The Progress & Freedom Foundation Blog

The August 5th issue of The Economist had a compelling cover story entitled "Leviathan, Inc." in which the author notes "[p]oliticians are reviving the notion that intervening in individual industries and companies can drive growth and create jobs." But direct, long-term government management of companies, corporations or, worst yet, entire industries has proven time and again not to be successful.

Simply put, the head of a company makes decisions to maximize the outcome for that company and its owners or shareholders. Any government employee—even one in a role as acting head of a private company—is legally required to make decisions under a far stricter set of guidelines. Guidelines which force the decisions to be made for what is best not for the business they are charged with operating, but for the country as a whole. This is the case even if the decision made by the bureaucrat will result in a 'net negative' to the company and its owners/shareholders.

The article's anonymous author suggests that instead of "pick[ing] winners and coddl[ing] losers," government should improve the environment for all business by reducing regulations, investing in infrastructure, and "encourage winners to emerge by themselves, for example through the sort of incentive prizes that are growing increasingly popular."

Governments Privatizing Public Utilities Even As Some Want to Convert Internet Into One

Two articles of interest in today's Wall Street Journal with indirect impact on the debate over the future of Internet policy. First, there's a front-page story ("Facing Budget Gaps, Cities Sell Parking, Airports, Zoo") documenting how many cities are privatizing various services -- including some considered "public utilities" -- in order to help balance budgets. The article worries about "fire-sale" prices and the loss of long-term revenue because of the privatizations. But the author correctly notes that the more important rationale for privatization is that, "In many cases, the private takeover of government-controlled industry or services can result in more efficient and profitable operations." Moreover, any concern about "fire-sale" prices and long-term revenue losses have to be stacked again the massive inefficiencies / costs associated with ongoing government management of resources /networks.

Of course, what's so ironic about this latest privatization wave is that it comes at a time when some regulatory activists are clamoring for more regulation of the Internet and calling for broadband to be converted into a plain-vanilla public utility. For example, Free Press founder Robert McChesney has argued that "What we want to have in the U.S. and in every society is an Internet that is not private property, but a public utility." That certainly doesn't seem wise in light of the track record of past experiments with government-owned or regulated utilities. And the fact that we are talking about something as complex and fast-moving as the Internet and digital networks makes the task even more daunting.

Government mismanagement of complex technology projects was on display in a second article in today's Journal ("U.S. Reviews Tech Spending.") Amy Schatz notes that "Obama administration officials are considering overhauling 26 troubled federal technology projects valued at as much as $30 billion as part of a broader effort by White House budget officials to cut spending. Projects on the list are either over budget, haven't worked as expected or both, say Office of Management and Budget officials." I'm pleased to hear that the Administration is taking steps to rectify such waste and mismanagement, but let's not lose sight of the fact that this is the same government that the Free Press folks want to run the Internet. Not smart.

The folks at the Pew Research Center's Internet & American Life Project came out with another installment of their "Home Broadband" survey yesterday. This one, Home Broadband 2010, finds that "adoption of broadband Internet access slowed dramatically over the last year." "Most demographic groups experienced flat-to-modest broadband adoption growth over the last year," it reports, although there was 22% growth in broadband adoption by African-Americans. But the takeaway from the survey that is getting the most attention is the finding that:

By a 53%-41% margin, Americans say they do not believe that the spread of affordable broadband should be a major government priority. Contrary to what some might suspect, non-internet users are less likely than current users to say the government should place a high priority on the spread of high-speed connections.

This has a number of Washington tech policy pundits scratching their heads since it seems to cut against the conventional wisdom. Cecilia Kang of The Washington Post penned a story about this today ("Support for Broadband Loses Speed as Nationwide Growth Slows") and was kind enough to call me for comment about what might be going on here.

I suggested that there might be a number of reasons that respondents downplayed the importance of government actions to spur broadband diffusion, including that: (1) many folks are quite content with the Internet service they get today; (2) others might get their online fix at work or other places and not feel the need for it at home; and (3) some may not care two bits (excuse the pun) about broadband at all. More generally, I noted that, with all the other issues out there to consider, broadband policy just isn't that important to most folks in the larger scheme of things. As I told Kang, "Let's face it, when the average family of four is sitting around the dinner table, to the extent they talk about U.S. politics, broadband is not on the list of topics."

CNET has just run the guest column, "Just say no to Ma Bell-era Net neutrality regulation," Adam Thierer and I wrote in response to "Just say no to fake Net neutrality" by Derek Turner (of Free Press), which decried the win-win-win compromise suggested by Amazon's Paul Misener, just as Free Press has more recently denounced the compromise proposed by Google and Verizon.

We make a few key points:

History demonstrates the dangers of regulatory capture, and the costs to consumers of regulation from lost investment and innovation.

These dangers and costs far outweigh the purported benefits of regulation (in addressing a non-existent harm).

Broadband markets are competitive enough to prevent the kinds of abuses advocates of net neutrality regulation fret about.

Government could foster more broadband competition by deregulating spectrum and local wireline franchising.

I've been having a lively debate with the commenters on the piece, so feel free to join in! Unfortunately, we don't seem to be getting much substantive engagement with our argument--just the usual mix of "These guys are just corporate whores!" and "Can't you see the sky is falling?"

Pub Interest Groups Decry Sunlight - Say It's Corrupting FCC Net Neutrality Process

techdirt's hit kind of a new low in the divisive Net Neutrality debate. Mike Masnick writes that the telcos have got their Net Neutrality deal with the FCC because, well, they have some mighty deep pockets, and they're prepared to use them - either for-or-agin the Dems - come election season. Consequently, FCC Chairman Julius Genachowski had no choice but to back down from his Net Neutrality / Reclassification madness and give the big boys what they want.

C'mon, Mike! You make the National Enquirer blush.

The "reporting" follows the well worn meme espoused by the Left that when the going gets tough, and the deal looks like it ain't cutting their way - then blame the "monopolists" for corrupting the process. Good lord, get a new riff already.

Free Press, Public Knowledge, MAP and OIC lobbyists (among other "reformistas") have practically installed themselves at the FCC since day one (I think I saw their cots, bedrolls and toiletries there the other day). To claim that they've been left-out strains credulity (as this FCC blog reveals).

Let's see. They've gotten their lobbying dollar's worth out of the Open Internet / Net Neutrality NPRM; the National Broadband Plan; the Wireless Competition Report; the Third Way Statement; the Third Way NOI; the 706 Report; and have supped at the FCC table throughout the "closed-door" Net Neutrality meetings.

Compromise will happen. It should. This is a highly charged debate that has divided many. The FCC hasn't helped any by trying to avoid the will of Congress, end-running around key court decisions, and attempting to jam an innovation-killing rule down the throats of American broadband consumers.

Though I think the Commission is wrong to try to regulate the Internet through broadband Reclassification, I also recognize that some discussion - possibly one that reaches compromise - should occur.

What I do not think is helpful is the idea, seemingly shared by the public interest groups, that "it's our way or no way; and if you get in the way of that - then you're a corrupt SOB."

Mike, remember the elementary school admonition - "sticks and stones..."? I'll bet the network providers do, and it's helped them keep their eye on the ball to ensure that a reasoned ruling comes out of the FCC.

The opposite would be corrupt - a closed process decided by a small handful of elite, "consumer advocates," impervious to reason, debate or the sunlight of opposing viewpoints. Until this summer, it looked like it was going in this direction. Now, thankfully, the process appears to be more inclusive - one which may result in a more fair outcome for all involved.

Interesting article in the New York Times today about how the radical media activist group Free Press is now working with an organization called The Harmony Institute toward the goal of "Adding Punch to Influence Public Opinion." The way they want to "add punch" is through entertainment propaganda. The Times article notes that Harmony's mission is "aimed at getting filmmakers and others to use the insights and techniques of behavioral psychology in delivering social and political messages through their work." And now they want to use such "behavioral psychology" and "political messaging" (read: propaganda) techniques in pursuit of Net neutrality regulation.

More on that agenda in a second. First, I just have to note the irony of Harmony's founder John S. Johnson citing "The Day After Tomorrow" as a model for the sort of thing he wants to accomplish. According to the Times interview with him, he says the movie's "global warming message [and] rip-roaring story, appeared to alter attitudes among young and undereducated audiences who would never see a preachy documentary." I love this because "The Day After Tomorrow" was such a shameless piece of globe warming doomsday propaganda that it must have even made the people at Greenpeace blush in embarrassment. After all, here is a movie that claims global warming will result in an instantaneous global freeze (how's that work again?) and leave kids scurrying for the safety of New York City libraries until a quick thaw comes a couple of weeks later. (Seriously, have you seen that movie? That's the plot!) So apparently we can expect some pretty sensational, fear-mongering info-tainment from Harmony and Free Press.

But here's what's better: Do you know who produced "The Day After Tomorrow"? Oh, that's right... Rupert Murdoch's News Corporation financed and distributed that movie!! The man that Free Press casts as the nefarious media overlord set to take over all media and program our brains gave us the greatest piece of radical environmental propaganda of modern times. Now, which does that prove: (A) Rupert Murdoch is hell-bent on programming our minds to embrace a sweeping global warming regulatory agenda, or (B) Rupert Murdoch is out to entertain people and make money? If you answered B, congratulations for being a sensible person. If you answered A, then click here now to start giving money to the Free Press!

OK, so let's get back to Free Press and what they are up to with the Harmony Institute (which I originally thought was an online dating site). Free Press apparently hired Harmony to research public attitudes about Net neutrality and how to influence them. Harmony's Johnson tells the Times they got interested in the Net neutrality because Free Press and the Pacific Foundation paid them handsomely to do so. And it appears Free Press got their money's worth.

Praise the Lord and pass the ammunition.

So goes the FCC's stacked "706 Report" on broadband this week, which said that Americans aren't getting broadband in a "reasonable and timely basis," the first negative conclusion since the report's inception.

Using the standard developed in the National Broadband Plan (NBP) - which recommends "that every household in America have access to affordable broadband service offering actual download (i.e., to the customer) speeds of at least 4 Mbps and actual upload (i.e., from the customer) speeds of at least 1 Mbps" - the Commission determined that by this benchmark "broadband remains unavailable to approximately 14 to 24 million Americans." (Not that 14 - 24 million Americans don't have high-speed access, as has erroneously been reported.)

The FCC is building its war chest so that it can justify Lilliputian Internet regulation of network providers. Through a number of recent proceedings, statements and reports - e.g., the Open Internet NPRM, Cellular Competition Report, and "Third Way" NOI - the 706 Report traffics in the same meme: network providers just aren't doing their job, so they must be coerced or shamed into proper "compliance."

Not uncharacteristically, The Free Press heralded the new, rather dour (and now redundant) broadband assessment. Said the lugubrious, special interest lobbyists - "Now that the FCC has taken the first step of acknowledging America's broadband problem, we hope that it will advance policies to reverse this decline though the promotion of real competition and true consumer choice."

I just have to chuckle at this sophomore opinion piece recently penned by the Free Press. Its main memes: Corporations are evil. Do not trust corporations, because they are evil. And, oh by the way, corporations want to control you and the FCC, because...they are evil.

Good golly, we get it.

Julius Genachowski claims his "Third Way" approach to taking over the Internet looks a lot like the benign "wireless model" of regulation.

If it were true, that would be a good thing.

According to Genachowski:

In its approach to wireless communications, Congress mandated that the FCC subject wireless communications to the same Title II provisions generally applicable to telecommunications services while also directing that the FCC consider forbearing from the application of many of these provisions to the wireless marketplace. The Commission did significantly forbear, and the telecommunications industry has repeatedly and resoundingly lauded this approach as well-suited to an emerging technology and welcoming to investment and innovation. In short, the proposed approach is already tried and true.

Presumably, the "wireless model," if applied to the Internet, would spur growth and innovation. But I have a question. In the FCC's NOI, how does the wireless model of "light regulation" apply to, er, the wireless model?

I haven't quite figured out the circularity of that one yet.

Oh, well. Maybe I shouldn't waste my time trying. It seems more apparent than ever that for wireless and wireline broadband service it's not really about regulating "downward" - i.e., deregulating, as is the hallmark of the "wireless model" - but instead, regulating "upward," thus adding regulation.