Democrats kick the net neutrality can down the road again

Speaker of the House Nancy Pelosi and her fellow Democrats today announced introduction of the Save the Internet Act, legislation that would repeal the Federal Communications Commission’s 2017 Restoring Internet Freedom order and replace the 2017 order with the Commission’s 2015 Open Internet order. Speaker Pelosi’s rationale for replacing the 2017 order with the 2015 order includes:

  • Lowering costs and increasing choice for consumers;
  • Giving entrepreneurs a level playing field on which to compete;
  • Helping bring broadband to every corner of the country; and
  • Ensuring American innovation and entrepreneurialism can continue to be the envy of the world.

From a banking and trade perspective, the rationale offered by the Democrats for repealing the current set of net neutrality rules at the Commission sounds good. Lowering the cost for accessing an information trading platform provides the benefit of reducing information discovery costs. Bringing broadband to every corner does increase the chances of network effects taking hold where the value of a network increases as more traders use it. As network effects increase, more data traders and content providers will be encouraged to carve out more niches on the internet and provide data consumers more options for content sources.

But what was blatant from an economics perspective was the total lack of discussion in the bill itself about how an advanced communications infrastructure underpins the economy; its role as part of a three-layered infrastructure that has supported the exchange of value since the earliest days of trade between small communities. At issue here is, in terms of trade, does the Save the Internet Act facilitate trade? My answer is no and the failure is due in large put to a number of mistakes driven more by politics than economics.

Mistake: Believing the Internet is About Democracy. It is Not.

The classic argument from the Democrats is that a free and open internet is great for American democracy; that gateway keepers such as AT&T, Comcast, and Verizon should not be allowed to prevent citizens from expressing themselves via broadband. But is accessing content via a communications technology the same as expressing thought via voice, graphics, and text over that medium?

I can buy and read a newspaper but it is not the same as sending letters to the editor or leaving comments online. If democracy is about expression, then there are plenty of examples where expression is limited in the private sector, and we should not forget that core providers, such as AT&T and Verizon, and edge providers, such as Facebook and Netflix, are private companies providing the data collection, data distribution, and data access that creates value on the internet.

Could Americans in their zeal for unfettered access to the internet as a digital medium for exchanging value and communications be conflating corporate power with government power? Building on the earlier point, democracy is about the relationship between citizens and government. Democracy is about the limits citizen and government agree to.

Democracy recognizes, at least in theory, that the State has a resources advantage that can be used to oppress the individual, thus preventing her from trading for and consuming resources necessary for daily survival. This imbalance in power is why democracy, again in theory, allows the citizen to express herself in the ballot box by choosing the representatives that are supposed to keep government at bay.

Unless core and edge providers have some agency relationship with government that puts them in a position to bring down the power of government on the citizenry, then corporation is in no position to stifle democracy.

Mistake: Congress Does Not Understand the Relationship Between Corporation and Government.

Corporations are not chartered by governments (state or federal) to protect consumer rights. Corporations are expected by government to create taxable events. They are expected to hire labor and apply capital in order to extract and process resources in such a way that they become deliverable for end use consumption. Both wages paid to labor and purchases are taxed in order to fill government coffers. To maximize taxable events, corporations must come up with more revenue streams or innovate the packaging and sales of product in order to create additional demand.

In the case of broadband access providers, they see an information services market that they would like to play in so that they can increase shareholder wealth. Competing with Facebook and Google allows these companies to create additional revenue streams that can be used not only to increase their shareholders’ wealth but, as mentioned above, generate taxes that go into government coffers. In short, government shoots itself in the foot by disallowing broadband access providers to not enter the content market.

Conclusion

The Democrats’ two-page legislation will not bring any improvement to a communications infrastructure that provides support for trade and commerce in the United States. It keeps broadband access providers out of the information markets, eliminating incentives for broadband access providers to expand their service offerings.

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The “economy” is doing better but I am seeing more homeless in Atlanta

I am seeing more homeless people in my West End Atlanta neighborhood. I have seen at least one sleeping in his vehicle. Others make use of the parks to sleep at night.  What I see on the ground does not coincide with the claims made in Washington of a booming economy.

WABE, citing data collected from the city of Atlanta, reported that the homeless population numbers around 3,000 people and is allegedly on a decline.  And last year, the Atlanta Journal Constitution reported that Atlanta ranks among America’s neediest cities based on 21 metrics including child poverty and the number of uninsured. Homelessness is the result of a number of factors including the lack of affordable housing, poverty, discrimination, and shifts in the economy. Can city policies adequately impact these factors?

Take the factor of affordable housing. Atlanta mayor Keisha Lance Bottoms has made affordable housing one of her top public policies, but it appears to me that such an approach falls out of line with one important goal of a city: to generate tax revenue necessary for providing the amenities that keep citizens interested in living in Atlanta.  Land owners want to see property values rise and see an increase in the revenues that their properties generate.

Also, as city leaders continue their efforts to make Atlanta a job center, they have to keep in mind that as part of the efficiencies offered by a city is the location of housing close to job centers.  Housing located close to job centers may also end up being some of the most costliest housing.

I ride into Buckhead every day from southwest Atlanta. I have blogged before about how the MARTA train feels more like those conveyor belts loaded with coal that go into a furnace to fuel a production facility.  In this case the human coal are the lower and middle income individuals heading into Buckhead to work a job that, ironically, may be on the chopping block in a few years due to artificial intelligence.  If these people can’t afford to live close to an employment center where they can walk to work, the pressures of living will really increase when they have to find alternative employment.

But even with current employment, there may not be enough affordable housing available because landlords will be under pressure to meet rising property taxes resulting from the increased values of their properties, at least in the short run. This rise in value and ensuing property taxes will result from increased demand for housing that Atlanta expects to face over the next ten years.

Let’s not forget the upward pressure expected on interest rates over the next two years.  Property owners will have to increase rents in order to cover higher mortgage rates.  For the city of Atlanta it means higher bond servicing costs as the city continues to raise money through bond issues for its development and operational needs.

Affordable housing, because of the above pressures, won’t increase in supply.  Only an economic downturn may bring about cheaper rentals but even that will be short lived because a downturn in the economy means a slowdown in hiring and the specter of non-affordability due to increased lost income.

Politics wise, it is time for elected officials, particularly Democrats, to eliminate the affordable housing mantra from their campaign slogans.  They won’t be able to achieve it at any meaningful scale.

 

Don’t expect a Trump-Democratic love fest over the AT&T-Time Warner merger

Last July, the U.S. Department of Justice filed an appeal of a U.S. District Court-District of the District of Columbia finding that AT&T’s acquisition of Time Warner Media would not hurt competition. The Justice Department, according to The Hill, believes the acquisition would harm competition where AT&T might not provide access to its newly acquired content by other competing content providers or video delivery networks.

Democrats today hinted that once they take-over the U.S. House, they would investigate the Trump administration’s opposition to the merger. Since the campaign for the presidency in 2016, Mr. Trump has verbalized his concern that a merger between the telecommunications giant and the media giant would be a bad thing because of the size of the new entity. In addition, Mr. Trump has expressed no love for CNN, the cable news network that would be one of the crown jewels on AT&T’s new portfolio.

As if any one needed a reminder of the no love lost between the Trump administration and the Atlanta-based news organization, one needed look no further than the spat between CNN’s Jim Acosta and President Trump during a press conference last week. Mr. Trump had no problem suspending Mr. Acosta’s access to the White House.

Congressional Democrats have attacked the merger from the net neutrality angle. Democrats such as Senator Ed Markey have come out against the merger in part due to antitrust and consumer protection reasons. According to Senator Markey, telecommunications policy should ensure that, ” … those with the best ideas, not simply the best access, can share their content with the world.”

But given that net neutrality was not at the top of voters’ holiday shopping list last week, I don’t expect Democrats to approach the Trump administration with anything that looks like a temporary truce. According to analysisanalysis by Gizmodo, a sweep of 1,180 campaign websites saw very few office seekers trumpeting the call for a free and open internet. Real household issues, such as healthcare and the economy, were on the top of family priorities.

I’ve read analysis where it is expected that outgoing Republicans licking their wounds from their 2018 defeat will vote to approve the resolution that passed last May in the U.S. Senate to repeal the Federal Communications Commission’s Restoring Internet Freedom order. This order, passed in 2017 by the Commission, repealed a 2015 Commission order that implemented net neutrality rules. The argument is that outgoing GOP congressmen who probably leaned toward the open internet philosophy would want to appease their former constituents by supporting net neutrality rules. I don’t see that happening.

I expect that outgoing Republicans will pay attention to whatever housekeeping matters are on the agenda, including tomorrow’s testimony by Federal Reserve chairman Jerome Powell before the House financial services committee. Besides, why would a GOP former congressman want to relieve themselves of their conservative bona fides so early after an election. You just don’t relieve yourself so quickly of political capital that you will need for any future political endeavors.