The Progress & Freedom Foundation Blog

1.14.2005
The PFF Blog is moving!
The PFF Blog is moving to a new address and a new publishing platform - you can view the new and improved system here: http://blog.pff.org. Don't forget to update your Favorites and Bookmarks with the new address. Some new features you'll have access to include a more robust search engine, TrackBack-enabled posts, and Archives by Subject (on new posts immediately, and on old posts as they are updated over the next few days). There may be a few growing pains as we get used to the new system - please let me know if you have any problems. As always, we welcome your comments via email (look for a link to the author's email address in the byline of each post) on both the new system and the entries themselves.
- posted by Blog Administrator @ 1/14/2005 03:55:18 PM

Your FCC at Work
The man's reputation is in tatters, his career in ruins, he is the headline act on "Contrition Tour 2005," and your FCC member wants to do something about it. Because if the FCC isn't watching out for these infractions, who will? Thanks, FCC. Maybe Broadband can lead the investigation.
- posted by Ray @ 1/14/2005 01:25:42 AM

1.13.2005
Reprise on the Baseball "Ownership" Scandal
My post below outlined the possible default rule and property rights issues involving Red Sox 1B Doug Mientkiewicz' decision to keep the ball from the final out of the World Series, rather than turning it over to the Red Sox. Over at the Volokh Conspiracy blog, this comment by Todd Kincannon to Volokh's argument that the employer-employee relationship should govern the matter fleshes out an interesting distinction in the "custom rules" argument, which I had thought should prevail in favor of Mientkiewicz: There is an extremely well established custom in Major League Baseball that players get to keep significant baseballs unless they end up in the stands. Umpires will stop games so that a player can retrieve a significant ball, such as the one he just got his 3000th hit with, or his very first hit, or was the ball he just made an unassisted triple play with, etc... One potentially important distinction here is that this ball is not particularly symbolic of a personal achievement by Mientkiewicz (he gets a put-out on the play; not a huge statistical deal), but instead is symbolic of a Red Sox team victory. Taking this argument to the next level, my friend Andrew "Hog" Warden has proposed a legal test that should be applied in the absence of an ex ante contractual clause. Although his sports acumen is sometimes clouded by his unwavering allegiance to anything Indianapolis-related, I am convinced this analysis hits the mark: If I were a judge, I'd adopt the "significance of the ball test." First, you have to look at the significance of the ball and determine why that ball holds value. Here, the Red Sox won the Series, and not because of anything Mientkiewicz did. Second, you have to look at the claimant and determine his relationship to the ball's significance vis a vis other claimants. Here, no way Mientkiewicz prevails over the interests of the Red Sox. I suppose this test could fail at the margins in cases where multiple pitchers combine to throw a perfect game, but we'll save that analysis for another day.
- posted by Adam @ 1/13/2005 10:36:34 PM

Municipal Broadband, Public Goods and Public Choice
There is much ongoing discussion of municipally-owned broadband projects, usually portrayed in this manner, as a battle between public-minded, well-intentioned politicians and greedy private firms who want to keep the forces of light from fulfilling the city's broadband dreams. Nevermind that good intentions are rarely sufficient basis for public expenditure. Despite utopian promises of economic development premised on building a a broadband network, this does not account for why private firms aren't doing it if this is the case. (See Laissez le Fiber Roulez) "This is just like the government building sidewalks or roads," is one supporting analogy that is often used by municipal broadband proponents. The USA Today editorial approvingly quotes the City Parish Manager in Lafayette: "Installing fiber-optic cable, he credibly argues, is no different from laying down sidewalks or sewer lines." Unwittingly or not, the Manager is making what is called a "public goods" argument -- that a city or municipality needs to build this because it is a public goods. Economist Tyler Cowen explains public goods here, and Nobel Laureate James Buchanan wrote an entire book on the subject, which is delightfully available online. The arguments get more than a little involved, but the chief characteristics of a public good are non-rivalrous consumption and non-excludability. Thus a sidewalk is a good example of a public good -- one person can use it (for the most part) without interfering with others' use and you can't exclude others from its use. Because it's a public good, private markets will not supply it because there is an externality and a free-rider problem; that is, I will be able to use the sidewalk without paying for it. [But see, The Lighthouse in Economics, (discussed here) Ronald Coase's debunking of a classic public goods example that shows private markets come up with ingenious ways to solve public goods problems.] [Another interesting sidelight is that as consumption of roads becomes more rivalrous (in terms of congestion), that is becomes more acceptable to talk about private toll roads as a means to alleviate congestion. This also indicates, as Buchanan discusses, that nothing is a completely private or public good.] What is striking about municipal broadband networks is that they have few, if any, characteristics of a public good. Broadband connections involve both rivalrous consumption and excludability (indeed, excludability is a rather important consumer demand in the guise of privacy concerns). Therefore, they are only public goods under the common parlance that some people might think they'd be good for the public. What these networks are, from an economic perspective, is a private good. And with private goods, we rely for the most part on private markets, absent market failure. In other words, this is a meandering way of saying, the proponents will need to come up with a better analogy because the sidewalk and roads one doesn't work. Finally, there is a curious confluence between the rhetoric of municipal broadband proponents (faster, cheaper, now!) and the defenders of the universal service status quo: these services are necessary, must be provided universally to all, and at a low rate. Watch then for the deal to be cut: In exchange for no more municipal broadband systems, roll universal service subsidies to broadband networks, impose service territory buildout requirements, underprice the service to achieve greater penetration, and, voila!, full blown public utility regulation for broadband. Maybe I am a pessimist...
- posted by Ray @ 1/13/2005 11:30:11 AM

1.11.2005
There's Something Rotten Near Detroit
In October 2004, SBC sought to deregulate business and residential rates in Detroit, Grand Rapids and Lansing. Section 208(2) of the Michigan Telecommunications Act states that, subject to an exception for a TSLRIC price floor, "if a regulated service is classified as competitive, the rate for the service shall be deregulated and not subject to review under this act." The statute seems clear enough on its face - i.e., dear regulators, once you declare a market to be competitive, your work here is done (other than a providing a check against predation). The Michigan PSC has elected to hold a hearing on the deregulation of residential rates and business rates in "Access Area B" later this year. But let's see how the PSC handled the requested deregulation of business rates, in the most competitive markets of the state, in its initial order: "[T]he Commission finds that SBC has made a sufficient showing as required [by section 208] to allow the Commission to take immediate action to declare basic local exchange service . . ." Yes? Yeesssss??? "provisionally competitive throughout SBC's Access Area A provided that some safeguards are put into effect and remain in place." Huh? But I thought the statute says... "Specifically, the Commission is persuaded that it should declare business basic local exchange service in SBC's Access Area A competitive for the purposes of a one-year trial period." Ugh. You just can't let go, can you. A rough analogy can be drawn between the PSC's underlying rationale here and an unfortunate, though oft-repeated ritual everywhere. UNE-P was a great tool for regulators to show that they were facilitating competitive entry in its heyday - and indeed, with some of the lowest UNE rates in the country, Michigan experienced some of the highest UNE penetration rates. That's called 'getting drunk.' Now, a primary reason for the PSC to impose this one-year trial period is to "assess the effects of the FCC's phase out of UNE-P." That's called 'trying to figure out what the hell I did last night.' And then, of course, the PSC states that "[f]acilities-based alternatives are more likely to be durable and would thus be more effective as a means of stimulating 'actual' competition," which is called 'having a moment of clarity.'
- posted by Adam @ 1/11/2005 05:19:14 PM

Cliff Clavin, Telephone Man
The Royal Post Office is re-entering the telecom market in Britain, offering a pence per minute rate that will supposedly undercut the pence per minute rate offered by British Telecom. I admit ignorance of UK telecom policy at the outset, but it would seem that phone competition there is something like UNE-P on steroids.
- posted by Adam @ 1/11/2005 02:58:44 PM

Capitol Power Play
Congress has yet to do anything productive so far this year (still more junkets to squeeze in before the Inauguration and the State of the Union), but already mischief is afoot on Capitol Hill. Senator John McCain (R-Arizona) was forced to step down as Commerce Committee chairman because of party term limits, but he has consoled himself with the fact that he could bump aside Conrad Burns (R-Montana) and head up the Communications Subcommittee. That would allow him to stay plugged in to the telecom and mass media issues he finds so compelling. However, according to Communications Daily (subscription required), new Commerce Committee Chairman Ted Stevens (R-Alaska) wants to keep telecom close to his vest, and is considering folding the Communications Subcommittee. To do so, he'll have to get a majority of the committee to agree; here's betting McCain's a 'no' vote. Grab some popcorn and enjoy the show.
- posted by Patrick Ross @ 1/11/2005 02:48:41 PM

9, 8, 2...Can You Find the Pattern?
The New York Public Service Commission will seek to overturn the FCC Vonage Order with an appeal to the Second Circuit Court of Appeals. The California PUC was first with an appeal in the Ninth Circuit and then Minnesota appealed in the Eighth Circuit. Minnesota's petition asks for the order to be set aside due to overreach by the FCC. The petitions from California and New York are not linked yet but presumably are based on the same grounds. Two of the biggest states and one of the most regulatory states just cannot let go...
- posted by Kent @ 1/11/2005 02:30:04 PM

1.10.2005
State of the Net
The Congressional Internet Caucus is hosting a conference February 9 on the State of the Net, featuring newly named Senate Commerce Committee Chairman Ted Stevens (R-Alaska). The topics at the Hyatt Regency Capitol Hill event include 1) trust, privacy and security; 2) intellectual property protection and innovation; and 3) media convergence and the Telecom Act rewrite. Caucus events are always informative and well-crafted, and I urge anyone with an interest in these issues to attend.
- posted by Patrick Ross @ 1/10/2005 04:01:40 PM

1.9.2005
Does "Finders Keepers" Help the Catchers?
Adam's post below discussed the apparent "finders keepers" rule for baseball ownership -- both on the field for players and off the field for fans. For fans, this could be explained as a promotional effort of the team -- a sort of lottery that increases the attractiveness of attending the game. For players, one would expect on the margin that this property regime would benefit the catching position. This is because the catcher has a greater chance to catching the final out, assuming that closers tend to be strike out pitchers. Therefore, this property rights regime is a subtle way of adding to the attractiveness of catching -- a position that needs all the help it can get.
- posted by Ray @ 1/9/2005 11:47:01 PM