Telecommunications

Ken Robinson provides a much needed response to the crazy proposition that telephone networks were paid for by the ratepayer, not investors; ergo, they are public property; ergo, they should be subject to net neutrality mandates and every other conceivable regulation. “We, the people, paid for these networks, not the phone companies, and we, not the phone companies, should decide on the policies of these utilities,” is how Bruce Kushnick phrased it in The $200 Billion Scandal. Robinson points out that nowhere does the purchaser of a product or service thereby acquire an equity position. And he notes that the public property argument — repeated by Kushnick in his book — is actually a more extreme view than Socialism or Read More ›

The competitive local exchange carriers are always looking for another shot in the arm by peddling their familiar “pro-competitive” theory of antitrust that would require the government to pick winners and losers and would have a chilling effect on investment. Yesterday they renewed their effort to force Verizon and AT&T to divest all network fiber they acquired in last year’s mergers if it overlaps what they already had. Under the merger conditions approved by the Department of Justice, Verizon and AT&T will divest fiber only to office buildings that were left without a competitive alternative following the merger — if, judging by the distance and likely demand, it would be uneconomical for competitors to lay their own connections to those Read More ›

The member of the European Commission in charge of telecom, Viviane Reding, admits that these are “times of convergence where we can access music, emails and media content using different terminals and networks and where also the borders between fixed-line and wireless are disappearing.” She has therefore initiated a review of the EU telecom rules — with a focus on opening up more spectrum, regulating less in markets “where competition is already effective” and achieving “competition and investment.” On the positive side, Reding advocates phasing out ex-ante sector-specific regulation — leaving control with competition law and authorities — and reducing the variety of regulatory approaches in recognition that “neither technology nor economic interest nor consumer behavior know national borders anymore.” Read More ›

Local officials act as if eliminating cable franchising will be the end of civilization — er, “livable” communities — but a new paper demonstrates the link between increased competition in video programming, increased consumption and increased local franchising receipts, which local officials can use to raise teacher salaries and expand Medicaid benefits. The study, by Robert W. Crandall and Robert Litan, estimates that if Congress eliminates franchising, local franchise fee receipts would increase by between $249 million and $413 million per year. (See “The Benefits of New Wireline Video Competition for Consumers and Local Government Finances,” available at Criterion Economics, LLP.) Local officials claim they’re not opposed to competition — they embrace it! — of course. But franchises are an Read More ›

The telecom reform proposal under consideration in the Senate Commerce Committee would create a $500 million account as part of the Universal Service Fund to subsidize broadband deployment in rural areas. The anecdotal evidence for some time has been that rural areas actually are not far behind urban areas as it is. Part of the reason that there is not much of a lag is small rural telcos have been able to finance broadband upgrades with USF. In a paper released Friday, the Congressional Budget Office sheds some much-needed light on the rumors. CBO claims that broadband is in fact permeating rural areas at a “rapid pace,” and cites a finding from the Pew Internet and American Life Project that Read More ›

Sen. Ted Stevens (R-AK) rightly worries that current universal service mechanisms are unsustainable as consumers migrate to Internet phone services that are lightly taxed and regulated (these services clearly should contribute their fair share). Stevens and others also believe that rural America won’t get broadband services without subsidies (we can’t know this for sure, because we have never tried the alternative approach of removing all of the barriers to competition and investment). Anyway, while Internet content and conduit providers obsess over net neutrality, something equally harmful is lurking in the shadows. A little noticed provision in the Senate’s “staff working draft” designed to expand the universal service funding base could have profound consequences. Currently, consumers of “telecommunications” services contribute billions Read More ›

This week Senate Commerce Chairman Ted Stevens (R-AK) introduced comprehensive telecom reform legislation which, as Adam Thierer notes, is a 135-page monster, represents a counterproductive obsession on the part of some policymakers over the smallest details of communications policy and doesn’t tear down any of the old regulatory paradigms that it sould. That said, the proposal would move the country in a positive direction in several respects. Net Neutrality — Unlike the House bill, which grants the FCC specific new authority to enforce the commission’s net neutrality principles — and which is guaranteed to lead to questionable enforcement proceedings and perhaps litigation between grasping and delusional competitors — the Stevens bill wisely requires the FCC to merely keep a watchful Read More ›

Imagine if you ran a business and independently came to the same conclusion as your competitor about the products you would offer and the customers to whom you would offer them? That would be called “conscious parallelism,” a result of legitimate shared economic interests. That’s always been perfectly legal. Well, there are some trial lawyers who believe that parallel business behavior is or could be proof of conspiracy, which would be a violation of the Sherman Antitrust Act. The Court of Appeals for the Second Circuit agreed in a case called Twombly v. Bell Atlantic. The Supreme Court is now considering a petition for certiorari. The case alleges that the Bell operating companies “conspired” not to compete against one another Read More ›

“So often we legislate in these areas when something is evolving [and] we legislate wrongly. The technology just goes around it. My view is, let’s wait and see. Let’s make sure there’s a problem before we legislate.” Senator Gordon H. Smith (R-OR), on the absence of a net neutrality provision in telecom legislation he plans to introduce for Senate consideration “As a very small content provider (editor of Politech), I’d presumably benefit in the short run from Net neutrality. But I spent over a decade in Washington, DC, more than enough time to realize that government failure is more of a problem than market failure, and to become healthily skeptical of giving the FCC new powers to regulate the Internet.” Read More ›

Separating content and conduit by force — “net neutrality” — unnecessarily exalts regulation and elevates bureaucrats over market forces. The million-word re-regulation of the industry that was the Telecom Act of 1996 resulted in the Great Telecom and Technology Crash of 2000-2003. Net neutrality risks a replay of this carnival of lawyers, micro-mis-management by apparatchik, price controls, the socialization of infrastructure and the screeching halt of innovation and investment in the “last-mile” local loop. For years the doomsayers have said telecom will contrive content-conduit plays like the cable industry, that they will thereby reap profits from broadband content and that it will be the end of civilization as we know it. They forget that content and conduit are naturally separate. Read More ›