“In other words, we stole the value from the telephone network and gave it to ... society. When I say we stole it, it was a government rule that produced this outcome.”

If this doesn't sound Nixonian, it ought to. It was Nixon who famously said, “If the President does it, it is not illegal.” But the president is not above the law, and he was forced to resign.

Also, one cannot steal from a company, although this point is often overlooked. One can only steal from a group of investors, employees and/or consumers. They are the ones who ultimately pay.

While the FCC was stealing from the communities of interest represented by the telephone companies, Hundt said, it also tried to repress broadcasting: “This is a little naughty: We delayed the transition to HDTV and fought a big battle against the whole idea.”

Hundt thought his actions all served a higher purpose, i.e., “We decided ... that the Internet ought to be the common medium in the United States and that broadcast should not be,” he said. “We also thought the Internet would fundamentally be pro-democracy and that broadcast had become a threat to democracy.” Huh?

Hundt boasted that identifying and encouraging a particular medium as the common one was unprecedented in American history, according to Jessell. “It has actually been an essential characteristic of media in the United States that we have never had a plan and we have felt that that was in the nature of our democracy and our capitalism to not have a plan,” Hundt said. “It's kind of interesting to think that we are now imitating China in this particular respect,” he added.

For that matter, I wonder whether the new National Broadband Plan could also be compared to a Maoist “Great Leap Forward” or Soviet-style Five Year Plan? I don't know anyone who argues Communism brought prosperity and human rights to China, the Soviet Union, Eastern European satellites or anywhere else. Throughout history, collectivism has always failed. Communism produced the Ukrainian famine of the 1930s, the Gulag Archipelago, the killing fields of Cambodia and countless other examples of poverty, torture and executions. But for many people the Dream will never die, obviously.

During Hundt’s tenure, the FCC adopted “sharp-edged rules” to create a diversity of competitors who could “weaken the political influence of the big, established (and typically Republican-leaning) firms,” (emphasis added.) as well as create choice for consumers. (Reed E. Hundt, You Say You Want a Revolution: A Story of Information Age Politics (Yale Univ. Press 2000) at p. 15).

Whether Hundt realized it or not, consumers would have been winners without his grand scheme. Fiber optic, wireless and computing technologies were and still are in the process of relentlessly slashing the cost new entrants incur when investing in competitive network facilities. As the late professor Schumpeter counseled, monopoly power cannot last for long “unless buttressed by public authority.” Which is why a central feature of the Telecommunications Act of 1996 was to invalidate exclusive franchises which shielded incumbent providers from competition.

In fact, Hundt probably harmed consumers by creating a bonanza for lobbyists and litigators and delaying investment in broadband. But, as Hundt pointed out,

Congress had not been mindful of Senator McCain's repeated warnings against transferring power to me. Now, … the Telecommunications Act of 1996 made me, at least for a limited time, … one of the most powerful persons in the communications revolution. (Hundt at 148)

Hundt complained that the other commissioners “told anyone who would listen that I was arrogant, imperious, stubborn, self-righteous, deceitful.” (Hundt at 182)

There it is, in his own words.

Unfortunately, Hundt exemplifies the type of person we frequently get when we opt for activist government.

The author of Life After Television, Microcosm and Telecosm, among others, has been trying hard to make the point that the very cutting edge of our economy is high technology and its abundant success is the product of freedom from government over-regulation. Obama and Co., he says, hope to change that.

Net neutrality is Orwellian. It is further evidence of America's careening drive into a planned economy--and stagnation.

A column by Holman W. Jenkins, Jr. offers some clues:

Ask the media bankers and investors at a recent FCC roundtable. To a man and woman, they said the FCC's stringent ownership rules have only cut broadcasters off from the capital to remake their businesses for the digital age.

Obviously the FCC goal is to put the spectrum in other hands instead of freeing broadcasters to develop cutting-edge services.

It is not just because the technology is new that it has made such a huge contribution to our economy; it's also because the new technology has been relatively unfettered by the government.

The whole subject of federal regulation re-emerges in a major way in coming weeks. Watch this space.

Meanwhile, Mark Landsbaum of the Orange County Register (in a column that I missed when it first came out) is among those trying to sound the alarm about losing freedom on the Internet.

Take note before they take it away.

The Georgia State Senate approved a sweeping reform of the state's telecommunications laws by a vote of 46 to 4 (see HB 168, as passed by the Senate).

The Senate bill

• Eliminates legacy telephone regulation that restricts competiton by creating artificial competitive advantages and disadvantages so that VoIP, wireless and wireline carriers will all have an equal opportunity to compete.
• Reduces inflated intrastate access charges for smaller rural telephone service providers and new entrants to the same level as interstate access charges.
• Sunsets Georgia’s Universal Access Fund, after providing a partial replacement of lost access revenues for ILECs who provide high-cost services (subject to a fully contested PSC hearing before allowing any fund distribution).

All providers of voice services should be subject to minimum regulation which does not discriminate on the basis of technology or history. This principle isn’t novel or unprecedented. In the Southeast region alone, the necessary reforms have been adopted in Alabama and other states are moving in the same direction.

George Gilder and I noted here that a 2007 study projected that Georgia consumers will save $3.3 billion over 5 years in the form of lower prices for voice services as a result of competition (which is at risk if regulation tilts the playing field).

Even more importantly, regulatory reform will reduce risk for investors who will have to finance universal access to the fastest broadband speeds, which the FCC staff estimates could cost $350 billion nationwide.

We cited another recent study which estimates that just a 7 percent increase in broadband adoption in Georgia would lead to the creation of 71,059 jobs and $3.9 billion in economic impact annually. Education, health care and financial services are sectors of the economy which are particularly well-positioned to benefit from increased investment in broadband.

The alternative to regulatory reform is to accept an unnecessary risk of diverting investment to another state with a lower risk profile.

Meanwhile, Secretary of State Hillary Clinton and the president's friends at Google are hectoring China on Internet policy. Although commanding twice as many Internet users as we do, China originates fewer viruses and scams than does the U.S. and with Taiwan produces comparable amounts of Internet gear. As an authoritarian regime, it obviously will not be amenable to an open and anonymous net regime. Protecting information on the Internet is a responsibility of U.S. corporations and their security tools, not the State Department.

Historical data suggest that for every $1 billion in revenue, "core" network companies provided 2,329 jobs, while non-network "edge" companies provided 1,199 (about half as many). This indicates that Net Neutrality rules that reduce revenues and growth for network companies, and transfer benefits (revenue or growth prospects) to non-network companies, are a barrier to job creation.

PK is worried the U.S. Court of Appeals for the D.C. Circuit might rule in a pending case that the FCC doesn't have jurisdiction to regulate broadband. The group also is fretting over a recent observation by AT&T that, "with each passing day, more and more communications service migrate to broadband and IP-based services," leaving the public switched telephone network ("PSTN") and plain old telephone service ("POTS") we all grew up with "as relics of a by-gone era."

Unless AT&T is also suggesting that the network which replaces the PSTN would also be subject to [the same regulatory framework, i.e., Title II of the Communications Act of 1934], how would any authority to take any action persist?" (emphasis added.)

But as AT&T points out, maintaining two separate communications networks will become increasingly costly and unsustainable.

Every time a household or business cuts its landline, the fixed costs of providing POTS must be spread over a smaller customer base, thus raising the average cost of serving the remaining customers. “[P]erhaps more than any other business in the world, the wireline TelCo is a fixed cost business.” According to one estimate, the average per-line cost of maintaining the legacy network has risen from $43 per year in 2003 to $52 per year today. (footnotes omitted.)

No matter what task one tries to accomplish, it helps to have a clearly defined objective. Is faster broadband for all the objective, or continued regulation for the benefit of various reliance interests? Didn't Congress establish a goal of ensuring that all people of the United States have access to broadband capability in Section 6001 of the stimulus bill, aka the American Recovery and Reinvestment Act of 2009? And didn't the President just say he does not believe in bigger government?

According to PK, Title II regulation would "expand the range of opportunities for more aggressive regulatory steps" for widespread deployment of broadband. Sure. Government could subsidize broadband by adding to the deficit or raising taxes or fees.

That would mean expanding or duplicating the current Universal Service program, which would be unwise. Much has been written about the disaster which is Universal Service. The U.S. Government Accountability Office (GAO), for example, noted in June 2008 in a report entitled "FCC Needs to Improve Performance, Management and Strengthen Oversight of the High-Cost Program," that Congress anticipated that competition and new technologies would eliminate the need for Universal Service support mechanisms, but the explicit fund grew nearly 153 percent between 1998 and 2007.

The President has said that it is time to end "tired old battles" and try some common sense. We can start here.

Christine A. Varney, the Assistant Attorney General for Antitrust concurs, noting

It is premature to predict whether the wireless broadband firms will be able to discipline the behavior of the established wireline providers, but early developments are mildly encouraging.

While wireless remains a possible source of platform-based competition, it remains unclear whether these services genuinely compete with wireline providers. At present, it would appear that most consumers regard wireless "broadband" through their CMRS handsets as a complimentary service to their wireline broadband connection, not as a substitute.

The Pew Internet & American Life Project found that 55% of American adults connect to the Internet wirelessly. Oops!

According to 16 civil rights, professional, service and elected officials' organizations,

wireless broadband has been a real success story for minorities ... Among all groups, wireless broadband might be most important to Hispanic Americans. Hispanic Americans "are among the most avid users of mobile broadband .... According to one study, African-Americans are the most active users of the mobile Internet -- and their use of it is also growing the fastest. This means the digitsl divide between African Americans and white Americans diminishes when mobile use is taken into account. The statistics from this study show that while only 33% of White Americans have used a mobile device to go online, 58% of African Americans have. Similarly, while only 19% of all Americans use mobile devices to access the Internet on an average day, 29% of African Americans do ....Commenting on this wireless success story, [FCC] Commissioner Clyburn has remarked that "[w]ireless adoption -- the use of handheld, mobile devices among African Americans is off the charts. (footnotes omitted.)

The administration is clearly backtracking. But why?

Part of the reason is some unexpected political pressure, including a letter signed by 72 congressional Democrats opposing the FCC's proposed rules soon after they were announced.

But the bigger explanation is the growing priority within the administration for nationwide, affordable broadband service. In the course of preparing the national broadband plan, mandated by the 2009 stimulus bill, universal high-speed access has taken on increased significance in the government's hopes for a rapid economic recovery. Beyond the current financial woes, Congress, the FCC and the White House all recognize the importance of improving the communications infrastructure to maintain U.S. competitiveness in technology innovation.

In today's carrier networks, IP may not always be hyped or even seen, but it is indeed everywhere – and in 2010, it's only going deeper and making an even bigger impact.

But the message of all the brave talk about "ultimate outcomes that have yet to take hold today" is that once again it is becoming reasonable to predict that cable will win. CableTV is already frankly devoted to the transmission of the high definition interactive video that will comprise 99 percent of network traffic. This is the black hole into which all the plans for sophisticated Rich Communications Suites, guaranteed QoS, Internet Multimedia Services, and all the abortive plan for Long Term Evolution (LTE) will fall.

The companies for the new era will be the hardware enablers of broadband interactive video: graphics and network processors, optical transponders, wavelength division muxing gear, and optical circuit switches for the new TDM circuits that will be crucial for the robust streaming video that will be at the heart of the market.

That's the Henry Gau Telecosm and I'm sticking to it. Upgrading the old networks for video and multimedia, one service at a time, is a non-starter. It will be swept away by truly broadband wavelength circuits optimized for interactive video streams. Within these circuits all other
traffic can flow without significant additional expense.

Security, routing, session management, and switching all will be done on the customer edge and the datacenter, which will comprise the bulk of the server edge.

Unless the telco's grasp that their old circuit model is relevant again, they are going to give way to cable TV players who already get the picture in high definition and are moving ever closer to video teleconferencing.

According to the Times, this combination could be just awful

Comcast could bar rival cable and satellite TV companies from access to desirable NBC shows, or it could offer them only at a high price, bundled with less attractive content …. Comcast could now be tempted to limit access to NBC content on rival Internet services, or charge them high fees. And Comcast could take its bundling business model to the Internet by forcing customers to buy cable packages in order to see content from NBC’s network online.

These concerns might not justify blocking a merger. But they do justify a careful review …. What regulators must not do is let this deal pass unchallenged.

Well, if the deal is rejected or withdrawn, various special interests get nothing.

• What is its impact on the prices consumers will pay?
• Would the combination mean more newsrooms (but perhaps fewer reporters) controlled by one entity?
• How would the transaction affect minorities and diversity on the airwaves?
• Would this merger lead to fewer voices on both traditional and new media?
• Does the nature of the transaction make even more urgent the need for FCC network neutrality rules?
• What about the future of competition in the several markets these companies serve?

The list of questions and consequences goes on. Clearly this proposal requires close and comprehensive Commission review.

Yes, I wouldn't put it past the clever operatives at the FCC to force Comcast to choose whether the company will continue to oppose network neutrality regulation or whether it would prefer to have its merger approved? Politics being what it is, and all that.

Comcast says it will

preserve and enrich the output of local news, local public affairs, and other public interest programming.

It is not inconceivable that the regulatory approval process can be used to force Comcast to cross-subsidize NBC. The network ranks a distant fourth in prime time; who knows, it may be a dinosaur.

Former FCC Commissioner Harold W. Furchtgott-Roth notes that the FCC can impose any condition for any reason on any merger.

Of course, in the exercise of its administrative authority, it would be entirely proper for the FCC to condition license transfers on compliance with FCC rules, and even to inspect closely whether the merging parties are in compliance with those rules. But compliance with existing rules rarely is the focus of FCC license transfer reviews. The merger reviews became examples of improper administrative behavior. The following is a list of the failings from just one merger review, SBC-Ameritech:

• The transaction was found to be out of compliance, even though it did not violate any extant statute or rule.
• The alleged harms were speculative and unrelated to the merger.
• The conditions did not remediate the alleged harms.
• The conditions were inconsistent with the Communications Act.
• The conditions were disproportionate to the alleged harms.
• The conditions placed undue administrative burdens and costs on both the FCC and participants in the telecommunications market.
• The conditions were either voluntary and therefore unenforceable or involuntary and therefore judicially reviewable.
• The FCC lacked merger-review authority.
• The order was adopted pursuant to extraordinary procedures that undermined the appearance of impartial decision-making.
• The order was adopted pursuant to an ad hoc and potentially arbitrary rule.
• The order failed to articulate intelligible principles for the "public interest" test for mergers. (footnote omitted.)

These and other failings are found in practically every merger reviewed by the FCC.

My interests were:

I could opt out of interest-based advertising or manage my ad preferences at the Google site, but, I figured, what's the point?

A Google representative told the New York Times that the Privacy Center pulls in tens of thousands of visitors each week. For every one person who opts out, four people change the categories they have fallen into, and 10 people do nothing, just look over the information on the site.

The same article quotes an academic who notes that some consumers do not understand behavioral advertising, and that “people are confused about which part of a Web page is advertising.” So apparently the argument is regulation is justified because it would relieve some people of the responsibility to get educated.

But one of the chief problems with any regulation -- no matter how well-intentioned -- is the difficulty containing it. For example, “a number of parties have suggested it would be appropriate to extend these privacy rights as a consumer protection to the offline side as well,” Rep. Boucher says.

The essays were the subject of a Capitol Hill event yesterday which featured remarks by Rep. Gene Green (D-TX) and Rep. Marsha Blackburn (R-TN).

According to The Hill’s technology blog,

By glancing at the authors, it's no surprise that the 14-essay pamphlet's thesis is that net neutrality regulations would ultimately be harmful for consumers and thwart innovation. The table of contents has familiar names: Randolph May (Free State Foundation), Wayne Leighton (Empiris), John Mayo (Georgetown University) and Hance Haney (Discovery Institute), to name just a few. You most likely already know their positions.

“What we’re talking about here is not discrimination, but differential pricing,” added Hance Haney, director and senior fellow of the Technology & Democracy Project at the Discovery Institute. Banning such a practice will force providers to “recover the entire cost of investment from consumers,” he added.