Time for Tennessee’s hidden phone tax to go

In Tennessee, legislation to eliminate the hidden subsidies in intrastate access charges applied to long-distance calls which originate and terminate within the state has passed the Senate Commerce Committee and the House Sub-Commerce Committee. The votes in the two panels were overwhelming: 8-1 and 12-1. It has taken real leadership by the bills’ sponsors — Sen. Mark Norris and Rep. Gerald McCormick — and others to write and pass legislation dealing with this matter over committed opposition. As amended, SB 0598 would prohibit telecommunications providers from charging intrastate access charges that exceed interstate access charges. The amendment includes a 5-year transition, beginning in April 2012. The House bill is HB 0574. As I’ve blogged about here and here, eliminating the Read More ›

AT&T + T-Mobile = ?

Talk about gutsy. AT&T is set to buy T-Mobile for $39 billion. AT&T is a giant corporation. When AT&T acquires T-Mobile, the number of national wireless providers will go from 4 to 3. And struggling no. 3 (Sprint) may not have anyone with which to partner. Is this a disaster? Can government protect the little guy? T-Mobile is dead in the water. It has run out of gas. It can’t make money. T-Mobile and AT&T are a natural fit because their networks rely on similar technology. Not true for Verizon Wireless and Sprint. If the government blocks this merger it will force an economically inefficient (and ultimately unsustainable) outcome. Politicians cannot alter the laws of economics. This merger is likely Read More ›

Access reform moves forward in Tennessee

Tennessee’s House Commerce Committee heard testimony this week on reforming intrastate access charges that long-distance providers pay to local tlecommunications carriers to originate and terminate calls between local calling areas within the state.
Access charges traditionally have been set far above cost to generate subsidies to maintain ubiquitous and affordable local service. In the Telecommunications Act of 1996, Congress directed the FCC and the states to pull the hidden or implicit subsidies out of access charges, because they are unsustainable in a competitive market. The FCC reduced interstate access charges, and exhorted the states to reduce intrastate access fees.
A brief paper that George Gilder and I prepared notes that in Tennessee today, for example, a long-distance provider would pay one randomly selected small rural carrier only 4.45 cents per minute to originate and terminate a call between any location in Tennessee and Los Angeles or New York City. But the same phone company would collect 22.84 cents per minute to originate and terminate any non-local call between two points within Tennessee. Yet the carrier furnishing the same service and incurring the same cost in either case.

(Note: with respect to any particular call, a local carrier generally provides only an originating or terminating service, however the long-distance carrier pays originating and terminating fees to the local carriers on either end of the call. The combination is what a long-distance carrier has to recover from consumers. For illustrative purposes, both we and the FCC reduce the number of variables and avoid arbitrary selections by focusing on what carriers charge for both origination and termination.)

We recommended that Tennessee’s intrastate rates should mirror the interstate rate the FCC has established for each carrier, which is fully compensatory. The recent National Broadband Plan makes a similar recommendation (p. 148).

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Antitrust should not apply to conduct between non-competitors

goodlatte1.jpgIntellectual Property subcommittee Chairman Bob Goodlatte, R-VA (pictured), said he is considering legislation to tweak antirust law to address net neutrality concerns, according to the Hill. That’s apparently because Rep. Henry Waxman (D-CA) reports that,

According to DoJ, favoring websites that pay high fees and degrading websites that don’t is perfectly legal under the antitrust laws as long as the phone or cable company isn’t in direct competition with the websites being degraded.

Goodlatte and Waxman seem to be talking about a vast expansion of the antitrust laws, which are presently concerned with anticompetitive behavior. As a definitional matter, if two rivals are not in competition with one another, then neither can behave anticompetitively toward the other. Nor would they have any incentive for doing so. What would be the point? Neither could derive any tangible benefit if the other were harmed.

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New Internet is unfolding

Among other things, George Gilder tells Forbes reporter Chris Barth that the text-based Internet with which we are familiar is evolving into a video-based internet, and the change will be transformative. “When voice came around as the dominant form of communication, it required a complete transformation. You couldn’t just upgrade the telegraph, you had to create a telephone system. The Internet, when you look at it, is another telegraph,” he explained. “Now we’re moving to interactive video. And video teleconferencing cannot be accommodated without a new, upgraded Internet, with new patches and tunnels and layers of Internet technology.”

Tennessee confronts a hidden phone tax

Yesterday the Tennessee Regulatory Authority (the state’s public utility commission) heard testimony about reforming intrastate access charges (i.e, the rates long-distance carriers pay to local telephone companies when calls are handed off between long-distance and local telecom providers). The rates have been set very high, historically, to generate significant subsidies for making local service affordable and ubiquitous. In my own remarks, I pointed out that the hidden subsidies embedded in intrastate access charges are a tax on consumers. Defenders of the status quo like to avoid that word, but a tax is a tax. Although fully justifiable when established in 1984 upon the breakup of Ma Bell, the hidden subsidies are simply inappropriate in today’s dynamic, competitive marketplace. Some might Read More ›

Photo by Chris Slupski

Facebook Helped Provoke the Egyptian Revolution; But Can it Govern?

The revolution in Egypt is another historic product of alternative media, espeically Facebook, home to the "April 6 movement" that commemorates the brutal beating death of a young Egyptian blogger who had exposed the 2008 beating of a demonstrator in the industrial city of El-Mahalla El-Jubra. Instead of stopping the communication, the police beatings provoked a huge following. And then a revolution. Read More ›

Pew’s discreet relationship with Free Press

Scott Walter, writing in Philanthropy Daily, has more on the vast left-wing conspiracy behind network neutrality regulation that was recently revealed by John Fund at the Wall Street Journal. Walter, who cites new evidence on the “discreet relationship” between the Pew Charitable Trusts and Free Press, wonders why “news journalists” did not report on the connections between several “nonpartisan” foundations, which also include the Ford Foundation, and Free Press? A segment of the journalism profession is a core constituency of Free Press, as has been reported. Pew presents itself as objective, but could it really have a partisan agenda?

Telephone and cable industries Wozniak attacks were fully regulated

Apple Computer co-founder Steve Wozniak has a poignant, but factually problematic, plea for Internet regulation in The Atlantic.

Please, I beg you, open your senses to the will of the people to keep the Internet as free as possible. Local ISP’s should provide connection to the Internet but then it should be treated as though you own those wires and can choose what to do with them when and how you want to, as long as you don’t destruct them. I don’t want to feel that whichever content supplier had the best government connections or paid the most money determined what I can watch and for how much. This is the monopolistic approach and not representative of a truly free market in the case of today’s Internet.

The free and open Internet Wozniak celebrates actually evolved in the absence of regulation. William E. Kennard, FCC chairman during the Clinton administration, declared that the “best decision government ever made with respect to the Internet was the decision … NOT to impose regulation on it.”
Meanwhile, back when the computer age was getting started and telephone services were ridiculed and reviled by Lily Tomlin (see SNL clip from 1976) and others, there existed a crucial – albeit frequently overlooked – symbiosis between monopoly and regulation. You don’t hear about it from Tomlin or Wozniak, but the Bell System was a legally-sanctioned and closely regulated monopoly.

While grieving that life for a young computer engineer sucked in the old days when phone and cable companies were monopolies, Wozniak alludes to several persistent misconceptions about the telephone and cable industries that ignore pervasive regulatory failure and provide no justification for Internet regulation.

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“A first step toward content control”

Over at the Washington Times, Internet regulation is being described as an “unholy scheme.” According to Editor Emeritus Wesley Pruden, this is a first step toward content control. Anyone paying attention can see how this would be a first step toward revival of the so-called Fairness Doctrine, sought by Barack Obama and the Democrats since he first arrived in Washington. The Fairness Doctrine would require broadcasters, definitely including the cable-TV networks, to provide airtime for anyone criticized by someone else on the air. That, too, sounds good to the inattentive and the well-meaning. What could be nicer than never having to hear anyone say discouraging things about you? John Fund at the Wall Street Journal reveals how Internet regulation is Read More ›