Out of Control

Today marks the first anniversary of Indiana's toll road privatization. The road fetched $3.8 billion for the state when it was leased to a Spanish-Australian company. The money has made much-need road construction possible in Indiana.

Governor Mitch Daniels wrote about the historic event in last years Annual Privatization Report.

For more on the privatization of the Indiana toll road check out Reason here, here, and here.

According to the Providence Journal, privatization efforts are alive and well in Rhode Island. This is great news after reports yesterday that Governor Carcieri was abandoning the much-anticipated plan to privatize “every state service that could possibly be performed more efficiently by the private sector.”

The ProJo reports:

“If necessary, we will jump through every hoop and we will fight the inevitable court challenges,” Carcieri said in a statement. “Let me be clear: I will not be deterred from my responsibility as governor to do everything possible to solve Rhode Island’s budget problems.”

The governor’s office had worked much of the year to privatize dietary and housekeeping services at the state-run Eleanor Slater Hospital and the state veterans’ home — a proposal he said would save $13 million over the next five years.”

Unfortunately, the Governor faces some political roadblocks from the state legislature:

“[T]he General Assembly passed a law last week tied to the state budget that applies strict oversight and reporting requirements before any privatization effort can go forward. The provision — put forth by Rep. Charlene Lima, D-Cranston, every year for the past 13 years without success — was introduced near midnight during a marathon House session. It became law last week when the General Assembly overrode the governor’s budget veto.”

Fortunately, Governor Cancieri knows that privatization is what’s best for Rhode Island and is willing to fight for the cause. For more, check out Reason’s Annual Privatization Report - http://www.reason.org/apr2006

A cursory glance at the headlines today could leave the impression that the Texas Transportation Commission handed a decisive victory to the North Texas Tollway Authority yesterday when it conditionally selected them over the private Cintra/JPMorgan team to build the State Highway 121 project in Denton and Collin Counties.

But having attended the TTC meeting yesterday (which should be available to watch here soon), it was abundantly clear that the decision was exactly that--a conditional acceptance--and the NTTA has a lot of work to do over the next two months to get its ducks in a row and develop a project agreement with the Dallas-area Regional Transportation Council. A very significant point to highlight is that the TTC did not close the Cintra procurement, preferring instead to keep Cintra's ready-to-execute project agreement in their back pocket in the event that NTTA is unable to seal the deal.

Reason Senior Fellow and TollRoadsNews.com editor Peter Samuel offers the most accurate wrap-up of yesterday's events that I've seen thus far.

The SH121 saga continues. It was not resolved today in favor of either NTTA or Cintra as had been expected. The Texas Transportation Commission voted a 60 day deadline for the North Texas Tollway Authority (NTTA) and the Dallas area Regional Transportation Council to reach a firm agreement on SH121, including enforcement provisions, toll rate policy, a project schedule, payment obligations, quantification of public benefits, and other matters.

This must include demonstration of the ability to go to financial close no less than 45 days later.

Ric Williamson chairman of the Commission laid down an ultimatum at the end of about two hours of talk saying that there have already been three efforts at reaching agreement. The NTTA proposal to date was a "bunch of promises" Williamson said, as compared to a "firm executable contract" of Cintra. If the RTC and NTTA can't do a deal within the deadline, then TTC will go with Cintra, the commission chairman suggested.

The commission took its lead today from Michael Morris, transportation director at the local council of governments and director of the Regional Transportation Council. Morris said that local officials would prefer to do a deal with NTTA over Cintra, but that this is conditional on NTTA and RTC getting detailed agreements on a range of issues.

It's no easy task for NTTA moving forward. As Peter notes, they're being asked to deviate from their normal way of doing business:

TxDOT issued a statement on behalf of the Commission afterward in which it said staff were were authorized to enter into a project agreement for SH121 once: (1) RTC negotiates the major terms with NTTA and submits those to TxDOT (2) quantification of public benefits (3) NTTA is able to close within 45 days of the agreement

Major terms still to be negotiated include:
- the timing and amount of annual payments
- enforcement provisions
- agreement length

NTTA has never previously agreed to concession type provisions which the RTC and TTC have now laid down.

Normally NTTA, like other toll authorities assure lenders that there are no constraints on their ability to raise toll rates in case of a financial shortfall. Here the RTC is insisting on NTTA committing itself to toll caps of the kind to which Cintra would be held under a concession contract. NTTA would have to agree to a [binding] schedule for project delivery. And NTTA would not have control of SH121 in perpetuity but only for an agreed term after which it would revert to the state.

The last point in bold is a big one. As Bob Poole and Peter wrote in their recent policy study, The Role of Tolls in Financing 21st Century Highways (pp 11-12):

In 1947, the Maine Turnpike pioneered a new form of bond financing [...] non-recourse toll revenue financing. It pledged prospective future toll revenues to service the debt, based on a traffic and revenue projection through the life of the bonds. The investors in these bonds are betting on the revenues being sufficient to service the debt because there is no recourse to any other state revenues. Most of the toll roads built in America in the past half century used such toll revenue bonds. The covenants usually oblige the toll authority to take certain actions to address the rights of bondholders if revenue comes up short. These may require toll increases, and in case of default a court can often appoint an administrator to manage the toll road in place of the normal directors appointed by the state. Governments wanting to lower toll rates or institute toll holidays or to provide toll exemptions [Editor note: you could add to this list, "sign a contract that caps toll rates"] are constrained by the terms of bond covenants. Those covenants create a legally enforceable fiduciary responsibility to protect the revenues needed to service the debt.

NTTA's obligations to debt holders and TTC/RTC's intention to place contractual caps on toll rates are in direct conflict, so it will be interesting to see how this develops. But it's not the only hurdle that needs to be cleared; other challenges include:

• Sorting out the issue of road standards--NTTA has pledged to build the road to its usual standards, which don't live up to the standards guaranteed under Cintra's agreement. It's not exactly a great deal for drivers if you trade off public authority control of the project for a lower quality road and/or lower performance expectations;


• NTTA needs to commit to a binding project delivery schedule;


• NTTA needs to line up solid lending commitments;


• NTTA and RTC will need to agree on the length of the contract, after which point the road would revert to state control;


• NTTA will need to solidify its fuzzy promise of $1.3 billion in "public benefit," a major point of contention in PriceWaterhouseCooper's critique of the NTTA proposal since that benefit would only materialize if there's money left over after debt service, operations & maintenance costs, and payments to the state;


• The agreement needs to include enforcement provisions and remedies to cover any NTTA failure to comply with the toll rate policy, project schedule, payment obligations, and other commitments. Private concessionaires are used to this sort of thing as a standard part of undertaking PPPs, but public authorities certainly aren't, so committing to these enforcement provisions could be a bitter pill for NTTA to swallow.

These are no small issues to resolve on a short time frame. And then there's the larger--but very basic--question that I've never heard a clear, direct answer to: if NTTA is somehow able to pull off the 121 project, how will they be able to pull off the other five projects they've already committed to begin construction on in the next five years (Southwest Parkway, Texas 360, Texas 170, PGB Turnpike eastern extension, and Trinity Parkway). It will take time for the 121 to ramp up in revenue collection, so it's not as if you can just turn on the money spigot on day 1 of operations and have a cash cow that you can immediately leverage.

Of course, if it all gets to that point, I do have a suggestion for NTTA: tap the private sector and use concessions! NTTA reps recently stated at an RTC meeting how much they support the private sector and that they even fought to get CDA (concession) authority under the recently passed SB 792, so why not use those new tools? Sure, it might be a little awkward to go toe-to-toe with Cintra on the 121 project and then turn around and court them and other firms for CDA projects down the road, but we're all adults here, right? As several commissioners and NCTCOG's Michael Morris noted yesterday multiple times, the silver lining of the whole 121 debacle is that it demonstrates the value of competition--"competition works" has been a consistent theme in these discussions. If NTTA is being genuine about fighting to get CDA authority and continuing its transformation into an aggressive, competitive public toll authority and then they should look seriously at concessions as an option for future projects.

There's a lot more to say about the events yesterday. I'll have a new commentary soon that delves into these and other related issues.

Just about any kind of interaction with foreigners is enough to get the Lou Dobbs's among us hot and bothered. Pitchfork Lou has compiled a list of "traitorous" companies that make use of offshore outsourcing and countless bumper stickers urge us to "Buy American," often adding an ominous extra prod along the lines of "while there's still time" or "the job you save might be your own."

Leaving aside all the reasons to ignore the "Buy American" imperative, let's say you really do want to buy
stuff made in the good ol' USA. How would you do it?

The buy American crowd probably doesn't care for Toyotas. But what if they're built in Tennessee by Americans? Nothing could be as American as Ford, yet as Adrian and I point out in our 2005 study Offshoring and Public Fear, the guts of a Ford Escort may be more foreign than the guts of a Honda Civic (where 75 percent of parts are made in the USA).

Today we're in the midst of iPhone-mania, and Apple watchers are eager to see if the new gadget will be the next iPod. In a NYT piece Hal P. Varian tries to answer what turns out to be a tough question:

Who makes the Apple iPod? Here’s a hint: It is not Apple. The company outsources the entire manufacture of the device to a number of Asian enterprises, among them Asustek, Inventec Appliances and Foxconn.

But this list of companies isn’t a satisfactory answer either: They only do final assembly. What about the 451 parts that go into the iPod? Where are they made and by whom?

Three researchers at the University of California, Irvine — Greg Linden, Kenneth L. Kraemer and Jason Dedrick — applied some investigative cost accounting to this question, using a report from Portelligent Inc. that examined all the parts that went into the iPod.

Their study, sponsored by the Sloan Foundation, offers a fascinating illustration of the complexity of the global economy, and how difficult it is to understand that complexity by using only conventional trade statistics.

Should we take a $299 video iPod apart and figure out where the most expensive parts come from? Examine the value each nation involved adds to the product? Consider something else?

After walking through some number crunching, Varian gives up--sort of:

Ultimately, there is no simple answer to who makes the iPod or where it is made. The iPod, like many other products, is made in several countries by dozens of companies, with each stage of production contributing a different amount to the final value.

The real value of the iPod doesn’t lie in its parts or even in putting those parts together. The bulk of the iPod’s value is in the conception and design of the iPod. That is why Apple gets $80 for each of these video iPods it sells, which is by far the largest piece of value added in the entire supply chain.

Those clever folks at Apple figured out how to combine 451 mostly generic parts into a valuable product. They may not make the iPod, but they created it. In the end, that’s what really matters.

Related: Are you driving on a foreign road?

I've seen one NBA game in the past six years, so naturally I'm qualified to comment on yesterday's draft. Mostly I get my news about sports from NPR's John Feinstein, who seems to publish a book every 12 weeks, and Frank Deford. Real sports fans are probably scoffing at me at this point.

Nonetheless, I had this thought: Deford and Feinstein often lament the decline of sports. A key complaint seems to be that 19-year-olds like Greg Oden can earn bajillions of dollars without, get this, making it past their freshmen years in college! The travesty!

For some reason, I've never heard an NPR commentator complain that Matt Damon never finished Harvard before becoming a professional actor. I also don't hear proposals to require a college diploma to start a business. But Feinstein today praised the NBA's ban on high school players in the draft. The NBA can do what it likes, naturally. It's a private organization. But the idea of the ban seems strange, a kind of rigidity in the sports labor market that keeps competition out and forces young high school graduates to do a year in college for no appreciable gain.

Feinstein made a couple of points that seemed dubious to me. He said that the NBA's rule barring high school students from the draft meant that Oden and others were more valuable to the NBA because of their maturity and the name recognition they had built up in college.

Given that more people watch the NBA than college hoops, I suspect that a year being paid to play professional ball would do more to increase name recognition (not to mention maturity) in young players.

I also think that Feinstein and Deford miss a major advantage to having high school players go straight to the NBA: Such an arrangement would drain much of the money out of college sports and, with it, the obvious and non-obvious corruption of college student life. College sports ought to augment the college experience, not detract or distract from it. I'm for intramural and inter-college games. I just think that highly talented basketball players should go where they're valued, and colleges should focus on education, not arena sports.

Over at Reason magazine, Jacob Sullum has an interesting post on Home Depot's efforts to promote environmentally friendly home improvement solutions. Home Depot asked suppliers to identify which products could be identified as "green", and supplier responded by picking some 60,000 products. For instance:

A refrigerator, for example, might be considered environmentally superior because of its energy efficiency.

But what about the energy and other resources used to make the refrigerator, the pollution generated by its production and transportation, or the waste generated by the packaging and the refrigerator itself when it's thrown out? Should a green stamp of approval be based on a product's entire life cycle, or just one or two easily measured features?

But, as the Reason Foundation study explains, hydrogen is much more costly and "dirty" to manufacture. In that context, hydrogen is far less efficient than gasoline.

Dragging the issue out of the corners of the extreme left wing, Congress today is debating reinstatement of the Fairness Doctrine. The not-so-veiled target, of course, is conservative talk radio, which tends to dominate the political discourse that occurs within the subset of the media transmitted on FCC-allocated radio spectrum from 530 and 1700 KHz.

The Fairness Doctrine, abandoned in 1987 after the FCC realized it would have a hard time withstanding constitutional challenge, stipulated that a TV or radio station had to provide time for opposing viewpoints. While the goal may have been to promote dialogue, most stations shied away from any political discourse at all, lest they face loss of license at the complaint of an aggrieved individual, stopwatch in hand, who felt shorted of due airtime.

A nasty spat has developed around Toledo, Ohio’s proposal to build a citywide broadband wireless system in partnership with MetroFi. The city council this week voted to withhold approval until it understood how the city planned to come up with the $2.16 million needed to fund it.

Bare-knuckled politics served as a backdrop to the proceedings, as Patsy Scott, director of Toledo’s Department of Information Services, quit, and was then apparently fired, in what appears to have been a tussle with Mayor Carty Finkbeiner. According to the Toledo Blade, Scott said she chose to resign after the mayor told her to threaten the Toledo-Lucas County Public Library’s levy if library director Clyde Scoles refused to endorse the muni WiFi project at this week’s council meeting. As an aside, the library system already had invested in its own WiFi network and offers free access at it libraries. Four hours after submitting her notice of resignation, Scott said she was dismissed from her job.

Finkbeiner denied making the threats against the library levy. Complicating the matter further is the fact that the Toledo Blade is a sister subsidiary of Buckeye CableSystem, which was a losing bidder for the Toledo muni contract. Both the Blade and Buckeye are owned by Block Communications.

Propensity toward civic infighting serves as another argument against municipal wireless. Toledo’s experience is reflected on a larger scale in San Francisco, where politics is the motivation on the part of several members of the Board of Supervisors to scuttle Mayor Gavin Newsom’s muni plan. Despite their high dudgeon about lack of broadband and digital divide, city officials know full well that muni wireless is an expensive vanity project—and they treat it as such. In Toledo, look no further than Scott, who as city IT director was a major asset to the project, yet ended up as a casualty. Readers can imagine how this sort of pettiness goes over at MetroFi, which is trying to run a business.

It bears repeating: government can’t do broadband. Toledo is a great example of how the nature of politics runs counter to intelligent planning and operations. One way or another, muni systems can’t help but fail. It’s in the genes.

Those fighting to ban race-based admission policies in public schools and colleges won a big victory today. The Supreme Court just struck down Seattle and Kentucky school districts' practice of matching students to schools by race. For years, hundreds of kids have been denied admission to schools of their choice in their own neighborhood in favor of worse ones much further away. Why? Because their skin tone threatened to disrupt the delicate racial balance district authorities were trying to achieve.

The court’s 5-4 decision in these cases effectively reversed its ruling three years ago when it gave the University of Michigan’s race-based admission policies a thumbs’ up. Outraged Michigan voters last year overturned that decision when they overwhelmingly approved a ballot initiative spearheaded by black California businessman Ward Connerly to ban the use of race in government admission and hiring. Connerly is launching similar petition drives in five more states in time for the 2008 November elections.

Chief Justice John Roberts Jr., writing the majority opinion in the Kentucky and Seattle cases, noted that school authorities had failed to meet the heavy burden of demonstrating why such race-based policies were necessary. “The best way to stop discrimination by race,” he said, “is to stop discriminating by race.”

Amen!

Here are the links to Reason’s coverage of the Michigan ballot initiative:

http://www.reason.org/commentaries/dalmia_20061026b.shtml
http://www.reason.org/commentaries/dalmia_20061107.shtml

And here is the Wall Street Journal story of the latest Supreme Court ruling:

http://online.wsj.com/article/SB118303957086351501.html?mod=djemalert

News of the bald eagle’s removal from the endangered species list on Reuters and elsewhere today:

It is a man-on-the-moon moment for wildlife….It's an incredible success story for our country, the eagle and the Endangered Species Act.

–Doug Inkley, senior scientist, National Wildlife Federation

Success story, yes. Man-on-the-moon moment, maybe—if by that you mean a national spectacle with little evidence to corroborate the “official” version of the facts.

Two major misconceptions evident in much of today’s coverage of the bald eagle’s recovery include, first, the reality that the bald eagle was endangered in name only. The population was threatened in the southern end of its range by the use of DDT as an agricultural insecticide after World War II, ending in 1972 when DDT was banned. Most eagles lived where DDT was not used heavily, and as a result have maintained healthy numbers to this day. Second, the bald eagle is being delisted in name only. Most of the provisions of the Endangered Species Act (ESA), including stringent land-use controls, will be carried over into revised legislation that constitutes a “mini-ESA” for eagles.

If you want your coverage of the bald eagle’s recovery to be a little less moonwalk, a little more grounded on Earth, check out Reason’s just-released publications, The Bald Eagle, DDT, and the Endangered Species Act and The Bald Eagle's Worst Enemy—How Federal Law Pits Landowners Against Eagles.

Read on for highlights of Reason’s publications on the delisting of the eagle.

Iranians are rioting over government plans to ration gasoline. It turns out that while Iran is one of the world's largest exporters of crude oil, it's also a major importer of refined gasoline, in large part because it lacks the refining capacity to turn oil into gas.

Iran also heavily subsidizes its gasoline so that Iranians at the gas pump pay just 40 cents for a gallon (my quick conversion to the English system from the article's stated price of 11 cents per liter). Consequently, as I heard a reporter for the Independent explain on NPR yesterday, Iranians have one of the highest rates of gas consumption per capita in the world. Instead of raising prices to reflect the market, the Iranian government has decided to allow drivers 21 gallons a month (somewhat over 200 gallons for taxi cab drivers).

It turns out that the price mechanism does affect incentives, whether you're in Chicago, Paris, or even Tehran. Artificially low prices cause overconsumption, shortages, and rationing. Go figure!

The Federal Trade Commission’s staff report on Broadband Connectivity Competition Policy released today largely gets it right.

The FTC staff acknowledged the high level of competition among broadband providers and correctly urged policy makers to go slow on regulating broadband business models, particularly network neutrality, which would prevent service providers from prioritizing Internet traffic or favoring some Web content and applications over others.

FTC Chairwoman Deborah Platt Majoras punctuated the findings, stating that without evidence of “market failure or demonstrated consumer harm, policy makers should be particularly hesitant to enact new regulation in this area.”

While the staff noted that an unfettered market for Web content management, applications prioritization and quality of service presents the potential for antitrust abuse, it also recognized that it has just as much potential to yield great benefits for consumers.

Notable excerpts from the report’s executive summary:

“It is not possible to know in the abstract whether allowing content and applications providers to pay broadband providers for prioritized data transmission will be beneficial or harmful to consumers.”

“In evaluating whether new proscriptions are necessary, we advise proceeding with caution before enacting broad, ex ante restrictions in an unsettled, dynamic environment.”

“There is evidence that the broadband Internet access industry is moving in the direction of more, not less, competition, including fast growth, declining prices for higher-quality service…

“…[W]e recommend that policy makers proceed with caution in evaluating proposals to enact regulation in the area of broadband Internet access.”

Maryland could find itself with some new residents after July 1, when Virginia is set to impose hefty civil traffic fines.

The "abuse fines" were tucked in the Commonwealth's $1-billion 2007 transportation bill. At the time Virginia politicians, including Governor Tim Kaine, hailed the surcharges as both a way to fill a funding gap without raising taxes and a way to teach bad drivers a lesson. On the face of it, that's a wise political move since southerners don't like new taxes and they like their justice swift and certain, in theory at least...

In reality, the looming fines have talk shows a'buzzing and blogs a'bloggin'. Callers to WTOP, a DC-area radio station, recently gave the governor an earful, some threatening to flee to neighboring Maryland. Those are strong words in context. Many Virginians have chosen to live in the Commonwealth because it has long been seen as a low-tax alternative to Maryland.

Virginians are right to be up in arms. The fines are out of proportion to the driving offenses. Virginia residents convicted of misdemeanor or felony traffic violations will be assessed the new surcharges. For instance, Virginia residents convicted of reckless driving will face an additional $1,050 charge on top of the normal $100 fine. Out-of-state drivers convicted of offenses in Virginia - for reasons that are unclear to me - don't pay the surcharge.

An out-of-state resident convicted of drunk driving in Virginia pays $250. The Virginian pays an additional $2,250. See a general explanation of the new civil fines issued recently by the Office of the Executive Secretary of the Supreme Court.

Many may have ignored news of the fines until now because they believe their safe driving will protect them. But reckless driving can include everything from exceeding the speed limit by 20 mph - 78 in a 55 mph zone - to failing to display a turn signal. Drivers with less serious charges will also be charged fees if they acquire eight or more points on their driving record.

Politicians who voted for the bill protest that the fines are necessary to ensure safety on Virginia's roads. That's nice rhetoric, but not terribly convincing given that Virginia is already one of the safest driving states in the union, according to the Commonwealth's own data:

Virginia's 2004 rate of 1.17 fatalities per 100 million vehicle-miles of travel was lower than the national average of 1.44 and gives Virginia the 10th-lowest fatalities rate among the states.

It may be of no importance that Assembly delegate and the chief architect of the bill, David Albo, is also a named partner in one of northern Virginia's most prominent traffic defense firms. Still, The Virginia-Pilot reports,

[T]he hefty penalties could be a bonanza for the politically connected law firms that chase down unpaid court fines.

In all but one city in South Hampton Roads, these firms have exclusive contracts that pay them as much as 30 percent of the amount collected.

One of them, Huff, Poole & Mahoney of Virginia Beach, earned more than $2 million in collection fees in fiscal 2006.

The San Francisco Board of Supervisors may not know it, but the new chairman of EarthLink has pretty much given them 60 to 90 days to make up their minds as to whether to pursue the municipal wireless partnership proposed by his company and Google.

Activists in San Francisco have been pushing the city council to dump the EarthLink-Google deal, which they see as too tainted by the profit motive, and pursue a taxpayer-financed municipal broadband system that will cost millions. The result has been months of gridlock as Mayor Gavin Newsom, who backs the EarthLink-Google deal, and vocal opponents on the city board, remain at loggerheads.

Meanwhile EarthLink, which once saw the muni wireless partnerships as a strategic growth area, has been getting second thoughts after finding that in other other markets network costs have doubled and competitors have dug in. Now comes a statement from Rolla Huff, EarthLink’s new CEO, that all of EarthLink’s operations are up for strategic review.

Here’s how InformationWeek reports it.

Saying he will spend the next 60 to 90 days reviewing EarthLink's current lines of business, Huff said, "I don't know at this moment where the company will wind up" in terms of overall strategy. "What I've told the board is that we will put together a clearly articulated and focused strategy of what EarthLink is going to be and what it's not going to be."

That's a fairly clear implication that at the moment it's unclear just what EarthLink is. One of the earliest nationwide Internet service providers, the Atlanta-based company succeeded by providing reliable and relatively low-cost Internet service to millions of consumers. Though the company still has 5.3 million subscribers (and $1.3 billion in annual revenue), its ISP business is declining fast as broadband options proliferate and it lost $30 million in its most recent quarter. Attempts to diversify, including joint ownership of virtual wireless carrier/handset vendor Helio, along with partner South Korean wireless company SK Telecom, and a series of municipal wireless projects, some in collaboration with Google, have not yet paid off.

More telling are statements that follow.

"The real question around municipal Wi-Fi is, 'What is the economic model going to look like?'" said Huff. "At end of day, we all have to understand what it's going to take to make money at this."

If he decides the business model is cloudy, Huff said, he won't hesitate to pull the plug -- even on highly visible projects like the Google-EarthLink effort to build a wireless network for San Francisco. "To the extent I don't think we have the capability to get to the point of profitability, I'll make that judgment, too."

EarthLink's strength lies in a fairly loyal customer base, but the monthly-subscriber model is changing, Huff said, for telcos and Internet companies alike. "The model is gradually moving away from monthly charges to a model that rewards those that can deliver very customized content to very well-understood groups of people."

This final statement may well be the epitaph for these costly, ill-conceived muni schemes. It runs counter to two major assumptions that muni enthusiasts have made since the beginning: First, all that’s needed to make broadband popular is a low price (or no price at all). Second, and more important, that broadband is a content-neutral utility, and one service is indistinguishable from another. Consultants have continually used these two dubious premises to sell municipal governments on throwing millions of dollars at misguided fantasies of creating cheap, city-run, broadband ubiquity. If EarthLink, which staked a lot on municipal wireless, is questioning them, perhaps its time some elected officials did, too.

The Dallas Morning News has an interesting profile today on Rik Williamson, chairman of the Texas Transportation Commission. It's well worth a read as an insight into a strong and controversial public official willing to take risks. For example, putting Gov. Rick Perry's forward-thinking transportation vision into action:

When Mr. Perry became governor in December 2000, he tapped his friend to tackle one of the biggest problems he saw facing the state [transportation needs].

"It was his idea. He told me, 'This is what you're going to do,' " Mr. Williamson said. [...] So he set about studying transportation. He laid out the dimensions of problems in financing roads and placed them against projected needs. He defined short-, mid- and long-term solutions and calculated the costs under a half-dozen scenarios, including taxes, bonds, private equity, private borrowing or public debt.

He and Mr. Perry laid down some goals, including competition for roadway construction, regional decision-making and consumer choices.

"Thus was born our strategic plan. That was actually the basis of the Trans-Texas Corridor," Mr. Williamson said.

On the recent legislative challenges to Perry's transportation plan (see here for Reason's related work), and the challenges that face political visionaries:

Mr. Williamson said he worked with legislators and will try to be more responsive. He also said he knows he is challenging the inherent nature of government to leave tough problems until they become a crisis for some future Legislature, and that requires someone to stand up and fight.

"I have had friends, even closet supporters, say to me that, 'You should have explained in more detail what you were doing and not gotten so ahead of everyone, and people wouldn't be nearly as mad at you,' " Mr. Williamson said.

"In the last six years, had consensus been the goal, I'm not sure we could have gotten far enough, fast enough to make the progress I think we've made."

Most difficult things are achieved through confrontation and tenacity, he said.

The day Mr. Perry is tired of hearing complaints about toll roads and sends him home to Weatherford, he will go happily, Mr. Williamson said.

As it is, when he and the governor talk, Mr. Perry doesn't comfort him or offer him that kind of relief.

"He doesn't console me and he doesn't apologize and he doesn't curse the darkness. He understood what he was getting into. And I certainly understood what I was getting into," Mr. Williamson said.

"And if it results in a long-term solution to what we think is one of the most pressing problems the state faces, then history will judge us as having made some good decisions," he said.

Today, Senate Republicans Defeated Big Labor's Card Check bill today; the motion failed to proceed 51-48. If the bill had passed it would have stripped workers of their right to a private, federally-supervised election when it came to deciding on union representation. Under the proposed Card Check system, there wouldn't even be an election. A union would have been organized if 50%+1 simply signed a card stating that they wanted a union. Imagine employers, union organizers and/or co-workers surrounding you and saying, "Just sign the card, sign the card."

Socialism is inherently boring, which is why its main enthusiasts are bores themselves people with high boredom thresholds, like professors and politicians.

-- Glenn Reynolds (aka Instapundit), in an interesting post on the rising power of the middle class in China

Economist Daniel K. Benjamin reports on a new study from the Quarterly Journal of Economics that shows squatters who experience the benefits of property rights protections positively influences their beliefs about markets. The study is the February 2007 issue of the QJE and was authored by Rafael Di Tella, Sebastian Galiani, and Ernesto Schargrodsky, and Bejamine writes about it in his tangents column for PERC Reports, a publicatin of the Property and Envrionment Research Center (PERC) in Bozeman, MT.

The authors studied the formation of squatter settlements outside of Buenes Aires, comparing families that received secure property rights with those that did not. The authors surveyed about 400 squatter families and found, as reported by Bejamin: "The squatters who received secure property rights are 20 percent more positive toward the market system than are the unlucky squatters. Indeed, the attitudes of the squatters with secure property rights are just as positive toward the market system as the attitudes of much more affluent Argentinians who are much better educated and have much higher incomes."

Benjamin concludes:

The importance of this study is that it suggests that changes in attitudes are no accident, and that it may be possible, on a broader scale, to overcome the widespread hostility toward market systems. The aphorism that “seeing is believing” is rarely more applicable, for it appears that the creation of private property rights has the potential to fundamentally change how people perceive the world, and thus, perhaps, the institutions and policies they are willing to adopt. For those who believe that environmental quality, individual choice, and personal freedom are important, this is good news indeed.

The article by Benjamin is in the most recent issue of PERC Reports and can be found here.

The full study in the QJE can be found here.

An editorial in today's Wall Street Journal becomes the latest to jump on Congressmen Oberstar and DeFazio for their warning letter to state officials about public-private partnerships.

They rightly point out the Congressman's self interest in his opposition.

In reality, Mr. Oberstar's main concern is protecting the political interests of himself and fellow Transportation Committee Members. All 75 of them -- about one-sixth of the entire House.

His committee is by far Congress's most bloated, and its main order of business is shepherding through the lard-ridden highway bill every six years. Road financing got federalized back in the 1950s for the purposes of building the Interstate Highway System. Today that system is nearly complete, and Transportation has become little more than a public works committee, with the highway bill serving as a vehicle for Members to hand out checks to favored constituents.

The last highway bill cost $295 billion, a third larger than its predecessor, and included 6,400 "special projects" -- bike paths, museums, snowmobile trails, parking lots -- that totaled $23 billion. These days, when the money does go toward actual road construction, it is often of the "Bridge to Nowhere" variety. Which is why states are finding public-private funding more and more attractive.

Public-private partnerships have become a proven tool to get new projects up and running -- and as the WSJ points out, that's what scares the Congressman.

You can read more about it here and here and here and here. Also check out my colleague Ted Balaker take on Congressman DeFazio on CNBC here.

Jeff Poor at the Business & Media Institute is calling the latest ban out of San Francisco “extreme” and characterizes it as “following the radically liberal traditions” of the city. Oh no! What is it this time??

Ban-happy San Francisco is usually great fodder for debate, but moments like these illustrate how too often that debate is just a stale trade of knee jerk reactions. In this case, critics are complaining that the City of San Francisco has cut bottled water out of their budget beginning July 1. After this “extreme” move, city employees will be forced to drink tap water originating from snowmelt in Yosemite National Park (or bring their own, probably lesser-quality, water to work), which costs 1000 times less per gallon than bottled water, saving the city an estimated $500,000 per year. If only all fiscal conservatives were that “radically liberal” we’d be in great shape!

In his post today, Poor criticizes both NBC and CNN’s coverage of the new mandate for not including anyone from the bottled water industry to speak against the ban, and says that the move “raises safety concerns” about the security of the water supply in the event of an earthquake. Let me get this straight: unbiased news coverage means making sure industry reps get their fair chance to speak every time a local government tries to cut a little pork? And city employees drinking bottled water at work staves off earthquakes how?

At least the San Francisco Chronicle was quick to point out that, as Geoff Segal noted here at the time:

In 2005, Los Angeles Mayor Antonio Villaraigosa ordered city agencies to stop buying bottled water for employees after the media reported that the city had spent nearly $90,000 on it. At the same time, the city water agency was financing a $1 million ad campaign praising the virtues of what came out of the tap.

As he so often does, Joel Kotkin offers some great thoughts on an urban issue. His latest commentary "Trust market to shape the new Houston" in the Houston Chronicle, is subtitled Planners' nightmare is a dream come true in creating an exuberant, workable hodgepodge.

It opens:

When speaking on urban issues, one reliable way to draw derisive comments is to mention Houston. Perhaps no major city in America has a worse reputation among planners, urban aesthetes and smart growth advocates.

Yet, to a remarkable extent, Houston may well defy its critics — not only by continuing to expand, but by constructing a new and dynamic model of American urbanism that transcends all the worn clichés about ''sprawl'' and the burgeoning city's inability to attract educated workers.

I appeared on "The Box" this weekend, a radio show produced by the Commonwealth Foundation in Harrisburg, PA. We discussed ways to deliver Mass Transit with lower subsidies -- you can hear the entire episode (including segments from Gov. Bill Owens, Dr. Jake Haulk and Ron Hartman) or select individual segments here.

Today marks the second anniversary of the U.S. Supreme Court's Kelo vs. New London decision, which lit a fire under the private property rights movement and set into motion a wave of policy reform that is still ongoing. Even though the decision to condemn the middle-class homes of Susette Kelo and her neighbors to make way for a private developers was an utter affront to freedom, it actually ended up being one of the best things that could have ever happened to the property rights movement. Today it's worth stepping back and taking a look at how far things have come in these two short years.

• Almost every state--with the notable exceptions of New York, New Jersey, Massachusetts, and Rhode Island--has adopted some form of eminent domain reform (see the Castle Coalition's handy map here, and their 50-state report card here). Some of these reforms are clearly better than others. For example, the five bills signed last fall by Gov. Schwarzenegger in California added very little if any protection to property owners, while states like Florida, South Dakota, and Georgia passed very strong reforms.
• Kelo added momentum to the regulatory takings reform movement, which had been reignited just seven months before with the passage of Measure 37 in Oregon. Last fall, property rights activists in four states placed measures with regulatory takings protections on the ballot. Measure supporters in Idaho and Washington faced decisive defeats after being outspent by opponents (often coalitions of environmental groups, planners, city & county associations, and others) by significant margins, yet Prop 90 was only narrowly defeated in California, and Arizona's Prop 207 passed by a healthy margin.
• Arizona's Prop 207 proved that a "Kelo-Plus" strategy of targeting eminent domain and regulatory takings in one reform package--although risky--can be an effective vehicle to enact comprehensive property rights protections. See my recent blog post on Prop 207 for more info.

However, this issue won't be going away anytime soon. The erosion of property rights that began in the early 20th century with the rise of the Progressive era and modern urban planning has been pervasive and far-reaching. It will take a long time and a lot of effort to undo the damage. Kelo provided a vehicle by which a lot of the low-hanging fruit could be plucked, but there's a lot more work needed, and property owners need to be constantly vigilant against new threats to their rights.

Just to give a sense of what's challenges still remain on the property rights landscape:

• Meaningful eminent domain reform has eluded three key states--California, New York, and New Jersey--which, not coincidentally, are among the biggest abusers of eminent domain.
• "Blight" definitions--often used as a justification for eminent domain--remain vague and amorphous in many states, leaving property owners vulnersable to abuse
• As some of the reform efforts have shown, it's easy to pass eminent domain legislation full of exemptions, loopholes, and window dressing. Right now in California, the League of California Cities is pushing sham legislation and a backup ballot measure that purports to restrict eminent domain but comes nowhere close to actually doing so. Luckily, the California Alliance to Protect Private Property Rights is countering with its own strong ballot measure, but citizens will undoubtedly be confused by the cynical attempts of big government supporters to pull the wool over their eyes.
• The poor, minorities, and the less affluent segments of society are disproportionately impacted by eminent domain abuse, according to a new study from the Institute for Justice. The study found that 58 percent of those targeted with the threat of eminent domain were minorities, and those targeted had an annual median income under $19,000 (compared to $23,000 in surrounding neighborhoods).
• Regulatory takings reform still has a long and difficult road to travel before it moves beyond Oregon and Arizona (and the handful of states like Florida and Texas with weaker statutory protections). Regulatory takings are the holy grail of the environmental movement, because modern environmentalism is predicated upon using regulation to restrict property use. A similar story could be told for urban planners, whose grandiose planning schemes often rely on uncompensated takings. Myopic planners and environmentalists that cling to the blunt hammer of regulation--as opposed to market-oriented, property rights based policy solutions--will fight like cats backed into a corner to stop regulatory takings reform, as we saw in California and Washington last fall when the Sierra Club, Defenders of Wildlife, American Planning Association, and others launched their well-funded attacks on the RT ballot measures.

So for those of us interested in restoring the tradition of strong private property rights that served this nation so well in its first century, Kelo was a pivotal moment and turning point from which some great outcomes have already been derived. But the more time that goes on, the more important it is to stay vigilant and advance the fight forward. Without vigilance, memories of the Kelo decision may fade, complacency may too easily set in, and rights may too quickly erode again.

More recent thoughts on Kelo from Pacific Legal Foundation's Tim Sandefur here.

Yesterday on On the Money, I debated Rep. Peter DeFazio on HOT lanes, public-private partnerships, and related stuff.

Video is here.

I'm just the latest Reasoner to take on D-Faz. Geoff Segal does it here; Bob Poole here.

Related: FAQs on HOT Lanes; FAQs on Public-Private Partnerships

Advocates on all sides of the U.S. health care issue have come out with guns blazing, and the silver screen is the scene of most of the contemporary battles. The most well-known documentary on the issue is the recently premiered Michael Moore film, SiCKO, there are other documentaries and fictional films that have been produced and contrast the health care systems in the U.S. and other countries such as Canada. Thursday morning, Cato Institute hosted a panel discussion with Stuart Browning (Fellow, Moving Picture Institute), Michael F. Cannon (Director of Health Policy Studies, Cato Institute) and Ezra Klein (Writing Fellow, American Prospect) that focused on Moore’s new film and other examples of health care in film as the starting point of discussion with clips from three films: SiCKO, Brain Surgery, and Barbarian Invasions.

What was unique about this event and deserves added attention was its focus not solely on health care, but the portrayal of health care in film (the title of the event was “Health Care on Film: Clips from SiCKO and Its Competitors”). There has been a rising trend in the use of documentaries to “expose” problems with the status quo or to raise awareness on a pressing social issue with prominent films such as Super Size Me, Bowling for Columbine, and others leading the way. Film in general is considered a medium that is able to reach a wide and varied audience to convey political messages whether through fiction or documentation. While films may serve as a starting point for discussion and debate over the issues they present, which happened at the event, there is reason to worry that an over-reliance on film may lead us away from rational discourse and emphasize emotional appeals and fallacious groupthink.

This occurred to me when I noticed a common theme in SiCKO: laughter. In many of the interviews Moore conducts, the interviewees respond with laughter, as though even asking the question is absurd. In the UK, Moore’s question of how much a patient paid is met with laughter and a “we don’t pay here.” At Guantanamo Bay, an U.S. soldier laughs as she says that the detainees there receive better treatment than she has ever had. This is important because this kind of laughter subverts the logical analysis of argumentation. When we see others laughing, it is a natural tendency to laugh as well. Laughing makes us happy. When we laugh with others, we are bonded with them in a way that makes us feel comfortable rather than isolated from an intellectual disconnection. When someone laughs on screen at the concept of paying medical bills, the suggestion is that such a concept is an absurdity. It is as if to say, “there is no way anyone can actually think that” or “that situation is so far-out there it doesn’t deserve consideration.” More so, film allows many of these “laughable” interviews to be collected, condensed into a short segment and then played before an audience as though there is almost no one who does not think of this as absurd. Through film, the threat of groupthink caused by a minutely sized group is not only present, but significant.

This analysis is not revolutionary and much of it has been said before. However, it raises an issue that deserves consideration and recognition. As we use film more and more to convey information and bring information to light, how far should we be willing to accept the medium? And to what extent can we use the medium for purposes of debate and rational discussion when it lends itself to tactics that excite the senses and requires the audience and on-screen individuals to ‘connect’?

As a filmmaker, Moore is brilliant at constructing a story that the audience can easily follow and brings them into the film. I am not faulting Moore in any way for employing this strategy in his filmmaking role because it is so effective. I am not faulting the technique itself even because it is merely a tool to reach a purpose. I am merely commenting on the nature of this documentary quality for the sake of understanding it so the average viewer can consider the reason why clips of people laughing are included in persuasive pieces so often. Is there a way for film to balance its emotional biases with substantive information that is conducive to meaningful debate? Or should we interpret film merely as a tool to hook an audience into a message and debate the issues elsewhere? If nothing else, we must recognize that films are not meant solely to present the issues and discourse, but connect with us through senses and influence us in ways that are not traditionally “rational”. While debates help delineate what is good and what is bad we are now faced with a more ambiguous position: the sicko.

Michigan's Single Business Tax, a $1.9 billion tax ranked by the Tax Foundation as the most burdensome corporate tax in the nation, is set to expire at the end of the year. Relief at last! Not so fast.

From the state's governor, Jennifer Granholm, comes this remarkable statement announcing the creation of a new corporate tax:

With our new Michigan Business Tax, we will be even better positioned to bring more promising, job-creating projects to Michigan," Granholm said. "But now we need further progress on solving this budget crisis so that we can continue to push forward with Michigan's aggressive economic plan.

Granholm has presided over one of the worst economic environments in the country. According to the Mackinac Center, Michigan has lost more than 200,000 jobs since 2000.

While other states have recognized the need to lower the tax burden on corporations in order to spur growth, Michigan has chosen a different route. The state runs ads featuring actor Jeff Daniels, of "Dumb and Dumber" fame, touting the Michigan Economic Development Corporation, dubbed a Government Subsidy Machine by Mackinac.

The city of Philadelphia and its private industry partner, EarthLink, have begun to promote citywide municipal wireless service in the City of Brotherly Love. Philadelphia, which back in 2005 was the first city to commit to building a metro WiFi system that would cover all parts of town, is among the most closely-watched muni operations. Its initiative sparked a trend across the country. Yet as service launches in many cities, there’s already been disappointment about the costs, the coverage and customer interest. And many believe, as Glenn Fleishmann reports at WiFiNet News, that the municipal wireless will rise or fall on Philadelphia’s experience.

Thus far in Philly, reviews are mixed. Novarum, an independent consulting firm the city employs to measure network performance, found that service was available in 74 percent of the sections it tested. In a less scientific test, Philadelphia Inquirer reporters found they could get a signal about 50 percent of the time, although when they did connection, the link was of good quality.

Still, that percentage of coverage is coming at a higher cost than planned. The Inquirer also reports that EarthLink is deploying an average of 42 access points per square mile, more than twice as many as what WiFi planners thought would be necessary. Because EarthLink is funding the project, the extra costs don’t come out of taxpayers pockets (something not true for residents of cities that have run into the same coverage problems, but are relying on city utility funds to bankroll the buildout), but the added expenditures have forced EarthLink to re-adjust its muni strategy. The company, for example, will limit bids to projects in large cities.

More insight comes from Anthony Townsend, research director and wireless consultant at the Institute for the Future, who, while supporting community wireless initiatives, never pretended that the municipalities would be somehow exempt from the technology, cost and competitive challenges that commercial providers face.

“What's happening with these projects now is that it's harder to do than they originally thought,” Townsend said.

He likes Wi-Fi, he said, and in a previous job worked to promote wireless hot spots in parks and other places where the public can use them. He just does not think Wi-Fi will work well over a large area where bigger providers such as Verizon Communications Inc. and Comcast Corp. already offer Internet service.

“It's not the wrong idea,” Townsend said. “It's just that Wi-Fi is turning out to be much more time-consuming and expensive than they thought.”

Several things can happen. The system could indeed be a success, in that it pays off for both Philly and EarthLink. The city itself sees the benefit of wireless applications and functionality and more residents get connected a lower prices. Or EarthLink could see the find itself hemorrhaging money and pull out, accepting the pain of any contract penalties in lieu of years of unprofitable operation.

Or the project can become slow drain on EarthLink revenues, where its networking costs continue to run ahead of sales. This has tended to be the experience with most muni systems. Look no further than Provo, Utah, which has once again revised its break-even numbers on its iProvo muni fiber system.

In that case look for EarthLink to renegotiate its agreement with the city, probably to raise prices and/or go slower on city build-out. This is the most likely outcome, because it saves face for everyone. As the past history of muni broadband shows, from a political perspective, anything short of a shutdown can be spun as a “success.”

Arizona's 7-month old property rights law, Proposition 207--the combined eminent domain and regulatory takings reform measure passed overwhelmingly by Arizonans last November--may end up forming the basis for a legal challenge to a new historic overlay district passed in Flagstaff this week. Here's the skinny from PLF:

The Pacific Legal Foundation today filed a demand letter with the City of Flagstaff, Ariz., which starts the clock ticking toward filing a lawsuit under Proposition 207, the Arizona Private Property Rights Act. This will be the first case invoking the protections of the Act.

The case challenges the new city ordinance adopted last night, which imposes a "historic district overlay" on a portion of the city. Essentially a new layer of zoning, this overlay imposes severe height and width restrictions on properties in the area and creates a new bureaucracy with power to deny property owners the right to renovate their homes.

PLF represents Jon Regner, a Flagstaff firefighter who purchased his property with the intention of renovating it and living in one house while renting out the other. The new ordinance prohibits him from doing this. PLF also represents several other landowners whose property rights are being trampled upon. Fortunately, with Arizona's powerful new property rights protection law, these property owners have a legal tool with which to defend themselves.

In just the first seven months of implementation, there have already been several indications that Prop 207 is changing the way Arizona communities approach regulation and growth management issues. For example, in April 2007 the Phoenix City Council voted to repeal a historic designation it had placed on an area in central Phoenix after being threatened with a Prop 207 challenge from an aggrieved landowner. Also, the Tuscon City Council recently delayed the adoption of a neighborhood preservation overlay district to study the potential Prop 207 ramifications after a group of property owners opposed it on Prop 207 grounds, arguing that it would restrict the use of their property and decreased its potential value.

In other words, Prop 207 is working.

I've just written a piece on Prop 207 that will be featured in Reason's upcoming Annual Privatization Report (slated for a July release) that talks about these events and more, and I've got a policy brief in the works that will provide more details on Prop 207 and articulate the case for it as the best current model for state-level property rights protections.

For more on Prop 207, check out Big Rattler's Prop 207 blog.

Rudy Giuliani's presidential campaign is starting to roll out details on his "12 Commitments to the American People," and the first of the twelve to be unveiled--Fiscal Discipline--caught my eye. In addition to ideas like mandatory sunset clauses for all Federal programs, a presidential line-item veto, and a PART-esque Government-wide Accountability Program (GAPStat) to measure program performance and identify waste and non-effective programs, what stuck out was that he has become the first candidate of either party to talk about privatization in a positive light:

Reduce the Federal Civilian Workforce by 20% through Attrition and Retirement: Within the next decade, 42% of the Federal Civilian Workforce – some 300,000 bureaucrats – will retire. (Congressional Budget Office, “Characteristics and Pay of Federal Civilian Employees”, 3/07)

• Replace only half, making the Federal government smaller and smarter through increased use of technology and privatization.
• Eventually saving the taxpayers $21 billion each year, while ensuring that the Federal government is focused on performing its essential responsibilities (Congressional Budget Office, “Characteristics and Pay of Federal Civilian Employees”, 3/07).

More details here. It's not exactly a surprise that Giuliani would talk privatization given his record as NYC Mayor, but it certainly is refreshing to hear it in the context of the underwhelming ideas being bandied about thus far among the candidates.

USA Today reports today that state revenue growth is sluggish. Collections only grew by 4.4% in the first quarter of the year, the slowest rate since 2003.

Of course the real issue isn't that revenues are off its that spending is through the roof, again. "Spending rose 7.6% in the first quarter, the highest rate since 2001. Medicaid spending, which had unexpectedly declined last year, has taken off again, rising 9.2% in the first quarter. That's the highest quarterly growth rate for the health care program in almost a decade."

State's additicion to spending runs deep -- despite strong growth over the past few years, many states have continued to increases taxes. This is especially true of so called "sin taxes." At least a dozen states entertained a cigarette tax increase, again.

While some states still have surpluses from previous strong growth if they don't change their spending plans (and they never do) we can see the tax man knocking on our door again...especially if a slow down in the economy doesn't coincide with a slowdown in state spending we're in real trouble.

Just got back from a book party for Doug Bandow's new book, "Foreign Follies: America's New Global Empire."

The book's synopsis is as follows:
The U.S. once was a traditional republic, remaining aloof from foreign conflicts. Today there is no problem on earth with which Washington is not concerned. The result is an oversize military, perpetual intervention, and constant conflict. September 11 demonstrated that Washington’s enemies could strike America at home. Iraq shows how even great power does not ensure international success. It’s time for a new foreign policy. The U.S. should be engaged in the world, trading for economic advantage, maintaining friendly political relations, sampling foreign cultures, and accepting persecuted peoples. But military action should be a last resort. Costly and destructive, war is ill-adapted to shape liberal societies. Its prosecution undermines liberties at home. Moreover, in an age of terrorism intervention encourages more, and more deadly, attacks on America. Doing less will leave a messy world. But it will be messy irrespective of the pretensions of would-be peacemakers and nation-builders. America’s first priority should be to build a stable, safe, and prosperous republic at home. Such a society requires peace as well as free markets.

Even if you don’t agree with everything Bandow says, this book will make you think. He addresses misappropriation of government funding & abuse of power and effortlessly explains the link between unnecessary intervention by the United States and the threat of terrorism.

Pick-up “Foreign Follies: America’s New Global Empire” here.

Wiley Rein’s annual telecom policy and law panel at NXTcomm, the industry trade show going on this week in Chicago, once again proved a high point of the confab.

Panelists from manufacturers, carriers, the FCC and policy think tanks commented on a number of hot button issues, with universal service taking the forefront.

ConnectKentucky continues to get more praise. The program was the first state effort to truly attempt to identify broadband haves and have-nots. Rather than rely on statistics, state officials sought to answer the most practical questions by thoroughly mapping the state to determine what areas had no broadband infrastructure, what areas had broadband service available, but low household penetration, and, finally, what solutions could be applied in both cases.

The FCC has floated the idea of creating similarly detailed broadband “map” for the entire country, as part of an effort to reform universal service rules for the broadband era. The chief concern comes down to directing universal service funds where they are most needed.

Here’s an excerpt from Telephony’s daily online coverage of the convention,

The FCC is looking to measure, among other things, speed and penetration to identify market failures and areas that may require special attention and funding. Carriers currently are required to file reports on broadband subscription numbers, but the picture these paint is unclear.

“With the absence of information it is hard to deal with this problem,” [Jeff] Campbell [director of technology and communications policy at Cisco Systems] said. “Mapping in Kentucky identified a lot of low hanging fruit next to other areas that were reachable. So people put money up because they could see where the gaps were and knew what it would take to get the job done.”

George Ford, chief economist and editorial advisory board member of the Phoenix Center, said part of the success in Kentucky was that is was a grass roots movement where people volunteered to drive around the state to create the maps. It might be difficult to duplicate that effort in a state like California.

[Robert] Quinn [senior vice president of federal regulatory at AT&T] added that Kentucky had another advantage. Because the effort was conducted as a public/private partnership, Kentuckians had confidence that the information in the database would be kept confidential.

Other, stickier, issues still inhibit broadband penetration—the stickiest being the reform of Universal Service Funding.

Quinn said the industry has to fix the [USF] distribution mechanism to ensure that “somehow, someway we will be able to get broadband on an economical basis to all consumers.”

Campbell said current USF is subsidizing old technology and that the industry should find ways to fund the building of new infrastructure. “Replicating the current system for broadband would be a huge disaster,” he said.

No policy panel would be complete without a discussion of network neutrality, and most of the panelists found the entire issue to be a ruse, Telephony reported.

However, its ability to take the incentive out of network investment remains. “You can’t apply Net neutrality to IPTV [for instance]. We are investing to bring a competitive service to market and if you tell me that neutrality will creep into video, there would be no business model for 25 Mb/s access,” Quinn said . Campbell said Net neutrality would hurt the quality of experience for new services. It would result in managing network traffic as if it were street traffic with no traffic lights. “Onerous legislation here would inhibit quality. They underestimate how much individual experience on the network today is improved by traffic management,” he said.

Ford said even the champions of dumb networks admit that nobody would even build such networks. “So it is not even a question of whether or not it would effect investment,” he said.

Illinois’ video franchise reform bill passed the state Senate 54-0 yesterday, putting an exclamation point on the House’s 113-0 vote two weeks ago. Although franchise reform bills have been passing by greater and greater margins, this is, I believe, the first time it has achieved unanimous majorities in both chambers of a state legislature. Despite efforts by municipalities to hold on control of what have become lucrative revenue streams to be milked for all their worth (with fees, surcharges and hidden costs passed on the consumers), legislators clearly heard from their constituents that they want competition and lower prices. The bill now goes to Gov. Rod Blagojovich (D), who is expected to sign it.

Read the Chicago Sun-Times' coverage here.

Anyone who has taken a labor economics class can tell you that unions have two priorities. Those are protecting their membership and getting more of them. So its not too surprising to hear Teamsters in Pennsylvania say that their "members come first" and that they're "interested in keeping our jobs for our members."

The issue is whether Pennsylvania can lease the turnpike and raise a projected $18 billion for new transportation investments throughout the state. Several Pennsylvania communities suffer from congestion, which is only going to get worse without significant investment. A truly viable alternative to leasing the turnpike has yet to be discovered (with the exception of raising a host of taxes and fees), yet it seems that the Teamsters have put their members needs over the rest of the Commonwealth. Some 2,000 jobs -- most of which would still exist under a privatized operation (the toll takers would likely be phased out as technology can replace them over time).

Much has been written on the plan in Pennsylvania -- Reason also recently published a response to some critics of the plan.

All of Reason's work on transportation can be found here.

Residents of south Fulton County voted overwhelmingly in favor of forming a new city -- Residents of Chattahoochee Hill Country in the southwester corner of the county passed with 83 percent approval.

The municipality will have fewer than 3,000 people scattered over 33,000 rural acres. While a governing structure has not been decided for CHC its highly possible that they will follow in the footsteps of Sandy Springs, Johns Creek and Milton and choose a largely privately operated city.

A working paper out from two economists at Colorado College looks at what happens to patents for new inentions to make cars more fuel efficient when the price of gasoline change. They find that a a 12 cent rise in domestic gasoline prices leads to a 9% increase in energy-saving patents immediately, and many times that amount over a longer period. Higher gas prices don't explain all the new patents, but the connection is large and very strong.

It makes simple economic sense that over time rising gas prices will be what really drives the switch to more fuel efficient technologies and eventually the move away from oil. And this force makes most government policies designed to speed up change marginal at best, ludicrous most often--like the new wave of ethanol polices.

A new paper by this name by Todd Zywicki and Anthony Sanders is available for those law and economics junkies out there.

The abstract says:

This Essay examines Richard Posner's critique of F.A. Hayek's legal theory and contrasts the two thinkers' very different views of the nature of law, knowledge, and the rule of law. Posner conceives of law as a series of disparate rules and as purposive. He believes that a judge should examine an individual rule and come to a conclusion about whether the rule is the most efficient available. Hayek, on the other hand, conceives of law as a purpose-independent set of legal rules bound within a larger social order. Further, Posner, as a legal positivist, views law as an order consciously made through the efforts of judges and legislators. Hayek, however, views law as a spontaneous order that arises out of human action but not from human design. For Hayek, law as a spontaneous order - of which the best example is the common law - contains and transmits knowledge that no one person or committee could ever know, and thus regulates society better than a person or committee could. This limits the success of judges in consciously creating legal rules because a judge will be limited in the forethought necessary to connect a rule to other legal and non-legal rules and what Hayek termed the knowledge of particular circumstances of time and place.

This Essay also explores Posner's argument that Hayek misunderstood the rule of law as the rule of good law. Contrary to Posner, in the view Hayek came to espouse in his later work, the common law embodies the rule of law in a way that positivist creations of law do not. When judges consciously make law it is those human actors, not the law as such, that rule. When law arises out of a spontaneous order, however, it is the law that rules. Judges merely articulate it. Posner does not distinguish between these two processes, and therefore sees a difference between the rule of law and the rule of good law which Hayek does not. This is because for Hayek the rule of law is only meaningful in a liberal society where law arises out of a spontaneous order.

In Part 2 of the Dust-Up (see my previous post for Part 1), Bruegmann and Ohland take on smart growth. Bruegmann asks the question: "If smart growth is the answer, what is the question?"

To get any significant number of people out of their cars and into transit it would be necessary for transit to be faster and more efficient than cars. Except in the case of rush-hour commuting trips to the very center of a few large cities in the United States, this not now the case. Without some dramatic changes in the type of transit we use, transit is very unlikely to be able to compete anytime in the near future.

It would take massive increases in density to boost significantly the present, extremely small market share of transit use in Los Angeles. And even if the market share of transit gained, the number of automobile users would increase more quickly than transit users for the foreseeable future. Without some dramatic increase in road capacity, this would guarantee worse traffic and longer trips for motorists and bus passengers alike. In fact this is what has been happening in L.A. for some years now. Most of the nostrums promoted by "smart growth" advocates are likely to make matters even worse.

. . . .

In fact if we didn't have the polarizing debate about sprawl and smart growth, it would probably be easier to tackle our transportation problems.

Read the whole thing.

• Bruegmann on the Future of American Cities, Pt. 1

University of Illinois at Chicago prof, author, and urban realist Bob Bruegmann is going toe-to-toe this week with transit advocate Gloria Ohland in the LA Times' Dust-Up on the future of urban growth. In Part 1 they present two sharply contrasting views on urban sprawl. According to Bruegmann:

After doing a considerable amount of research on this subject for my book I concluded that very little of what was said about sprawl was either accurate or useful. The accepted wisdom today is that sprawl is recent, peculiarly American and caused by increasing automobile ownership and use. In fact, if we define sprawl in the most basic way as the decentralization of cities at constantly lower population densities and without any over-arching plan, it is fair to say that it has been going on since the beginning of urban history. Whether in imperial Rome or 19th century London, whenever a new group of people could afford to escape the congestion, noise and unsanitary conditions of city centers, they did so. In fact the exodus from central London in the 19th century, made possible by the newly invented railroad and public transportation, was at least as great as anything seen in the United States after World War II.

And every time a new group moved out there was an intellectual and artistic elite that was affronted and wished to stop it. In 19th century London, for example, "right-minded" individuals condemned the miles of brick row houses then being constructed for middle class families as ugly boxes erected by greedy developers. They considered these new neighborhoods a blight on the countryside and were sure that they would become a slum in a generation. Of course, within a generation, this same class of people had decided that these very row houses were the essence of central London, the antithesis of the new sprawl they saw at the urban fringe.

And so it has gone over the centuries. Today we are told that sprawl is economically inefficient, socially inequitable, environmentally damaging and aesthetically ugly. The current lead argument is often environmental, based on the notion that high-density compact settlements are more energy-efficient and less polluting than lower density, more scattered ones. However, there is little evidence that this is the case. The old 19th century cities were environmental horrors and only worked as well as they did because they were so much smaller than today's cities and most people were so poor that they had few choices in where they lived or worked. The most likely scenario to solve our energy problems and avert global warming is not to remake our cities at 19th century densities so that they can sustain 19th century technologies like the internal combustion engine, but instead to find new fuel sources and more efficient ways of using them at whatever densities people choose to live.

In any event, even if I am completely wrong and sprawl is a terrible thing, the record of attempts to stop it are not promising. In London, for example, where planners instituted a green belt and some of the toughest restrictions in the world immediately following World War II, they were unsuccessful. Indeed, the urban population of London has now scattered across much of the South of England. Throughout Europe, people are buying and using cars at a much faster rate than in the US and their dense, old cities are now sprawling outward faster than most American cities, particularly places like Los Angeles. In fact, the L.A. region has become so much denser over the last 50 years that it is currently the densest urbanized area in the United States. It is this increase in density and not density-lowering sprawl that lies at the root of many of the woes experienced by L.A. today.

Ohland's response offers a concise distillation of the main pro-transit, pro-smart growth (and in my estimation, misguided) arguments. It can be summed up in two sentences:

"[R]educing the amount of driving should be our number-one public policy goal"

"We've got to build more compact communities near transit instead of more sprawl."

These sentiments are almost taken as an article of faith among like-minded urban planners and smart growth advocates, but as my colleagues Sam and Ted point out here, here, and in their recent book, The Road More Traveled, conventional wisdom among urban planners is chock full of transportation myths (pardon the pun) that need to be reconsidered. Also be sure to check out Sam's earlier post about the myth of the transit-oriented city.

Have you seen Google's public policy blog?

They say, "We hope this blog will serve as a resource for policymakers around the world -- including legislators, ministers, governors, city councilmembers, regulators, and the staffers who support them -- who are trying to enact sound government policies to foster free expression, promote economic growth, expand access to information, enable innovation, and protect consumers. We also hope (cliché alert) that this blog will promote real conversation, so we've enabled comments."

Interesting... you can check it out here.

A new study from the Institute for Justice in Wahsington, D.C. provides empirical support for what most of us already now: the poor and minorities are the ones most victimized when eminent domain is used for so-called economic development puproses. After examining 184 projects across the nation, the IJ report concluded that:

58 percent of those targeted with the threat of eminent domain were minority residents (compared to only 45 percent in surrounding neighborhoods that were not targeted with takings), and those targeted had an annual median income of less than $19,000 (compared to $23,000 in surrounding neighborhoods). Moreover, a greater percentage of people living in areas targeted for eminent domain for private development have less