Blog - Page 8

Is the proposed Stop Online Piracy Act, H.R. 3261 (SOPA) a “massive piece of job-killing Internet regulation,” as our friends at the Electronic Frontier Foundation claim? According to the sponsor of the proposal, House Judiciary Chairman Lamar Smith (R-TX), there is an urgent need to protect American innovators from foreign theft via the Internet. Rogue websites that steal and sell American innovations have operated with impunity. The online thieves who run these foreign websites are out of the reach of U.S. law enforcement agencies and profit from selling pirated goods without any legal consequences. According to estimates, IP theft costs the U.S. economy more than $100 billion annually and results in the loss of thousands of American jobs. The Stop Read More ›

At next week’s administrative session, the Georgia Public Service Commission will consider a proposed order from the Public Interest Advocacy Staff concerning the applications of three small telecom service providers for subsidies from Georgia’s Universal Access Fund. The companies are: Chickamauga Telephone Corp., Public Service Telephone Co. and Ringgold Telephone Co.
According to Kristi E. Swartz, writing in the Atlanta Journal-Constitution in August,

The Public Service Commission held two days of hearings this week on three requests of more than $1 million each. Opponents took particular aim at executive and owner compensation.
Ringgold Telephone, which serves northeast Georgia, paid five executives more than $950,000, according to testimony and documents filed with the PSC. Public Service Telephone, which operates in Middle Georgia, doled out $2 million in dividends to its three private owners, according to testimony and documents filed with the PSC.

We are talking about government-mandated subsidies, which force urban and suburban telecom consumers in Georgia, without regard to individual economic circumstances, to pay inflated prices for wireline telephone service for the purpose of subsidizing telephone service in rural communities. Will rural consumers really be cut off from the rest of the World without these subsidies, or do the subsidies mainly benefit richly compensated executives and owners of legally-privileged telecom service providers? It is hard to tell. “Because the rural companies are private,” notes Swartz, “much of their financial information is undisclosed.”

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Federal Communications Commission Chairman Julius Genachowski’s criticism of intercarrier compensation in extensive remarks on telephone subsidies last week is a reminder for many states of the need to reform intrastate switched access rates.
Although Congress mandated the elimination of implicit subsidies embedded in the rates for both interstate and intrastate telecommunications services in the Telecommunications Act of 1996, it did not set a deadline. The FCC has substantially reduced interstate switched access rates in recent years, but a considerable amount of hidden subsidies remain in intrastate switched access fees.
In Florida, for example, one telecom service provider charges 5.64 cents per conversation minute for intrastate long distance versus only 1.65 cents for interstate long distance. The difference represents a hidden subsidy component that operates as a form of tax that only residents of Florida pay, since the lower interstate fees apply to calls which cross state lines.

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Chairman Julius Genachowski of the Federal Communications Commission spoke of the need to reduce subsidies for traditional wireline telephone service last week, as well as a perceived need for his agency to use the savings to subsidize broadband services (see the press release and the text of the speech).
Genachowski is absolutely correct about the need for reforming universal service and intercarrier compensation. Unfortunately, his determination to reform telephone subsidies is not for the purpose of generating consumer savings, but about redirecting resources currently at his disposal for the purpose of gaining some measure of control over unregulated broadband networks. Though cleverly disguised, this is actually a third major attempt to (slowly) impose public utility regulation on broadband service providers.

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You gotta love this guy. Or do you? Referring to the Department of Justice’s challenge to the AT&T + T-Mobile USA merger, Sprint CEO Dan Hesse (mug shot to the right} claims, I don’t believe that what the DOJ said in any way, not even a little bit, should be viewed as we want to keep four [major telecom carriers] …. My view is [the DOJ] would look at other consolidation very differently. What is he saying? According to another report, Hesse believes, [Y]ou could make a very, very strong argument, I believe, that if you have two value players that, let’s say, got together, that gave them more scale and a better cost structure to compete with the twin Read More ›

Congressman Lee Terry (R-NE) and Congressman Mike Ross (D-AR) are encouraging their colleages to co-sign a letter urging Federal Communications Commission Chairman Julius Genachowski to reinvent the Universal Service Fund that subsidizes telephone service in rural areas served by small telecommunications common carriers. The USF is an inefficient subsidy mechanism that may no longer be necessary. The Government Accountability Office made a similar observation in a 2008 report to Congress. While considering legislation codifying universal service, the Senate Committee on Commerce, Science, and Transportation anticipated that competition and new technologies would reduce or eliminate the need for universal service support mechanisms. However, rather than decreasing, the cost of the high-cost program has grown substantially to $4.3 billion in 2007, increasing Read More ›

Does Google present Google products at the top of search result lists? That was the question Senator Mike Lee (R-UT) asked at a congressional hearing this week. Senator Al Franken (D-MN) complained that Schmidt’s response was “fuzzy.” See, e.g., this. If the Google algorithm does favor Google products, is the implication that consumers are so stupid that they will not compare search results, but rather home in on the top search result? That’s absurd. Most consumers use the Internet in search or value, looking for the best products at the most reasonable prices. Consumers who want to save money are accustomed to hunting and searching. Google makes it easier than ever to hunt for bargains. Consumers can access the offerings Read More ›

Title VI of the so-called American Recovery and Reinvestment Act of 2009 directed the Federal Communications Commission to submit a report to Congress containing a “national broadband plan.” Among other things, the statute specified that the plan should ensure that “all people of the United States have access to broadband capability.” It should also include a “detailed strategy for achieving affordability of such service and maximum utilization of broadband infrastructure and service by the public,” the statute said.
This process provided regulatory enthusiasts like Public Knowledge, Media Access Project, New America Foundation and U.S. PIRG an opportunity to advocate for government control of the broadband economy. In joint comments filed with the FCC, the groups called for the national broadband plan

to recognize that certain fundamental principles are too important to leave to the marketplace. * * * * a vibrant broadband network, placed at the center of our economy and our ability to communicate with one another, must follow in the footsteps of the Communications Act of 1934. This begins not with a discussion of competition, but a broad statement of the rights of all Americans to provide “all people of the United States” without discrimination access to “adequate facilities at reasonable charges.”

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Blocking the merger between AT&T + T-Mobile is apropos of this administration’s strategy for creating jobs, according to James M. Cole, the deputy attorney general.

The view that this administration has is that through innovation and through competition, we create jobs. Mergers usually reduce jobs through the elimination of redundancies, so we see this as a move that will help protect jobs in the economy, not a move that is going in any way to reduce them.

Remarkably, someone forgot to include that in the complaint filed by the Department of Justice in the District Court for D.C. The complaint itself does not allege that the merger will cost jobs, nor does it suggest that blocking the merger would create or save jobs. As a technical matter, antitrust is not concerned with job protection, although many seek to exploit it for that and other purposes. More on why that is a bad idea in a minute.
Instead, the complaint is focused specifically on the possibility that the combined company may not longer offer T-Mobile’s lower-priced data and voice plans to new customers or current customers who upgrade their service.
Yet, the complaint concedes that from a consumer’s perspective, local areas may be considered relevant geographic markets for mobile wireless telecommunications services. On the other hand, enterprise and government customers require services that are national in scope, according to the complaint.

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Sprint Nextel Corp. is a troubled company, and that is unfortunate. Government cannot save Sprint, only subsidize it. That could harm our economy. Government can only subsidize the weak at the expense of the strong.
Sprint posted another dismal earnings report late last week. The company had a net loss of $847 million in the second quarter, for a total of $1.2 billion in net losses so far this year. Sprint also lost $3.5 billion in 2010, $2.4 billion in 2009, $2.8 billion in 2008 and it recognized net losses of $29.4 billion in 2007.
What is Sprint’s comeback plan? Not surprisingly, the company is quietly seeking a stealth bailout from the Federal Communications Commission.

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