From the Archives: 'Cable Competition' (1991)

With all the talk about net neutrality these days, I was reminded of this letter to the editor from me published in the Chicago Tribune on September 11, 1991, about cable television monopolies:

Cable Competition
September 11, 1991|By Richard E. Sincere Jr.

ARLINGTON, VA. — Should cable TV monopolies be ended and competition take their place?

This seemed to be the question professor Tas Papathanasis asked in an Op-Ed article on Aug. 26 ("Inject competition into cable TV"). Unfortunately, Mr. Papathanasis does not deliver what he promises.

There is no reason, technical or economic, why cable TV companies cannot compete head-to-head in the same local market. Yet Mr. Papathanasis proposes a timid solution to the current problem of cable monopolies-make companies compete periodically for exclusive contracts to serve localities. In reality, this is no different than the current situation in most markets.

In those places where companies are allowed to compete in every sense of the word-Allentown, Pa., is one notable example-the price of basic cable service is kept low and consumers have more choices regarding the channels they receive and the services companies make available.

A temporary monopoly such as that proposed is still a monopoly; we consumers remain the losers. Once local governments allow competition among currently available services and once the federal government allows telephone companies to enter the cable TV business, consumers will be the big winners.

From the Archives: Policy analyst James Gattuso discusses problems with Net Neutrality – Part II

Policy analyst James Gattuso discusses problems with Net Neutrality – Part II
January 24, 2011 12:15 AM MST

In a January 11 interview with the Charlottesville Libertarian Examiner, James Gattuso – who is a senior research fellow in regulatory studies at the Heritage Foundation in Washington, where he focuses on communication policy – spoke about the Federal Communications Commission’s recent ruling on so-called “Net Neutrality.”

Gattuso argued that the new rules were at odds with efficient economic operation of the Internet and also that they were based on “flawed” claims of legal authority by the FCC.

He also predicted that Congress will take action to reverse the FCC's ruling.


Congressional Review Act
One avenue will be the Congressional Review Act, which was passed in 1996 and allows Congress to overrule executive branch regulations.

Another possibility, Gattuso said, is “standalone legislation to reverse the FCC’s decision and strip them of authority to act in the future.”

This could face a hurdle, however, because Net Neutrality rules have “been a priority item for president Obama and he can veto any such standalone bill.”

He suggested that a “much more potentially winning strategy is going to be the funding approach, where they will put on an appropriations rider prohibiting the FCC from using any funds to enforce this rule.”


Threat to the First Amendment

James Gattuso (c) 2011 Rick Sincere

Finally, Gattuso expressed his concerns that the FCC’s new rules could have negative implications for freedom of expression now protected by the First Amendment.

“The rules as written by the FCC ban ‘unreasonable discrimination,’” he said. “They use the word ‘reasonable’ quite a bit in the rules, which ultimately means the FCC will have discretion to decide how content can be treated on the web, what can be given priority, and what must be given priority.”

This means, he added, that “whenever a company has a plan for treating one group of content different from another or even treating it the same as another, the FCC can say ‘yes’ or ‘no.’”

That will put the FCC “inevitably into the business of deciding what speech is valuable, what speech is important, and which speech is favored.”

That, Gattuso concluded ominously, is “a dangerous path.”

Publisher's note: This article was originally published on Examiner.com on January 24, 2011. The Examiner.com publishing platform was discontinued July 1, 2016, and its web site went dark on or about July 10, 2016.  I am republishing this piece in an effort to preserve it and all my other contributions to Examiner.com since April 6, 2010. It is reposted here without most of the internal links that were in the original.

From the Archives: Policy analyst James Gattuso discusses the problems with Net Neutrality – Part I

Policy analyst James Gattuso discusses the problems with Net Neutrality – Part I
January 24, 2011 12:03 AM MST

When the Federal Communications Commission issued rules regarding Net Neutrality in December 2010, it set off a debate about the value and legitimacy of those regulations.

Earlier this month, the Charlottesville Libertarian Examiner had an opportunity to interview James Gattuso, senior research fellow in regulatory policy at the Heritage Foundation in Washington. Gattuso had addressed a group of Virginia political activists in Richmond about the FCC’s new rules.

Gattuso summarized his remarks by saying that “the FCC last month adopted rules to regulate the Internet. They’re vague rules but, I think, very detrimental rules to society and the economy.”


‘Vague notion of fairness’

The argument for these rules, he said, “is essentially a vague notion of fairness,” which posits that “ISPs -- companies like Verizon and Comcast, which provide Internet service to individuals and businesses -- should treat all traffic the same, with no differentiation between how the speed or quality with which they’re delivered.”

This, he went on, is a “tempting idea but ultimately flawed.”

It is flawed “because for practical purposes there’s always been and needs to always be differentiation” in services regardless of what kind of business is under discussion.

Moreover, Gattuso said, “the idea of premium services and discount services is inherent to a marketplace. I can’t think of a single industry that does not use premiums and discounts. It’s an economic tool that’s beneficial to consumers.”

Premiums and discounts, he continued, are “necessary to the success of the Internet itself.”

No legal authority

Gattuso also argued that the FCC lacks the legal authority to issue Net Neutrality regulations.

James Gattuso (c) 2011 Rick Sincere

The FCC gets its authority from the Communications Act of 1934 and many subsequent amendments, he said. This law “gives the FCC authority over broadcasting. It gives the FCC authority over the telephone system, but it does not give authority anywhere in the text [for] regulating the Internet.”

To get around this lack of legal authority, Gattuso noted, “the FCC has argued in the past that it has what is known as ‘ancillary jurisdiction,’ which means if they regulate something that is similar to the Internet, they can regulate the Internet itself.”

The problem with this position, however is that the claim “was thrown out in a case in federal court last April, without much ceremony. It was not taken seriously by the court, nor should it have been,” said Gattuso.

However, he added, “with this December decision, the FCC is coming back again with a very similar argument, this time based upon a particular section [of the code] that was meant to be deregulatory.”

In that section, “Congress instructed the FCC to act to encourage development of advanced Internet services. This was a provision that was meant to instruct the FCC to deregulate, to reduce barriers, to advance Internet services if they are not being deployed.”

What the FCC is claiming now is that this deregulatory provision of communications law is “in fact a new grant of authority that they did not otherwise have, mandating them to regulate.”

This, Gattuso concluded, is “a complete reversal of what Congress intended and, ultimately, also legally flawed.”

In Part II of this interview, James Gattuso talks about what the congressional response might be, and whether Net Neutrality is a threat to freedom of expression.


Publisher's note: This article was originally published on Examiner.com on January 24, 2011. The Examiner.com publishing platform was discontinued July 1, 2016, and its web site went dark on or about July 10, 2016.  I am republishing this piece in an effort to preserve it and all my other contributions to Examiner.com since April 6, 2010. It is reposted here without most of the internal links that were in the original.

Mettez vos mains sur le volant!

An amusing viral video that has attracted almost 200,000 hits on YouTube in about three days turns out to be a publicity gimmick by a company that manufactures hands-free mobile telephone equipment.

The video, which appears under the misleading title "Kid fails driving test 5 times in a day," is a sort of "candid camera" prank, in which several California driving teachers are the targets of the joke.

Here's the video:

As you can see, the "kid" is not "fail[ing] his driving test," but rather is taking driving lessons from exasperated instructors.

Since the video ends with a plug for "Parrot.com," most people should have got the clue that this was a commercial production, and not some teenager playing amateur "Punk'd" with a hidden dashboard camera.

The truth came out in a FishbowlLA post earlier yesterday:

The video is part of a marketing strategy for a company called Parrot.com to raise the awareness of the new laws in California, as well as, to raise the brand awareness of their hands-free mobile devices in the US. Parrot funded the production of the video.

The video is not scripted. The company installed hidden cameras in the car and hired "John" to test the limits of these driving instructors using his cell phone.

Who is Parrot.com, you may ask?

According to its corporate web site,

Based in Paris and founded in 1994 by Henri Seydoux, its Chairman and CEO, Parrot S.A. is one of the profitable, fast-growing companies that have emerged from the "start-up" generation. Since its beginnings, Parrot's core competence has been the technologies for embedded noise-robust voice recognition and signal processing, with applications in mobile computing and mobile communications.

Parrot also hosts a web site called "ParrotSafeDriving.com," which provides a guide to hands-free driving legislation across North America. Among other things, it offers this useful map of U.S. states and Canadian provinces that prohibit (or are soon to prohibit) driving while using a cellphone or PDA or similar device:


This gives a whole new meaning to "red, blue, and purple states."

Free-Market Wireless Beats Government Telecom Monopoly

An amusing front-page story today in the Daily Progress (Charlottesville, Virginia) reports how University of Virginia officials lament the multiplication of cell-phone use among students who live in the dormitories on grounds.

It seems that for years, the University ran a monopoly on telephone service for dorm rooms, providing land lines and charging a premium price for long-distance service. The monopoly pricing was incorporated into the University's budget, with the money going toward telecommunications infrastructure projects.

What the University did not count on was the desire for freedom -- freedom to choose, freedom to move -- on the part of students, who increasingly use cell phones to communicate both locally and distantly with friends and loved ones. Consequently, the revenue from long-distance phone calls in dorm rooms has plummeted precipitously.

Reports Kate Andrews of the Daily Progress:

"The volume of student long distance calling has been dropping for many years," said James A. Jokl, director of UVa’s communications and systems. "I suspect many reasons, including e-mail and calling cards in the past and additionally cell phones more recently."

In the 1997-98 academic year, students spent more than 5 million minutes making long distance calls. That rate fell to 600,000 minutes last year, bringing in only $30,000.

Look at those numbers: Long-distance call-minutes have diminished to only 12 percent of their numbers of only seven years ago.

This may be a small example, but it is one more strong piece of evidence that, when government creates or facilitates a monopoly, some competitor in the private sector will come along to undercut prices or provide better service. Monopolies cannot and will not (and must not) be maintained.

U.S. Postal Service, take note.