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Lynne Kiesling

Courtesy of Slashdot, and following up on Mike's spectrum auction post from earlier this month, the 700 MHz spectrum auction has come to a close. From the New York Times blog post mentioned in the Slashdot article:

The winning bids totaled $19,592,420,000. That's nearly double the amount the commission had hoped to raise from the spectrum being abandoned next year as television stations switch to new frequencies. On the scale of billions, the total has hardly changed in a month. But bidding continued on little blocks of frequencies around the country that cellphone companies are using to fill in gaps in their service. The last bid in the auction was $91,000 for frequencies around Vieques, P.R.

Michael Giberson

David Pogue in the New York Times:

I can't tell you how huge this is going to be. There will be thousands of iPhone programs, covering every possible interest. The iPhone will be valuable for far more than simple communications tasks; it will be the first widespread pocket desktop computer. You're witnessing the birth of a third major computer platform: Windows, Mac OS X, iPhone.

Lynne sees herself as "an early-but-not-bleeding edge adopter."

Not me. I mean, sure, I love a good gadget. Sometimes I crack open Wired purely for the technolust frisson. But I'm usually happy keeping my technolust fantasies on a virtual level. I don't need to own the things to enjoy the feelings of wonderment and coolness that come with knowing these things are out there existing in the world. I don't "love a good gadget" so much as love the ideas of all the good gadgets out there in the world. In fact, owning actual, physical things often spoils the fantasy.

My current cell phone is a beat up, two or three-year old (I forget which) Motorola with a weak battery. No built-in camera, no music player, no web browsing. Apparently it can download ring tones, but I've not been too keen on running snippets of popular song through the tinny little speaker. I believe it is possible to upload images to the tiny little screen, but don't believe it is worth the trouble to figure out how.

More from Pogue:

The release of iPhone 2.0 is over three months away, but I'll stick my neck out and make a prediction: it will be a gigantic success, spreading the iPhone's popularity both upward, into the corporate market, and downward, into the hands of the masses. iPhone 2.0 will turn this phone into an engineering tool, a game console, a free-calls Skype phone, a business tool, a dating service, an e-book reader, a chat room, a database, an Etch-a-Sketch...and that's on Day One.

I just may have to risk my technolust fantasy and actually enter into a physical relationship with one of these devices.

(Maybe I should have included the warning message that Pogue started his column with, "this column is about the iPhone. If you're one of those people who are sick and tired of hearing about the iPhone, then scroll on while you still can." Oh well. If you were one of those people, you be gone by now.

If you are still reading iPhone stories, but haven't yet read Lynne's more substantive post commenting on the technology and economics of Apple's iPhone SDK release, you should read it.)

Lynne Kiesling

The palpable buzz around the release of the iPhone last year was exciting, and indicated some of the great design and functionality we can expect from mobile phones in the future (even if I won't get one yet because I won't give AT&T my business, and I haven't seen a local vendor selling them unlocked yet for me to take to another provider). But at the same time the iPhone's functionality was limited relative to its capabilities; it could do so much more than the web-based applications and the Apple applications installed on it.

One way to achieve that potential is for Apple to allow third-party developers to develop applications for the iPhone. Developers are chomping at the bit to do so. So yesterday Apple announced a Software Developer's Kit (SDK) that developers can use to get the technical information they need to develop applications for the iPhone. Moreover, the venture capital firm Kleiner Perkins Caufield & Byers had established a $100 million venture capital fund for iPhone entrepreneurs, called the iFund.

The title of this PC World article about the SDK gets at the interesting economics of Apple's decisions, from a property rights perspective.

Apple's SDK blows open the process of creating native apps for the iPhone by letting most any would-be coder get started. Developers can sign up and download the SDK for free, which in turn allows Apple to reach out to a wider cross-section of would-be coders than they might have otherwise.

According to iPhoneDevCamp co-founder Raven Zachary, "The fear [in the development community] today was that Apple was going to constrain the ability for third-party developers to distribute apps, in the same way they did with the iPod games market." There, Zachary notes, Apple made it very difficult for small developers to create and release a game: "You have to get Apple's approval, have them approve the source code, and then they take a large percentage of the profits for the distribution of that app.

"What we've seen instead is Apple opening up the marketplace in the same way they've opened up the podcast directory in iTunes Music Store. They will be far more open about letting developers list their apps," says Zachary.

Apple's software and design are the reasons that this device is so popular, is the phone to beat in the mobile market, and will become increasingly useful in business environments (which is one of the objectives of the various iPhone moves that Apple is currently making). Apple has a long history of keeping its software, its operating system, etc. proprietary; in fact, in the 1980s one of the biggest criticisms of Apple was that IBM and Microsoft's operating system proliferated and gained larger installed base and market share because of the extent to which they shared information about how to write software interfaces to their operating system.

So here is Apple, apparently having learned from its 25-year history of deciding how far down the property right chain they should retain use rights. And that's exactly what an SDK does -- it grants use rights to some of Apple's property, to enable them to develop applications that Apple hopes will make that property, and the iPhone, more valuable to more possible customers. This is a far cry from the 1980s Apple approach to software development, and as the quote above suggests, is not necessarily universal across the entire Apple product line.

I think this CNET article hits the nail on the head:

To me, the most interesting thing about the development of the smartphone industry is the wide-open nature of the race. This time around, a winner is not going to be picked in the early stages of the competition. Several huge important companies--Apple, Microsoft, Google, Nokia, RIM, and don't forget about Palm just yet--have already had an impact on the development of the product, and will continue to do so well into the future.

Despite sitting out the first few years, Apple has arguably vaulted ahead of its competition in just 12 months. The other players in this industry came into smartphones building them for businesspeople and their IT masters. Then they tried to woo the consumer.

Apple has done the complete opposite, hooking those who had never used a smartphone before with the iPhone's interface, and now giving them the opportunity to use it for both work and play.

The first era of the mobile-computing industry was about hardware. The second part will be about software. And right now, no one is developing mobile software like Apple.

Apple is allowing developers more generous use rights in its software to strengthen the value of the iPhone, and to open the door to further innovation in mobile computing and communications. I hope they continue to turn the mobile communications market on its head: this type of creative destruction is the foundation of our economic well-being.

Michael Giberson

If you, like me, were looking forward to the FCC's auction of prime 700 MHz wireless spectrum -- and frankly who wouldn't be interested in seeing how the FCC's new hierarchical package bidding rules worked out in the C-block auction -- you may have noticed the distinct lack of news on the topic in the major press.

Jump to the FCC's auction website, however, and you'll see the auction action continues. Auction round 175 will start in about 30 minutes.

Only 13 new bids were received in round 174, with licenses still contested for places like Minot, ND and Salisbury, MD. Just about all of the major results are already resolved, except that technically all auctions remain open until they all are ready to close. But C-block hasn't seen a new bid since round 90. D-block, the spectrum loaded with public service obligations, received a single bid back in round 1.

There is light at the end of the tunnel. The FCC has ramped up the pace to 10 rounds per day, and an industry analyst was quoted by Reuters as saying the auction should be wrapped up within a week.

Michael Giberson

Over 200 companies have qualified to participate in the upcoming FCC spectrum auction. While that sounds like enough to create a lot of competition, as the auction approaches FCC chairman Kevin Martin is beginning to sound a little nervous. Yesterday he expressed concern that problems in the credit markets and general economic conditions may discourage some bidders or limit their ability to participate, Reuters reported. However, "Martin said the auction must go forward since Congress has ordered the FCC to begin the auction by January 28."

Contributing to pre-auction jitters at the FCC may be the recent demise of Frontline LLC. Frontline had been expected to be one of the primary bidders for the "D Block" spectrum, the band of airwaves that is being offered with a bunch of strings attached in terms of priorities for public safety usage, build-out requirements, and other limits. The Frontline folks were heavily engaged in the regulatory processes at the FCC creating the D Block requirements. Last week the company concluded it didn't have enough financing to go into the auction, so it closed up shop. (Grant Eskelsen at the Progress and Freedom Foundation says the failure of Frontline should be no surprise, and hopes it will be the "end of what has been a tragically flawed experiment in the D-block from the outset.")

What happens if the auction is a bust? The reserve prices adopted for each block are: Block A - $1.8 billion; Block B - $1.37 billion; Block C - $4.6 billion; Block D - $1.33 billion; and Block E - $900 million. If the reserve prices for blocks A, B, C, and/or E are not met in the auction, the FCC will close the auction for that block and set a new date to auction the unsold spectrum. According to this summary of the FCC auction rules, the new auction would use the same reserve prices as before, but the FCC may alter performance or access requirements imposed on the winners. The new auction would have to begin within a few weeks of the conclusion of the first auction.

According to the FCC rules, "If the reserve price established for the D Block of the 700 MHz Band is not satisfied by the results of Auction 73, the Commission may decide to re-offer that license subject to the same service rules or reconsider the rules applicable to that block." The WSJ reported yesterday that the FCC could give the spectrum to the highest bidder even if the bidder didn't reach the $1.33 billion reserve. Silicon Alley Insider suggests that some interesting gaming may result.

Michael Giberson

I was wrong a few weeks ago when I wrote, “While the FCC has sponsored research and considered deployment [of package bidding and combinatorial auctions], so far they have been dissuaded by the complexity of the auction design and opposition from commenters.” The FCC has tried package bidding once before, in 2003, when it auctioned six regional narrowband PCS licenses in the 900 MHz band. It wasn’t much of a test of combinatorial auction designs, however: only two bidders participated in the auction, and the FCC sold only five of the six licenses offered.

Much more interesting is the limited package bidding to be allowed in the auction of 700 MHz spectrum scheduled to begin January 24. This is the auction that has attracted the interest of Google along with just about every wireless company out there. (Wired reports on why the auction is such a big deal.)

One piece of the 700 MHz spectrum being offered, the “C Block,” is attracting the most interest, and it is the block that the FCC is offering under new “Hierarchical Package Bidding” (HPB) rules. HPB is a complicated name, but it is a pretty simple idea. In effect, the FCC is offering two ways to bid on the 12 regional C Block licenses: companies can submit individual bids on one or more of the 12 licenses, and companies can submit bids on three super-regional packages of licenses. The most interest will likely be in the package containing regional licences 1-8, covering the fifty U.S. states. (The other four licenses are divided into an Atlantic package, covering Puerto Rico, the U.S. Virgin Islands and the Gulf of Mexico, and a Pacific package, which covers U.S. Pacific territories.)

The HPB rules emerged from the experimental auction design work of Charles Holt and Jacob Goeree while they were testing a variant of the FCC’s simultaneous multi-round auction rules that permitted package bidding. (See links below.) Relatively poor performance of the FCC’s package bidding auction design led Holt and Georee to examine alternative approaches, and they eventually developed and tested the HPB design.

Various experimental tests examined the FCC’s standard simultaneous mult-round ascending auction, the FCC’s variant SMR with package bidding, an approach called RAD, the combinatorial clock design, and the HPB design that Holt and Goeree proposed as an alternative. In accepting the HPB, the FCC said:

[W]e will use HPB in part because the mechanism for calculating [prices] is significantly simpler than other package bidding pricing mechanisms. … In addition, we find that . . . HPB procedures in general strike a careful balance between permitting bidders adequate bidding flexibility and discouraging insincere and anticompetitive bidding behavior.

The design has been developed and tested in the economics lab. We are about to see how well it performs in practice.

NOTES: The FCC provides much more information on the 700 MHz auction online. I extracted the FCC quoted material from a Caltech press release that also has comments from Goeree and additional commentary. The results of the tests have been presented in numerous reports authored by Goeree, Holt, and others:

Hierarchical Package Bidding: A Paper & Pencil Combinatorial Auction (October 2007)

An Experimental Test of Flexible Combinatorial Spectrum Auction Formats (September 2007)

An Experimental Comparison of Flexible and Tiered Package Bidding (May 2007)

An Experimental Comparison of the FCC’s Combinatorial and Non-Combinatorial Simultaneous Multiple Round Auctions (July 2006)

Comparing the FCC’s Combinatorial and Non-Combinatorial Simultaneous Multiple Round Auctions: Experimental Design Report (April 2005)

Michael Giberson

David Porter and Vernon Smith have put together an assessment of the FCC’s 12 years of experience with spectrum auction design, forthcoming in the Journal of Law Economics and Policy. From the introduction:

Recent policy discussions regarding broadband Internet access have revived debates about various methods for allocating electromagnetic spectrum rights and the appropriateness of spectrum auctions. Debates over the assignment of spectrum rights via auction are hardly new. Economists have long argued that auctions would promote efficiency… Still, auctions have attracted vigorous opposition from defenders of traditional “public interest” licensing… When this market-oriented approach was actually implemented in the United States in the early 1990s, these debates ceased being purely theoretical. Twelve years of actual experience with spectrum auctions now allow us to look back and assess what lessons can be learned from the adoption of this approach.

The paper provides a focused, non-technical look at market design issues that have arisen as the FCC implemented a 1993 federal law permitting spectrum auctions. Many of the “best and brightest” among auction economists have participated in the research and analysis of the FCC’s auction design proposal. Perhaps not surprisingly, auction theory didn’t contain an answer for every broad design issue or narrow auction implementation task that came along. As a result, there has been a lot of trial-and-error and learning along the way.

Porter and Smith are experimental economists, and their writing is heavily informed by their background. After assessing some “unexpected” strategic behaviors in early auctions – jump bidding, parking, retaliatory bidding, and various other signaling games – Porter and Smith note that the “behaviors observed in these auctions may have been surprising to the FCC and some economists, but they had been observed many times in laboratory experiments.”

The article then turns to a discussion of “new, untested rules” imposed by the FCC in the attempt to curtail strategic bidding and speed up auctions, and two areas of current interest: information policy and package bidding. Information policy concerns how much information about other bid and bidders during the course of the auction. Generally, the more information disclosed, the more effort bidders will put into strategic bids – often to the detriment of auction efficiency and seller revenue. The FCC proposed a strict “no information” policy for the Advanced Wireless Services auction, a position endorsed by the FTC and Department of Justice, but then decided to reveal all information if certain (easily met) conditions were in fact met. (They were.) Porter and Smith remark that information policy can be tested in the lab.

Package bidding, which requires a combinatorial auction design, gives bidders tools to bid for just the combinations of licenses desired, something complicated or impossible to do in the FCC’s standard simultaneous ascending auction design. Package bidding can be particular valuable in spectrum auctions because depending upon a bidder’s business strategy and existing resources, any one license may be either a complement or substitute for other licenses being offered. Both Smith and Porter (among others) have long advocated use of combinatorial auctions for the sale of spectrum. While the FCC has sponsored research and considered deployment, so far they have been dissuaded by the complexity of the auction design and opposition from commenters. [See UPDATE, below.] (Combinatorial auctions have been used by others, see the citations in the articles for examples.)

A sort of motto or theme that permeates the work of economists involved in experimental testing of market designs is, in effect, “You can pay a little, and learn from your mistakes in the lab, or you can pay a lot when you learn from your mistakes in the field.” While Porter and Smith don’t quite state the idea outright, it is fundamental to their outlook. In fact, the idea is embedded in their title, “FCC Spectrum Auction Design: A 12-year Experiment.” The FCC hasn’t avoided testing their auction design ideas in experiments, it is just that they have chosen to experiment in high-stakes, hard-to-control, live action auctions with billions of dollars of resources at stake. How many resources have been wasted in the FCC’s 12 years of poorly controlled experiments?

Of course, the auctions, even if not as efficient as they could be, are vast improvements over allocation by government fiat or allocation by lottery, the approaches auctions have replaced.

Porter and Smith say, “a fresh reexamination of the FCC auction design protocols is overdue,” and they suggest a few criteria: reduce participation costs to bidders, make it easier to assemble desired packages, and minimize incentives for strategic behavior. And, of course, “Whatever the proposed redesign, it should be thoroughly tested first in the laboratory.”

UPDATE: I was wrong, the FCC hasn't been dissuaded completely from trying package bidding, as I explain in a January 2008 post, the FCC tried package bidding in a small way in 2003 and is about to try a new package bidding design in the big 700 MHz auction. See that post for additional detail and links.

Michael Giberson

A few recent news articles on congestion has Peter Klein at Organization and Markets asking, "Why the Resistance to Pricing?"

When the quantity demanded exceeds the quantity supplied — causing shortages, delays, congestion, misallocation — the solution is to raise the price. Every freshman economics student knows this. Why, then, are regulators, industry groups, and consumer representatives so often opposed to rationing by the price mechanism?

Klein offers two examples, the airport congestion issue (citing a Reason Foundation commentary and my blog post of last week) and a Wall Street Journal story on internet congestion. In the case of pricing proposed to help clear airport congestion, Klein draws upon the quote I used from the Air Transport Association, "We are unalterably, adamantly opposed to it." From the Wall Street Journal article on internet congestion, Klein notes the extensive interest in technological solutions -- bigger, better, faster, more. "All purely technological remedies. No mention of pricing," he says.

Scott Wallsten riffed on the same topic in a commentary in response to news report that internet service provider Comcast was sometimes limiting capacity usage by customers who use file sharing services:

While this story immediately degenerated into a fight over net neutrality, economists' ears should have perked up. If network traffic needs to be "managed," then something is probably wrong with prices. Getting prices right--by charging heavy users for the costs they impose on everyone else, for example--would go a long way towards reducing the need to manage the network.

Wallsten draws on analogies to road use, electric power, and water utilities, to suggest that rates for high-speed internet use could be priced by some mechanism other than a flat access fee. "Consider highways. ... Policymakers have generally tried to deal with congestion by building more roads" -- the technological solution rather than pricing. Pricing proposals to address congestion, like HOT lanes, often face opposition even from parties would be benefit from faster travel.

Klein asks, "Is [the opposition to pricing] simply Bryan Caplan’s anti-market bias? Is it interest-group politics? Or is there something specific people don’t like, or don’t understand, about prices?"

It is possible that any proposed price will make some people worse off, possibly almost unavoidable, so some part of any opposition may be simple self-interest. But I think there may be a deeper phenomena at work, in Klein's words, "something specific people ... don't understand about prices."

People naturally understand the allocative function of prices -- the paying you X so I can get Y -- but have a harder time understand the coordination function provided by prices -- the paying you enough X so that other people don't take all of the Y first. Particularly when the value of the coordination function varies dramatically over time (rush hours, peak loads, high season at vacation spots), it seems harder to grasp the abstract service of coordination provided by prices.

Maybe there is work in the behavioral economics literature about congestion pricing, or maybe some sophisticated economics experiments have teased out these differences. I don't know, but if not it seems like a promising research topic: Why the Resistance to Prices?

Michael Giberson

The Washington Post story is headlined, "O'Malley Encouraging Utilities Commission To Assert Its Powers":

The hearing on the 16th floor of the state government building in Baltimore was as charged as a cross-examination. Two Verizon officials were called to appear before Maryland's utility regulators to explain a 50 percent increase in customer complaints about their phone service. And from the first moment, it was clear a grilling was in order.

"What are you doing to improve the service?" demanded Steven B. Larsen, the new chairman of the Public Service Commission. Another commissioner, Lawrence Brenner, told the phone company representatives, "It helps if you come along willingly rather than be dragged."

The article explains that while the Commission is officially less prominent than other state agencies with larger staffs and budgets, "it is emerging under Gov. Martin O'Malley (D) as an aggressive force." The key word in that last phrase is "under."

Larsen called the case the "most immediate example" of the commission's more aggressive approach to regulation, which he said has been adopted slowly by some on the commission staff.

He said some staff members asked, "Why don't you give them a phone call?" But, Larsen said, "it was obvious to me that we needed to do something immediately."

It isn't clear from the article over what period the "50 percent increase in customer complaints" occurred or just how many complaints are at issue. If the 50 percent increase happened quickly, then maybe immediate action was reasonable. If we're talking a 50 percent higher total last year than the year before, I would wonder why the Commission waited so long to take action (when they could have, you know, made a phone call back when complaints were only 25 percent higher).

Of course, a discrete phone call to signal Commission concerns won't show how much the Governor cares and won't generate stories in the press about Martin O'Malley, man of action. Do you get the feeling that the phone calls that the Commission cares most about are those that come from the Governor's office?

Michael Giberson

A Swiss software security research company, WabiSabiLabi, is establishing an online auction site to allow security researchers to auction off discoveries of software vulnerabilities. In their press release, they said:

Recently it was reported that although researchers had analyzed a little more than 7,000 publicly disclosed vulnerabilities last year, the number of new vulnerabilities found in code could be as high as 139,362 per year. Our intention is that the marketplace facility on WSLabi will enable security researchers to get a fair price for their findings and ensure that they will no longer be forced to give them away for free or sell them to cyber-criminals.

Yes, they will screen the bidders in the effort to determine that they aren't "cyber-criminals," and they will test reported vulnerabilities before allowing an item to be put up for auction. The Washington Post described vulnerability researcher Dino Dai Zovi as excited about the vulnerability auction service:

"I can see this service creating much more incentives for researchers to find flaws," Dai Zovi said. "Not everyone is willing to spend 20 to 40 hours looking for vulnerabilities in software just to receive a little thank-you note in Microsoft's security advisories."

The discovery of software vulnerabilities provides something of the nature of a network or club good. Presumably the software vendor - the provider of the initial good or service around which the network grows - would have an incentive to pay for acquisition of this information so as to put out a better product. But if the standard offer of payment is "a little thank-you note," perhaps the existing market for such intellectual property is not yielding competitive prices.

Michael Giberson

The tech trade press seems abuzz with speculation over Google's interest in the FCC’s spectrum auction rules. Google phone? Google wireless? Google the spectrum monopolist? Google turning your cell phone into a mobile AdWords delivery device?

All of this wild-eyed speculation seems a bit over the top to me, perhaps because the essential idea proposed by Google seems so sensible. In the letter (link below), Google wrote: "In particular, the Commission should clarify that the service rules governing the 700 MHz bands already allow the use of dynamic auction techniques, such as real-time auctions and per-device registration fees."

Here’s the big idea: dynamic auction techniques, such as real-time auctions. Rather than having a telecom company buy a large chunk of spectrum in the hopes of eventually being able to fill it with subscribers, a spectrum wholesaler would own and auction off spectrum usage rights in small slices. Telecom companies could buy what they needed as they needed it. Or, eventually, wireless devices would buy the spectrum bandwidth needed, when they need it.

Prices in this resell auction would naturally be dynamic -- going up and down with the demands placed on the available capacity -- and dynamic pricing seems to make some people nervous. But really it is just about, as Google says in the letter, devising a system under which a "particular slice of spectrum ends up in the hands of the user who values it most at any particular time and place." If your wireless fax isn’t time sensitive, just say so and your device will bid low. Need to talk to someone right now? Go ahead and pay the current price, and less time-sensitive uses of the spectrum will get out of your way. Most retail consumers would likely continue to sign up for wireless phone services like they do now – paying fees related to the level of service demanded – and the service provider taking the price risk in the secondary spectrum market. Over time, wireless devices, and their owners, will get smarter about buying and using the kinds of service they need.

Notice that two separate auctions are involved here. The first would involve the FCC auctioning off large amounts of spectrum to interested buyers, using one of the FCC's existing auction designs or some improvement thereof. Google is proposing that the winners in that first auction be allowed to resell some or all of the spectrum purchased in a secondary auction, using dynamic auction processes and systems they hope to manage.

Adam Kovacevich, a spokesman for Google, said, "In general, it's the belief of a lot of people in the company that spectrum is allocated in an inefficient manner." The letter cites one report indicating that use in “any given geographic area averages some 5 percent of total available spectrum.” They think they can do better, and in the letter to the FCC they ask whether the rules will prevent them from trying.

NOTES: The Google letter to the FCC can be found at this link. (Thanks to Computerworld.) Another somewhat related news story, concerning a lawsuit over FCC rule changes in an earlier auction, is up at MarketWatch. Yesterday I posted Auctioning the Airwaves, Google Style.

Michael Giberson

Google filed a proposal on Monday with the Federal Communications Commission calling on the agency to let companies allocate radio spectrum using the same kind of real-time auction that the search engine company now uses to sell advertisements.

The NYTimes article is a little short on the technical details of the proposal (I guess not everyone is a market design geek). Usually these filings turn up on the FCC website, but in a few brief attempts I haven't turned up anything yet. I'll let you know when I find it.

In the meantime, some additional details and commentary can be found at O'Reilly's Radar, The Next Net, GigaOM, and bloggingstocks.

If it turns out that spectrum will be available via a continuous, dynamic auction, similar to how Google sells space for advertisements, it will raise the significance of auction theory work on the properties of that market design. For economists and other technical types, a good place to start is Hal Varian's paper, "Position Auctions." If you are new to auction theory, begin with Ken Steiglitz's Snipers, Shills, and Sharks, a fine introduction. While the book focuses on eBay-style online auctions, it also discusses and provides citations on position auctions.

Michael Giberson

Some financial analysts have concluded that maybe the XM-Sirius merger is not such a good idea, or at least not the outright winner that the companies themselves suggest. As the WSJ's Deal Journal says: "Regulators may not present the only hurdle faced by Sirius and XM in their efforts to forge a successful combination."

Which would be a shame, since then we would be spared the further lectures of National Association of Broadcasters president David Rehr on the evils of monopoly. Speaking to broadcasters in Las Vegas the day before the Senate Commerce Committee was holding a hearing on the merger, Rehr said:

No matter how much Mr. Karmazin and everyone else at Sirius and XM use the word, it is not a merger they seek. It is a monopoly.

A monopoly? Well sort of. They would be the only audio news and entertainment broadcasters that rely upon satellites to deliver programming to subscribers. But consumers have lots of other ways to access audio news and entertainment. (I tend to use internet "radio" in the office, and increasingly CDs or an MP3 player jacked into my car radio when driving. Don't you find that most car radio ads are highly annoying?)

It is a government sanctioned monopoly.

So I guess that would make them the only government sanctioned audio news and entertainment broadcasters that rely upon satellites to deliver programming to subscribers. But consumers still have lots of other ways to access audio news and entertainment. And most car radio commercials are still highly annoying.

Now some of you might not be aware I am an economist by training.

This much was true, I was not aware even though Dr. Rehr picked up a PhD in economics from George Mason University, just like me.

A little googling reveals that Dr. Rehr's dissertation was titled, "The Political Economy of the Malt Beverage Industry" (which certainly sounds more interesting than my own work, "Improving Coordination Between Regional Power Markets"). It looks like Dr. Rehr was working for National Beer Wholesalers Association at the time he did his dissertation - sounds like a clear case of spillover benefits!

I ask you, when has a monopoly ever served the interests of the consumer?

A good question, perhaps deserving of a dissertation or two all by itself. Alas, if the XM-Sirius merger collapses of its own weight we may be spared the natural experiment that might illuminate that inquiry.

A monopoly is a monopoly is a monopoly, and we at NAB will continue to adamantly oppose it.

I'm please to see a fellow GMU grad out there fighting against the evils of monopoly. I am kind of surprised, however, that a trade association like NAB would go to such efforts -- spending lots of its own time and resources -- in what is apparently a public-spirited campaign.

I mean, after all if the merged XM-Sirius company would be a monopoly, that must mean that they are in a separate market from the localized, land-based radio broadcasters that make up NAB membership. And if the markets are separate, than clearly what goes on out there in that potentially-monopolized market won't hurt NAB members. So NAB and its members -- presumably determined in the Dr.'s analysis to be in some-other-market-not-related-to-the-satellite-radio-market -- must be opposing this prospective monopoly out of the collective goodness of their collective hearts.

(Or maybe this is just another example of their long history of anti-consumer lobbying. HT Gizmodo.)

If radio broadcasters really want to do something good for the world, maybe they should direct less attention to lobbying against the competition and more to serving their consumers. For example, how about doing something about those annoying radio commercials.

Lynne Kiesling

OK, this is one the better April Fool's Day techie pranks I've seen in a while:

MOUNTAIN VIEW, Calif., April 1, 2007 - Google Inc. (NASDAQ: GOOG) today announced the launch of Google TiSP (BETA)™, a free in-home wireless broadband service that delivers online connectivity via users' plumbing systems. The Toilet Internet Service Provider (TiSP) project is a self-installed, ad-supported online service that will be offered entirely free to any consumer with a WiFi-capable PC and a toilet connected to a local municipal sewage system. ...

"I couldn't be more excited about, and am only slightly grossed out by, this remarkable new product," said Marissa Mayer, Google's Vice President of Search Products and User Experience. "I firmly believe TiSP will be a breakthrough product, particularly for those users who, like Larry himself, do much of their best thinking in the bathroom."

Hat tip to Slashdot.

Tee hee!

Michael Giberson

XM and Sirius, two satellite radio networks, announced plans to merge yesterday. Amusingly, in the New York Times the story begins with "The nation’s two satellite radio services, Sirius and XM, announced ...", while in the Washington Post leads with ''XM and Sirius, the two satellite radio companies ...." In each case the hometown company goes first.

Both stories highlight the apparently high antitrust standard the two companies must overcome to gain approval for the merger. The Post:

The FCC bars a single company from controlling the satellite radio market, but FCC Chairman Kevin J. Martin recently noted that such rules can be changed. Martin said yesterday that the hurdle "would be high. . . . The companies would need to demonstrate that consumers would clearly be better off with both more choice and affordable prices."

As the Times explains:

An army of merger and antitrust lawyers for both sides worked several marathon weeks of conference calls and trips to Washington to gauge the political climate for the transaction before opining that the deal should pass regulatory muster. Simpson Thacher & Bartlett and Wiley Rein are representing Sirius; XM is being advised by Skadden, Arps, Slate, Meagher & Flom; Jones Day; and Latham & Watkins.

Doesn't it seem a little silly that federal regulators are suggesting somehow the world would be worse off with one satellite radio company (for the time being) where as of a few years ago there were none? Do consumers have a right to two money-losing national music, talk and news services? Doesn't the FCC know that by raising barriers to exit, they create barriers to entry for some future satellite radio rival?

I'm not a subscriber to either service -- in fact I just barely had a CD player put in to my car a few months back when I started commuting to an office. The CD player also plays mp3 files and has an audio imput so I can plug in an iPod. I don't really need more options for in car entertainment, but I've been tempted to go satellite after conversations with a few passionate fans.

You know, just maybe if they called up Texas Fred, the Zydeco Cowboy and put him on coast-to-coast, I might have to do it.

Lynne Kiesling

Up early for a Saturday, for a 6:45 AM Liverpool/Chelsea game (which the good guys won 2-0, even though fave KP hottie Xabi Alonso took a knee to the mouth and had to have stitches) ... so inevitably I am trolling for geeky network regulation fodder now that the game's over.

And I have found it: several posts on the question of the continuing relevance or value of the FCC. Should it be abolished? The impetus for these posts is this Jack Shafer column in Slate, in which he argues in the affirmative, and that instead the radio spectrum should be sold off.

Although today's FCC is nowhere near as controlling as earlier FCCs, it still treats the radio spectrum like a scarce resource that its bureaucrats must manage for the "public good," even though the government's scarcity argument has been a joke for half a century or longer. The almost uniformly accepted modern view is that information-carrying capacity of the airwaves isn't static, that capacity is a function of technology and design architecture that inventors and entrepreneurs throw at spectrum. To paraphrase this forward-thinking 1994 paper (PDF), the old ideas about spectrum capacity are out, and new ones about spectrum efficiency are in.

Almost everywhere you look, spectrum does more work (or is capable of doing more work) than ever before. For instance, digital TV compresses more programming in less spectrum than its analog cousin. As the processing chips behind digital broadcasting grow more powerful, spectrum efficiency will rise. Ever-more efficient fiber-optic cables have poached long-distance telephone traffic from microwave towers, and this has freed up spectrum in the microwave spectrum for new use by cell phone companies.

Indeed. Not only has the nature and extent of spectrum's scarcity changed because of innovation, but the ability to control interference has also improved. Technological change has drastically affected our ability to define and enforce property rights in spectrum, as well as giving us better means for "governing the commons" in cases where users decide to keep a particular slice of spectrum as a common-pool resource. Shafer then delivers the goods when he points out that Coase made these arguments over 40 years ago, and they are even more true today:

Technology alone can't bring the spectrum feast to entrepreneurs and consumers. More capitalism—not less—charts the path to abundance. Hazlett and others, going back to economist Ronald H. Coase in 1959, have advocated the establishment of spectrum property rights and would leave it to the market to reallocate the airwaves to the highest bidders. Such a price system would tend to encourage the further expansion of spectrum capacity.

I have argued this for quite some time (see also the Telecom category of posts), although many people dismiss my arguments as being the "ravings of an extreme libertarian". Perhaps. But one role model for me in this is Fred Kahn, who joined the Civil Aeronautics Board in the Carter administration, did the benefit-cost analysis and found the CAB to be net negative for consumers, and demonstrated enough political leadership to succeed in "turning out the lights, closing the door, and liming the soil after him so it couldn't come back from the ashes". And even though we all complain about how the romance has gone out of travel, Kahn's vision and leadership have made it cheaper and easier for firms to enter the airline market and compete, and for consumers to get what they want out of the industry, which is primarily low fares. Economic growth and increased consumer surplus ensued.

So is there a Fred Kahn for the FCC? Kevin Martin ain't it. Michael Powell could have been, I think, if he were incoming Chairman in 2007 instead of having come and gone. Congress could abolish the FCC ... yeah, right, what was I thinking? Those pandering sycophants? A baboon with a random number generator would be more likely to hit upon the correct policy sooner than them. Even though all logical arguments point toward the FCC's abolition, the political power and populism that drives outcomes in politicized industries like this are likely to dominate. Yet another reason to find a way to get as many important decisions as possible out of political processes.

Peter Klein at Organizations & Markets, Jim DeLong at PFF, and of course the irrepressible Glenn Reynolds all took note of the Shafer column. Mr. Shafer, welcome to the spectrum property rights club!

Michael Giberson

The NYTimes has a story on municipal WiFi, focused on Tapei, Tiawan. You get a sense of the story line from the title: "What if They Built an Urban Wireless Network and Hardly Anyone Used It?"

That such a vast and reasonably priced wireless network has attracted so few users in an otherwise tech-hungry metropolis should give pause to civic leaders in Chicago, Philadelphia and dozens of other American cities that are building wireless networks of their own.

Like Taipei, these cities hope to use their new networks to help less affluent people get online and to make their cities more business-friendly. Yet as Taipei has found out, just building a citywide network does not guarantee that people will use it...

"There is a lot of hype about public access," said Craig J. Settles, a technology consultant in Oakland, Calif., and author of "Fighting the Good Fight for Municipal Wireless." "What's missing from a lot of these discussions is what people are willing to pay for."

The problem isn't technology, so much as business model, the story reports.

But even if Q-Ware meets its target this year, the company will need 500,000 users in a given month to break even, a target it is not expected to hit for several more years, according to Chou Yun-tsai, the chairwoman of Taipei's Research, Development and Evaluation Commission, which oversees the WiFly project.

"It's a huge task," Ms. Chou said.

Michael Giberson

Ray Gifford offers a realist's prognostication on the likely effects of network neutrality: only the lawyers win.

Not the end of the world if network neutrality laws pass, not the end of the world if they fail to pass. Only, if network neutrality becomes law, low latency high-speed service will be routed through "private networks" while ordinary traffic travels via the "public network" internet. The distinctions between the two will be somewhat arbitrary, but important to the law, and that is why lawyers win. Overall, a sensible if not too hopeful view.

Compare the calm Gifford tone to the more alarmist sounds of eBay CEO Meg Whitman (that's her smiling face in the picture) in an email sent to members of the "eBay community":

Right now, the telephone and cable companies in control of Internet access are trying to use their enormous political muscle to dramatically change the Internet. It might be hard to believe, but lawmakers in Washington are seriously debating whether consumers should be free to use the Internet as they want in the future ... These large corporations are spending millions of dollars to promote legislation that would divide the Internet into a two-tiered system....

Today's Internet is an incredible open marketplace for goods, services, information and ideas. We can't give that up. A two lane system will restrict innovation because start-ups and small companies -- the companies that can't afford the high fees -- will be unable to succeed, and we'll lose out on the jobs, creativity and inspiration that come with them.

No, the big, bad corporations aren't trying to take away your internet.

The best explanation I've seen is that some phone and cable companies are contemplating a build out of "last mile" connections to consumers using ultra high speed fiber optic systems. They hope to earn some of their profits by selling high-value video, phone and other services to those consumers. Their prospects for succeeding at this part of the venture depends upon their being able to restrict ultra high speed service to the services they offer. If they are required to provide open access on any ultra high speed wires they build, it diminishes their incentive to invest in the system.

(It doesn't look like eBay has posted the letter itself online, but here is eBay Government Relation's position on net neutrality.)

Addendum: A Bay Area techie, who bills himself as "The Only Republican in San Francisco", writes to draw my attention to his own worthy collection of postings on net neutrality. Try here or here, or read them all. Good stuff.

Michael Giberson

Anti-net neutrality campaign Hands Off the Internet wants to show it, too, can be "hip" to the ways of the kids on the internet. To show how "with it" they are, they've put together a purposely crudely-drawn animation explaining the dangers of net neutrality. Similarly crude economic reasoning underlies their voice-over. The basic message: net neutrality means consumers will have to pay for enhancements to the internet instead of big corporations that make billions of dollars online.

One set of big companies says policy X is absolutely necessary to protect consumers. Another set of big companies says policy not-X is absolutely necessary to protect consumers. What makes me think that this whole thing is not about protecting consumers?

Pro-net neutrality campaign Savetheinternet.com says:

If Net Neutrality is so bad for consumers, why do ALL the major consumer groups support it and ALL the major phone companies oppose it? Who do you trust more to defend your Internet rights? Without meaningful protections of Net Neutrality, there will be less choice on the Internet and higher prices, at a time we're already falling far behind the rest of the world.

Scary isn't it? Falling behind the rest of the world, and all. But let me answer their question, "Who do I trust more to defend (my) internet rights?" My answer: the companies that I'm a paying customer of, and who I can switch away from if and when I don't like their policies. It certainly isn't the government that gives us politically-driven enforcement of "decency" regulations for broadcast radio and TV. Do we want the same FCC that does decency for broadcast radio and TV to be our tax-paid protector of net neutrality?

Ask me "who do I trust more to defend my movie-going rights?" I gotta go with markets. Same thing for the internet. If there were a monopoly provider of internet connections in my area, I might be worried. Maybe I'd want assurance in my contract that the ISP won't block my choice of content. Maybe I'd even consider regulatory oversight as a possibility. But that isn't the world we live in.

C'mon, kids, monopoly pipes and wires are soooo last century. Get with the times.

Michael Giberson

First ninjas, and now the Gun Owners of America have come out fighting for "net neutrality." PFF wordslinger Randolph May ably defends open competition against the would-be regulators with a well-aimed long blog post, "Way Off Target."

Michael Giberson

The policy wonks at the Progress and Freedom Foundation have long worked to oppose the creation of overly restrictive "network neutrality" regulations, for example releasing the "The Digital Age Communications Act�s Regulatory Framework and Network Neutrality: A Statement of the DACA Regulatory Framework Working Group" by Randolph May, James Speta, Kyle Dixon, James Gattuso, Raymond Gifford, Howard Shelanski, Douglas Sicker and Dennis Weisman. Here is a sample:

Beyond the general incorporation of competition law principles, [the Digital Age Communications Act] also states that it is an unfair method of competition to substantially impede the interconnection of public communications facilities and services in circumstances in which the denial of interconnection causes substantial harm to consumer welfare. This �interconnection authority� is not necessarily dependent on traditional antitrust doctrine. Given the result of the Trinko case and the importance of interconnection in communications markets, the DACA provides separate authority for the FCC to order interconnection. [Footnote omitted]

In the other corner is Ask a Ninja: Special Delivery 4 "Net Neutrality."

I, personally, am of the wonk persuasion, and I favor the wonks in this battle. The lengthy treatise is also my weapon of choice.

But against ninja? The PFF boys don't stand a chance.

Lynne Kiesling

In his last column in Technology Review in December 2004, Michael Schrage talked about the importance of the diffusion of innovation. He made a lot of very trenchant observations, including

The challenge for policymakers and populations alike is how to cope with the pervasive-and perverse-consequences of ever more people gaining access to ever more innovations that offer ever greater impact for ever lower costs. Why? Because diffusion is inherently messy and unpredictable, and because the ingeneuity of a technology's adopters more than rivals the creativity of its original innovators. We ignore this at our peril.

I am going to use this quote as a stepping-off point for several posts this week, and I start with a "how cool is this?" example that illustrates the multi-dimensional dynamic of innovation. You know the story: you get a new technology, you say "gee, that's cool, but I wish it could also do X". Then you get on with your life. But chances are, there are other people out there who also want it to do X. One of those folks, imbued with entrepreneurial spirit and seeing an opportunity, innovates a new product or service that does X. Not only do those of you who wanted X to begin with benefit, but those of us who didn't realize we wanted X before also benefit, because in the process of creating the innovation and bringing it to market we discover our preferences over X relative to other product and service offerings out there, given our budget constraint. Our preferences feed into innovation, and what's more important and more overlooked, innovation feeds into our preferences. All the more reason why Hayek was bang-on right when he said that competition is a discovery procedure: the action is in the dynamics of innovation, not in the static discovery of my liking Fresca better than Diet Pepsi.

I offer as Exhibit A a somewhat frivolous example, but when I saw it, it made me metaphorically smack my head and say "of course!" 411song will, for 99 cents, identify a song and send you a text message with the song and artist information, and a link to get the mp3 of the song.

• Hear a song you love.
• Call (866) 411-SONG.
• Wait for the beep and hold your cell near the music for just 15 seconds.
• We identify the song and send you a text with all the song info (artist and song name) and a link to GET it.

Sure, it's frivolous, but I'd be willing to wager that it'll profit.

Hat tip to Daily Candy, one of my favorite daily fun reads.

Lynne Kiesling

So what, you say? It amounts to the deregulation of DSL, through the vehicle of saying that phone companies no longer have to share their phone lines with competitors. It puts DSL on more equal regulatory footing with cable, in the wake of the Supreme Court's Brand X decision earlier this year that negated the open access for competitors mandate.

This is huge, and hugely good. As usual, Ray Gifford has clear and cogent commentary on it:

For this, the Chairman deserves congratulations, not just for the regulatory parity it will achieve, but the Schumpeterian incentives it creates.

It is peculiarly foreign to the regulatory mindset that you only invest in those things where you believe you will be able to earn back and keep the profits from that investment. In capitalist parlance, we call that a property right. This Order acknowledges that.

Some folks are nervous that this ruling means more entrenchment of big old phone companies and less opportunity for competing resellers who lease their wires. I prefer to see it as the removal of a regulatory mandate that forces property owners to let others use their property for a fee.

Sonia Arrison agrees with me on this, and points to the vibrant reseller industry in cell phones, which has not been hampered by the lack of an access mandate. I should also mention here that I am thrilled to find that Sonia has set up her own website, yay!

If you define property rights clearly and reduce transaction costs, sharing and reselling may still happen. But it will happen in a more economically efficient and dynamic way.

Another good commentary comes from Tim Lee at Technology Liberation Front:

In any event, if your goal is to spur investments in new infrastructure, the first step must be to insure that the company that invests capital reaps the profits from that investment. It�s hard to see how �open access� rules could possibly accomplish that. Once the dust has settled from the well-deserved death of �unbundling,� we should have a thorough debate about how best to lower barriers to entry to the broadband market, so that companies can more easily build infrastructure (especially wireless infrastructure) to compete with the incumbents. But the debate must start with the principle that the government should respect the rights of companies who invest in infrastructure to profit from their investments, rather than �unbundling� them and giving �access� to other companies who have not bothered to make such investments.

Question: for you electricity folks out there, do you see any lessons here that we could apply to the putative lack of transmission investment in electric power? We've had open access rules since Order 888. We had investment problems before then, but you could argue that the open acess tariff in electricity transmission reduces the incentive to invest in high voltage wires.

Lynne Kiesling

I have taken advantage of the relative liberty and calm of the past three days to work on an overdue paper with a co-author, to whom I owe my share of the work. The question is this: in a physical network that retains some natural monopoly characteristics while some of the rest of the vertical supply chain in the industry is increasingly competitive [gee, she can't be talking about electricity, can she?], can ownership structure substitute for traditional "natural monopoly" regulation? Specifically, if competing retailers own shares in the wires network, and those shares give them use rights that they can use, sell or rent, will the beneficial tensions of those retailers exercise the "socially optimal" discipline on the capacity use, pricing, and construction in the upstream wires sector?

The more I think of this, the more I think there's an untapped telecom application for this idea. Most sensible people agree that the idea of open access to essential facilities leaves a bit to be desired (i.e., is crap) for many reasons, including the difficulty of determining the price that competitors should be charged for the use of the incumbent's physical network. In Illinois, for example, Ameritech/SBC had to accept a payment from competitors equal to the minimum long-run average cost if the network were being used at its optimal scale. I could draw you a bunch of simple graphs to show why this is a stupid idea, why it's totally incentive *in*compatible, and why SBC rightly complained (although they egregiously and foully exercised their political muscle in late 2003 to rectify the matter). Plus, that LRAC is estimated; it's not like SBC's CFO has it tattooed on the back of the neck! If it's estimated through a political process, then the whole panoply of rent seeking kabuki players come out onto the stage, and ya gotta wonder whether or not the LRAC the ICC uses is really LRAC*! I'm thinkin' ... not!

The competitive joint venture idea (CJV) would instead involve this: the FCC (or is it the state PUCs who have jurisdiction at that level? It's such a muddle I can't tell) holds an auction for the use rights of the wires network and switching capability constructed by the incumbent. Competing retailers bid for those use rights, using some well-thought-out design for the auction. The proceeds go to the incumbent, so there will be no sniveling or whining about so-called "stranded costs". From that point on, the local wires+switching is a CJV, with periodic (annual?) auctions for the use rights for the following year. Or, you could just do one auction at the start, for the right to be a member of the CJV in which the use rights would be determined by the retail market share of each of the CJV members. No entry/exit barriers, no restrictions on the ability to build new wires (except for the usual construction and local zoning junk).

It sounds like a reasonable alternative to open access to me, and certainly worth discussion, scrutiny, and testing (experimental, of course). I'm going to hold off on more whimsical speculation until I've thought further through this paper and have a version ready to go up on SSRN or some such thing.

Lynne Kiesling

A bill pending in the Texas Senate would open up the market for broadband over power lines in the state, according to this Ft. Worth Star Telegram article from Monday. Note in this excerpt that the issue of who pays for the service and why they pay for it is present, as it always is in utility discussions. Note also that some of the commenters actually want utilities to bear some of the risk of the decision to implement BPL. This may be the beginnings of a cultural change. But, utilities are still arguing for passing costs along to customers, in essence reducing their risk.

But where consumer and industry groups part ways is on how Texas should get there -- and who should foot the bill. Many detractors believe that the new technology is being oversold and -- despite the limited pilot projects -- remains largely unproven.

They also complain that under the deal that TXU and some utilities want -- the plan as outlined in the initial Fraser bill -- power companies could get into this very risky venture at no risk to themselves.

Rather, the utilities could pass on 100 percent of the upgrade costs to their electric customers, and then reap 60 percent of the profits. Electric ratepayers would receive the remaining 40 percent through a credit on their bills.

"That is what offends me the most," said Geoffrey Gay, an attorney who represents Fort Worth in utility matters. "It's not just the silliness of making the electric customer pay the cost -- but that [the utility] can make profit off this through some other mechanism, and then tell the ratepayers that they can get credit for just 40 percent. That's really offensive."

But Stephen J. Houle, TXU's vice president for corporate technology, said passing on the cost to electric customers makes sense because BPL potentially improves the overall efficiency of the utility's electric operations.

For instance, broadband over power lines can let utilities remotely monitor their electric substations, it allows them to detect equipment failures and it can provide technicians with real-time data about equipment operations in remote locations, Houle said.

Houle estimated the cost at $300 million to $600 million to make BPL available throughout TXU's North Texas service territory. "Hopefully, after we get this installed and you get just outstanding service ... you'll be so happy that you'll think it's a bargain," he said.

He said that under Fraser's bill, utilities could lease out their lines to independent BPL operators -- theoretically at little or no cost to ratepayers.

Fraser, chairman of the Senate Business and Commerce Committee, described the legislation as a starting point for discussion. He said that the bill was brought to him by utility representatives and that the final version will incorporate changes to protect consumers.

"The intent is not to spread the cost to everybody over the system -- that is not what we're trying to do," Fraser said. "This is an unproven technology -- there are pilot programs going forward, but we don't know for sure if this technology is going to work."

I think this is very interesting, both the opportunities for the BPL technology and the rhetoric and the possibility for treating the utility like a normal, for-profit, risky venture in this transaction. But I suspect that the "consumer advocates" also would argue that 100% of the profit from BPL should be returned to them, instead of 40%. I also suspect that the measures to "protect consumers" that Senator Fraser is talking about adding will put in very static price protections for customers. Will that really promote the public interest? Why not let the customers and the utilities figure out what's in the public interest by having the utilities making service offering and the customers choosing among them? Yeah, these BPL offerings are targeted at mid-size isolated communities, but they still have to compete with satellite and the potential competition that traditional broadband would provide if companies decided to offer it and enough customers were willing to pay enough for it.

But the really interesting thing will be the treatment of the equipment costs. Why, when we live in a world in which cell phone companies give away phones to get your business, should customers and utilities be told who will bear what share of the cost? Does Verizon decide that before they build more cell towers? I don't think so, and furthermore, they don't charge me for my phone!

Let me put it another way: why doesn't the legislation just say that utilities may offer BPL service using their wires, and they may offer service choices to their customers? Let the buyers and sellers learn what the optimal price risk assignment is. Don't have the hubris to think that legislative determination of the price risk split is anything other than an avenue for rent seeking.

Lynne Kiesling

On Sunday Radley Balko had a disturbing, if not surprising, note about possible regulation of cable and satellite channels. He quotes a column in the Pittsburgh Tribune-Review:

A U.S. Senate bill authorizing government censorship of cable and satellite TV channels references children 44 times and the First Amendment not at all.

His post made me think about a couple of things. First, several people whose opinions I respect (and with whom I generally agree) think that Kevin Martin will be a good FCC Chairman. I am so not convinced. I don't see any of the comprehension or appreciation of the Hayekian/Schumpeterian dynamism in these converging industries that we saw in, say, Michael Powell. The sense in which Martin looks "free-market" to me is a much more static, caricatured conservative way, one that still allows a lot of room for mischief from dirigiste technocrats. Furthermore, Martin has repeatedly been a stoolie for the nanny indecency crowd, a position I find utterly insupportable and inconsistent with the crucial combination of individual liber