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Corporate Welfare

Watch the "open" CNBC debate over 700 MHz rules -- you decide

CNBC's Larry Kudlow hosted a debate over Chairman Martin's proposed open access/net neutrality regulations for the 700 MHz auction.

Both sides were ably represented:

  • John Rutledge of Rutledge Capital took the free market view and
  • Gerry Waldron who represents Google and worked for Chairman Ed Markey took the pro-regulation view.

Watch and enjoy!

The Department of Justice on "bid rigging"

Given the issue of whether or not the 700 Mhz auction is being run for the benefit of the American taxpayer, there is a very interesting quote from a Justice Department official today on their view of "bid rigging" in a competitive government auction, in this case concerning a defense contractor.

  • "The antitrust division is committed to protecting the competitive market for Americans," said Assistant Attorney General Thomas O. Barnett, who heads the department's antitrust division. "We will continue to bring to justice those who rig bids and thereby deprive the public of the benefits afforded by a competitive bidding process."

It is interesting to juxtapose this Justice Department quote of today with another quote from today in the Dow Jones article on the 700 MHz auction, which quoted the position of Gigi Sohn of Public Knowledge on "bid rigging":

  • She acknowledged that effectively Google and public interest groups were asking the FCC to "rig the auction" to facilitate a third national broadband competitor to the incumbents - AT&T Inc. (T), Verizon Communications Inc. (VZ) and the cable companies.

The ends don’t justify the means.

FCC pulling the rug out from under the Administration's broadband policy?

Kudos to the Wall Street Journal today for their twin great editorials on net neutrality and the 700 MHz auction: "Reed Hundt's Spectrum Play" by the Jounal editorial writers and "Telecom Time Warp" by Robert Crandall and Hal Singer.

  • The Journal editorial accurately hits on the Google/Hundt cabal to rig the auction rules so they can win the Nation's most valuable spectrum at a deep discount.
    • Google is laughing all the way to the bank that they could sucker a Republican Chairman of the FCC to carry their water and stand heavily on the competitive scales to pick them as winner before the bidding commences.
    • It will be interesting to see how Chairman Martin "squares this circle" and explains why market participants should ever trust what he says going forward on competition and regulation given that up to now he has discussed no market failure or consumer problem that requires regulation to solve up to now.
  • My favorite point of many in Robert and Hal's great editorial is reminding everyone the outrageousness of the FCC mandating "unbundling" (a drastic action reserved for entrenched monopolies) when the wireless industry is so obviously competitive that the price of a wireless minute has fallen by 84% over the last decade!
  • Amazing! Chairman Martin apparently finds market failure when prices are plummeting, consumer choice has exploded, subscribership and usage has skyrocketed and investment boomed. Huh?
    • What's wrong with this picture? 
      • The only apparent explanation is that Chairman Martin now believes more in the regulatory hand of Big Government than the "invisible hand" of market forces.
    • Wireless is the single biggest competitive success story in communications!
      • And Mr. Martin's reward for all those market players that invested billions of dollars of risk capital to buildout the world's most competitive facilities-based wireless marketplace -- is heavy handed and unnecessary "separations" and unbundling monopoly regulation!

Bottomline:  The Bush Adminstration's sole policy goal in telecommunications has been to promote broadband investment and deployment to all Americans.

FCC Martin proposes corporate welfare for Google in 700 MHz auction

According to DowJones, FCC Chairman Kevin Martin is proposing some of the net neutrality/open access regulation that Google requested for 22 of the 60 MHz of prime 700 MHz of spectrum to be auctioned off by the FCC in early 2008 for use in about 2010.

I have three points to make about Chairman Martin's reported net neutrality/open access proposal.

Frontline wants competition through "zoning regulations?"

The Washington Post gave a lot of "free" ink to former FCC Chairman Reed Hundt today to push for his Frontline Wireless corporate welfare scheme. The article also provides a "bay window view" of Mr. Hundt's perverted view of "competition."

  • Mr. Hundt said: "We're asking the FCC to place conditions on the sale of the license, just like zoning on real estate."
  • Competition through zoning regulations!
  • This captures the essence of Mr Hundt's "market" views. He has always thought "competition" was much too important to be left to the marketplace.
    • Mr. Hundt's entire tenure as FCC Chairman was characterized with a deep distrust of free market forces and a fondness for writing very detailed regulations that heavily tilted the playing field to guarantee his desired outcomes.

Now that his company has $3b in capital and is prepared to raise up to $10b in the next five years, according to the Post, why is he so afraid to compete in the auction like everyone else?

Frontline's proposal is so disingenuous: Let me count the ways

Frontline's Reed Hundt is mounting a furious eleventh hour effort to finagle a backroom sweetheart deal for his company from the FCC, in the 700 MHz auction. He attacked the outstanding op ed in the Washington Post by Robert Hahn and Hal Singer in both the Post and in RCR.  Our former Big Government FCC Chairman, Mr. Hundt also apparently has lost his cool and perpsective in railing against the rollout of the new, innovative and already successful iPhone as somehow a market failure that only his company can cure.

No due diligence for Frontline Wireless? Special favors for special interests?

Congrats to Jeff Eisenach of Criterion Economics for his outstanding and incisive analysis "Due Diligence: Risk Factors in the Frontline Proposal."

  • Jeff Eisenach wonderfully brings clear thinking and common sense to a topic that sorely needs it.

The analysis exposes the Google-supported Frontline Wireless proposal for what it is... a "trust us" investment of effectively billions of dollars in forgone receipts due to the American taxpayer in a free market auction.

"Earmarked Airwaves" -- a 700 MHz auction "UNE-P" deja vu?

Kudos to Robert Hahn and Hal Singer for their outstanding op ed in the Washington Post "Earmarked Airwaves."

  • The editorial cogently presents the fork in the road that faces any major FCC decision: to follow law, which promotes competition and market-driven outcomes, or to freelance and try and "manage" competition and pick winners and losers in advance through "spectrum earmarking."
  • FCC history is littered with freelance "managed competition" failures, but two are particularly ignominious and highly relevant to this 700 MHz auction:
    • the illegal UNE-P scheme to rig telecom competitive outcomes following the 1996 Telecom Act; and
    • the Nextwave auction scandal that kept 30 MHz of prime spectrum fallow and tied up in court for almost a decade.

At its core a spectrum auction is the quintessential type of competition. The auction law's purpose in 1993 was to use market forces, competition, to allocate the public's asset most appropriately, largely because previous FCC spectrum allocation processes were so ineffective, unfair and prone to serious abuse and graft.

  • While no process is perfect, a clean competitive auction process has proven highly effective in rewarding US taxpayers and fostering a growing and highly competitive wireless marketplace that greatly benefits consumers.

This 700 MHz auction may be shaping up to be FCC Chairman Kevin Martin's legacy moment: will it be marked by promoting competition and market-based outcomes or will it be marked by standing on the auction scales to ensure the spectrum is "earmarked" to the predetermined, chosen "winner" -- in this case former Clinton-Gore FCC Chairman Reed Hundt's Frontline Wireless company.  

What? We're not one of Google's favorite blogs! How can that be!

Can you believe it?

Google launches its new public policy blog today and the NetCompetition/Precursorblog is not one of the blog links under "What We Are Reading!" Horrors!

First of all, it is not very "authentic" of the Google bloggers to not admit that they regularly read Precursorblog -- we know they do!

  • Of course they do.
  • It's just one of those guilty pleasures that they do behind closed doors because it is not politically correct at Google to expose one's mind to conservative or free market thoughts.  

Second, don't you believe for a minute that Google does not want to know what their latest public policy or PR vulnerability is.

Welcoming Google to the blogosphere!

The following is the comment I posted to Google's first "authentic" blog post on net neutrality in Google's new public policy blog:

Welcome to the blogosphere! We congratulate Google for joining the NN debate more openly using your own "authentic" voice and not those of your surrogates. It is also about time for Google to be more specific on the issue of net neutrality.

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Q&A One Pager Debunking Net Neutrality Myths