Last month, the House of Representatives passed the FISA Amendments Act of 2008, Congress's latest response to President Bush's demands for expanded eavesdropping authority. The Democratic leadership, seemingly intent on avoiding real debate on the proposal, scheduled the final vote just a day after the bill was introduced in the House. Touted by Democratic leaders as a "compromise," it was supported almost unanimously by House Republicans and opposed by a majority of Democrats.

The 114-page bill was pushed through the House so quickly that there was no real time to debate its many complex provisions. This may explain why the telecom immunity provision has received so much attention in the media: it is much easier to explain to readers not familiar with the intricacies of surveillance law than the other provisions. But as important as the immunity issue is, the legislation also makes many prospective changes to surveillance law that will profoundly impact our privacy rights for years to come.

Specifically, the new legislation dramatically expands the government's ability to wiretap without meaningful judicial oversight, by redefining "oversight" so that the feds can drag their feet on getting authorization almost indefinitely. It also gives the feds unprecedented new latitude in selecting eavesdropping targets, latitude that could be used to collect information on non-terrorist-related activities like P2P copyright infringement and online gambling. In short, the FISA Amendments Act of 2008 opens up loopholes so large that the feds could drive a truck loaded down with purloined civil liberties through it. So the telecom immunity stuff is just the smoke; let's take a look at the fire.

The importance of judicial scrutiny

The most fundamental question in the FISA debate is whether judicial oversight will be required when the government spies on international communications originating on American soil. FISA has never limited spying on purely foreign communications, but under current law, the government must obtain court approval to tap a phone line or fiber optic cable in the United States, even if the other end of the communication is abroad. An application for a FISA warrant must specify the person or organization being targeted and present evidence that the target is an "agent of a foreign power," such as the Chinese government or Al Qaeda.

The Bush administration has chafed at these restrictions, insisting that the president has the inherent authority to eavesdrop on suspected terrorists without court oversight. Director of National Intelligence Mike McConnell argues that that the FISA process is so cumbersome that it impedes the intelligence community's efforts to spy on terrorists.

Civil libertarians disagree, noting that FISA sets a lower bar for approving surveillance than the process for obtaining ordinary criminal warrants. And in emergency cases, FISA allows the government to begin spying immediately and seek a warrant after the fact. Most importantly, civil liberties groups emphasize that without judicial oversight, there is no way to know if the government is respecting any limits that Congress establishes.

Consider, for example, the case of National Security Letters, administrative subpoenas that the Patriot Act allows the FBI to issue without court oversight. Last year a government audit last year found hundreds of cases in which the FBI had issued NSLs without following even the permissive rules of the Patriot Act. Civil libertarians warn that similar corner-cutting is inevitable if the NSA is allowed to choose eavesdropping targets without judicial scrutiny.

No individual warrants for international calls

When it comes to judicial oversight of domestic-to-foreign calls, the legislation the House passed last month is an unambiguous victory for the White House and a defeat for civil libertarians. The legislation establishes a new procedure whereby the Attorney General and the Director of National Intelligence can sign off on "authorizations" of surveillance programs "targeting people reasonably believed to be located outside the United States." The government is required to submit a "certification" to the FISA court describing the surveillance plan and the "minimization" procedures that will be used to avoid intercepting too many communications of American citizens. However, the government is not required to "identify the specific facilities, places, premises, or property" at which the eavesdropping will occur. The specific eavesdropping targets will be at the NSA's discretion and unreviewed by a judge. Moreover, the judge's review of the government's "certification" is much more limited than the scrutiny now given to FISA applications. The judge is permitted only to confirm that the certification "contains all the required elements," that the targeting procedures are "reasonably designed" to target foreigners, and that minimization procedures have been established.

Crucially, there appears to be no limit to the breadth of "authorizations" the government might issue. So, for example, a single "authorization" might cover the interception of all international traffic passing through AT&T's San Francisco facility, with complex software algorithms deciding which communications are retained for the examination of human analysts. Without a list of specific targets, and without a background in computer programming, a judge is unlikely to be able to evaluate whether such software is properly "targeted" at foreigners.

The House legislation also drastically extends the timeline for reviewing surveillance activities, potentially allowing the government to commence eavesdropping and then drag out judicial review for months. Under existing law, the government must obtain judicial approval within 72 hours of the start of emergency wiretapping. In contrast, the judicial review of "certifications" can stretch out as long as four months. After beginning eavesdropping, the government has a week to submit its "certification" to the FISA court, which has 30 days to review the application. If the judge finds problems with the certification, the government can continue eavesdropping for another 30 days before it is required to comply with the order. And the government can buy still more time by filing an appeal to the FISA Court of Review. The appeals court may take as long as 60 days to make its decision, and the government will often be allowed to continue eavesdropping throughout the process of judicial review. This means that in many cases, the government will have completed its spying activities long before the courts reach a decision on its legality.

No "targeting" Americans

The legislation does provide modestly enhanced protections for Americans living overseas. The "authorizations" described in the previous section are only available when they "target" those who are not American citizens or legal residents. When the target of an eavesdropping program is an American, the government must satisfy more stringent requirements, including the traditional requirement that the target is an "agent of a foreign power." The surveillance also must cease within seven days if judicial approval for it is not forthcoming.

This section is a modest restriction on the government's prior eavesdropping powers. Traditionally, FISA did not govern purely overseas eavesdropping activities, even if they targeted American citizens. Under the new legislation, the government will need court approval to "target" Americans overseas, even when the surveillance is conducted overseas.

However, as a practical matter, this enhancement of Americans' privacy rights may prove extremely limited. The government may not "target" Americans under the broad "authorizations" discussed in the previous section, and in some cases the government may discard information obtained about Americans as part of the required "minimization" procedures, but the government would retain significant latitude to decide which information it retains. The paradoxical consequence is that broader wiretapping orders may be approved more easily than narrower ones. For example, the government could not unilaterally "authorize" the "targeting" of a particular San Francisco resident's international communications. However, it could "authorize" a dragnet surveillance program that intercepted the international communications of all San Francisco residents under the pretext that it was "targeting" any foreign terrorists who might happen to communicate with San Francisco residents.

This is particularly troubling when we remember that in 2002, the Foreign Intelligence Surveillance Court of Review held that FISA does not prohibit coordination between foreign intelligence gathering and domestic law enforcement. That suggests that the FBI could ask the NSA to tailor its filters to intercept evidence of Internet gambling, copyright infringement, or other ordinary crimes. The Americans whose communications were turned over could not be the "target" of the surveillance, but the House legislation requires only that foreign intelligence gathering be "a significant purpose" of eavesdropping programs. If a terrorist surveillance program also catches American citizens who are gambling or infringing copyright law, that's even better!

Other provisions

As has been widely reported, the legislation would grant broad, retroactive immunity to firms that participated in the president's warrantless surveillance program. The bar for granting immunity is extremely low: to receive immunity, the firm must merely demonstrate that it had received a letter from the government stating that the program was lawful. Since we already know that the program participants received such letters, there is no practical difference between this standard and blanket immunity.

The legislation expands the list of people who can be spied on to include those engaged in "the international proliferation of weapons of mass destruction." And curiously, it has an extremely broad definition of "weapons of mass destruction." It includes not only nuclear, chemical, and biological weapons, but also "any explosive, incendiary, or poison gas that is designed, intended, or has the capability to cause a mass casualty incident." As Wired's Jason Sigger points out, this is significantly broader than the traditional definition. The legislation mandates that the Inspectors General of each agency involved in FISA surveillance prepare reports to Congress detailing the nature and extent of post-September 11 surveillance activities.

Democratic leaders have made much of a provision designating FISA (along with ordinary criminal wiretapping procedures) as the "exclusive means" for intercepting electronic communications. But as a ruling last week made clear, this provision is little more than window dressing. Republican-appointed judge Vaughn R. Walker ruled last week that the 1978 FISA statute established "the exclusive means for foreign intelligence surveillance activities to be conducted." If the president ignored the exclusivity provisions of the current iteration of FISA, it's not clear what is accomplished by adding another one.

Compromise or capitulation?

Democratic leaders have worked hard to portray the legislation as a compromise, but close examination of its provisions suggests that it is an unvarnished victory for President Bush and his allies in Congress. The legislation eliminates meaningful judicial oversight of eavesdropping between Americans citizen and foreigners located overseas and effectively legalizes dragnet surveillance of domestic-to-foreign traffic. It stretches out the judicial review process so much that the government will in many cases be able to complete its surveillance activities before the courts finish deciding on its legality. And Democratic leaders have capitulated on the immunity question, agreeing to language that would almost certainly lead to retroactive immunity for lawbreaking telecom companies.

Many supporters of Barack Obama were dismayed last month when he announced that he would support the legislation. Indeed, more than 20,000 have joined a group on his campaign website urging him to reject the bill; the group is now the largest on his website. But thus far, Obama has maintained his support for the bill.

Last week, an Obama surrogate insisted that "with FISA expiring," the bill was the best Democrats could hope to get. The only problem is that FISA isn't expiring. It was enacted in 1978 and is not scheduled to sunset. The Protect America Act did expire in March, but given that the Bush administration managed to prevent terrorist attacks under FISA for almost six years until last summer's passage of the Protect America Act, it's hard to be too alarmed about living under FISA again for the final six months of Pres. Bush's term.

The Democrats' capitulation is particularly puzzling because, as we've pointed out before, the Democrats' firm stance on FISA this Spring turned out to be a political asset, not a liability. When House Democrats called Pres. Bush's bluff and allowed the Protect America Act to expire in March, it got a wave of positive coverage from the media, which pointed out that the PAA's expiration would have little effect on the government's ability to spy on terrorists. Now that Democratic leaders are switching sides yet again, we've seen the re-emergence of unflattering coverage focusing on the Democrats' weakness on national security issues and lack of party unity. Protecting civil liberties ought to be a matter of principle, but even if Democratic leaders are unmoved by civil liberties concerns, one might have expected them to stand up to the White House based on purely political motivations.

Civil libertarians' last stand against expanded government surveillance will occur in the Senate, in a vote that is expected to occur this week. So far, the determined opposition of a small group of Senators led by Chris Dodd and Russ Feingold has managed to stall the legislation for a couple of weeks. Dodd has signaled that he will continue using every weapon at his disposal to stop the legislation. But with Democratic leaders lining up in support of the bill, Dodd and Feingold face an uphill battle.

In 1976, a special Senate committee revealed massive abuses of power by the FBI, the National Security Agency and other government agencies. One notorious case was the FBI's attempts to undermine and discredit Dr. Martin Luther King Jr. The bureau tapped King's phones and bugged his hotel rooms. The FBI used the information in attempts to discredit King with churches, universities and the press.

For three decades, the NSA obtained copies of virtually all telegrams to and from the United States without court oversight. The NSA also tapped international phone calls. From 1967-73, the NSA kept a "watchlist" of surveillance targets that included many Americans.

FISA was carefully designed not to hamstring legitimate intelligence gathering. FISA even allows the government to begin spying immediately and seek retroactive judicial approval within 72 hours. Most importantly, FISA left overseas surveillance activities completely exempt from judicial oversight.

But in early 2007, the FISA court reportedly ruled that a warrant is needed to intercept communications between two foreigners as those communications pass through the United States. Technological changes have made that an increasingly common occurrence, and the Bush administration seized on the ruling to justify the hasty passage of the Protect America Act. But this law went far beyond clarifying the foreign-to-foreign issue. In effect, it once again gave the NSA unfettered authority to intercept domestic-to-foreign communications without court supervision.

The Protect America Act was set to expire this past weekend, but the bill passed by the Senate would make its surveillance powers permanent.

The Senate also granted another item on the president's wish list: retroactive immunity for telecom companies that participated in the government's warrantless surveillance programs during the past seven years. Those companies are now facing customer lawsuits for violating their privacy, and the White House is doubtless worried that unless the suits are quashed, they could reveal embarrassing details about the NSA's illegal activities.

But granting retroactive immunity would seriously jeopardize Americans' privacy because it would leave telecom companies with no real incentive to stand up for their customers' privacy the next time the government asks them to break the law. It would also be a slap in the face to those companies that risked the wrath of the Bush administration by refusing to participate in the NSA's illegal activities.

Modern computer technology makes the potential for the abuse of unfettered executive power much greater today. Judicial oversight is at least as important in the 21st century as it was in the 20th, and Congress should resist Bush's demand for unchecked spying powers.

The issue isn't whether Congress should block cooperation between telecom companies and the government when the National Security Agency wants to engage in eavesdropping on American soil. The debate is about whether that cooperation should be subject to judicial oversight, as the law has required for the last 30 years, or whether instead the telecom companies can simply ignore the law when the president asks them to. Last November, former Attorney General John Ashcroft suggested that firms that participated in warrantless surveillance programs "based on explicit assurances from the highest levels of the government" should be let off the hook.

Accepting this argument, as the Senate did yesterday, undermines the fundamental purpose of the warrant process, which is to ensure independent review of domestic spying activities. And the law was quite clear on this point. FISA makes it a criminal offense to "engage in electronic surveillance under color of law except as authorized by statute." The law included a variety of exceptions, but until the passage of the Protect America Act last summer, none of them involved "assurances from the highest levels of government." Firms like Verizon and AT&T have small armies of lawyers who know this area of law as well as anyone on the planet. They hardly needed the president's help to interpret it. If the firms' actions were in compliance with the law, they'll have the opportunity to prove that in court. And that is where the fight should play out.

Press reports suggest that the Bush administration has created at least two warrantless surveillance programs with the cooperation of major telecom companies. The first, reported by the New York Times in 2005, involved the warrantless interception of several hundred Americans' international phone calls and e-mails. Under the second, first reported by USA Today in 2006, Verizon and AT&T (then called SBC) reportedly provided the government with access to the domestic calling records of its customers. Qwest CEO Joseph P. Nacchio declined to participate in the latter program, believing that doing so would be against the law. Nacchio now alleges that the NSA retaliated for his refusal by canceling an unrelated, lucrative government contract. (He faces unrelated charges of insider trading.) Last summer, the Heritage Foundation's Matthew Spalding insisted that giving amnesty to illegal immigrants would be "deeply unfair to the millions who obey the law and abide by the rules."

By the same token, letting AT&T and Verizon off the hook would not only be unfair to the customers whose privacy they violated, it would also be unfair to Qwest, which was put at a competitive disadvantage for obeying the law. Nor is retroactive immunity necessarily constitutional, at least as long as the telecoms don't have to give some compensation to the people who filed the lawsuits that would be scratched by the Senate's bill.

Republican senators have argued that Verizon and AT&T are unable to defend themselves adequately because the Bush administration is preventing them from disclosing classified documents that could exonerate them. But the courts have a long track record of reviewing sensitive information in private and dismissing cases that cannot be litigated fairly without exposing state secrets. Last year, the U.S. Court of Appeals for the 9th Circuit dismissed a lawsuit against the Bush administration for warrantless surveillance because the plaintiffs' case hinged on the contents of a classified document. The court held that the case could not be litigated without exposing state secrets and so it would not be litigated at all. The 9th Circuit has so far refused to dismiss on state secret grounds the pending class action lawsuit against AT&T for its participation in warrantless surveillance. But the court has signaled that it is open to reconsidering this decision as the case proceeds. If the House follows the Senate, the judges won't have the opportunity. The telecoms won't have to admit they broke the law or compensate their customers. What sort of incentive does that give them to refuse the next time the government asks them to break the law?

Now, the Senate bill will move to a conference committee to be reconciled with House legislation that does not include a free pass for the telecoms or authorize warrantless surveillance of Americans' international communications. With the Democrats controlling both houses of Congress, one might expect the conference committee to side with the House. But the Democratic leadership's heart doesn't seem to be in the fight. Senate Majority Leader Harry Reid, D-Nev., seemed ready to capitulate after yesterday's vote when he said the bill had been "improved" by the Senate and that he "preferred to move on to other legislation."

Particularly disappointing was Hillary Clinton's decision to skip yesterday's votes. On the campaign trail, Sen. Clinton has argued that her years of Washington experience give her a unique ability to fight back against Republican hardball tactics. Those skills were sorely needed in the Senate yesterday, but she didn't fit the debate into her schedule. Some Democratic voters may wonder if this is the kind of leadership she would show as president. In contrast, Barack Obama voted with civil libertarian Russ Feingold, D-Wis., on all six amendments and the cloture vote, only missing the vote on the final bill after the outcome had become clear. More Democrats should have followed Feingold. If Congress wants its laws to be followed in the future, it cannot give a free pass to companies that broke the law in the past. Republicans are clearly forgetting this. House Democrats should stand up to them.

Bush's predecessor was also an ardent supporter of increased wiretapping authority. For example, on July 29, 1996, Bill Clinton unveiled a proposal to expand government surveillance by permitting the use of "roving wiretaps." The nation was still reeling from terrorist attacks on the Atlanta Olympics and American barracks in Saudi Arabia, and many suspected that the explosion of TWA Flight 800 was also the work of terrorists. Clinton argued that these tragedies highlighted the need for legislative changes, and he pressed Congress to act before its August recess.

But Congress had a bipartisan tradition of its own to defend. As they had done since Watergate, Congressional leaders raised concerns about civil liberties. Then-Speaker Newt Gingrich said he was willing to consider changes to the law, but vowed to do so "in a methodical way that preserves our freedoms." Senate Majority Leader Trent Lott vowed that Congress would not "rush to a final judgment" before going on vacation. In the end, the 104th Congress finished its term without giving President Clinton the wiretapping authority he sought.

Today's Democratic Congress has been far less protective of Americans' privacy rights. Last August, in a virtual repeat of the events of 1996, Bush demanded that Congress approve expanded wiretapping powers before going on vacation. This time, Congressional leaders showed few qualms about "rushing to judgment." Indeed, both houses of Congress approved the White House's preferred legislation with minimal changes within three days of its introduction.

Why are today's Democrats less concerned with civil liberties than Republicans were a decade ago? Democratic leaders would doubtless point to the 9/11 attacks. Those attacks have certainly contributed to a changed political climate, but they don't justify Congress's panicky reaction to the president's demands. Congress had already expanded eavesdropping powers several times since 9/11. Congress approved new wiretapping authority with the Patriot Act in 2001, and approved further expansions later in 2001 and in 2002, 2004, and 2006. If the new powers the president was seeking weren't urgent enough to include in those revisions to the law, it's hard to believe they were an emergency in August 2007.

Moreover, the powers Congress granted last summer are far broader those sought by the Clinton administration in 1996. The "roving wiretaps" Clinton requested in 1996 and finally received in 1998 merely allowed investigators to obtain a single warrant to bug multiple phones used by a specific individual. In contrast, the Protect America Act completely eliminates the warrant requirement for surveillance "concerning persons reasonably believed to be outside of the United States" — even if one party to a call is an American citizen and the wiretap occurs on American soil. The attorney general is required to disclose to a secret court the general procedures used to choose wiretapping targets, but no judge reviews the list of specific targets to verify that the law is being followed. This evisceration of judicial review is an invitation to future abuses.

The lone virtue of the Protect America Act is that the powers it granted are now set to expire in mid-February. As this revised deadline approaches, Speaker Nancy Pelosi and Majority Leader Harry Reid will once again face pressure to rush the White House's preferred legislation out the door. The president will claim that failure to act before the Protect America Act sunsets will undermine the government's ability to eavesdrop on terrorists.

It's an ominous claim, but it's not true. The Protect America Act allows the administration to "authorize" eavesdropping programs for a year at a time. That means that the government's various warrantless surveillance activities will continue to operate at least through August. And of course, if the need for new wiretaps arises after the act sunsets, the administration still has the opportunity to file for warrants under the Foreign Intelligence Surveillance Act (FISA). FISA even allows the government to begin surveillance first and apply for an emergency warrant after the fact.

In short, the administration will have ample authority to intercept terrorist communications for at least the next six months. As they shepherd FISA reform through Congress, Pelosi and Reid would do well to heed the advice of one of Pelosi's predecessors: "The goal here is not to allow the terrorists to pressure us into suspending the very freedoms that make America precious." Those words are as true today as when Newt Gingrich said them in 1996.

The biggest potential for m-banking, as it is called, is in India, where new mobile connections are growing at the phenomenal rate of 6 million per month. Until now, phone connections in India have been largely urban. But a new policy has provided incentives for telecom companies to set up cell phone towers in rural areas, where 70 percent of Indians live. Within five years, mobile operators expect India to have 500 million connections.

Mobile phones can create virtual accounts in virtual banks. You can look up your m-bank balance and issue instructions through text messages. Security can be ensured through multiple passwords. Even villagers without cell phones can, for a fee, use phones of local shopkeepers, who are evolving, unwittingly, into virtual tellers of virtual banks.

When a customer pays cash to the shopkeeper to recharge his m-account, it is like depositing cash in a virtual account. The customer can withdraw cash, too. For a fee, the shopkeeper will transfer money from the customer's m-account to his own, and then pay hard cash to the customer. This can be extended to the payment of bills.

But if Indian telecom companies are to offer formal m-banking services, they will need regulatory approval from the Reserve Bank of India, which worries that banks may be targets for money laundering, and so insists on a strong "know your customer" policy. The reserve bank ignores small sums transferred through the shopkeeper network, but so far will not allow telecom companies to scale up and offer formal bank accounts, interest-bearing deposits and other banking services.

As banking regulators have already done in such countries as Kenya and South Africa, the Reserve Bank of India will likely insist on telecom companies joining hands with a licensed bank before offering formal m-banking services.

Yet the Reserve Bank of India has a good reason to encourage m-banking. It has long spoken of the utopian ideal of a bank account for every family, even in rural areas. This has been a pipe dream, given the limitations of the bank branch network. But m-banking could make the dream come true, even for illiterate villagers. Such illiterates cannot handle the paperwork of a conventional bank. But they can deposit and withdraw money through smart cards that can be recharged with the shopkeepers' help.

The corruption bedeviling subsidies and cash transfers to the poor could be reduced if the sums were deposited directly in m-accounts of the beneficiaries. Today, much money allocated to the poor does not reach them — it is siphoned off by corrupt bureaucrats and contractors. Safe m-accounts could ensure that only the intended beneficiaries get the money.

Traditional bank operation is limited by the fact that large swaths of rural India lack electricity, and even electrified villages often get power for only six to eight hours at night. Mobile phones can overcome this hurdle: They need very little electricity, and can be charged at night.

Rural marketing companies have long used solar-powered batteries to run Internet kiosks in market centers. These solar batteries can charge mobile phones at night. Even tractor batteries can be hooked up to charge cell phones. So cell phones could provide m-banking to virtually the whole of rural India.

Cell phones are already being used for money transfers. Millions of rural Indians have migrated to neighboring states (and the Persian Gulf) seeking work, and they send remittances home. But their families back home are often illiterate and have no access to banks.

Money orders through the postal system reach all villages, but charge high fees. Mobile phones transfer money faster and more cheaply than the postal system, using the shopkeeper network. This is a good start, but it needs to be scaled up. That means companies need to create new mobile phone banking ventures, and regulators need to let them.

The courts have a proven track record of fashioning balanced remedies for the copyright challenges created by new technologies. But when Congress passed the Digital Millennium Copyright Act in 1998, it cut the courts out of this role and instead banned any devices that "circumvent" digital rights management (DRM) technologies, which control access to copyrighted content.

The result has been a legal regime that reduces options and competition in how consumers enjoy media and entertainment. Today, the copyright industry is exerting increasing control over playback devices, cable media offerings, and even Internet streaming. Some firms have used the DMCA to thwart competition by preventing research and reverse engineering. Others have brought the weight of criminal sanctions to bear against critics, competitors, and researchers.

The DMCA is anti-competitive. It gives copyright holders—and the technology companies that distribute their content—the legal power to create closed technology platforms and exclude competitors from interoperating with them. Worst of all, DRM technologies are clumsy and ineffective; they inconvenience legitimate users but do little to stop pirates.

Fortunately, repeal of the DMCA would not lead to intellectual property anarchy. Prior to the DMCA's enactment, the courts had already been developing a body of law that strikes a sensible balance between innovation and the protection of intellectual property. That body of law protected competition, consumer choice, and the important principle of fair use without sacrificing the rights of copyright holders. And because it focused on the actions of people rather than on the design of technologies, it gave the courts the flexibility they needed to adapt to rapid technological change.

Here are the top ten reasons to cut off the taxpayer dollars flowing to National Public Radio and the Public Broadcasting System.

10. We live in a 500-channel world. Back in 1967, when the Public Broadcasting Act was passed, most Americans only had three television channels – ABC, NBC and CBS. But today we have six over-the-air networks and hundreds of cable channels offering everything from news to soap operas to classic movies to history and opera.

9. Sesame Street isn't so special any more. When anyone suggests cutting the budget for the Corporation for Public Broadcasting, its defenders immediately cry "they're trying to kill Sesame Street!" In fact, Sesame Street is big business and would survive in any environment. But also, as Jacob Sullum of Reason notes, "Children's programming that has an audience does not need taxpayer subsidies. Noggin, which is more 'commercial-free' than PBS stations, carries 12 hours of kids' shows (including two different versions of 'Sesame Street') every day, and they are at least as good as the PBS offerings in entertainment and educational value. Parent-acceptable children's programming can also be seen on Nickelodeon, the Disney Channel and ABC Family."

8. Republicans are trying to regulate the way public broadcasting works. A Republican chairman of the CPB, which funds both NPR and the PBS, has appointed a Republican activist as president and CEO. He also commissioned a conservative activist to report to him on PBS's programming.

7. Public broadcasting has a liberal bias. The reason the Republicans are poking around in PBS's business is that they're tired of taxpayer-funded radio and television networks being used to campaign against Republican administrations and their policies. Does public broadcasting have a liberal bias? Is the Pope Catholic? I have the luxury of choosing from two NPR stations. On Wednesday evening, June 29, a Robert Reich commentary came on. I switched to the other station, which was broadcasting a Daniel Schorr commentary. That's not just liberal bias, it's a liberal roadblock.

6. Bias is inevitable. Any reporter or editor has to choose what's important. It's impossible to make such decisions without a framework, a perspective, a view of how the world works. But taxpayers shouldn't have to subsidize any set of biases.

5. You shouldn't use tax money for lobbying. As soon as a congressional subcommittee voted to reduce funding for the CPB, NPR's 800 stations and PBS's 300 stations swung into action. They broadcast 30-second spots urging listeners to call their congressman and "save public broadcasting." Their websites said in bold lettering, "Please call your Senator today to express your support of federal funding for Public Broadcasting" and provided the phone numbers and email addresses. This was a multimillion-dollar ad campaign in a week, paid for with tax dollars. It's just wrong to use our tax dollars to lobby Congress to get more of our tax dollars.

4. Public broadcasting subsidizes the rich. A PBS survey shows that its viewers are 44 percent more likely than the average American to make more than $150,000 a year, 57 percent more likely to own a vacation home, and 177 percent more likely to have investments worth more than $150,000. Why should middle-class taxpayers be subsidizing the news and entertainment of the rich?

3. Public broadcasting gets only 15 percent of its money from the federal government. Businesses and nonprofits deal with 15 percent revenue losses all the time. If NPR and PBS lost all their federal money, they wouldn't disappear. They might eliminate their least popular programs, they might work harder to get local sponsors, or they might have to tighten their belts. But a 15 percent budget cut wouldn't put them out of business.

2. We have a $400 billion deficit. Not to mention total federal liabilities of $72 trillion. It's hard to imagine how we'll ever pay that off. But you start by cutting non-essential spending. Surely, in a 500-channel universe, public broadcasting is non-essential.

And the number one reason to privatize public broadcasting is:

1. The separation of news and state. We wouldn't want the federal government to publish a national newspaper. Why should we have a government television network and a government radio network? If anything should be kept separate from government and politics, it's the news and public affairs programming that Americans watch. When government brings us the news—with all the inevitable bias and spin—the government is putting its thumb on the scales of democracy. It's time for that to stop.]]> Mon, 25 Jul 2005 00:00:00 EDT http://www.cato.org/pub_display.php?pub_id=4002 http://www.cato.org/pub_display.php?pub_id=3768 When NBC announced plans to cancel the original "Star Trek" series in 1968, fans responded with a massive letter-writing campaign that won the program an additional season. But this time, Trekkies responded with something networks understand better — cash.

Specifically, a group of loyal fans working in the aerospace industry pledged $3 million to bring back the venerable show's latest version for a fifth season. And yet, the series still seems doomed. Why?

The answer lies in the fact that UPN, the series' current network, is a broadcaster. That means it survives solely on advertising revenue, so it is forced to base its programming decisions on what appeals to advertisers, not to fans.

But that is not the case for all portions of the television dial. Fee-based programming is exploding, led by the expansion of pay-per-view offerings, evolution into major networks of "premium" cable programmers like HBO and Showtime, and broad public access to cable and satellite TV.

With the emergence of the XM and Sirius satellite networks, even radio is getting into the act.

When fans have the opportunity to pay for the shows that they like most, fee-based programmers do not need to rely as heavily on advertising for revenue. Subscription channels are more inclined to offer diverse niche programming that appeals to a variety of small but passionate audiences.

HBO is a prime example. Charging premium prices for premium programming allows it to earn eight times more revenue per viewer than "free" broadcaster CBS. This in turn makes it easier for HBO to show programs that appeal to small audiences.

HBO also has incentive to spend money on programs of high quality and production value, because those programs attract viewers willing to pay subscription fees. For proof of the power of those incentives, see HBO's consistent domination of recent Emmy awards.

But UPN is a broadcaster, not a subscription programmer. And the Federal Communications Commission, which regulates the television industry, wants broadcasters to remain "free." This means UPN must air programming that appeals to advertisers, not passionate fans who are willing to spend money to see certain shows.

The FCC has actually waged a 40-year war against fee-based programming. At the behest of now-threatened VHF and UHF broadcast stations, government regulators have imposed "must-carry" regulations on cable operators. And many local governments make "franchise" requirements that force cable systems to use some of their channels for specified purposes.

For a time, regulators even placed rate caps on cable that narrowed the variety and quality of programming that cable systems could include in their "basic cable" packages.

But the FCC's vision for mass communications is fading. Americans are leaving the broadcast networks in droves, in favor of "narrowcast" programming found on less-regulated cable and satellite systems — including the subscriber channels. Simply put, viewers are realizing that "free" television isn't really free. One way or another, they still end up paying for it.

Broadcast networks and government regulators now face a simple choice: They can continue their efforts to regulate cable and satellite programming so subscription-based media become as bland as broadcast fare, or they can let broadcasters experiment with subscriber services.

Hopefully, if the "Star Trek" series gets yet another revival, it will be in a mass communications environment where niche shows have a better chance to live long and prosper.

The term "peer to peer" (P2P) refers generally to software that enables a computer to locate a content file on another networked device and copy the encoded data to its own hard drive. P2P technology often attracts people who use it to reproduce or distribute copyrighted music and movies without authorization of rights owners.For that reason, the short history of P2P technology has been one of constant controversy and calls by many in the content industry to regulate or even ban P2P-based networks or software.

As a general preventive measure against copyright infringements through digital technologies including P2P, copyright owners often use digital rights management (DRM) techniques to encrypt content or otherwise restrict access. Depending on the access or compensation arrangement, content owners may differentiate prices and limit use by the number of plays, duration of access, temporary or partial uses, lending rights, and the number of devices on which the file may be accessed. The potential level of use control may go beyond the expectations of consumers accustomed to a broader range of uses enabled by analog technology. Consequently, many consumer advocates now contend that DRM is harmful to consumers because it tilts the balance of control in favor of copyright holders. For their part, rights owners respond that DRM merely offsets grave dangers made possible by digitization and Internet distribution.

This study argues that the basic functions of DRM and P2P can be quite complementary and that innovative market mechanisms that canhelp alleviate many copyright concerns are currently blossoming. Government should protect the copyrights of content owners but simultaneously allow the free market to determine potential synergies, responses, and outcomes that tap different P2P and DRM business models. In particular, market operations are greatly preferable to government technology controls, on the one hand, or mandatory compulsory licensing schemes, on the other. Recent court decisions regarding the liability of P2P networks or software providers may force the Supreme Court to revisit its own precedents in this area. In the absence of an efficient resolution by the Court,Congress may pass legislation that may interfere with both technological evolution and free-market processes.

In the mid-1990s as it seemed that lawmakers were about to abandon much of the regulatory apparatus that had hampered the telecommunications industry since the 1930s, the telecom equipment industry began to boom, helped in part by the rise of the Internet. The deregulatory trend led ultimately to the 1996 Telecom Act, and soon the architects and implementers of that act were congratulating themselves on a job well done. We were supposedly building a new telecom infrastructure fit for the information age.

Then, in 2000, shipments of telecommunications equipment went into sharp decline, and construction of the information age infrastructure came to a grinding halt. Lots of money and jobs were lost, and the new class of telecom industry executives that had emerged in the post-deregulatory era got most of the blame. These people were thought to be manipulating the market and misleading consumers about sales and growth. Once the truth came out—so goes the “official” story—the market collapsed.

However, even a fairly cursory glance at the actual history of this period suggests that the “official” story exaggerates the powers of senior telecom executives and that a far better place to look for a source of telecom’s collapse is the Federal Communications Commission, which at the time was determined to crowd as many firms as possible into the telecom sector. That strategy was to be achieved by lowering barriers to entry and, in particular, by giving newcomers low cost access to the networks of the carriers. When it became obvious that the market was top heavy with competitors, the telecom bust occurred.

It would have been far better if deregulation had simply let market forces do their work without scoring success primarily on the number of competitors. If there was worry that the incumbent carriers were so powerful that no meaningful competition could emerge, policymakers should have taken a look at newer technologies such as wireless and voice-over-IP, which are potentially highly disruptive of the incumbent players’ position. The good news is that the kind of regulatory measures that brought about the telecom bust now look like they are failing legal challenges. But what happened to telecom in the late 1990s remains a cautionary tale of how reforming regulation rather than truly deregulating can lead to disaster. With Congress potentially poised to re-open and revise the Telecom Act, lawmakers must learn from the mistakes of the past and ensure they do not repeat them.

The Bush administration has rightly decided not to appeal a recent federal appeals court decision tossing out Uncle Sam's heavy-handed regulatory scheme. The Federal Communications Commission now needs to get out of the way.

The United States is the global leader in computers and software. These industries are driven by entrepreneurs facing only light government regulation.

Wireless communication, too, is sprinting ahead. By the end of 2004, there likely will be more wireless than land-line phone numbers. Not coincidentally, government does far less to "manage" wireless communication than traditional phone services.

Even cable, more lightly regulated than telephone land lines, is moving ahead. It has become the biggest provider of high-speed Internet access, now enjoyed by some 48 million American adults. Cable companies also are jumping into the phone market.

Yet broadband Internet access, which transforms service possibilities, seems to be crawling rather than galloping. So both President George W. Bush and presumptive Democratic presidential nominee Sen. John Kerry, D-Mass., have promised to invest in broadband.

The problem is not inadequate federal attention, however. It is misguided regulation - for 70 years and counting - that has slowed the development of broadband.

Telecommunications policy remains bound by the 1996 Telecommunications Act. Alas, observes my Cato Institute colleague Adam Thierer, "Congress wanted market competition, but did not trust the free market enough to tell regulators to step aside and allow markets to function on their own."

Flawed when it was passed, the law now is outmoded as well. Eight years ago, the divide between cable and telephone companies was obvious. No longer.

Unfortunately, the FCC has spent the last eight years attempting to micro-manage telecommunications. In particular, firms seeking to enter the industry pushed for mandated access at subsidized prices from the existing telephone networks.

Three times the FCC drafted regulatory schemes, only to see the District of Columbia Circuit Court of Appeals thrice strike them down. Most recently the court noted the agency's "apparent unwillingness to adhere to prior judicial rulings."

Efforts to preserve and even expand state regulatory authority are equally misguided. Federalism generally decentralizes authority and promotes experimentation, which are good things.

However, the telecommunications market is national. States should not create barriers at their borders to deregulation. Even restrictions promulgated in the name of "transparency" and consumer protection usually slow reform.

Washington should limit state interference to purely local issues, such as taxing citizens to guarantee "lifeline" rates and service. Indeed, Congress should kill off the wastrel Universal Service Fund, supported by a 9.5 percent levy on interstate calls, leaving the issue to states.

Unfortunately, the current system of political interference, legal wrangling, and persistent uncertainty discourages investment and penalizes innovation. Why spend money if your competitors can ride free on your efforts?

Now the FCC is sensibly urging the providers (the Baby Bells) and the resellers (such as ATT, MCI, and Sprint) to engage in normal commercial negotiations to set rates. This should be genuinely private, arms-length bargaining, with no federal or state regulators attempting to manipulate the results. Let the companies concentrate on satisfying consumers rather than politicians.

Some analysts advocate continued regulation for historical reasons - arguing that the Baby Bells retain advantages from their many years as local monopolies. Economist Laurence Kotlikoff has contended: "The local phone system is not only a public good, as defined by economists, it's also a public good as in who paid for it - the definition by everyday folk."

Actually, states regulated phone rates in return for the companies' monopoly status. Moreover, the firms lost that protection years ago.

The companies have spent the intervening years investing in new infrastructure. Observe James Gattuso and Norbert Michel of the Heritage Foundation: "For the most part, yesterday's network no longer exists."

In any case, the focus today should not be on the past. Instead, the question policy-makers should ask is: What is the best means of building the finest possible telecommunications network for the future? Continued government micro-management will not do the trick.

It's time to engage in real deregulation. Admittedly, no one knows exactly what will result. But we will almost certainly get more and better services, new and more efficient devices, and an improved and expanded infrastructure more quickly and at lower cost.

There's no reason the United States shouldn't be No. 1 in telecommunications. But as FCC Chairman Michael Powell observed, Uncle Sam must "clear away the regulatory underbrush." The United States will become No. 1 in telecommunications only when Washington demonstrates that deregulation really means deregulation.

But one person who definitely won't be watching "The Sopranos" finale is my young daughter. The violence, profanity and sexual content is not something I want her exposed to. I'm not sure what the right age is for children to see such programming, but at the point my wife and I think she's ready, we'll talk to her about such shows before we sit down to watch them with her. These are tough choices all parents have to make.

There is another alternative, of course. Our government could decide for us which shows are best for our children, or perhaps just determine which hours of the day certain shows could be aired in an attempt to shield our children's eyes and ears from them. While there are those who would welcome such a move, I would hope that there are still some other parents like me out there who aren't comfortable with the idea of calling in Uncle Sam to play the role of surrogate parent. Censorship on an individual/parental level is a fundamental part of being a good parent. But censorship at a governmental level is an entirely different matter because it means a small handful of individuals get to decide what the whole nation is permitted to see, hear or think.

Are lawmakers really serious about censoring cable TV? Regrettably they are. Building on the momentum of the new indecency witch hunt that is driving many talk-show hosts off broadcast radio, and has television shows like "E.R." altering their content to keep censors happy, lawmakers are now putting cable programming in their cross-hairs. Discussions have taken place in Congress about "codes of conduct" for cable TV, and even a government-approved "family-friendly" tier on cable systems. Joe Barton, R-Texas, chairman of the House Commerce Committee, which oversees media industry regulation, recently said censorship of pay TV is "an issue whose time is coming. I think we're approaching the time when whatever we apply to the broadcasters, in some way, voluntarily or involuntarily, is going to be applied to cable."

Step back for a moment and think about what this means for popular cable programs such as FX's "The Shield," Comedy Central's "South Park" or "The Daily Show," Showtime's "Queer as Folk," or any of the admired programs that air on HBO in addition to "The Sopranos" ("Sex and the City," "Curb Your Enthusiasm," "Six Feet Under" and "Deadwood.") Are we worse off for having these shows in this world? Some policy-makers apparently think so, and have - in the name of "protecting the children" - put the creative community on notice that they no longer have the artistic freedom to make such programs on their own terms. And Americans who have grown to love such shows will be forced to live with sanitized versions. (Would a bleeped, kid-friendly "Sopranos" even be worth watching?)

Parents need to stand up and tell the government to stay out of their business and then get down to the serious business of educating their children about the realities of this world, include what we see and hear in media today. Government censorship is never a good solution in a free society. As someone on "The Sopranos" would say, just "forgettaboutit!"

A heated dispute erupted in late 2002 between corporate giants in the high-tech sector over how the networks owned by cable and telecom companies will be governed in the future. Several major software and e-commerce firms have formed the Coalition of Broadband Users and Innovators to petition the Federal Communications Commission to adopt rules ensuring that cable and telephone industry broadband operators will not use their control of high-speed networks to disrupt consumer access to websites or other users. In the name of preserving "network neutrality" and Internet "openness," CBUI members argue that the FCC must adopt preemptive "nondiscrimination safeguards" to ensure Net users open and unfettered access to online content and services in the future. CBUI claims such preemptive, prophylactic regulation is necessary because the current market is characterized by a cable-telco "broadband duopoly" that threatens Internet users.

Such rhetoric and calls for preemptive regulation are unjustified. There is no evidence that broadband operators are unfairly blocking access to websites or online services today, and there is no reason to expect them to do so in the future. No firm or industry has any sort of "bottleneck control" over or market power in the broadband marketplace; it is very much a competitive free-for-all, and no one has any idea what the future market will look like with so many new technologies and operators entering the picture. In the absence of clear harm, government typically doesn't regulate in a preemptive, prophylactic fashion as CBUI members are requesting.

Moreover, far from being something regulators should forbid, vertical integration of new features and services by broadband network operators is an essential part of the innovation strategy companies will need to use to compete and offer customers the services they demand. Network operators also have property rights in their systems that need to be acknowledged and honored. Net neutrality mandates would flout those property rights and reject freedom of contract in this marketplace.

The regulatory regime envisioned by Net neutrality mandates would also open the door to a great deal of potential "gaming" of the regulatory system and allow firms to use the regulatory system to hobble competitors. Worse yet, it would encourage more FCC regulation of the Internet and broadband markets in general.

Maybe so. But constitutional rights cannot be overridden by temporal majorities -- not 51 percent of the people or even 91 percent of the people. And the court has the final word when it comes to the Constitution. A federal judge in Denver already has held that no-call prohibitions on telemarketers -- with exemptions for calls that are arguably more intrusive, like those from charities, polling organizations, and (you guessed it) politicians -- violate the First Amendment. Speech may not be suppressed based on its content, said the judge. Now the Tenth Circuit Court of Appeals will review the lower court ruling.

Yes, the Supreme Court has declared that commercial speech is not entitled to the same First Amendment protection as non-commercial speech. So the Denver decision may well be overturned. That may strike some consumers as the right outcome, but the Court's distinction between commercial and non-commercial speech has never been coherent. When someone advertises a political book, promotes a paid political event, or markets merchandise in support of a political cause, the commercial and political implications are inextricably entwined. It's time for an overhaul of the Supreme Court's commercial speech doctrine. Our Constitution protects Klan speech, flag burning, even "gangsta" rap. Surely the right of companies to provide information about their products is no less worth protecting.

No-call may be a great idea -- but only if the arrangements are controlled by private contract and not by government regulation. A phone customer does not own the lines coming into his home, so he may not restrict their use. Once a call enters his house, the customer has a remedy: Hang up. That's not much different than radio or TV. If you don't want to see a commercial, turn off the TV or switch channels. Your ownership of the television doesn't give you the right to prevent advertisers from broadcasting into your living room. Similarly, your ownership of a phone doesn't mean you can suppress usage of incoming lines. If you would rather eat dinner uninterrupted, just turn off the ringer. You can even use caller ID or record your messages and return them selectively.

The lines coming into a home are either owned by a private carrier (like Cox or Comcast or Time Warner) or by a common carrier (like BellSouth, Verizon, Quest or SBC). If the lines are owned by a private carrier, the user's contract will control whether and how calls are screened. Almost all private carriers have call-blocking technology. Naturally, carriers would be liable for breach of contract. But if the lines are owned by a common carrier, then government dictates the rules. Indeed, government has placed limits on the ability of common carriers to police their own networks, which must be available to serve all comers. Longer term, the solution is to get rid of the common carrier model and substitute private carriers so the market, rather than government, regulates access.

Proponents of no-call point to the Supreme Court's 1970 Rowan v. U.S. Post Office Department decision. The Court upheld the constitutionality of a scheme whereby each mail recipient could direct advertisers to exclude the recipient from unwanted mailings. But the Post Office is different. First, it's a monopoly and, therefore, affords no opportunity for competitive privacy models. Second, mailboxes can't be turned off the way that phone ringers, radios, and televisions can. Without mail blocking, senders can trespass on recipients' property. Third, the Post Office scheme allows recipients to choose which particular senders to exclude. Neither Congress nor a government agency categorizes senders in a manner that requires blanket exclusion or blanket access.

When government sets the rules, it must not discriminate based on the content of the calls. That's what the First Amendment means. Free speech is not subject to plebiscite, no matter how many millions sign up for no-call. Justice William Brennan got it right: "If there is a bedrock principle underlying the First Amendment, it is that government may not prohibit the expression of an idea simply because society finds the idea itself offensive or disagreeable."

The new European version of the old Microsoft antitrust game has gone on nearly five years, so far. EU Competition Commissioner Mario Monte finally got around to accusing Microsoft of doing something terribly naughty by: (1) giving consumers for free Media Player with Windows, and (2) not giving competitors a free tour of the inner workings of Windows. Those odd complaints were accompanied by threats of big fines, which could theoretically top $3 billion. The stock market took one look at the evident absurdity of the charges and yawned, dropping Microsoft stock by one penny.

In the real world of political influence-peddling, any theoretical virtues of antitrust soon turn to vice -- protecting competitors rather than protecting competition. Europeans are not even shy or subtle about their intentions. The EU Commission claims to have gathered "evidence from a wide variety of consumers, suppliers and competitors." The comment about competitors is certainly true. The commission has been heavily lobbied by the Computer and Communications Industry Association, which represents the likes of Sun Microsystems, Oracle and AOL. As Brad Hill remarked in E-Commerce Times, the unseemly sight of watching U.S. companies go after another U.S. company in Europe is "an unusual and perhaps unique precedent."

One of the EU's two complaints is that Microsoft has an advantage in relatively inexpensive servers, those that link office PCs or workstations, because servers based on UNIX or Linux supposedly have trouble communicating with desktops using Windows. If that was a real problem with cheap servers, why would it not also be a problem with costly servers? If big UNIX and Linux servers also had trouble talking to Windows desktops, then Windows desktops would not work well on the Internet, which is dominated by UNIX-Linux servers.

These complaints about low-end servers emulate the U.S. government's previous efforts to define markets in ridiculously narrow ways. When our Justice Department claimed Microsoft had a monopoly of "Intel-based" personal computers, that excluded by definition all computers made by Apple, Sun Microsystems and Palm. Today, even that bogus distinction is breaking down because Sun is selling Intel-based servers. In the U.S. case, unlike Europe's, prosecutors prudently spoke only of "personal" computers because they knew Windows faces huge competition from servers and workstations using UNIX or Linux.

First quarter sales of Windows-based servers were up 10 percent from a year earlier, according to IDC, but Linux servers were up 35 percent. The IDC predicts sales of Windows-based servers may rise to $19 billion by 2006, but combined sales of UNIX and Linux servers would still top $34 billion. Such dominance of UNIX and Linux is why Mr. Monti is careful to confine his complaints to only low-end servers where Windows machines do well precisely because they're low-end (i.e., cheap). That is like defining low-end automobiles as a separate market and then complaining that market is unfairly dominated by Kia.

Among "vendors of low-end servers," as the EU puts it, Sun has been losing market share to both Windows and Linux hardware. Sun had to offer an Intel processor and Linux software to compete on price. Blaming compatibility with Windows would be an unlikely excuse because: (1) Compaq, Dell and IBM sold plenty of low-end Linux servers, and (2) Sun has long offered a card and software to read or use Windows applications and also sells Star Office for both its own operating system and Windows.

European gripes about media players are almost as technologically illiterate as our Justice Department's previous obsession with browsers. Apple just came out with a fabulous new Safari browser that will likely be available for Windows before long. But nobody still believes it makes any commercial difference which free browser people prefer. The only reason it made a difference to Netscape was that Netscape was trying to charge a lot of money for the browser and because it was then tied to the leading home page, or portal, where ads were sold. The only reason Netscape later mattered to AOL (which never used it) is that buying that company amounted to buying the valuable right to sue Microsoft.

A year ago, Nielsen/Net Ratings figured Real Media reached 17 million home viewers through streaming or downloads, Windows Media 15.1 million and QuickTime 7.3 million. But that involved counting by format (which ignores even MP3 music), and all three players can read rival formats. Besides, there are many other media players, including AOL's Winamp, QCD, Sonique and UltraPlayer. As more of us rip and burn CDs and DVDs, we use that same software for playback, such as Musicmatch Jukebox or Roxio Easy CD&DVD Creator. Some skip media players altogether and download music files to a portable player.

The big three media players still have advantages for streaming media -- watching or listening to something as it happens. Real dominates streaming, but there are new contenders including Macromedia Flash MX.

Microsoft, Apple and Real give away media players because they want to sell related software that produces content. No company can push its proprietary formats because consumers insist on a media player that can play all leading formats (such as MP3, mpeg and avi). Any archaic notion that consumers won't bother with downloading is nonsense: Apple boasts of 100 million downloads of QuickTime 6 in less than 10 months.

Europe's case is just all about pleasing Microsoft's competitors at the expense of ordinary consumers. When EU officials speak of evidence from "consumers," they mean an opinion poll from 157 corporations using server or audiovisual software. No ordinary consumer objects to having more useful features in Windows rather than fewer.

EU Commission spokesman Tilman Lauder explained his boss's threats as "yet another invitation" for a settlement. Invitation for a payoff sounds more like it. Mr. Lauder added that any fine would be based on the "gravity" of the accusations, not on any demonstrable damage to competitors (much less to consumers). They may be eager to settle since "Super Mario" has not been looking so super lately, after losing several cases in the Court of First Instance in Luxembourg. Australia's Financial Review recalled that court president "Bo Vestereforf has severely chastised Commission officials for sloppy casework and trampling on the rights of defendants." Looks like they're doing it again.

In England, the Economist warns of a danger that this European meddling with a hugely important U.S. company "could trigger a trans-Atlantic conflict of the sort that was widely discussed when General Electric's takeover of Honeywell was blocked by Monti after it had cleared regulatory hurdles in America."

Unless we have lost all sense of national pride and moral outrage, that seems the least the EU should expect.

The latest round began with heavyweight AT&T against the injured lightweight. AT&T claims MCI diverted federal agency calls through Canada to avoid paying access fees to local carriers. AT&T called this "fraud and racketeering," and impugned its rival's patriotism, saying MCI "demonstrated their willingness to play fast and loose with our national interest to line their pockets." Similar disputes about creative routing and unpaid access fees have long been commonplace, with AT&T often the accused rather than the accuser. But such squabbles have heretofore been settled quietly, rather than through intemperate press releases.

"Whether true or not," the New York Times observed, these accusations "could make it harder for the company to keep some of its current customers and sign up new ones." After two more MCI rivals piled on, Accounting Web remarked, "This latest fraud charge, levied by three of MCI's chief competitors -- AT&T, SBC Communications and Verizon -- could derail the company's efforts to resolve its Chapter 11 bankruptcy case with the federal government."

Perhaps the idea of derailing MCI never occurred to AT&T, SBC and Verizon, though it happens to be in their interest. The Atlanta Journal-Constitution reports, for example, that SBC "lost 249,000 residential and business lines in the [past] quarter to rivals such as AT&T and MCI." Since MCI is vulnerable and AT&T is not, it makes commercial sense for SBC to now make common cause with AT&T against MCI.

The new accusations follow a suspicious trail of several previous efforts to damage the MCI brand. When something smells this fishy, it is time to do a little fishing.

On July 7, the SEC imposed a record $750 million fine on the remnants of WorldCom. Predictably, MCI's competitors attacked that huge fine as being far too lenient. Jim Cicconi, general counsel to AT&T, called it "a travesty of justice" that MCI should be able to "emerge from bankruptcy at a competitive advantage." The complaint that bankruptcy is an "unfair advantage" presumably means MCI will be relieved of unpayable debts. But debt relief is an unavoidable part of any bankruptcy, and a recent bankruptcy is certainly no advantage in the market for new capital.

Whether and how MCI emerges from bankruptcy is for its creditors to decide. It is not the proper concern of rival firms with an unhealthy interest in slaughtering wounded competitors. Nor is it the proper concern of politicians who have nonetheless staged one mock hearing to publicize MCI rival's self-interested complaints and plan to stage another. Unfortunately, USA Today spoiled those shows by demonstrating that AT&T, Verizon and SBC are major contributors to those most active in the campaign to punish MCI into oblivion -- Sens. Susan Collins, Maine Republican, Orrin Hatch, Utah Republican, and Edward Kennedy, Massachusetts Democrat; and Rep. Henry Bonilla, Texas Republican.

The fishiest issue is the campaign to prohibit the federal government from doing business with MCI. As the Wall Street Journal noted, "For many [bond] investors, the biggest concern is whether the new assertions will hurt MCI's effort to bid for government contracts."

Media stories quote Tom Schatz, president of Citizens Against Government Waste, who wants the government to boycott MCI. Mr. Schatz worries that "MCI could emerge from bankruptcy with an unfair advantage," which "could force prices across the industry to nosedive." But why is a lobbying group that claims to worry about federal spending now suddenly more worried that MCI might charge the government less money than AT&T?

Interest groups trying to use the government to abuse MCI are insufficiently coy about their intentions. A query from The Washington Post to Verizon found "the regional phone giant has no plans to drop its strident lobbying campaign against WorldCom in Washington."

The Communications Workers of America want MCI sold to "responsible companies" -- specifically, AT&T or Sprint. Columnist Deroy Murdock saw right through that ploy: Unlike MCI, AT&T and Sprint are unionized. Selling MCI to AT&T would be the easiest way to expand union membership (and to give antitrust officials a heart attack).

What AT&T, Verizon, SBC and the communications workers union have in common is that they were once part of the government-enforced "Ma Bell" monopoly. While it lasted, you could not even choose your own telephone. Long-distant calls were exorbitant, ostensibly to subsidize local calls but more likely to subsidize administrative overstaffing, lavish offices and fat paychecks.

An antitrust suit from 1974 to 1982 resulted in the AT&T long-distance service spinning off Western Electric, Bell Labs (now Lucent) and seven regional monopolies, which have since reassembled themselves into four -- Verizon, SBC, Bell South and Qwest. Justice cited an essay of mine from the Harvard Business Review of December 1974, "A kind word for cream skimming." But I was never a fan of the breakup. I just thought anyone should be free to buy telephones and long-distance services from anyone who offered them. That would have been a matter of deregulation rather than antitrust.

What ultimately undid Ma Bell's monopoly, as I predicted in 1974, was legal and technological innovation. The technological challenge came from MCI, which began in 1963 and spent the next six years persuading the FCC to let it use airwaves to transmit computer data between St. Louis and Chicago.

Long before the antitrust deal, MCI had already made significant inroads into AT&T's long-distance business. That meant AT&T could no longer count on monopoly profits from long-distance to subsidize local service. And that made spinning off local services to the Baby Bells look like a good deal. MCI was thus a key part of the beginning of the end for a cozy monopoly.

The recent sniping at MCI may be nothing more than a revival of this old feud -- a grudge match. Whatever it is, it looks like bullying. And the nasty chatter about "punishing" the new MCI for the old WorldCom malfeasance is as unreasonable as it is irrelevant.

WorldCom executives accused of accounting fraud are reportedly close to being indicted, including former Chief Executive Officer Bernie Ebbers, former Controller David Myers and former Chief Financial Officer Scott Sullivan. Having the government boycott the new MCI would do nothing at all to punish anyone who is guilty, but it would do a lot to punish many who are innocent.

If the newest attacks on MCI turn out to be as dubious as previous ones, any damage they inflict will fall on MCI's 50,000 employees, 20 million customers and numerous bondholders. That would not be fair, and it would not be smart.

The legislation, which passed with a veto-proof majority and now moves to the Senate, is an attempt to strike down one of a series of new rules issued by the Federal Communications Commission as part of a court-ordered relaxation of government control over the media. The new FCC rule would lift current limits and allow media companies to own enough television stations to communicate with 45 percent of the nation's viewers. Another new rule that Congress is out to overturn would allow companies to own both a newspaper and a broadcast station in a large media market.

The new FCC rules threaten Congress because they would increase the financial resources and manpower that media firms can invest in covering the news -- including the shenanigans of politicians -- and they would diminish the ability of politicians to shape news coverage. That's why the FCC drew criticism from such ideologically diverse lawmakers as Sen. Trent Lott (R-Miss.), Rep. John Dingell (D-Mich.), Sen. Ted Stevens (R-Alaska), Sen. Ernest Hollings (D-S.C.), Sen. John McCain (R-Ariz.), and Sen. John Edwards (D-N.C.).

Most broadcast news operations operate on shoestring budgets, with only a few reporters and news directors. Newspapers also usually have tight budgets that limit the depth and breadth of their reporting. Federal lawmakers and other politicians like that situation just fine because it limits the media's ability to conduct in-depth, investigative reporting and news analyses. But if a local newspaper and broadcast station were to work together as part of a media company or if several television stations were to band together as part of a large regional chain, they could pool their resources and provide their audience with more-comprehensive news coverage, including increased scrutiny of politicians.

The graver threat to lawmakers is that new FCC rules would decrease politicians' ability to bully the press, especially in small and mid-sized media markets. As many journalists can attest, media companies must be careful about how heavily they scrutinize or criticize a politician for fear the politician will cut off the flow of information from his or her office and deny requests for essential interviews. Many journalists will thus report the news in a limited, narrow way that is viewed favorably by the politicians. The reporters may also fall into covering stories "suggested" by politicians' press officers even though the stories are not newsworthy.

Expanded and more diversified media companies could better stand up to politicians -- and meet their responsibilities to the reading and viewing public. A company that owns a newspaper and broadcast station in a mid-sized market could cover a congressman far more aggressively (and honestly), and the congressman could not blacklist the company for fear of losing contact with voters in that media market. Likewise, a chain of television stations that has a combined potential audience of nearly half the nation would be large enough to stand up to the most powerful U.S. senator.

Large, diversified media corporations could more intensely scrutinize members of Congress, and could also provide more penetrating coverage of powerful special interest groups. Thus, it's not surprising that some of the strongest supporters of Congress' efforts to overturn the FCC rules are special interest groups that bristle at media scrutiny, including the National Rifle Association, the National Organization of Women and the U.S. Conference of Catholic Bishops.

Americans have long been calling for members of Congress to work together to advance important legislation. It's too bad that last week's display of bipartisanship was only intended to protect lawmakers and special interests.

All is apparently now safe for our democracy. Imagine the horror if we actually allowed media companies to deliver more news and entertainment to the citizenry.

The alliance of interests that shot down the liberalization rally around the flag of "diversity," claiming that media is too homogenous for their tastes even though, by all measures, today's media marketplace is more diverse and competitive than ever before. As FCC Chairman Michael Powell recently noted, "You can't have the NRA in the debate saying there are gun-hating media liberals, and at the same time, I've got Code Pink screaming about the conservative pro-war bias of the media. And then I'm supposed to somehow reconcile that?" If such a motley crew of groups can each find something different to gripe about, in other words, today's overall media offerings are quite diverse.

Here's the real problem with the debate about media ownership in America today -- it is based on political fumings of those with an ax to grind with the media. Some are convinced media is too large and out of control, others that it is too liberal or too conservative, too censored or too libertine, too something-or-other and the government needs to fix it.

Let's consider some of the numbers that aren't usually mentioned in the debate. Of the 1,721 full-power commercial and non-commercial TV stations in the U.S., Viacom owns only 39 stations, or 2.27% of total. Fox owns 35, or 2.03%. NBC owns 29, or 1.69%. And ABC owns only 10, or 0.581%. It is in this environment in which the FCC voted to slightly relax the national TV ownership cap such that potential household viewership could rise to 45% from 35%.

This ownership cap is mistakenly perceived by some to be a limit on overall, actual market share. It is actually even more restrictive: It is a cap on the total potential percentage of eyes and ears that networks are able to reach with combined broadcast properties that it directly owns.

But even if a network could reach half or more of the total viewing audience, so could the other networks and many other non-network broadcasters. Despite potential audience reach, actual market share for TV networks is far smaller and the competition they face is quite intense. For example, non-network broadcast station owner Sinclair Broadcast Group, Inc. owns 63 TV stations (3.66% of U.S. TV stations). Paxson Communications owns 61 (or 3.54%), Hearst-Argyle owns 34 (1.98%), Tribune owns 27 (1.57%), Gannett owns 22 (1.28%), and Belo owns 19 (1.10%).

Importantly, none of these companies face the artificial 35% audience-reach cap imposed on their TV network rivals. Given the competition that networks face from these rival station owners, it is unclear why the relaxation of the national ownership cap has generated such intense opposition.

The competition has also led to a diversification and splintering of both content and the audience itself. Geoffrey Colvin of Fortune noted recently that, "25 years ago the three major networks controlled 90% of the audience. So we've gone from each dominant player having 30% of the audience on average to each having 14%. That is not a trend toward increasing concentration." Mr. Colvin also noted that, "In the old days, if a prime-time show didn't get a rating of 20, it was in danger of cancellation. Now TV's top-rated shows typically get a 12; the finale of American Idol got a 20 and made national headlines. And of course that was on Fox, a network that didn't exist 25 years ago. The overwhelming trend is not fewer choices but increasingly splintered audiences paying attention to more media voices."

OK, so what's the problem here again? Media barons monopolizing the airwaves? Hardly. While the old media universe featured television, radio and newspaper, today's boasts competition between all those old outlets plus cable, satellite and the Internet. Consumers have more and better choices today for news and entertainment today than ever before. Artificially limiting the size of the soapbox that a company can build is uncompetitive, unconstitutional, and not the kind of reality program anyone had in mind.

In reality, the media are less concentrated and more competitive today than they were 30 years ago. And consumers are unambiguously better off. Consider two families, circa 1973 versus 2003, and the media and entertainment options available to them. The 1973 family could flip through three major network television stations, or tune in to a PBS station or a UHF channel or two. By comparison, today's families can take advantage of a 500-plus channel universe of cable and satellite-delivered options, order movies on demand, and check out a variety of specialized news, sports, or entertainment programming -- in addition to those same three networks.

Or, these hypothetical families could just listen to the radio together. Seven thousand stations existed in 1970 nationwide to choose from. Today more than 13,000 stations exist and subscription-based music services are delivered nationwide and uninterrupted via digital satellite.

And then, of course, there's the Internet and the astonishing cornucopia of communications, information, and entertainment services the World Wide Web offers today's families. In the media Dark Ages of 1973, it would have taken a great deal of time and money to publish your own newsletter. Today, the Internet gives every man, woman, and child the ability to be a one-person publishing house or broadcasting station, and communicate with the entire planet. Instead of going to the library to retrieve information, as our hypothetical 1973 family might have done, today the library comes to us as the Net puts a world of information at our fingertips. While the 1973 family could read the local newspaper together, today's families can view thousands of newspapers from communities across the planet.

And the list goes on: video recorders, DVD players, interactive TVs and cell phones, MP3 players, and a seemingly endless array of other portable/wireless computing and communications devices are available to us today that the families of 1973 only dreamed of, or saw in a "Star Trek" episode.

But while America's mass media marketplace is evolving rapidly, the same cannot be said for the regime of rules that govern it, which are stuck in regulatory time warp. Federal regulations that limit how much of the national market can be served by broadcast and cable companies, or prevent a company from owning a newspaper and television station in the same market, or prohibit a television network from buying another network, should be abolished. Why should media companies be forced to play by a distinct set of random ownership rules that we impose on no other industry?

These rules have become historic anachronisms that ignore new market conditions and the intense competition for our eyes and ears. Indeed, far from living in a world of "information scarcity" that some fear, we now live in a world of information overload. The number of information and entertainment options at our disposal has almost become overwhelming and most of us struggle to figure out ways to filter and manage all the information we can choose from in an average day. It is important to keep such facts in mind when debating changes to the archaic media ownership rules that the FCC is considering revising. Even as the underlying business structures and relationships in this industry continue to change, the one undeniable reality of our modern media marketplace is that information and entertainment are commodities that cannot be monopolized. Accordingly, the FCC should relegate these outdated media ownership rules to the dustbin of telecom history.

Global telecommunications markets have traditionally been closed to foreign trade and investment. Recent World Trade Organization negotiations resulted in a Basic Telecommunications agreement that sought to construct a multilateral framework to reverse that trend and begin opening telecom markets worldwide. Regrettably, this new WTO framework is quite ambiguous and open to pro-regulatory interpretations by member states.

In fact, during recent bilateral trade negotiations with Japan, U.S. government officials adopted the position that the new framework allowed them to demand that the Japanese government adopt very specific regulatory provisions regarding telecom network interconnection and pricing policies. The Office of the U.S. Trade Representative argued that Japanese officials should require their domestic telecom providers to share their networks with rivals at a generously discounted price to encourage greater resale competition.

Those interconnection and line-sharing rules were borrowed directly from the U.S. Telecommunications Act of 1996, a piece of legislation that remains the subject of intense debate within the United States. Good evidence now exists that those rules generally retard net-work investment and innovation by encouraging infrastructure sharing over facilities-based investment. Consequently, the USTR has generated resentment on the part of Japan and other trading partners as it has attempted to force them to adopt heavy-handed telecommunications mandates that have very little to do with legitimate free-trade policy.

The USTR must discontinue efforts to impose American telecommunications regulations on other countries as part of free-trade negotiations and should instead focus on reforming or eliminating the most serious barriers to foreign direct investment both here and abroad.

Congressional spending sprees are nothing new in Washington. But now, new spending initiatives are cropping up that cover telecommunications services, the Internet, and the high technology sector in general. Although federal legislative activity on this front is not a formally unified effort, the combined effect is tantamount to the creation of what might be called a "Digital New Deal." Just as policymakers proposed a litany of New Deal programs and spending initiatives during the Great Depression era, lawmakers today are devising many new federal programs aimed at solving the supposed emergencies or disasters that will befall the telecommunications industry without government assistance. The recent troubles of the dot-com and telecommunications sectors have only added fuel to the fire of interventionism.

The new communications, cyberspace, and Internet-related spending initiatives that policy-makers are considering or have already implemented can be grouped into four general categories: (1) broadband deployment; (2) digital education, civic participation, and cultural initiatives; (3) cybersecurity; and (4) research and development. Dozens of new federal programs have been proposed in these areas during the 107th Congress. And dozens of other assistance programs already exist.

The dangers of the cyber-pork barrel should be obvious. Washington subsidy and entitlement programs typically have a never-ending lifespan and often open the door to increased federal regulatory intervention. That kind of political meddling could also displace private-sector investment efforts or result in technological favoritism by promoting one set of technologies or providers over another. Moreover, subsidy programs are unnecessary in an environment of technological competition, characterized by both proliferating consumer choices and uncertain market demand for new services. Finally, perhaps the leading argument against the creation of a Digital New Deal is that by inviting the feds to act as a market facilitator, the industry runs the risk of becoming more politicized over time.

Before high-tech sector leaders become too comfortable in Washington circles, they should ask themselves if they want their future to be so closely tied to the whims of federal legislators and regulators.

On Aug. 8, the Federal Communications Commission (FCC) approved a new rule that will raise the cost of purchasing a new TV set by as much as $250. The purpose of this FCC TV tax is to force American consumers to purchase a product they have refused to pay for voluntarily. This is a naked case of regulatory corporate welfare: putting the financial interests of industry lobbyists ahead of the consumer.

The new FCC regulation will require all new TV sets to come equipped with the capacity to carry digital broadcasts. Digital TV is the newest fad in TV engineering. It will allow TV sets to eventually receive DVD quality picture and sound. Currently the "digital tuners" to provide this new technology aren't cheap. They can easily add between $200 and $300 to the cost of a TV set -- which in some cases is more than the cost of the new TV itself. So this would be like the Transportation Department requiring car buyers to pay more for accessories than for the new car itself.

Broadcasters and some TV manufacturers who produce the tuners -- Zenith, for example -- are feverishly pushing the new regulation.

Michael Powell, the normally free-market-leaning FCC commissioner, is leaning toward approving the new law that would prohibit stores like Wal Mart and Circuit City from selling TVs without the tuner after 2006.

The FCC was, of course, created to safeguard consumer interests, but in this case the agency will mandate a new expensive technology, whether consumers want it or not. Most American households already have access to cable or satellite TV. These viewers have mostly shunned the digital TV fad. Requiring these consumers to buy tuners with their TVs makes as much sense as forcing McDonalds customers to buy the fries if they want the Big Mac; or Apple to sell computers with Intels inside, or even baseball card packs to come with a stick of gum.

We have here a multimillion-dollar income transfer from the TV viewing public to the broadcasters, with Uncle Sam as the policeman and enforcer. Once again, the Bush administration -- in this case, the usually sensible FCC Chairman Michael Powell -- placing the special interest ahead of the national interest. In this case, the broadcasters' rush for special favors from government are no different or less justified than the handouts to the steel industry, timber companies, and million-dollar farmers.

The broadcasters disingenuously justify their federal protection racket by arguing that the economies of scale from mass purchases can lower costs to consumers. No doubt that's true. But, of course, that argument could be made to justify government interference in every new business and industry. If the government would require people to buy lemonade from my son's roadside stand, he can lower his costs and prices too. To listen to the sanctimonious "public interest" arguments of the broadcasters, one might think they were selling the polio vaccine, not a prettier picture on a TV screen.

The FCC's case for this product mandate is weak in the extreme. There is no market failure here that needs to be redressed. In fact, history proves just the opposite. One of the hallmarks of the new high-technology age is how rapidly consumer electronic innovations become available to the mass buying public. Today, through the magic of the free market, even low-income households can afford color TV sets, cellular telephones, CD players, DVD players, microwave ovens, the Internet, personal computers, and on and on. The diffusion of these technologies in virtually every case, occurred without government aid.

If anything, government's track record has been one of inhibiting the diffusion of exciting technologies. This has indisputably been the case in the area of broad-band technology. Government telecom regulations in the 1990s have shrunk the incentive for phone companies to invest in the necessary cable infrastructure to bring high-speed broad-band service to tens of millions of homes and businesses that still lack access. Here government has contributed to the digital divide in America.

As for digital TV, this new technology will become widely adopted, not when the government decrees it to be so, but when the prices fall fast enough that Americans willingly purchase the product on their own. The FCC shouldn't stand in the way of this new technology, but it shouldn't mandate it either.

When the consumer is king, product quality improves and prices fall.

The FCC's latest assault against consumer sovereignty should be overruled by Congress -- and before the next station break.

Orbitz, which sells airline tickets to travelers over the Internet, is owned by 5 major airlines and affiliated with 30 more. Its charter requires it to display flight and fare information in an unbiased manner, sorted only by price, number of stops, length of trip, and other basic criteria.

Despite the fact that Orbitz has plenty of competition, other players in the industry have trotted out antitrust arguments to try to keep it from operating or cripple it with regulations. The intensity of the assault should set off alarms, because it is simply the latest example of antitrust being used to suppress competition rather than to promote it.

Orbitz was created because the founding airlines have a strong interest in fostering sources of comprehensive, unbiased information on schedules, fares, and seat availability. Improved information will decrease airline operating costs and promote their interest in filling as many seats as possible. Orbitz is also introducing new software for booking reservations. This will introduce competition and reduce fees in a part of the industry that now derives market power from government regulation. It will also restructure the industry to reflect the new economic realities of the Internet.

The antitrust attack on Orbitz is highly technical and is directed at provisions of the charter that require the participating airlines to provide Orbitz with all fares that they make publicly available, which is alleged to create excessive power over ticket selling. Another cause of antitrust concern is that Orbitz might in some fashion enable airlines to coordinate, and raise, their fares.

Neither charge is valid. The charter provisions that are drawing fire are necessary to the creation of an unbiased information source. The real motivation of most opponents is their vested interest in the status quo.

The seriousness with which the attack is being taken by the government, the press, and the public illustrates a general failing of contemporary antitrust regulation. Antitrust enjoys an excellent image, primarily because of the belief that it protects consumers. But in practice, the energy behind antitrust policy often comes from firms that are threatened by new arrangements. Pressure from such firms is skewing antitrust policy into a series of efforts to suppress innovation for the benefit of industry incumbents and to the detriment of consumers.

It wasn't supposed to turn out this way. In fact, today was supposed to be a day of celebration because policy makers stipulated several years ago that by May 1, 2002, every commercial broadcaster in America was to be transmitting HDTV signals to the public. According to a recent USA Today survey of the nation's commercial television stations, however, only 15 percent of them are broadcasting HDTV signals to the public. Worse, roughly 800 of the nation's 1,400-plus stations recently petitioned the Federal Communications Commission (FCC) for waivers from this deadline.

What went wrong? A lot of things are to blame but ultimately it comes down to a federal industrial policy that substitutes bureaucratic mandates for the wisdom of markets and the desires of consumers.

In a nutshell, here's how the plan was supposed to work. At the request of the powerful broadcast lobby, Congress granted every broadcaster in America an additional license to compliment their existing analog license. With this valuable new license, which they received for free, broadcasters were supposed to start making the transition to HDTV, while continuing to broadcast traditional analog signals via their old channel. By 2006 - or so the theory went - all Americans would have purchased the hardware necessary to receive HDTV. Then the old analog stations could "go dark" and be turned back into the federal government to be re-auctioned for other purposes.

To fully appreciate the magnitude of this public policy fiasco you need to know that the value of the new digital TV licenses that Congress forked over to the broadcasters was estimated between $10 billion to $100 billion. Moreover, this was high-quality, "beachfront" spectrum that could have been sold for many other important uses. So while cellular companies were spending billions to buy the spectrum for the digital cell phones we use today, the broadcasters were getting away with the high-tech equivalent of a Teapot Dome scandal by nabbing this mother lode of free spectrum.

How did broadcasters get so many members of Congress to sign off on this unprecedented taxpayer rip-off? Broadcasters argued that they have historically been given free spectrum in exchange for a promise to "serve the public interest" with high-quality programming as well as local news, weather and sports. To continue this tradition of free, over-the-air broadcasting, broadcasters claimed every local station needed to be "loaned" an additional channel to make the transition to digital TV. When they were done with the transition and had forced everyone to convert to their digital signals, they'd throw us back the bone of their analog spectrum and let the feds auction it off.

But that may not happen. For a rule change in 1997 allows broadcasters to hold onto their analog channel until 85 percent of Americans have made the DTV transition. Only then will they return it to the FCC for re-auction. Problem is, at the glacier-like pace at which this transition is proceeding, it may be 2010 or even 2020 before we see anything close to 85 percent of homes with HDTV-receiving capabilities since everyone will need to replace their home's TV sets with new units or converter boxes. Not everyone is ready to plop down his hard-earned cash for a prettier picture, and some people don't care about digital TV.

There are no easy escape routes from this industrial policy mess. Perhaps the best solution would be to cut our losses and allow the broadcasters to keep what they've got, and more importantly, to sell it as they wish. This option would be difficult for some to swallow because the broadcasters would be getting away with murder. But it would achieve the important goal of freeing the spectrum they're hoarding by encouraging them to sell it through private auctions to those who value it more highly. And it would get the feds out of the business of micro-managing the television industry.

Congress should have auctioned off this spectrum back in the mid-1990s and let the chips fall where they may. HDTV would probably have emerged, but through other means (satellite or cable), and other wireless providers would have snatched up the spectrum at auction and put it to better use. As it stands now, we're left with the mother of all industrial policies, and few pretty TV pictures to show for it.

In the New Deal of the 1930s the Rural Electrification Administration used federal subsidies to extend electricity to rural and isolated communities across the country. By subsidizing the significant capital investment needed to run wires and build infrastructure, REA support brought electricity to households that might otherwise have waited many years for such service.

Today, similar arguments are being made for subsidizing new technologies, such as broad-band Internet service. Some people are promoting the equivalent of an "REA for broadband" to ensure that rural and low-income communities gain access to high-speed communications connections. However, the REA analogy is not only misplaced, it is harmful. The wires over which broadband service can be transmitted are already in place--owned by telephone, cable, and even electricity providers. Upgrades are needed to provide broadband, but not the massive investment that is required to run a new line to every customer's home. And wireless transmission from both satellite and land-based systems has just begun. Whereas electricity has traditionally been provided by a single distributor, broadband Internet service has many potential distributors that use a variety of technologies.

Tax credits or subsidies to promote broadband deployment would distort competition between those technologies, enriching incumbents and thwarting the technologies of tomorrow. For an industry in which the technologies of today were unheard of just a few years ago, nothing could threaten progress more. And for those consumers who are waiting for prices to fall or service to extend to their communities, new technologies and competition will offer the best solution.

Lost in this debate, moreover, is the fact that access to the information superhighway does not require broadband. While broadband is superior, it is not necessary for access.

The first question, then, is whether low-income, rural, and other households are gaining access to the Internet at all. The second question is whether those households--and for that matter, all Americans--are gaining broadband Internet access. To both questions, the answers are decidedly positive. In light of this, broadband tax credits or subsidies appear to be an unwise, unnecessary, and expensive approach to what is quickly becoming a nonproblem.

The bill goes by the acronym “CRASH Act”: “The Call Responsibly and Stay Healthy Act.” (Is anyone else a little tired of these silly bill names lawmakers invent to attract media coverage?) The CRASH Act would require that states impose restrictions on hand- held cell phone calling or risk losing a portion of their federal highway funds. This is also known as blackmail: “Do what the feds say or no taxpayer dough, got it?”

Congress might as well abolish state and local governments and set traffic and vehicle operation standards for the nation. In fact, the feds already impose rules on several things in your car, including the following: air bags, seat belts, tire safety, crash standards, gas mileage, emission limits, fuel taxes, drinking age requirements, and, until recently, the nationwide 55-mph speed limit. It goes without saying that all this activity is of dubious constitutionality, and a federal cell phone law stands on even shakier legal footing.

But state-level cell phone bans aren’t needed either. There are far more distracting activities inside a car—such as tinkering with your car stereo or arguing with a passenger—that we currently do not prohibit. A recent study by the University of North Carolina Highway Safety Research Center analyzed more than 32,000 traffic accidents caused by distracted drivers to determine what factors contributed to those accidents. Among the top causes were: outside objects, persons or events (29.4 percent of accidents surveyed); adjusting the radio, cassette, or CD player (11.4 percent ); and other occupants of the vehicle (10.9 percent ).

The less significant causes were: moving objects in the vehicle (4.3 percent ); other objects or devices in vehicle (2.9 percent ); adjusting vehicle / climate controls (2.8 percent ); eating and drinking in the car (1.7 percent ); using or dialing on a cell phone (1.5 percent ); and smoking-related distractions (0.9 percent ).

Cell phone bans might also have unintended consequences. For example, Rep. Ackerman’s bill would force drivers either to use a hands-free device or to pull off to the side of the road to make a call. Such a prohibition already exists in Suffolk County, N.Y., which is partially within Ackerman’s congressional district. Tragically, a few days after Ackerman introduced his federal mandate, a driver in Suffolk County pulled over to the side of the road to comply with the law and was struck by a delivery truck and killed. With the nation’s highways growing increasingly congested, mandating that drivers pull over to make a call would only exacerbate traffic congestion and simultaneously place drivers at risk.

So if cell phone bans aren’t the answer, what are concerned policy makers to do? Instead of banning specific activities inside vehicles, the better solution would be to enforce existing laws against reckless or negligent driving. If drivers are weaving in and out of traffic and posing a risk to others, they should be pulled over and ticketed, regardless of why they are doing so.

Finally, technology is helping solve a problem it created. “Hands-free” devices, one-touch speed dialing, “on- board” navigation devices, and voice-activated calling systems are enabling drivers to live by the old “10 & 2” rule and keep both hands on the wheel and their eyes on the road.

Policymakers should be patient and let technology solve this problem for them. In the meantime, federal lawmakers should get out of the business of telling us what to do in our cars.]]> Mon, 25 Jun 2001 00:00:00 EDT http://www.cato.org/pub_display.php?pub_id=4262 http://www.cato.org/pub_display.php?pub_id=4296

With cell phone use exploding in recent years (more than 115 million wireless subscribers today), it is not surprising that these devices would cause some problems. But how big of a problem does cell phone use in cars pose? The results may surprise you.

The AAA Foundation of Traffic Safety has released the results of a new study in which the group analyzed 26,000 traffic accidents to determine what factors contributed to those accidents. Among the top causes were: outside objects, persons or events (19.7 percent of accidents surveyed); eating and drinking in the car (18.8 percent); adjusting the radio, cassette or CD player (11.4 percent); and distractions caused by other occupants in the vehicle (9.4 percent).

The less significant causes listed by the survey were: moving objects in the vehicle (3.2 percent); using or dialing on a cell phone (1.5 percent); using other devices in vehicle (1.4 percent); adjusting climate controls (1.2 percent); and smoking-related distractions (1.2 percent).

Compared to using a cell phone, it is 12 times more likely you will cause an accident by snacking in the car and eight times more likely you will cause an accident by playing with your car stereo. It would make more sense for policymakers to ban eating Big Macs and listening to Britney Spears in our cars than it would to ban cell phone use.

This is not to say, however, that using a cell phone while driving doesn't pose some degree of risk. And this threat, critics argue, is likely to grow as cell phone use grows. But while new technologies often introduce new problems into society, still newer technologies typically come along to solve those problems.

For example, "hands-free" cellular devices, which employ an earpiece and a clip-on microphone, are on the market and widely used by motorists. One-button speed-dialing, an option on almost all phones, enables drivers to place calls without having to dial a series of numbers. And voice-activated calling is right around to corner. This will allow drivers to simply say "call home" and let the phone do the rest.

Imposing burdensome restrictions on cell phone use in cars is unnecessary and may cost lives by having the unintended consequence of discouraging drivers from carrying a cell phone in their car. With an estimated 118,000 emergency calls placed by cell phone users every day, the life-saving applications of cell phones are well established. If a ban were to discourage drivers from carrying phones in their cars, the costs would likely outweigh the benefits.

On a more practical note, it is difficult to understand how such a ban would be enforced. Where will policymakers draw the line? Since snacking behind the wheel and playing with your car stereo are more distracting and dangerous than cell phone use, should legislators ban those activities first? What about arguing with you spouse or kids in the car? Should that be policed? And what about the CB radios truckers still use?

There's a simpler way to approach this problem from a public policy perspective: Don't try to ban technologies (cell phones, radios, CBs, etc.) or specific activities (conversations, singing, smoking, etc.) inside the cabin of an automobile. Instead, simply enforce those laws already on the books dealing with reckless or negligent driving. If a driver is weaving in and out of traffic lanes, or posing a serious threat to others on the road for any reason, they should be pulled over and probably ticketed if the infraction is serious enough.

In conclusion, a degree of patience and humility is necessary by policymakers. It is impossible to legislate a 100 percent risk-free society into existence. Technology is solving a problem it created. Turning our nation's law enforcement officers into a cellular SWAT team will only deter them from policing more dangerous activities while threatening to further erode our liberties.]]> Thu, 10 May 2001 00:00:00 EDT http://www.cato.org/pub_display.php?pub_id=4296 http://www.cato.org/pub_display.php?pub_id=1502 Executive Summary

Changing committee chairmanships in Congress and a leadership shakeup at the Federal Communications Commission have once again opened a window of opportunity for comprehensive telecommunications policy reform. While new faces are taking over within Congress and at the FCC, however, old issues continue to dominate the telecom policy landscape.

This is largely due to the fact that, when Congress last attempted to address these matters five years ago by passing the historic Telecommunications Act of 1996, legislators intentionally avoided providing clear deregulatory objectives for the FCC and instead delegated broad and remarkably ambiguous authority to the agency. That left the most important deregulatory decisions to the FCC, and, not surprisingly, the agency did a very poor job of following through with a serious liberalization agenda.

The Telecom Act, with its backward-looking focus on correcting the market problems of a bygone era, has been a failure. Instead of thoroughly clearing out the regulatory deadwood of the past, legislators and regulators have engaged in an effort to rework regulatory paradigms that where outmoded decades ago. In short, it was an analog act for an increasingly digital world. The new leadership in Congress and the FCC should adopt a fresh approach based on deregulation and free markets.

Regrettably, there's one big problem with that question. Simply stated, the notion that the telecom industry has been deregulated is a fairy tale. Asking how well telecom deregulation has worked makes as much sense as asking how well Social Security privatization or post office privatization have worked. We don't know because none of these sensible ideas has been tried.

Instead, we've seen what might be called "Deregulation Lite," with some minor rules and restrictions relaxed by the Telecom Act. Policy makers give a great deal of lip service to the benefits of free markets, but they refuse to allow a truly free market in telecom services to develop. Prices and market entry are micro-managed, and powerful state, federal and international bureaucracies sit in judgment of this sector. Consider three post-Telecom Act developments:

• In August 1996, the Federal Communications Commission (FCC) issued its mammoth 737-page, 3,200-footnote "Interconnection Order." The edict, which ranks as one of the longest and most convoluted rules in the history of regulatory policy making, produced a stream of litigation. In fact, the Supreme Court recently decided to hear another round of cases dealing with ambiguous and controversial Telecom Act regulations.
  
  
• In May 1997, the agency created the "E-Rate" program (known in most circles as the "Gore tax"), which unilaterally established a new government bureaucracy to help wire schools and libraries to the Internet. The FCC then decided the American people would pick up the $2.25 billion per year tab for the program by imposing a hidden tax on everyone's phone bills.
  
  
• Finally, since the Telecom Act became law, FCC spending and staffing grew to all-time highs. Last year, the FCC requested a gross budget of almost $280 million and total staffing of 1,975 people. By comparison, 10 years ago FCC spending stood at $108 million and staffing at 1,734 people. In other words, the FCC's budget has doubled over the past decade and the agency has hired roughly 250 additional bureaucrats.

In sum, the era of "deregulation" has seen the FCC issue one of the biggest regulatory edicts in U.S. history; create an unconstitutional new federal program plus a hidden tax to pay for it; and grow to become bigger and more powerful than ever.

Deregulation should mean the removal of regulations -- not the imposition of new forms of regulation to replace old ones. And deregulation should also mean the eventual "sunsetting" of the agency that oversees the sector that legislators hope to deregulate.

Ironically, Republicans, who have controlled Congress during and after passage of the Telecom Act, should have learned this lesson from Democrats. In the late 1970s the Democrats almost completely deregulated the airline industry and simultaneously put a plan in motion to shut down the agency that oversaw that sector. By the mid-1980s, the Civil Aeronautics Board, which had once micro-managed almost every facet of the cartel-ridden airline sector, was phased out. As a result, more people fly today because the cost of air travel fell and service options multiplied.

Why has true telecom deregulation been derailed? Because policy makers have developed a bad case of "Chicken Little complex": a persistent fear that the sky will fall on telecom companies and consumers if regulators let go of the reins of power. As a result, legislators, regulators and the courts continue to treat the industry as a plaything. Exhibiting regulatory hubris, these bureaucrats think they can "create competition" if they try hard enough -- and trying hard means regulating a lot.

Hence, the situation five years after passage of the Telecom Act is slightly rosier than it was in 1996 -- not because regulation helped improve matters, but rather because technology continues to evolve in spite of regulation. Perhaps the next time Congress takes a stab at "deregulating" this industry someone will take the time to look up the word and understand what it means so we can get this job done.]]> Thu, 08 Feb 2001 00:00:00 EST http://www.cato.org/pub_display.php?pub_id=4378