Out of Control

More Net Neutrality Nonsense

The Web is abuzz today with reports and analysis of the latest network neutrality bill to be introduced this year. The as-of-yet unnamed bill, sponsored by Reps. John Conyers (D-MI) and Rep. Zoe Lofgren (D-CA) seeks to amend the Clayton antitrust act to specifically prohibit Internet service providers from prioritizing or managing any data traffic as it crosses the network and offering any sort of price tiering that would say allow a major applications provider, say Apple, Google or Disney, from paying for better quality for services, such as video or gaming, that require special treatment.

If enacted, it will mean, at the very least, conventional broadband users will be forced to subsidize the bandwidth-intensive entertainment applications used by a small percentage of the population. This, Conyers and Logren assure us, is fairness.

The new bill, which would put Internet price regulation in the courts, stands alongside a net neutrality bill introduced last month by Rep. Ed Markey (D-MA), which aims to make the FCC the final arbiter of Internet business models. Sadly it seems that the debate is no longer whether to regulate, but who will regulate.

Chengdu China earthquake

As many people have heard, a 7.8 magnitude eqarthquake rumbled through Chengdu, China yesterday, killing more than 9,000 people. Full coverage from the New York Times can be found here.

Chengdu is a city of 10 million people--larger than New York City--and a logistical hub for the interior of China. It is also a center of development for the entire nation (and the "gateway" to Tibet). Fortunately, Chengdu is likely to recover faster because the Chinese government has embraced an outward approach to economic development. If this had happened 20 years ago, the death toll would likely have been much higher and the recover much longer.

Adrian Moore and I had the distinct pleasure of visiting Chengdu when we visited China last year to study transportatin and infrastructure issues. Chengdu is also a tourist destinatin in its own right as the capital of the Sichuan Province (and home of the Panda), a haven for amazing food, and the home of an incredibly friendly and open people.

You will be able to read more about Chengdu and its transportation challenges in our forthcoming book (October 2008) from Rowman & Littlefiled, "Mobiltiy First: A New Vision for Transportation in a Globally Competitive Economy"

Speaking of biofuels. . .

After my previous post about a serious academic paper on biofuels, I came across this amusing article about a fight in California over collecting fuel taxes from people who burn used cooking oil in their diesel cars.

Alt fuels and alt vehicle technologies are accelerating rapidly. Which means fuel taxes are an increasingly unsustainable way to fund transportation infrastructure, a key reality my colleagues and I are wrestling with on the National Surface Transportation Infrastructure Finance Commission.

What struck me about this article though, is the central point that CA's regulatory system cannot handle the very green innovations the system is supposedly set up to encourage. The stories of people who so desparately want to use greener biofules and just can't do so legally are jaw droppers. That lightweight Terry Tamminen says in the article "When you go through a period of change, there is always a clunkiness to the bureaucracy." That misses the mark by a mile. Regulatory systems are designed to find what is believed to be the one best way to solve a problem, and force that on everyone and expunge all else. Our crazy over-regulated energy system will continue to suppress innovations and thwart progress.

Speaking of biofuels. . .

After my previous post about a serious academic paper on biofuels, I came across this amusing article about a fight in California over collecting fuel taxes from people who burn used cooking oil in their diesel cars.

Alt fuels and alt vehicle technologies are accelerating rapidly. Which means fuel taxes are an increasingly unsustainable way to fund transportation infrastructure, a key reality my colleagues and I are wrestling with on the National Surface Transportation Infrastructure Finance Commission.

What struck me about this article though, is the central point that CA's regulatory system cannot handle the very green innovations the system is supposedly set up to encourage. The stories of people who so desparately want to use greener biofules and just can't do so legally are jaw droppers. That lightweight Terry Tamminen says in the article "When you go through a period of change, there is always a clunkiness to the bureaucracy." That misses the mark by a mile. Regulatory systems are designed to find what is believed to be the one best way to solve a problem, and force that on everyone and expunge all else. Our crazy over-regulated energy system will continue to suppress innovations and thwart progress.

The tricky bits of biofuels

Researchers at UC Berkeley took a close look at biofuels in a paper called Review of Environmental, Economic and Policy Aspects of Biofuels. It is notable because unlike sooooo many other things I have seen about biofuels, this paper looks at a broad range of strengths and weaknesses and effects of different biofuels. The main takeaways are a) each of them entail tradeoffs, and you have understand all of those tradeoffs to judge the merits of any biofuel, b) policy cannot treat all biofuels the same, but has to tackle them based on their individual characteristics if we want to maximize the good and minimize the bad.

Here is the abstract of the paper. You can download it here.

The world is witnessing a sudden growth in production of biofuels, especially those suited for replacing oil like ethanol and biodiesel. This paper synthesizes what the environmental, economic, and policy literature predicts about the possible effects of these types of biofuels. Another motivation is to identify gaps in understanding and recommend areas for future work. The analysis finds three key conclusions. First, the current generation of biofuels, which is derived from food crops, is intensive in land, water, energy, and chemical inputs. Second, the environmental literature is dominated by a discussion of net carbon offset and net energy gain, while indicators relating to impact on human health, soil quality, biodiversity, water depletion, etc., have received much less attention. Third, there is a fast expanding economic and policy literature that analyzes the various effects of biofuels from both micro and macro perspectives, but there are several gaps. A bewildering array of policies - including energy, transportation, agricultural, trade, and environmental policies - is influencing the evolution of biofuels. But the policies and the level of subsidies do not reflect the marginal impact on welfare or the environment. In summary, all biofuels are not created equal. They exhibit considerable spatial and temporal heterogeneity in production. The impact of biofuels will also be heterogeneous, creating winners and losers. The findings of the paper suggest the importance of the role biomass plays in rural areas of developing countries. Furthermore, the use of biomass for producing fuel for cars can affect access to energy and fodder and not just access to food.

Leasing Chicago's Midway Airport

If there was any question whether investors would be interested in a long-term lease of Chicago's Midway Airport, it was answered in the affirmative at the beginning of April. Six high-powered teams submitted their qualifications to the city, which will presumably winnow them down to the best-qualified subset, who will then be invited to submit formal bids. With the basic terms of the lease already decided (in order to win agreement from Midway's airlines), the winner will be the firm offering the highest dollar amount.

The six teams included mostly firms that had been expected to bid-though noticeably absent were industry giants Ferrovial (which may have its hands full refinancing its costly acquisition of BAA) and Fraport (which had been rumored to be seriously interested). The six that did submit qualifications are:

* Abertis/Babcock & Brown/GECAS-Abertis owns TBI which operates Albany and Burbank airports under contract, and has long-term leases for the terminals at Orlando-Sanford.
* Macquarie Capital/Macquarie Airports/Macquarie Infrastructure Partners I and II-Macquarie already has a Chicago presence via its lease of the Chicago Skyway and holds stakes in Sydney, Brussels Charleroi, Bristol (UK), and Copenhagen airports.
* Hochtief AirPort/GS Global Infrastructure Partners I-Hochtief has major stakes in Athens, Budapest, Dusseldorf, Hamburg, and Sydney airports.
* YVR (Vancouver) Airport Services/Citi Infrastructure Investors/John Hancock Life Insurance-YVR operates airports in Chile, Dominican Republic, Jamaica, and Canada.
* Morgan Stanley Infrastructure Partners/Aeroports de Paris/HMS Host-ADP owns the three major Paris airports and operates other airports in Cambodia, China, and Europe.
* AirportsAmerica Group/Carlyle Infrastructure Partners-a somewhat mysterious group about which Carlyle has declined to provide details (except, presumably, to the city of Chicago).

The city has not released a timetable, but it's likely to announce the short-list within a couple of months, along with a formal invitation for the short-listed teams to submit their bids. Lisa Schrader, the city's deputy CFO, told Aviation Daily that they expect to close the lease transaction within 9 to 12 months, after approvals from the FAA, TSA, and the City Council.

There is much speculation as to how much will be offered for the 50-year lease. In Issue No. 32 of my Airport Policy Newsletter, I expressed skepticism that the figure would be in the $3 billion range that has been mentioned in many media reports, given the airport's small land area (one square mile), limited airside capacity, and already fairly well-developed retail operations. But in recent weeks I've had several knowledgeable people suggest to me that there is more potential than meets the eye at Midway. For example, as of now, there are 1,895 weekly airline departures, but as recently as 2004 that number was 2,449-so we know that a 30% increase (at least) is possible. An attorney advising one team suggested that his team had come up with a number of creative options to maximize value at the airport. Another told me that there has been recent interest by developers in acquiring land bordering Midway, in hopes of being able to negotiate joint-development deals with the winning bidder. So while I remain somewhat skeptical, I'd be pleased to be proven wrong.

If Midway does generate significant value for the city, the lease could be as precedent-setting as the city's January 2005 lease of the Chicago Skyway. That transaction focused global attention on the United States as a new market for privatization of toll roads. But for the same thing to be possible in the airport sector would require Congress to amend the Airport Privatization Pilot Program legislation it enacted in 1996 . Although it permits four air carrier airports to be leased, only one can be a large hub, which is how Midway is categorized by the FAA. The FAA's reauthorization proposal, which was largely ignored by Congress last year, had called for liberalizing the pilot program. It would probably take active lobbying by America's mayors to open up additional large-hub privatization opportunities.

Reason Foundation's Airport Policy and Air Traffic Control Research

Drew Carey on War on Drugs, Cory Maye

"Despite 100 years of heavy social and financial costs, and no indication that victory is attainable, the U.S. government continues to wage its war on drugs," says Drew Carey in a new Reason.tv video that tells the tragic story of Cory Maye and Ron Jones. Maye was in his home late at night with his one-year-old daughter. A stranger kicked down his door and barged into his daughter's dark bedroom. Maye shot and killed the intruder - just as millions of other Americans would.

But it turned out the intruder was actually Police Officer Ron Jones, raiding the home for drugs. Maye had no criminal record or past. The police did not find any drugs in his home at the time, but a few days later claimed to have found small amounts of marijuana. Police found marijuana, crack cocaine residue and scales at Maye's next-door neighbor's home, but never charged that person with a crime.

Instead of the cops admitting they had the wrong part of the duplex, received bad information from an unreliable confidential informant, and that Maye was protecting his family and acting in self-defense, they charged him with capital murder. Maye was convicted and sentenced to death. Thanks in part to the reporting of Reason magazine's Radley Balko, Maye's sentence was later reduced to life in prison.

More Drew Carey Reason.tv Videos

You Can Dance In Arizona Again

The Arizona Republic reports, “Kick off your boots and get ready to two-step because dancing is now allowed at San Tan Flat. Pinal County Superior Court Judge William O'Neil overturned a decision from the county Board of Supervisors that said the country-Western-themed restaurant was operating an illegal dance hall by allowing patrons to dance to live music on its back patio. The judge's ruling brings closure to the conflict between the county and restaurant owner Dale Bell, who have been at odds for more than two years after San Tan Flat neighbors complained about noise coming from the property. The saga of San Tan Flat drew national attention, prompting commentary from actor Drew Carey and conservative Washington Post columnist George Will. The case also received several comparisons to the 1984 Kevin Bacon film Footloose, in which a small town bans rock music and dancing.”

Here’s the Reason.tv Drew Carey video on the case: Footloose in Arizona.

Reason.tv Editor Nick Gillespie’s take.

Florida, Virginia Save on Highway Maintenance

Reason Foundation’s Shirley Ybarra, Virginia’s former secretary of transportation, looks at how Virginia and Florida are saving millions with fixed-price maintenance contracts.

Reason’s Transportation Research

Arizona Starts to Tackle Job Licensing Laws

Reason’s Foundation’s Adam Summers details job licensing regulations in Arizona, writing, "In Arizona, if you want to be an acupuncturist, a hunting or fishing guide, landscape architect, pre-arranged funeral salesperson, or even a well driller you'll need a license. There is even government registration required to be a geologist…More and more often, if you want to work or start a business, you have to seek permission from the government, pass arbitrary requirements, and pay fees to the state. More than 1,000 occupations are currently regulated by the states, and many others are regulated at the federal and municipal levels. According to a recent Reason Foundation study, Arizona requires licenses for 72 jobs, below the national average of 92 and similar to neighboring Colorado (69) and Utah (84). California topped the list with a whopping 177 licensed occupations."