Kelly William Cobb

Congress Slams FCC's Internet Takeover

Posted by Kelly William Cobb on Tuesday, May 25th, 2010, 11:04 AM PERMALINK

Remember when Free Press and others claimed Congress was demanding that the Federal Communications Commission “do whatever it takes” to enact Net NeutralityIf you thought that was ridiculous then, it certainly is now.  Yesterday, 74 House Democrats sent a letter to the FCC rebuking their unilateral drive to regulate the Internet without direction from Congress.  From the letter:

The uncertainty this proposal creates will jeopardize jobs and deter needed investment for years to come.  The significant regulatory impact of reclassifying broadband service is not something that should be taken lightly and should not be done without additional direction from Congress. (emphasis added)

If a letter last fall from 72 House Democrats stating that they had concerns with Net Neutrality was a shot across the bow, this letter is meant to deliver a significant blow to the FCC’s radical plans.  Assuming House Republicans maintain opposition to Net Neutrality, that also means an even larger majority of Congress now opposes the FCC’s actions.

On the Senate side, yesterday 37 Republicans also sent a letter to the FCC with a slightly sharper tone.  They noted that Net Neutrality has “been previously rejected by Congress and both Democratic and Republican administrations,” and called the legality of the FCC’s push for Internet regulations into question.

Free Press claims: “We cannot wait for Congress to act to protect consumers,” and Public Knowledge says: “They should be able to move ahead with their plans to protect consumers.”  But when did protecting consumers mean circumventing our system of checks and balances?  And does protecting consumers mean letting a team of unelected bureaucrats guided by pronounced socialists dictate the government’s first major foray into Internet regulation?  Wrapping pleasant rhetoric about “consumer protection” around command-and-control regulations sounds more like political strategy in Venezuela than how policy should be made in the United States.

Yesterday, Democratic lawmakers also announced that they will begin looking at ways to rewrite the antiquated Communications Act of 1934, which guides the FCC’s legal authority.  While the outcome and timetable of that undertaking is certainly unknown, it is at least the appropriate avenue to determine our nation’s telecom laws.  And during the process, ATR will continue to weigh in heavily to ensure the laws reduce the regulatory burden and promote competition in a free market.

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The FCC's Phony Wireless Crisis

Posted by Kelly William Cobb on Thursday, May 20th, 2010, 5:06 PM PERMALINK

The Federal Communications Commission is incredibly adept at creating crises in order to implement their unwarranted regulatory goals. Their ruthless campaign to enact Net Neutrality persists despite hardly any justification or evidence. And today, they’ve announced an entirely new crisis.

For the first time in at least seven years, the FCC’s Mobile Wireless Competition Report has determined the wireless industry isn’t “effectively competitive.” Not only does this conclusion go against nearly every measure of competition (including the FCC’s own data), but it is almost obvious that it was made solely to provide cover for onerous regulations. Chairman Genachowski indicated in his statement that the report helps justify their initiative to mandate that cell users get texts when they’re going over minutes or roaming. Commissioner Copps called it “worrying” and proclaimed: “We are going to need an extra dose of vigilance going forward and use whatever policy levers we have available.”  (Last week Copps's top staffer said her boss "would love to have jurisdiction over everything.")  The pro-regulation organization Free Press declared, "The wireless market has substantial obstacles to effective competition, and these obstacles restrict consumer choice, service quality, service price, innovation and investment."

A look at the FCC's own facts say otherwise. Today, 74 percent of the U.S. population has a choice between at least 5 wireless carriers, up 9 points from 65 percent last year. 98 percent of the country has access to 3G speeds, up from 63 percent in 2006, and nearly every major wireless carrier is battling to be the first to roll out super fast 4G networks by the end of this year. And that’s less competitive? The FCC also admitted in their report that the cost for cell phone service dropped by 36 percent between 1997 and 2007 at the same time the overall consumer price index rose by 34 percent. But apparently it wasn’t robust competition that brought those prices down.

Further, despite the FCC’s gushing admiration for European style policies, compared to virtually every other country, the U.S. outperforms in wireless competition. According to a leading report from Bank of America/Merrill Lynch in April, cell phone users now pay an average of 4-cents per minute, down from the FCC’s estimate of 10-cents per minute in 2003. This is the lowest price out of of all 26 developed countries studied. And while most Americans can choose from at least 5 providers, Europeans generally max out at 4. The private sector also invested $20.4 billion into wireless networks last year, while Britain, Germany, France, Spain, and Italy invested $17.9 billion - combined.  The report also points to the "Herfindahl-Hirschman Index", which measures market consolidation, to claim there is not enough competition.  This is odd because the U.S. has the lowest score - meaning the most competition - of all developed countries.

The game in politics is to define yourself, define your opponent, and define the conversation. The FCC’s report on wireless competition appears to be less a neutral study than a political move to, as the report states, “provide data that can form the basis for inquiries into whether policy levers could produce superior outcomes.” Terrific. The FCC has defined the conversation by falsely declaring the wireless market is failing and demonized the largest opponents of new regulations (the companies they will target) in the process, all to set the Commission up as a hero that will save the day with an onslaught of unnecessary new rules and bureaucracy.

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Fairness Doctrine 2.0: "Nudging" What You Read Online

Posted by Kelly William Cobb on Wednesday, May 19th, 2010, 5:39 PM PERMALINK

The Fairness Doctrine was a rule abandoned in 1987 that required broadcasters to give equal time to opposing points of view. While the stated goal was to expand discourse in the name of the “public interest,” the policy trampled all over basic property and First Amendment rights. It has been pushed in recent years primarily as a means of silencing prominent talk show hosts that don’t share the same political views as the politicians in charge.

Despite President Obama’s statements in opposition to reinstituting the Fairness Doctrine (at least on broadcasters), it appears his regulatory czar, Cass Sunstein, holds a different take when it comes to the Internet. An uncovered clip from a radio program has found Sunstein declaring:

“Sites from one point of view agree to provide links to other sites so if you are reading a conservative magazine they would provide a link to a liberal site and vice versa…If we could get voluntary arrangements in that direction it would be great. …But the word ‘voluntary’ is a little complicated. Sometimes people don’t do what’s best for our society… And the idea would be to have a legal mandate as the last resort and to make sure it’s as neutral as possible…”

This in effect would entail heavy regulation and enforcement of all content on the Internet, and would be a gross violation of property and First Amendment rights. And why should anyone blindly assume government bureaucrats are neutral enforcers? In effect, this is the Fairness Doctrine for the Internet.

The new push for Net Neutrality centers on subjecting Internet access to Title II of the Communications Act, thereby applying a vague rule preventing “discrimination” to allow the government to manage the way service providers run their networks. By simply tossing the content side of the Internet under Title II as well, one can imagine how this same rule can result in Fairness Doctrine 2.0.

Sunstein’s suggestion should come as no surprise. He recently co-authored the book Nudge, which argues that policies should be designed to “nudge” people into making better choices without full-on coercion. Sunstein says he opposes outright bans or mandates, but if you aren’t forced to read the story, someone will certainly be mandated to put it in front of you. There also appears to be quite a slippery slope (which prompted a fantastic discussion in the Cato Unbound blog last month) from Sunstein’s oxymoronic term “libertarian paternalism” (or “nudging”) to hard paternalism with heavy government involvement.

Yet, for posterity’s sake, here is an absurdly false editorial from Free Press on Huffington Post about why all of Congress supports Net Neutrality. And here is a more reasoned post about why Congress largely opposes it. Now, I think Free Press should be “nudged” into displaying my article about why Net Neutrality is a government takeover. And if they don’t maybe Cass Sunstein can help mandate it.

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Net Neutrality is a Government Takeover

Posted by Kelly William Cobb on Wednesday, May 19th, 2010, 9:46 AM PERMALINK

Last week, Sen. Byron Dorgan spoke to a room full of Internet regulation supporters at the Free Press Summit and said that the free-market community's argument that Net Neutrality is a government takeover is a lie. He also felt compelled to say that ATR and others were spreading falsehoods by calling it such. I shot back today with a piece in the Daily Caller explaining why I believe Net Neutrality is certainly a government takeover.  From the op-ed:

Sen. Dorgan dismissed the argument by the free-market community that this is a government takeover, claiming “nothing could be further from the truth.” But that’s like saying the government isn’t taking over the auto industry, just telling car companies what models they can and can’t make. That they aren’t taking over health care, just telling insurance companies what plans they can and can’t offer.

Net Neutrality is a government takeover. The free-market community isn’t arguing that under these specific regulations the government will now own the industry – though that is the end goal of many Net Neutrality proponents like Free Press. Opponents argue that under the FCC’s Net Neutrality regulations the industry becomes the near absolute pawn of the government. When management practices are approved or denied by a government bureaucrat, it is a certainly a government takeover. And when the first of such regulatory steps tap into the very spine of the Internet – the networks on which everything else depends – that opens the door for further regulation and government intrusion.

It also does not assuage concerns that the FCC, Sen. Dorgan, and Free Press want to completely reclassify Internet access under a different section of the 1934 Communications Act called Title II, only to simply use “forbearance” – or voluntarily restraint – from applying every single regulation in that section to the Internet. The FCC’s forbearance could be temporary and subject to electoral tides and politics, not the consumer-driven free-market. This should be a concern for people on all sides of the political spectrum, who can easily envision specific regulations they oppose suddenly popping up on the FCC’s agenda.

To read the entire op-ed, click here.

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Montgomery County Joins D.C. in Pushing Cell Phone Tax Hikes

Posted by Kelly William Cobb on Tuesday, May 18th, 2010, 5:09 PM PERMALINK

As the D.C. City Council weighs a major 51% hike in telephone taxes, metro area residents living just north in Maryland have a battle of their own. Facing a $1 billion overspending addiction, the Montgomery County Council is now taking up a proposal to raise the tax on residents’ cell phones by up to 50% per line.

The nearly $12 million tax hike would push the tax rate on cell phones to 22 percent in Montgomery county – almost 4 times higher than the general sales tax rate in Maryland. It would also be three times higher than the cell phone tax paid by Virginia residents, further increasing the comparatively onerous tax burden for residents residing on the Maryland side of the D.C. metro area.

The cell tax would also target residents who use wireless broadband Internet connections. The FCC’s recent National Broadband Plan already aims to target wireless Internet users with the Universal Service Fund tax. As more people surf the Net through wireless connections (market share for wireless and satellite together has already jumped to 17%), this is bound to slow broadband adoption.

Montgomery county officials ought to take a queue from their neighbors in next door Prince George’s county. Back in 2008, a ballot measure that would have raised the phone tax to 19 percent – less than the Montgomery County proposal – was shot down by 71 percent of voters. Given that, it’s highly doubtful county officials have the support of their residents on this one.

Montgomery residents: contact your council members below.

Nancy Floreen, Council President

Montgomery County Council General Contact
(240) 777-7900

Ike Leggett, Montgomery County Executive
(240) 777-2500

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How the FCC is Destroying Investment in the Internet

Posted by Kelly William Cobb on Tuesday, May 18th, 2010, 2:07 PM PERMALINK

Last week before a room of Net Neutrality skeptics at The Cable Show, the FCC’s chief of policy analysis, Paul de Sa, claimed that the Commission factored in possible market reactions to their plan to reclassify and regulate the Internet.  If that’s true, they either didn’t pay attention to the results or didn’t care.

The FCC and proponents of Net Neutrality have long argued that their regulatory goals will not impede the ability for telecom companies to continue expanding and investing in broadband Internet (which they alone have built out to over 95% of American households).  In their comments supporting Net Neutrality, the socialist organization Free Press stated flatly that “Network Neutrality will not deter ISP investment.”

So, for the folks who have never heard of the “private sector,” I’ll start by explaining that publicly traded companies raise money to expand their business by selling “stocks” to investors.  For Internet service providers, when those stocks go up, it means more money to be reinvested in building out networks and speeding up service.  When stocks go down, it means less.

As the Wall Street Journal first pointed out, since the FCC’s announcement on May 6 that it will toss the Internet under a 1930s regulatory regime in order to enact Net Neutrality, the number of people wanting to invest in our Internet infrastructure has fallen sharply.  Here’s a brief rundown of how well some ISP stocks have performed between the day before the FCC announcement and right now:

  • Comcast: down 9.08%
  • Cablevision: down 9.25%
  • Time Warner Cable: down 5.15%
  • AT&T: up 0.21%
  • Verizon: down 0.14%

How these numbers jive with FCC Chairman Genachowski’s ambitious National Broadband Plan to expand more Internet access and adoption, I’m not sure.  But I doubt they’ve done a real market analysis for that either.

UPDATE: Our friends at the Phoenix Center have a couple terrific quantitative pieces that dismantle the above arguments made by Free Press.  The first breaks down statements by Free Press that Net Neutrality won't impact infrastructure investment by service providers.  The second paper takes aim at Free Press's argument that service providers walk away with substantial profits and don't reinvest that money into better service and products.

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The FCC: Your Cell Phone Nanny

Posted by Kelly William Cobb on Thursday, May 13th, 2010, 12:59 PM PERMALINK

In the government's latest effort to emulate the European Union and maternally cradle individuals to the greatest extent possible, the Federal Communications Commission wants to mandate that cells phone users get messages keeping them apprised of roaming charges and phone usage.

Let’s ignore the fact that similar features already exist for consumers to monitor their usage and billing (apps, settings and software on the phone, texting the carrier to get updates, etc).  The point against this absurd undertaking is much broader than that: it is always a consumer’s (and company’s) responsibility to read and understand a contract they sign when purchasing a good, not the government’s responsibility to take care of it for them.

The FCC is justifying this initiative by citing a few hundred comments received (out of a few hundred million cell phone users) and saying these standards are already in place in Europe.  They say: “There can be many causes of bill shock, including unclear or misunderstood advertising, unanticipated roaming or data charges, and other problems.”

Yet, these causes can be avoided by a few basic steps like:

  • Not assuming an advertised plan is the one you are signing up for.
  • Looking at your cell phone to see if you are in a roaming area.
  • Telling your teen to stop sending hundreds of texts under the dinner table.

Contrary to the FCC’s belief that overregulation is a helpful undertaking, this is guaranteed to raise the cost of doing business and these costs will be passed on to consumers. ATR's Center for Fiscal Accountability has calculated that taxes and regulations already comprise 46.4% of cell phone bills.

Moreover, it is simply not the role of government to baby individuals who don’t know how to use their cell phones, tools already available to them, or read the contracts and plans that come with them.  Sadly, even frenchman Alexis de Tocqueville saw this nanny-state form of government coming in the U.S. over 150 years ago:

“For their happiness, such a government willingly labours…it provides for their security, foresees and supplies their necessities...manages principal concerns, and directs their industry – what remains, but to spare them all the care of thinking and all the trouble of living?”

For the FCC, apparently just that.

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Free Press Continues Manufacturing Congressional Support for Net Neutrality

Posted by Kelly William Cobb on Monday, May 10th, 2010, 1:46 PM PERMALINK

The Federal Communications Commission is trying desperately to manufacture Congressional support for their radical proposal to regulate the Internet.  But it now appears they have simply found a socialist organization to do their bidding.

Today, CongressDaily revealed that a letter supporting Internet regulation being circulated by Rep. Jay Inslee (D-WA) was actually written by Ben Scott, the policy director of the left-wing advocacy group Free Press.  Scott’s name was found in the “properties” section of the letter as the original author.

Free Press has long been viewed as a key orchestrator for Net Neutrality regulations and last week was the first to tout a letter from Sen. Rockefeller and Rep. Waxman that was meant to give some political cover when FCC Chairman Genachowski announced his ambitious plan.  (I wonder who wrote it.)  There has been a push in recent weeks to fabricate an image of strong Congressional support for the plan, even though Congress doesn’t appear too likely to be on the FCC’s side.  Last fall, 72 Democrats sent a letter to the FCC last fall stating their reservations about Net Neutrality, and the legislation to enact Net Neutrality has fewer co-sponsors than the bill to prohibit it.  Nevertheless, it’s good to finally know with certainty who is running the ground game at the FCC.

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Congress to FCC: Don't Enact Net Neutrality

Posted by Kelly William Cobb on Thursday, May 6th, 2010, 9:50 AM PERMALINK

Yesterday, the FCC made the bold announcement that it will begin procedings to regulate the Internet.  But before the announcement was made, there was a flurry of activity to manufacture hollow support and provide cover for the FCC to make its move. Most notably, the organization Free Press declared that Congress is demanding the Commission "do whatever it takes" to begin regulating the Internet.  Their justification?  Two lawmakers sent a letter to the FCC.

The letter from Sen. Jay Rockefeller (D) and Rep. Henry Waxman (D) came amid an obviously false report that FCC Chairman Julius Genachowski was reluctant to reclassify the Internet from an unregulated to a regulated entity, all to enact so-called Net Neutrality rules.  While it is true that the two Members of Congress chair their respective chambers' commerce committees, that in no way implies the consent of Congress to do anything.

Here’s my take on the numbers: Rep. Ed Markey’s bill to enact Net Neutrality (H.R. 3458) has 24 cosponsors, while Rep. Marsha Blackburn and Sen. John McCain’s legislation that would prohibit the FCC from regulating the Internet in virtually any way (H.R. 3924) has 35 cosponsors.

On top of that, last fall 72 Democratic Representatives sent a letter to the FCC generally opposing Net Neutrality.  Assuming Republicans remain opposed and those Democrats maintain their concern, by my count that’s 250-181 opposed to Net Neutrality in the House (with 4 vacant seats).  In other words, 57% of the U.S. House of Representatives.  Now just think how many lawmakers will be excited by the next step of not just enacting Net Neutrality, but regulating the Internet under parts of a law designed in the 1930s for traditional phone companies.  My guess is probably not many.

Unfortunately, the press has chugged the kool-aid and painted this letter from Rockefeller and Waxman as an indication that Congress has the FCC's back.  But then why wouldn't Congress work with the FCC to pass a bill enacting Net Neutrality and avoid the regulatory reclassification, lengthy rulemaking process, and inevitable lawsuits challenging the decision from that process?  Because Congress doesn't generally support this move by the FCC and the FCC knows that.

So, Free Press and Public Knowledge have nudged a couple lawmakers in leadership positions to sign off on their radical proposal, but the numbers just don’t add up.  Congress is largely not in favor of Net Neutrality, let alone reclassification.  This is a merely a couple groups throwing a smokescreen over strong opposition, all to provide cover for Chairman Genachowski to undertake the radical task of regulating the Web.

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ATR Condemns FCC's Move to Regulate the Internet

Posted by Kelly William Cobb on Wednesday, May 5th, 2010, 5:56 PM PERMALINK

[PDF Version]

Today, Americans for Tax Reform condemned the Federal Communications Commission (FCC) for indicating it will attempt to regulate the Internet under portions of Title II of the Communications Act.  The FCC is pushing for these new regulations in order to enact Net Neutrality rules.

Kelly William Cobb, executive director of Americans for Tax Reform’s Digital Liberty Project released the following statement:

“The Commission’s indication that it wants to regulate the Internet under an arcane law designed for 1930s telephone companies, all to enact so-called ‘Net Neutrality’ rules, is a prime example of the tail wagging the dog.  Given that the Internet has flourished as an unregulated entity for over 25 years, this move by the FCC is unwarranted, overreaching, and destined to crush investment and growth throughout the entire Internet ecosphere.”

“Consumers – not government – are the best regulators of businesses, and these consumers have long used market-correcting forces to protect their interests on the Internet.  Instead, the FCC’s decision will open the door to anti-free market policies such as price setting, taxes, and other regulatory impediments to Internet expansion and adoption.  Further, the vague nature of what and how rules will apply creates enormous uncertainty for service providers currently planning to invest in expanding broadband networks.”

“A U.S. Court of Appeals recently told the FCC that their overzealous drive to enact Net Neutrality regulations was an attempt to ‘shatter’ the bounds of their authority.  It’s clear that without the consent of Congress or the Courts, the Commission is continuing its reckless pursuit.”