Faithful readers will recall that, several months ago, I penned a 7-part "Media Metrics" series that took a hard look at the health of the media marketplace. Today, the Progress & Freedom Foundation is releasing a greatly expanded version of these essays that I have put together with my PFF colleague Grant Eskelsen. In this 100-page special report, "Media Metrics: The True State of the Modern Media Marketplace," we begin by noting that heated debates about the state of the media marketplace continue to rage in Washington, and opinions seem to range from grim to outright apocalyptic. As we note on pg. 1:

Many people--including a large number of legislators and regulators--argue that America's media marketplace is in a miserable state. Some claim that citizens lack choice in media outlets and that options are just as scarce as ever. Others believe that media "localism" is dead or that many groups or niches go underserved because of a lack of true "diversity" in media. Others argue that the market is hopelessly over-concentrated in the hands of a few evil media barons who are hell-bent on force-feeding us corporate propaganda. And still others say that the quality of news and entertainment in our society has deteriorated because of a combination of all of the above. It all sounds quite troubling, but is any of it true?

After taking an objective look at the true state of America's media marketplace, we conclude that such pessimism is unwarranted. Indeed, a careful review of the facts reveals that---contrary to what those media critics suggest---we have more media choice, more media competition, and more media diversity than ever before. Indeed, to the extent there was ever a "golden age" of media in America, we are living in it today. The media sky has never been brighter and it is getting brighter with each passing year.

Barbara Esbin and I have just released a short PFF essay asking the question: "Where is the FCC's Annual Video Competition Report?" The FCC is required to produce this report annually and yet the last one is well over a year past due and the data is contains will be over two years old by the time it comes out. I've embedded our paper about this below.

As I have argued many times before (see 1, 2, 3, 4), some sort of usage-based bandwidth metering or consumption cap makes a lot of sense as a way to deal with broadband network traffic management. So, if this is the direction that Comcast is heading--and this recent Broadband Reports piece suggests that it is--that is fine with me. The article says it might work as follows:

A Comcast insider tells me the company is considering implementing very clear monthly caps, and may begin charging overage fees for customers who cross them. While still in the early stages of development, the plan -- as it stands now -- would work like this: all users get a 250GB per month cap. Users would get one free "slip up" in a twelve month period, after which users would pay a $15 charge for each 10 GB over the cap they travel. According to the source, the plan has "a lot of momentum behind it," and initial testing is slated to begin in a month or two.

"The intent appears to be to go after the people who consistently download far more than the typical user without hurting those who may have a really big month infrequently," says an insider familiar with the project, who prefers to remain anonymous. "As far as I am aware, uploads are not affected, at least not initially." According to this source, the new system should only impact some 14,000 customers out of Comcast's 14.1 million users (i.e. the top 0.1%).

It's always been my hope that we could potentially head-off burdensome Net neutrality regulations by encouraging carriers to deal with the problem of excessive bandwidth consumption by using time-tested price discrimination solutions instead of the sort of packet management techniques that are the subject of such heated debate today. Of course, on one of our old podcasts on Net neutrality issues, Richard Bennett pointed out to me that this still might not alleviate the need for other types of traffic management techniques to be used. And he also pointed out that the very small subset of true bandwidth hogs are almost entirely heavy BitTorrent users, so perhaps the way Comcast was dealing with them was just another way of skinning the same cat.

What do the debates over net neutrality, the economic "stimulus" plan, and the Fed's interest rate-cut binge have in common? And what does this gentleman have to do with any of them?

Net neutrality, tax rebate "stimulus," and endless Fed rate cuts all assume the solution to the economic question at hand is to ration or divvy-up existing capacity rather than create new capacity. With net neutrality, we must fight over a fixed amount of bandwidth and decide who gets how much on what terms. With economic stimulus, we rob Peter to pay Paul in the hope that Paul will spend the money faster than Peter would have and thus avoid an official recession. The same logic goes for the Fed's effort to pump up consumer demand for goods and credit in the short term, even though we know easy money will come back to bite us on the other side in terms of higher prices and distorted asset markets (see, sub prime fiasco). All these efforts focus on manipulating demands and wrangling over a finite supply in the short term, rather than generating new supply over the long term.

Last week, while in Paris to give the keynote speech at the European Fiber-to-the-Home conference, I paid a visit to our friend, the original supply-side economist, Jean-Baptiste Say.

Tomb of Jean-Baptiste Say (1767-1832), Pere Lachaise Cemetary, Paris

Say knew that economies don't grow via the demands of consumers. After all, consumer demand is infinite. Our wants are never-ending. But just because we want something doesn't mean we can have it. No, economies grow through production, via the supply of new and innovative goods and services. Over time, the expansion of our productive and creative capacity transcends the zero-sum battles that define greed and demand. Productive supply is the only path by which we can increase our actual real consumption, or demand, without inflation or confiscation of property. Pumping up demand while neglecting the foundation of supply is a recipe for disaster, whether in tax rebates, monetary "stimulus," or regulation of the Internet.

All our Washington leaders, from Ben Bernanke to Ed Markey, should relearn the central lesson of Jean-Baptiste Say: Supply creates its own demand.

Our friend Brian Wesbury exposes the folly of last week's dual debates over artificial stimulus.

In almost simultaneous events last week Congress attacked baseball players for taking performance-enhancing drugs while at the same time supporting artificial and temporary stimulus for the US economy no matter what the long-term costs. ...

Many people don’t like professional baseball players using steroids because they mask the underlying ability of the player. They taint the results.

But so does artificial economic stimulus. Monetary policy accommodation can help people feel wealthier for awhile, but it cannot create wealth. Printing money does not make anyone wealthier. If it did, then counterfeiting should be made legal and everyone in the world would then be wealthy. The same is true for tax rebates. If they really could increase wealth, then why not make them much larger and much more frequent?

Alas, I doubt we will ever hear an Andy Pettitte-like confession from Speaker Pelosi, Chairman Bernanke, or President Bush: "Yes, in February of 2008, I injected the U.S. economy with a stream of ill-gotten dollars in an effort to cover up -- if only temporarily -- for past mistakes that led to an inflamed and sore housing market. It was stupid, I know. Was I desperate? Yeah, I was."

If you're wondering what is going on in the turbulent capital markets and whether "the coming recession" will be as severe as everyone says, you should read PFF board member John Rutledge's explanations here, here, and here. Rutledge's key point:

What is happening in today's asset markets is not a GDP event; it is not the result of late mortgage payments. It is a profound reduction in the willingness of wealth-holders to own the existing stock of assets. It will not be fixed by giving checks for $12.50 to every man, woman and child. The fix must restore confidence in the underlying assets.

Another crucially important article you should read comes from Bill Wilby, whose take on the U.S. dollar is key to understanding the asset price shocks highlighted by Rutledge.

Last week I posted another installment in my ongoing series about the possibility of metering bandwidth in the future ("Why Not Meter Broadband Pipes?") Make sure to read the comments to that post over on the TLF because the essay provoked an interesting discussion and some outstanding suggestions from readers.

On a related note, Mark Desautels, Vice President of Wireless Internet Development at the CTIA (the wireless industry's trade association) has an editorial in RCR Wireless News today entitled, "Paying for the Bandwidth We Consume." Mark poses a question that I have raised in some of my posts on this issue:

Much is made of the fact that consumers prefer flat-rate pricing because they know what it is going to cost each month, and that is understandable. But it also creates (potentially) huge subsidies between users. My question is: If consumers were aware of the amount of the subsidies they might be paying, would they be as opposed to paying for the bandwidth they actually use as is generally believed?

That really is an interesting question and the guys over as DSL Reports point out that there are tools that users can download to help us answer that question. They are also running a poll right now asking people how much bandwidth they use per month.

Congress is considering whether to allow a ban on taxing Internet access to expire.

Taxing Internet access would be a bad idea. Consumers remain sensitive to the price of broadband, and because taxing price sensitive goods can significantly reduce demand, taxing Internet access is likely to have a negative effect on subscribership.

Given Congress's recent hand-wringing about broadband availability and takeup it would be ironic if it were to endorse a policy sure to reduce broadband's growth rate.

Daylight savings time begins early this year, setting off a mini-tech panic as IT-administrators across corporate America sweat out whether patches and other fixes will accomodate the new time fiat. Based on research on electricity use from the 1970's, Congress expects the time-shift to save an equivalent of 100,000 barrels of oil per day. Assuming counter-factually that electricity use patterns are the same as they were in the 1970's, that amounts to a $6,000,000 per day energy savings based on a $60/barrel oil price. Times three weeks, that means there are expected savings of $126,000,000.

I wonder what the costs are to the IT industry, corporate networks and individuals in adapting to the new time? Given the direct costs, opportunity costs and the like, not to mention the costs of IT-failures based on the new rule, I would not be surprised if they offset the purported savings.

To make it worse, here is a paper from the California Energy Commission that questions whether there will be any meaningful energy savings, especially since the time-move occurs in March and November when peak electricity demand almost never occurs. If this is correct, then the cost benefit becomes even more dubious.

Rob Atkinson, President of the Information Technology & Innovation Foundation:

One of our key challenges stems from the fact that while economists in many other nations, like Tawain and China, read Joseph Schumpeter, ours read neo-classical economists. As a result, while the former recognize that disequilibrium characterizes economies and that innovation and productivity are the keys to prosperity, most U.S. economists rely on models of equilibrium and focus on enhancing allocation efficiency.

He was speaking at the ACT seminar on its recent paper, National Policies as Platforms for Innovation: Reconciling a Flat World with Creative Cities (Feb. 2007).