Universal service doesn’t encourage #capital for #entrepreneurs

Regulating commerce is one thing. Failing to encourage capital formation and distribution of capital to entrepreneurs cannot be acceptable. Section 214 of the Communications Act demonstrates how out of touch current law is with today’s technology and the entities that deliver that technology. The 115th Congress and the next Administration need to revamp universal service such that funding actually encourages new entrants into the broadband market and the innovations that come along with that entry.

Under section 214 of the Act, common carriers designated as eligible telecommunications carriers (ETC) qualify for receiving universal service funds. A common carrier is engaged in providing foreign or interstate communications by wire or radio.  The Federal Communications Commission revamped its 20th century based support program, originally designed to subsidize voice services, to now support deployment of broadband services in high cost areas, areas where broadband providers argue it is cost prohibitive to provide high-speed access services.

Among the criticisms of the program is its inefficiency. Specific concerns have been raised about funds supporting services in areas where competition already exists. On reflection why is this a problem? If a carrier sees the opportunity to take a single-digit percent of market share where garnering such a share covers her fixed and variables costs while generating a profit, so what if other choices already exists? New entrants enter the fray when they believe that they have an innovative way of providing services and eventually taking market share. This is part of the adventure of applying venture capital; digging in for a period of time a generating returns based on new ideas.

The Commission’s concerns about funding services in areas where there is already competition also stems from locking itself into an approach that results in common carriers being funded as opposed to wireless internet access providers. Again, current law paints a box where only common carriers can play. Wireless internet access providers may not want to build infrastructure for the purpose of being common carriers. It is too expensive and unnecessary to duplicate existing networks where instead their focus is rightfully on bringing value to those networks and consumers alike by providing alternative methods of accessing them. The Commission speaks of innovation too frequently to then turn around and pass up an opportunity to put its money where its mouth is.

Until the Commission decides to recognize the value that non-common carrier innovators bring to broadband deployment, the universal service fund as currently constructed will continue to be a pool of capital unavailable for use by certain new entrants.

Posted in broadband, broadband access provider, capital, entrepreneur, Federal Communications Commission, technology, Title II, universal service fund | Tagged , , | Leave a comment

There is nothing wrong with #gentrification. Just make sure you call it what it is.

Gentrification takes on a nasty meaning for residents in mostly black neighborhoods. Years of no investment, high unemployment, and low wages take their toll on communities where high crime and stagnation becomes the brand. Proposed influxes of infrastructure and other forms of capital near the top of the list of remedies for these neighborhoods. I’m all for these remedies.

In my vision, no neighborhood in any city should have to endure urban blight. I get tired of seeing young men walking around looking idle and unproductive. The optics send a signal that the mindset of some residents is one of resignation to a life of no big ideas, no growth, no pursuit of opportunity. It is depressing.

Yesterday, Federal Communications Commission member Ajit Pai put out a proposal to create gigabit opportunity zones where local and state lawmakers would provide incentives to attract broadband deployment. Any area where average household income falls below 75% of the national household median income would qualify. Tax credits are expected to make up a part of the enticement for broadband providers to deploy facilities and provide services over them.

Commissioner Pai also wants to see job growth and to meet this goal proposes tax incentives that offset payroll costs for entrepreneurs. I also appreciate the additional shout out the Commissioner gave to entrepreneurs by discussing access to capital. Government, according to the Commissioner, should promote access to capital by increasing the appeal and availability of crowdfunding.

Again, I applaud the Commissioner’s initiative to not only promote more broadband deployment but to get more capital into the hands of entrepreneurs. My concern is that we simply call this what it is: gentrification. Why is this correct nomenclature necessary? Because accurately identifying the policy by what it does gives policymakers and lawmakers better insights into how best to sell this package to current constituents who, under this proposal, will pay for it with their property and sales tax dollars. Individual entrepreneurs already existing in these neighborhoods will want to know whether the price of capital will start increasing when word gets out about potential new deployment of broadband infrastructure. Will those entrepreneurs who were holding the line in these neighborhoods using slower speed internet access find themselves having to move to cheaper areas?

The plan would have more teeth if there were a way to guarantee low cost capital flowed to existing entrepreneurs that use broadband as part of their business models. Otherwise, the people this plan is intended to help will find themselves being cleared out, ironically, by people who already have capital.

Posted in broadband, broadband access provider, capital, entrepreneur, Federal Communications Commission, gentrification, Uncategorized | Tagged , , | Leave a comment

.@FCC does not recognize value cable places on content

Recently the Federal Communications Commission released a plan for increasing the number of ways consumers can navigate video content. The Commission wants cable companies to provide pay television subscribers with a free app that allows the subscriber to access their video content. The Commission believes that at an annual amount of approximately $231 for set top boxes, households are getting hosed and that additional choice is needed in order to reduce this financial burden.

The Commission appears to be ignoring the capital side of set top box equation. No where in his plan does Commission chairman acknowledge the billions cable companies spend on obtaining licensing to programming or creating their own content.  To extract value from this content, cable companies charge consumers a positive premium for using platforms necessary for accessing the content including set top boxes. The Commission is blatantly circumventing the ability of cable companies to extract the value of the content by requiring that cable companies provide consumers with apps that allow the consumer to avoid monthly fees altogether.

The Commission believes it is correcting some type of market failure by providing consumers access to content at a reduced cost, but by interfering with a market transaction, the Commission is creating an environment that sends a false signal to content providers and navigation technology providers. Device makers may think twice about investing resources into developing hardware where the use of free apps freezes the hardware provider out of the market. Small, non-cable affiliated app developers may have second thoughts as well, especially going up against deeper pocketed cable companies or internet portal companies such as Google who can leverage its advertising revenue to provide video navigation apps for free.

In addition, with the requirement that cable companies provide free apps and the expectation that established internet portals will enter the video navigation application market, smaller entrepreneurs will have a harder time accessing capital as investors view their business model as a source of lower returns.

Sending skewed market signals and reducing small app developer access to capital doesn’t make for good video marketplace policy.

Posted in apps, broadband, cable, capital, entrepreneur, Federal Communications Commission, Uncategorized | Tagged , , , , | Leave a comment

#HillaryClinton should read the Full Employment Act

Hillary Clinton today came out hard against Donald Trump’s attack on the Federal Reserve, where the real estate developer and Republican nominee for president accused the American central bank of creating a “false economy.” Mrs Clinton in responses chided Mr Trump for attempting to talk up or talk down the economy. Sorry Mrs Clinton, but as potential managers of America’s mixed economy, you are expected to comment on what Janet Yellen and company are doing over at the Federal Reserve.

Mrs Clinton should refresh herself with the Full Employment and Balanced Growth Act (15 U.S.C. 3101, et. al.). The Act, an amendment to the 1946 Employment Act, was passed in response to sluggish growth, high unemployment, and high interest rates of the 1970s. Section 3101(b)(2) of the Act noted that fiscal and monetary policies had failed to move the economy toward full employment, increase real income, or balance the federal budget. To To recalibrate the economy, the Act called on coordination between the President of the United States, Congress, and the Board of Governors of the Federal Reserve System. The very word “coordination” tells me that there is going to be some communicationg and opinion sharing between all three government entities if effective economic policy is going to be crafted.

Was Mr Trump wrong to do a little carnival barking at the Fed? Nope.

Posted in Donald Trump, Economy, Election2016, Federal Reserve, Hillary Clinton, Uncategorized | Tagged , , | Leave a comment

From #USVI to #VIexit

Imagine a new jurisdiction that has as its drivers an economy driven by and serving as a Caribbean hub for technology, energy, and transportation. It is made up of three city-states, each city-state, given its infrastructure and population, specializing in but not necessarily restricted to one of the above economic drivers. Its “government” would be limited to developing, deploying, and maintaining infrastructure including harbors, highways, airports, and broadband; settling lawsuits; prosecuting crimes; and providing external defense.

It wouldn’t levy a tax. Instead, this administration would act more like a joint stock company, funded by residuals earned on its equity interest in businesses that earn significant revenues or employ significant numbers of people and by annual capital contributions made by citizens.

The administration would not be allowed to make or enforce laws that address personal decisions, beliefs, or behaviors short of prosecuting crimes that involve property or personal harm. No ;laws against or for abortion. No laws against or for religion. No laws for or against sexual orientation. The managers and board of directors of this administration would serve a seven-year term and citizens would decide whether to renew their terms.

Dividends collected would be reinvested in infrastructure. Citizens would have an ownership interest in this joint stock structure and would collect dividends based on their annual capital contribution. Citizenship would be limited to individuals born in the jurisdiction; the children of citizens born in the jurisdiction; and those purchasing citizenship status minus the right to vote.

A different form of “government” based on enhanced individual freedoms, equity ownership; and no taxation…..

If you can celebrate the birth of a nation that didn’t have you in mind when it was formed nor has you in mind when the benefits are distributed, then its time to open your mind to the possibilities of something bigger, better, and all yours ….#VIexit

Posted in Political Economy, U.S. Virgin Islands | Tagged | 1 Comment

Refining @FCC’s role on privacy

The Federal Communications Commission has been amplifying its preference as the protector of consumers particularly under the stewardship of current chairman Tom Wheeler. The Commission has overstepped the boundaries established for consumer protection in the Communications Act of 1934. The Act does not mandate that the Commission try to impersonate its sister agency, the Federal Trade Commission or that Mr. Wheeler do an impersonation of Senator Elizabeth Warren.under the Communications Act.  Should the Republicans take the White House and keep the Congress, refining the role of the Commission in an updated, streamlined Communications Act should be on top of the GOP’s agenda.

Let’s look at the extent of consumer protection under the Act itself. Section 151 of the Act describes the purpose of the Act and the Commission as regulating interstate and foreign commerce in communication by wire or radio.   Regulation in the communications space should result in a nation-wide and world-wide communication system provided at reasonable charges that facilitates national defense, while promoting safety of life and property.

Section 151 does require that this rapid, efficient communications network be provided to consumers without discrimination based on race, color, religion, national origin, or sex. In other words, should decisions on how and where to deploy a network be based on consumers’ race, color, religion, national origin, or sex, the Commission is expected to step in and rectify the bad act. Also, if the consumer is facing unreasonable rates, the Commission would also be expected to step in and review these rates.

Section 222 requires that telecommunications carriers, a category in which the Commission has erroneously included broadband providers, exercise a duty to protect proprietary information related to a carrier’s customers. Assuming that the Commission’s net neutrality rules survive federal appellate court review, this would mean that broadband providers, for example, would have to disclose such information to broadband consumers upon their request. This section also requires that where a broadband provider receives customer proprietary information as a result of providing the consumer broadband services, the broadband provider can only use such information when providing the service through which it gathered the information, or to provide other services necessary for providing broadband services.

In other words, in today’s communications world where media and broadband are converging, broadband providers who themselves are information providers in search of advertising revenue, would be hamstrung from selling this information to third parties.

This presents the Commission and the markets a problem. If the Commission is gung-ho on competition throughout the internet ecosystem, would it be good policy to apply these 20th century rules to broadband/media companies doing business against media and data companies that have been coming into their own and subject to no regulation in a digital 21st century?

Personally I do not believe that in an age where consumer information is currency that there should be any consumer protection rules in this area. Yes, I am a member of the minority on this issue and will expound on it at some other time. I’ll leave this side note by saying that consumers have little to no property right in most of the information they want kept private and when they do share information it should be fair game for these companies to trade on.

In the meantime, Congress can reconcile the issue by expressing within the Communications Act that the Federal Trade Commission be the sole entry regulating consumer protection issues regardless of whether the firm in question is a broadband provider or an information portal such as Google. This would be a first step toward equating the treatment of two converging industries.

Posted in broadband, broadband access provider, Congress, data brokers, Election2016, Federal Communications Commission, Federal Trade Commission, free markets, Internet, net neutrality, Uncategorized | Tagged , , , | Leave a comment

A war on #capital is not what we need

It is unfortunate that Bernie Sanders has reduced the political economy down to a battle between the wealthy and the rest of us. Since Mr. Sanders is an uber-statist there should be no surprise that he would leave government off of his list of bad things that impact the average American. Politicians whittle the status of the political economy down to a voting issue where packages of goods and services are concocted and offered to the electorate in exchange for the right to regulate commerce and create more programs that employ more bureaucrats.

Blaming the wealthy for the negative state of affairs only serves to heighten a sense of urgency to make change now before the lower classes predicament is worsened by increasing income or wealth inequality. Only the State can come to the individuals rescue and save her from the morass.

The politically astute realize that arguments like those made by Mr. Sanders, Hillary Clinton, and other progressives are a waste because they ignore the real definition of economics and the realities of a capitalist-based society. Macro-economics is about making a nation attractive to the flow of capital while micro-economics is about how efficiently that capital is put to use when it is converted into a going concern or a firm. The vast majority of the electorate play no role in how capital flows because the vast majority of the electorate how no capital to flow to anywhere. It makes the issue of voting moot since the vote has no impact on the day-to-day decisions involved in macro or micro-economics.

All is not lost for the individual, however. How she fares in a world where she has no leverage on the decisions to accumulate and distribute capital depends on how well she can enhance her value to those who hold capital. The individual must wake up every morning thinking about what value she can create; how she can leverage that value and be compensated for its provision. She has to take on a hunter’s mentality when negotiating the political economy and quickly discard a consumer’s mentality that expects something steady and risk free from the economic environment. This mindset can only be achieved with the realization that the ineffective nanny economy of progressives has to be replaced with an entrepreneurial, value-driven economy.

The individual’s value to the capital flow process is a concept that Mr. Sanders and other progressives never mention in part because they don’t understand how the American economic system works; in part because telling an electorate with a “do more for me” mentality that it should take on the responsibility of enhancing their value would be political suicide.

If Mr. Sanders is sincere about a revolution, he should first get rid of the “democratic socialist” moniker; join us anarcho-capitalists; abandon the “war on bankers” rhetoric (those guys have been around since Jesus. They aren’t going anywhere); and instill a little of that Brooklyn toughness and gruffness into a narrative that says that each individual should focus on identifying and providing the best value to our economic jungle.

Posted in Bernie Sanders, capital, economics, Economy, Election2016, free markets, government, liberty, Political Economy | Tagged , , , | 1 Comment

No, Paul Krugman. Verizon has been investing

Economist Paul Krugman has an opinion piece in The New York Times where he attempts to call out Verizon’s failure to invest in its FiOS network as the reason for the company’s unionized workers discontent with the broadband provider.

Yes, Verizon hasn’t been in the news lately for deploying FiOS, a project it started two decades ago in response to competition from cable-based broadband providers such as Comcast and Time Warner, but it cannot be said that Verizon has stopped investing in its networks. Verizon has been rolling out a mobile broadband network that reaches over 90 percent of the nation. The company is also still competing with the likes of Comcast and Time Warner not only in terms of deploying broadband and special access services, but also as a media company.

My impression when I first read Professor Krugman’s piece was that he must have taken a nap over the past year. Verizon recently acquired AOL and is also making a play for Yahoo! Verizon wants to optimize the traction its broadband network has by making it a platform for AOL and Yahoo!’s content. AOL also has an advertising platform that Verizon can leverage on its broadband network as well.

Professor Krugman’s observation took me by surprise and also took me back to when my son was born, just around the time FiOS deployment was heating up. The Chuckster is now 14 and looking forward to high school. I suggest Professor Krugman start being a little more forward looking as well.

Posted in broadband, cable, capital, unions, Verizon | Tagged , , | Leave a comment

The Latest from Mayberry: Of Pimps, Prostitutes, and Capital

Fifty years from now the socio-economic-political classifications of race, lower income, and middle income will either be erased or severely minimized. In their place there will be two major classes.

One class will be the high income class, where the members of that class have built and leveraged networks through which they exchange highly specialized information and knowledge that add to their wealth.

The second class will be comprised of “pimps and prostitutes.” That class will be made up of everyone else; those left with no choice but to turn their bodies and their “souls” into a commodity.

As an economist, I have no problem with either class. How one chooses to leverage whatever assets they have in order to survive is their business. As a human being who prefers to see the human race pursue a course of enlightenment using reason, intellect, and science, I find the second category personally very disturbing.

Posted in Political Economy | Tagged , , , | 1 Comment

The Latest from Mayberry: The Six Commandments

Life is too complex to spend time on four extra commandments that you will probably break after this morning’s pew riding session, so here are the six commandments that you should follow to bring clarity to a certain world of uncertainty.

DON”T BE RULED. This is the first and greatest commandment (though one need not keep it holy). Your life and the decisions you make to maximize it are yours and no entity or individual on this planet should be put in a position to tell you otherwise.

OWN YOUR ELITISM. You have worked hard and invested money and time into being the best. Take ownership of the environment you create and maintain to promote that hard work and investment. In short, let the haters hate.

NETWORK WITH WINNERS. The company of winners not only will inspire you, but bring you valuable information that will guide your pursuit of excellence.

FORM STRATEGIC PARTNERSHIPS. This commandment is closely related to that on networking. No one gets anywhere by themselves. Seek out partners that bring expertise necessary for achieving the milestones along your path to greatness or at least on your path to a pay check.

BRING VALUE TO CAPITAL. The entities that control capital control the economy, commerce, and business. In pursuit of maximizing returns on capital, they seek out people who can get them those returns. Educate yourself and create the expertise they need.

CAUSES ARE FOR LOSERS. Fifty-two years after the Civil Rights Act, Americans still have to be convinced that black lives matter. Forty-three years after Roe v. Wade, women are still fighting pot-bellied old white men for control over their bodies. Meanwhile, the only people benefiting are the those who can game the grant-writing system and take trips to DC and state capitals making rhetorical testimonies before lawmakers and judges in the day time while partying with these same people at night and attending fancy fundraisers.

May you apply these commandments accordingly, and remember,


Posted in American society, culture, free thought, liberty, Political Economy | Tagged , , | 3 Comments