Whoosh! Hold on to your hats for this one. According to a story on NPR's Morning Edition, a California lawyer is asking the California Supreme Court to rule that all roller coasters should be classified as common carriers. Then, like airplanes and trains, as carriers they would be subject to a higher standard of care.

Hmmm...Somehow I don't think people get on roller coasters for the same reason they get on planes and trains. But you never know what the California courts may do. (For all I know, the California Supreme Court may share the same water fountain with the 9th Circuit!)

Anyway, my (unfortunate) prediction is that the California Supreme Court will decide whether roller coasters should be classified as common carriers before the FCC decides whether broadband should be classified as common carriage, although that issue has been pending at the agency now for going on two years. Here's another (unfortunate) prediction: By the time you get through watching the twists and turns the FCC takes in deciding how to classify VoIP, you will feel like you've been on a roller coaster. (Message to FCC: I hope you prove me wrong.)

Well, here's wishing all your coasting may be safe in 2004.....as we roll into another year!

The latest Milken Institute Review (Fourth Quarter 2003) has some interesting stuff: Martin Campbell-Kelly, author of a useful history of the software industry, defends software patents (warily); economist Frank Lichtenberg examines the value of pharmaceuticals; and the newly-appointed Chief Economist of the IMF has an excerpt from his book Saving Capitalism from the Capitalists.

I like to plug the Review. (Nothing to do with its good sense in publishing my article on stock options last year, of course.) Subtitled "A Journal of Economic Policy," it is edited by Peter Passell, a former New York Times-man gone straight, and it is consistently intelligent and readable.

A bit late to the parade, a few contributions to Ray's list of 2003's Naughty and Nice:

Lumps O' Coal -
The California Assembly - Privacy Laws. On July 1, 2004, the California Financial Information Privacy Act takes effect and will allow consumers opt out of information sharing by financial institutions and their affiliates or partners. Following in the manner of the uber-costly and entirely unsuccessful federal Gramm-Leach-Bliley regulation of privacy notices issued by financial institutions, the California law specifically details the form that consumers will receive. Surely this will keep the paper-products industry happy and may even move the U.S. Postal Service into the black though it won't actually protect the privacy of Californians. (Thanks to Jim Harper's end-of-year privacy memorandum for the pointer.)

Viral kids who wreck havoc on our lives (and their software creations too.)

Responses to August electricity blackout that focus on new government "reliability standards." Secretary Abraham noted last month that at least four existing reliability standards were not observed by one participant in the blackout while another pair of standards were not met by a second participant. An interim report on the causes of the blackout is available and it is safe to say that a lack of regulation was not the cause.

Delicious Treats -
Michael Powell and the FCC for rescuing the wildly popular Do Not Call list from legal limbo at the FTC. I maintain that the political and legal implications of a list maintained by the federal government to prevent the reach of legal commercial endeavors from our households are numerous and largely negative, however the Do Not Call list as envisioned by Chairman Tim Muris was a political masterstroke. At once he took off the table far-reaching limits on commercial speech and activity, costly attempts by some states to regulate interstate advertising and self-styled consumer advocates' who saw the Congress as fertile ground to demagogue against the use of information to lower the costs associated with finding new customers. Muris gave Members of Congress an easy way to do something - fund the list - without running significant risk of new "privacy laws". In a more positive light, the Trade Commission reminds us all that the government can play a positive role to limit annoyance and to prevent economic harm in the marketplace. Do Not Call is in the anti-fraud traditions of the FTC and serves as a preventative against more costly and damaging policy alternatives.

The Website Team at The Progress & Freedom Foundation for a major overhaul to our principle and digital means of communication with the world.

Bloggers who offer links to primary sources along with their observations.

The Ninth Circuit yesterday upheld as "fair use" a series of photographs called "Food Chain Barbie," which "depicted Barbie in absurd and often sexualized positions." These included "Malted Barbie" -- a nude Barbie in an old Hamilton Beach malt machine. For "Fondue Barbie" and "Barbie Enchiladas," use your imagination, or read the opinion.

I'm a big proponent of property rights, including IP rights, but the world definitely needs more parody, especially in this era of grim PC police of all persuasions, and the court got this one right. If you are lucky enough and good enough to create a product that turns into a cultural icon (and everyone knows what "Barbie" means without any explanation), then it should be fair game for all kinds of riffs. Thus I loved it when Ralph Nader took off on the MasterCard "Priceless" slogan in a campaign ad, and the decision against the Cat-in-the-Hat parody of the O. J. Simpson trial has always seemed unfortunate, even though probably correct under existing doctrine.

Furthermore, sensible law of fair use is vital to the long term health and acceptability of intellectual property as an institution. As the Napster experience has shown, it is exceedingly unwise to get into a position where the public feels that IP rights are either too complicated or too restrictive.

So maybe the next in the series should be "Ninth Circuit Barbie," decorously robed, of course.

Amazon just delivered PFF's copy of William Landes & Richard Posner, The Economic Structure of Intellectual Property Law (Harvard Univ. Press 2003). It starts out with a few numbers on the growing importance of IP in the world of law and econ:

+ Increase in patents issued annually from 1985 to 2001: 111,000 to 260,000.
+ Increase in annual U.S. receipts from foreign trade in IP from 1987 to 1999: $10 billion to $36.5 billion.
+ Increase in percentage of federal civil cases involving disputes over intellectual from 1985 to 2001: 100%.
+ Increase in membership of the Intellectual Property Section of the American Bar Association from 1980 to 2001: 5,526 to 21,670.
+ Increase in number of law journals specializing in IP, technology, and art from 1980 to 2003: 2 to 26. [N.B. This seems low to me; a Stanford University Libraries website on copyright has 62 links to journals on the law of IP & technology.]
+ Increase in number of articles in economics journals dealing with IP from 1982 to 2000: 5 to 235.
+ And so on.

A work by these authors is of course AN EVENT for anyone interested in law, economics, and intellectual property. More comment will forthcome after we have a chance to read it.

Received some direct and e-mailed criticism of my classifying the failure to pass the energy bill as "naughty." The criticism went something like this: "how can you defend that pork-laden, ethanol-mandating, special interest tax giveaway monstrosity called the Energy Bill?"

Put that way, it's sure not easy. Next, my essay praising the Alien and Sedition Acts....!

The Energy bill, though a painful orgy of rentseeking, would at least have brought some certainty through the electricity title. Most agree that the incentives for transmission investment are inadequate and further that the nation's transmission system is inadequate. The electricity title, on the margin, would have brought certainty and made investment in transmission more attractive. Likewise, forestalling FERC's standard market design would have allowed a rough armistice to take place between the various regulatory and industry interests. Whether these benefits would have been worth the rest of the Energy bill, I cannot say for sure, but here is my modest defense of why its failure to pass was indeed "naughty."

I offered John Windhausen an opportunity to respond to my December 23 post on "Phone Politics" to close the local loop, at least for this year, and he offers the following:

"I appreciate the respectful comments from my friend Randy May concerning local rate setting. I was not surprised that we agree that local rate-setting has involved "socio-politics". I, too, believe that local
rates should be set at more economic levels. This could be rather easily done with regard to traffic-sensitive costs and direct costs. Of course, there is no agreement even among economists about the sound economic way to allocate fixed, non-recurring costs among a variety of services. These decisions are inherently political, because there is no "right" answer.

But I was surprised that we agreed on one other point -- the need to "implement rate-setting policies based on sound economics." Randy's point appears quite different from the point of the recent PFF paper that would totally deregulate rates. I have little confidence that deregulating local rates would yield a rate structure based on "sound economics" because the ILECs would simply shift arbitrarily the fixed, non-recurring costs to non-competitive markets and to lower prices in competitive markets whether they can drive CLECs out of business.

Yes, CLECs were "encouraged" to enter the market, by Congress, the White House, the FCC and state regulators. Now that we have entered, and have demonstrated the pricing and innovative benefits that competition can bring, policy-makers should transition to a more rational local pricing structure. But the transition should include consideration of the effect on facilities-based CLECs who took the market risk to fulfill the policy-makers' dreams of a competitive marketplace. Like it or not, for competition to succeed against ILECs that have a 100-year head-start, competition must be nurtured and our policies managed carefully."

Here's what I have to say in response. John, the PFF report, Trends in the Competitiveness of Telecommunications Markets, to which you refer makes a strong case, at least IMHO, that the local marketplace, including residential service, is now fully contestable, if not effectively competitive. If that is true, all of the points about the allocation of traffic-sensitive and non-traffic sensitive costs, which are relevant in markets in which a company retains dominant market power in one service segment but not another, become essentially irrelevant. I think competition already has been nurtured (witness the data in the report), and I am all in favor of reasonable transitions. But it is now time for everyone involved in telecom policy to work earnestly towards envisioning and implementing a real deregulatory end-game. Love might be, but transitions are not forever.

Here's what else I have to say to John: Happy holidays and best wishes for the New Year. We'll continue the debate next year...but let's hope, not forever.

Level 3 Communications today filed a forbearance petition at the FCC. [Not posted yet.] The petition asks the FCC to forbear, to the extent legally applicable, from imposing access charges on voice over internet protocol (VoIP) calls. Specifically, Level 3 wants the FCC to forbear from requiring access charges for IP-PSTN and incidental PSTN-PSTN VoIP. [Note to the uninitiates: access charges are the wildly-inflated charges that long distance carriers pay to local exchange carriers to originate or terminate calls, and which in fact act as a subsidy to keep local monthly rates artificially low. Clear now, isn't it?]

The petition is important because it cements the growing consensus that VoIP be able to escape the legacy regulatory world of access charges and other traditional telecom taxes. It also would give the FCC an opportunity to further develop its Section 10 forbearance authority, a power falling into unfortunate desuetude. It will be interesting to see if there is any support for this petition (other than from pipsqueak, cheerleading think-tankers like me, that is). The other good thing about a forbearance petition is that it forces the FCC to act within one year (light-speed for them), or the petition is granted.

Assuming freedom to range abroad and a bit afield at year's end, the news this morning that the Chinese Communist Party is proposing to amend China's constitution to provide that "citizens' lawful private assets are inviolable" strikes me as an encouraging development. In any accounting of a "naughty and nice" list (see below), I would put this, at least for now, on the "nice" side of the ledger.

As Madison reminded us in his famous October 1788 letter to Jefferson, written bills of rights, or what he called "these parchment barriers", ultimately may not be efficacious in protecting individual rights. But he went on to say that delineating such rights in the written constitution nevertheless is useful because the "political truths" declared would "become incorporated with the national sentiment." And, when he introduced the bill of rights in the first Congress, he suggested that if rights are incorporated into the constitution, they have a tendency "to impress some degree of respect for them, to establish the public opinion in their favor."

Free speech is guaranteed in the Chinese constitution as well, and we know that is one individual right that the "parchment barrier" has not protected. But the Communist Party's embrace as a constitutional matter of the inviolability of private property is at least a step in the right direction. Presumably one that has Marx and Lenin flinching in their graves. While modern communications technologies can be used for ill as well as good, my bet is that Chinese leaders (and others like them) will find it increasingly difficult to suppress individual expression and the free flow of information in the age of the digital revolution.

As we know from our own American experiment, the protection of private property, including intellectual property, and the protection of individual rights, are both necessary prerequisites to advancing the cause of progress and freedom. Let's hope the announcement from China is a sign of real change to come, and not just some more ink on a "parchment barrier".

This being the time for end-of-year lists and appraisals, not to mention for tippling too much eggnog and being a bit too free with your opinions, I hereby offer my nominations for who's been naughty and who's been nice in 2003. I invite my colleagues to join the thread with their own nominations.

Naughty

The FCC for taking seven months to release it Triennial Review Order, a 500-plus page monument to legal incoherence and economic confusion that the DC Circuit will inevitably deliver us from sometime this spring.

The United States Senate for failing to make permanent or even extend the Internet Tax Moratorium. States and localities looking for tax revenue are now free to belly up to the bar. And, of course, honorable mention for naughtiness should go to the National Governors Association, which lead the charge to be able to tax net access.

The United States Senate (again) for not being able to pass an energy bill. Though pork-laden in parts, it could have incrementally helped solve investment incentive problems with the nation's electric grid and would have delayed the Federal Energy Regulatory Commission from enacting its misbegotten industrial policy called standard market design.

The Ninth Circuit Court of Appeals for [fill in the blank for its lawless decision of the moment]. In this case, I would cite its decision in the Brand X Internet Services case, where it ruled that cable modem service had "telecommunications service" components, as opposed to being a relatively unregulated, "information service." [Hearkening to Randy May's well-coined musings on the metaphysics of communications services.] Of course, the Ninth Circuit in part was filling a void left by the FCC's inaction after the City of Portland case, so it is the FCC's fault too.

Nice

The FCC for making incremental, measured, and fact-driven changes to the media ownership rules in the face of shameless mau-mauing and demagoguery.

The RBOCs and the IXCs and the CLECs for reaching a rough consensus that voice over Internet protocol should remain unregulated.

Former NTIA director Nancy Victory and FCC Cable Bureau Chief Ken Ferree for both rejecting as premature calls for so-called 'net neutrality' regulation -- and at a PFF conference no less!

The United States armed forces for accomplishing much and working so hard to protect our freedom. [Very little directly to do with digital policy, but I cannot help but in a small way celebrate their effort and sacrifice.]

The Florida Marlins for beating the Cubs and the Yankees.