitol Hill briefing on Tuesday, as well.

He worried that the bill would allow the largest wireless carriers to buy up all of the spectrum at auction, expanding their dominance of the airwaves. He said the carriers might not even plan to use some of the spectrum but could buy it just to kill off competition.
He argued that Congress should rely on the FCC to use its technical expertise to set the conditions of the auction.

These guys apparently will never learn.
The FCC has a poor track record of trying to improve on the free market, and the Reed Hundt era is recent exhibit “A.” Seeking to promote competition in local telephone service during Hundt’s tenure in the late 1990s, the FCC required incumbent local telephone companies to provide below-cost wholesale access to their networks while preventing them from competing in the long-distance market. According to Hundt, in You Say You Want a Revolution? (2000),

The Clinton administration had the conviction that astute and sharp-edged rules could open markets to competitors … some firms would succeed, others fail. But the competition would create choice for consumers, and the diversity of the competitors would weaken the political influence of the big, established (and typically Republican-leaning) firms. The new competitive markets would stimulate investment in new technologies and lead to fair prices for consumers. All five lanes of the information highway would converge in a race to tomorrow (which we would not stop thinking and talking about).

The FCC’s “pro-competition” framework was an abject failure which led to overinvestment in the core of the network and underinvestment in the local connections at the network’s edge. According to Robert W. Crandall of the Brookings Institution,

For the most part, these policies simply transferred billions of dollars from incumbent telephone companies to fund marketing campaigns required to sell the same services under a different name [that of an unaffiliated retail competitor].

While Reed Hundt and other idealists were busy helping to precipitate an investment bubble that burst in 2000-02, meaningful voice competition was emerging, unbeknownst to the FCC, from the wireless and cable industries which are not subject to active FCC oversight.

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John Cook, of Seattle-based GeekWire, reports that Apple has enough cash reserves to pay off eight EU countries’ debts–if it wanted to, which, of course, it doesn’t. This story, based on an infographic from MBA Online the day before, puts Apple’s big quarter in prospective. GeekWire characterizes their revenue as “Three Yahoos, two Googles and a Microsoft”. It’s also interesting, and worth noting, that 2/3 of it is stored overseas. Here we have a company that makes trinkets, bought voluntarily by free people, produced willingly by free people. Yet even after giving billions of dollars to the governments they labor under, they still make more money than even the most irresponsible governments can lose. Consider: Governments take money from people Read More ›

Showdowns are likely in the Senate and House of Representatives later this month on legislation combating online piracy. The House Judiciary Committee is expected to vote on the Stop Online Privacy Act, H.R. 3261 (SOPA), and the full Senate on the Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act, S. 968 (Protect IP Act). These measures have generated some overheated rhetoric.
A recent column in Roll Call by Stephen DeMaura and David Segal, entitled “All Candidates Should Be Concerned About SOPA,” for example, suggests that SOPA could be exploited by political opponents to restrict free speech.

Here’s a plausible campaign scenario under SOPA. Imagine you are running for Congress in a competitive House district. You give a strong interview to a local morning news show and your campaign posts the clip on your website. When your opponent’s campaign sees the video, it decides to play hardball and sends a notice to your Internet service provider alerting them to what it deems “infringing content.” It doesn’t matter if the content is actually pirated. The ISP has five days to pull down your website and the offending clip or be sued. If you don’t take the video down, even if you believe that the content is protected under fair use, your website goes dark.

Another recent column in Politico by Tim Mak entitled “Bloggers: SOPA’s the end of us” makes a similar claim and implies a tidal wave of opposition is forming (we shall see).

The conservative and liberal blogospheres are unifying behind opposition to Congress’s Stop Online Piracy Act, with right-leaning bloggers arguing their very existence could be wiped out if the anti-piracy bill passes.

There is no way these bills would permit an opposing campaign or campaign committee to pull down websites harboring “infringing content,” nor would they authorize censorship of lawful speech.

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The National Telecommunications Cooperative Association (NTCA) began the process of litigating the Federal Communications Commission’s recent Connect America Fund Order on in the U.S. Court of Appeals for the Fourth Circuit Friday. NTCA, which represents over 570 “locally owned and controlled telecommunications cooperatives and commercial companies throughout rural and small-town America,” notes, among other things, that “[p]rovisions [of the Order] mandating an ultimate price of zero for all switched access and reciprocal compensation services, imposing retroactive and dynamically changing caps on USF-supported costs and blurring the lines between regulated and nonregulated operations are inconsistent with law.” What this particular dispute is ultimately about is not whether NTCA’s members are entitled to recover their reasonable costs as a matter of law Read More ›

An item in the Wall Street Journal by Emily Steel notes how software application developers could radically alter the online advertising business that has allowed firms like Google and Facebook to prosper. Consumers are downloading independently-produced apps which allow them to customize their Facebook page or optimize their Google search results. In the process, these consumers begin to see ads that do not originate from Facebook or Google. On Facebook, for instance, big splashy ads appear along the border and in the middle of the pages, pushing content–and the advertising actually sold by Facebook– further down the page. The applications can similarly interfere with search results, placing new sets of ads above the ones bought, say, by Google advertisers. This Read More ›

AT&T and T-Mobile withdrew their merger application from the Federal Communications Commission Nov. 29 after it became clear that rigid ideologues at the FCC with no idea how to promote economic growth were determined to create as much trouble as possible. The companies will continue to battle the U.S. Department of Justice on behalf of their deal. They can contend with the FCC later, perhaps after the next election. The conflict with DOJ will take place in a court of law, where usually there is scrupulous regard for facts, law and procedure. By comparison, the FCC is a playground for politicians, bureaucrats and lobbyists that tends to do whatever it wants. In an unusual move, the agency released an analysis Read More ›

The Federal Communications Commission issued its Connect America Fund Order to ensure ubiquitous broadband Internet access services on Friday.
When Congress debated the Telecommunications Act of 1996, the section concerning Universal Service (Section 254) was somewhat controversial. Broadly speaking, there seemed to be considerable support in the House of Representatives for limiting Universal Service, and there were some influential senators who wanted to expand it (the House is somewhat more representative of urban areas that contribute subsidies, and the Senate is somewhat more representative of rural areas that receive subsidies). The result was a compromise in which Universal Service is defined (in Sec. 254(c)(1)) as “an evolving level of telecommunications services that the Commission shall establish periodically … taking into account advances in telecommunications and information technologies and services.” Notice how information services are missing in the first half of that sentence. Although the FCC is allowed to take notice of information services, Universal Service has to support telecommunications services only.
This is relevant because the FCC subsequently ruled that broadband Internet access is an information, not a telecommunications service (Order at paragraph 71). The commission also subsequently ruled that a service has to be one or the other, and that it cannot be both (“hybrid services are information services, and are not telecommunications services,” ruled the FCC in a 1998 Report to Congress at paragraph #57).

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