Out of Control

I can’t imagine anyone being happy with ambiguous rules the Federal Communications Commission announced today for next year’s auction of spectrum for wireless services.

As expected, FCC Chairman Kevin Martin decided to dabble in market experimentation, requiring the winner of a 22-MHz block of the coveted spectrum to allow any phone, device or application to work within that group of frequencies. Even then, Martin hedged, stating that this wireless network neutrality requirement is “subject to certain reasonable network management conditions that allow the licensee to protect the network from harm.”

Huh?

Those two great words “network management” always seem to show up when network neutrality is on the table. Combine that with Martin’s allowance of “reasonable” safeguards on the network and you have a loophole that you could fit Google’s market cap through.

In other words, the FCC rules allow the licensee, on its own and at any time, to start restricting devices and apps if it feels that they threaten the stability of the network, by themselves or when used by large numbers of customers. One assumes then that the licensee would then fall back on established bundled business models, which today assure that the device, the network and the application work properly. So much for wireless net neutrality.

Despite the fervent calls for network neutrality by lawmakers and some industry leaders, when the rubber hits the road, they readily allow wiggle room, which to me reveals a startling lack of faith that net neutrality is correct policy. Even Alan Davidson, Google’s Washington policy counsel, has said that not all network management is anticompetitive.

Martin’s allowance of “certain reasonable network management conditions” recalls the out he built into the network neutrality condition he placed on AT&T in return for approving its acquisition of BellSouth. There, he specially exempted video and wireless—the two services that network neutrality opponents say would be the worst affected by a ban on use of any network quality or reliability tools.

Adding in the fact that Martin stopped short of setting aside spectrum for wholesale only (a decision that has the Consumers Union and Free Press apoplectic), it’s hard to understand whether, in the long term, these auction rules change anything. Still, as Randy May notes, the FCC’s lip service to wireless network neutrality gives credibility and momentum to those who seek to impose greater government regulation on the Internet, and who seek to impose these egregious and self-defeating rules, which address no real problem, on all Internet service providers.

It would have been better for all if Martin had just opened the spectrum bidding to all-comers and allowed the winners to chart their own business course.

…from the world economy.

Alas, there is no link as I witnessed the crass appeal to economic populism first-hand. Speaking at the ALEC annual conference, the Presidential aspirant and former Arkansas Governor outlined a comprehensive plan to pull the US out of the world economy. His main points:

1. Tax reform (good idea) to get American corporations to repatriate the $10 trillion they have ‘parked’ overseas and ‘reinvest’ it in the US to ‘rebuild’ our manufacturing base (terrible idea)
2. A new big federal effort to develop domestic, alternative fuels so that in 10 years, ‘we don’t have to take a drop of foreign oil’ (terrible, horrible, no-good, very bad idea)
3. “fair trade” instead of “free trade”

Now, this latest “man-from-Hope” has about as much chance of being sworn in as President in 2009 as I do. But the rapturous applause and standing ovation he received from the 1,000 or so conservative—mostly republican—state legislators in the room was ominous evidence that large segments of the right are retreating into nativism and fear. The recent demagoguery on immigration may not have been an isolated outlier.

There have been a couple of developments recently that should give California taxpayers some hope in the fight against ever-rising public pension costs.

The first was the Third District Court of Appeal decision that upheld a previous ruling that the $560 million pension obligation bond authorized by Gov. Schwarzenegger and the State Legislature in 2004 was invalid because it was not approved by the public or a two-thirds supermajority in the Legislature. (Read the court's decision here.) According to Harold Johnson, an attorney for the Pacific Legal Foundation, which fought the bonds, "It's a big victory and a sobering message for the spendthrifts in the Legislature. They can't use the credit card to cover ongoing costs of government." (See a good Orange County Register story about the decision here.)

The second piece of good news came in the form of a public pension reform initiative proposed by the California Foundation for Fiscal Responsibility, which was formed by former Assemblyman Keith Richman, author of the failed 2005 pension reform proposal.

The CFFR's initiative focuses on improving the state's traditional defined-benefit (DB) system, rather than switching to a defined-contribution (DC) plan like the 2005 proposal. It would amend the state constitution to limit pension and retiree benefit levels (although these limits could be overturned by a supermajority vote), and would apply to local government agencies as well as the state. Here are some of the details:

• Retirement age for new, non-safety employees would be aligned with Social Security requirements (65 years for most; public safety workers such as police and firefighters would be eligible to retire ate age 55)
  
• Pensions for new public employees (including any Social Security payments) would be capped at 60-67 percent of an employee's final compensation
  
• Pension calculations would be made based on the average salary of the five highest earning years (California is the only state in the nation that bases its pensions on just the single highest earning year, which encourages "pension spiking")
  
• Pension calculations would only include base salaries (no adding in accrued vacation time or overtime to boost pension payments)
  
• Post-retirement health benefits would be actuarially reduced for employees that retire early
  
• "Contribution holidays," where the state does not make any contributions to the pension system in a given year because pension fund returns have been particularly good (which then forces the state to make larger payments to compensate when returns are low or negative), would be prohibited
  
• Post-retirement health benefits would be actuarially reduced for employees that retire early
  
• Retroactive benefit increases, such as those authorized by the now infamous SB 400 legislation in 1999, would be prohibited
  
• Death and disability benefits are protected for all new and current employees
  
• The state can increase benefits or otherwise modify the provisions of the measure with a three-fourths vote
  
• Local governments can increase benefits with a two-thirds vote
  

The proposal is expected to produce cost savings of at least $500 billion (that's "billion" with a "B"!) over 30 years. The savings come largely from encouraging employees to work longer, which affords them greater income in the long run and reduces the amount of time (and costs) the government must pay for their post-retirement health benefits.

There's usually plenty in the farm bill to complain about -- subsidies come to mind. However, this year is extra special. A provision was tucked into bill that would prohibit states from privatizing some welfare services, such as the distribution of food stamps.

If it passes it would dismantle a massive modernization program in Indiana, which by most measures was the worst in the nation. The paper intensive process often led to multiple trips and a lack of consistency that drove error rates to unacceptable levels-leading to $100 million in misspent funds each year. Under the contract with IBM will make systematic changes and upgrades quickly. This will bring about better, more accurate services to customers, faster, at massive savings (some estimates put it at $100 million a year). Indiana FSSA Secretary Mitch Roob wrote about the project and its importance in our recent Innovators in Action (see page 24).

According to the Wall Street Journal the move will also harm "21 other states that have privatized administration of their food stamp programs to some extent, and five more that are considering it. Already, Governors from Minnesota, Florida, Texas, Washington, Connecticut and Rhode Island have objected to the provision."

Several amendments to the bill have been offered up - including one by Texas Congressman Pete Sessions that would have provided waivers to the ban. It failed on a party line vote. Seems likely that the WSJ was right - this is more about union memberships than delivering services. Its true that the Indiana modernization led to fewer AFSCME members, however, despite AFSCME's predictions the employees are winners too (assuming that working for the private sector isn't evil). With more than 99% of them transferring to the private partner, at equal pay and benefits, employees are now able to focus on helping those who need help rather than pushing paper.

All is not lost, yet. The Senate still has to take up the bill and Sen. Lugar has suggested he'd work to remove the provision. Further, while the President has threatened a veto, its because of other language in the bill and not the anti-privatization measure.

It should be no surprise by now that the environmental movement has been dominated by radicals who choose extremism over meaningful discourse. The Washington Times today, however, includes a story that paints a shockingly bleak picture of environmentalists. On July 13, Michael T. Eckhart, president of the American Council on Renewable Energy (ACORE) sent a letter to Marlo Lewis, senior fellow of the Competitive Enterprise Institute (CEI), which contained these lines:

It is my intention to destroy your career as a liar… If you produce one more editorial against climate change, I will launch a campaign against your professional integrity. I will call you a liar and charlatan to the Harvard community of which you and I are members. I will call you out as a man who has been bought by Corporate America. Go ahead, guy. Take me on.

The substance behind hatred and ferocity of this letter shows that Mr. Eckhart does not care about finding the truth or pursuing debate and discussion surrounding climate change, but just wants his own views to be accepted by all. That he is willing to threaten another person for holding a contrary opinion is deplorable, but likely, the sentiment of many other environmentalists.

But all is not lost. The Environmental Protection Agency is now reconsidering its membership with ACORE as a result of this letter. Perhaps the EPA’s response is a sign that there is hope for environmentalism in a sane, rational world.

Well, the fireworks came as promised. The American Legislative Exchange Council’s Telecommunications and IT Task Force approved model legislation for state deregulation of Voice over Internet Protocol (VoIP) calling, battling back a controversial amendment that would have applied the current carrier-to-carrier access charge scheme to VoIP calls.

The model “Advanced Voice Services Availability Act of 2007,” intended for use by state legislators, enjoins state public utility commissions from regulating rates, terms or conditions on interconnected VoIP services.

While the measure had strong support among ALEC public and private sector members, rural telephone companies feared the legislation would result in their loss of payments from other carriers for the completion of calls on their network. Groups such as the Organization for the Promotion and Advancement of Small Telecommunications Companies (OPASTCO), the Independent Telephone & Telecommunications Alliance (IT&TA) and the Pennsylvania Telephone Association all asked task force members to oppose the model bill on grounds it would raise rates for rural users.

During Thursday’s Task Force meeting at ALEC’s annual meeting in Philadelphia, David Bonsick, director of government and public affairs for Embarq, a telecommunications service provider with primarily rural operations areas, said, “flash-cutting to deregulation would likely cause irreparable harm to hundreds of rural telephone companies.”

Bonsick touched off some emphatic give-and-take between task force members over VoIP deregulation. An amendment that acknowledged the access charge issue but remained neutral on mandating or prohibiting payments was offered, then withdrawn. In the end, Bonsick proposed a stronger amendment that would have mandated payment of access charges for completion of VoIP calls, but it failed when his motion to vote was not seconded.

While rural companies do depend on access charges and intercarrier compensation for a substantial portion of their revenues, access rates are regulated by both federal and state mechanisms. Rates are not set by the market, but by complex formulas that, result in different carriers paying different access fees to the same rural company for the same connection. Some task force members argued that access payments thwart the development of competition from other technologies by keeping rural rates for conventional dial tone artificially low.

State Rep. Phil Montgomery of Wisconsin, the author of the model bill, said it was his wish to keep the access charge issue separate.

According to Physorg.com, "French doctors are puzzling over the case of 44-year-old civil servant who has led a quite normal life -- but with an extraordinarily tiny brain."

This one was just too ironic not to mention! It is amazing that this man survived his condition but, the fact that he worked for the government as a civil servant, the French at that, and no one ever noticed an inefficiency, a slow turn around time, or unproductive work habits doesn't surprise me.

Dr. Lionel Feuillet reported to Fox News "The brain itself, meaning the grey matter and white matter, was completely crushed against the sides of the skull. The images were most unusual... the brain was virtually absent."

After undergoing further neuropsychological testing, it was discovered that the man had an IQ of 75. Most people in society have at least an IQ score of 85. However, the article made it very clear that this didn't hinder the man from working as a civil servant.

We need to send the Frenchies our Annual Privatization Report and encourage them to form public-private partnerships. That way they might end up with two tiny French brains instead of just one :)

In his critique of the AT&T’s deal with Apple to exclusively market the iPhone in an article in the Business Section of Sunday’s New York Times (no link), author Randall Stross’s real complaint is that, in order to use this expensive personal communications and entertainment device that, at least until this week, he and the media thought everyone would want, he has to sign up with AT&T. This, he says, shows that customers are still powerless before an AT&T that has the same dictatorial control over the equipment they can attach to the network as it did when it was the national telephone monopoly.

If wireless customers were truly captive, there would be no iPhone to begin with. AT&T wouldn’t have to pour investor dollars into snazzy new devices specifically designed to attract new customers (or retain existing ones). Similarly, Apple would have no reason to develop such a product because it would get no interest from the carrier community.

Stross also overlooks the element of risk, which Apple and AT&T shoulder in return for the equity of an exclusive cachet. Now that Apple and AT&T are reporting disappointing iPhone sales, perhaps legislators like Rep. Edward Markey (D., Mass.), will realize he mistook a $500 gadget for tech geeks with high disposable incomes for an essential public good, and will pull back from demanding regulations that would prohibit AT&T, or any wireless service provider, from negotiating for exclusive rights to sell what are, in the end, expensive toys.

When it comes to new products, true monopolies have no risk of failure--or ensuing investor blowback. A captive market means technology evolves in small increments, if at all. The uneven performance of iPhone illustrates Stross’s mistake in equating an exclusive value-added partnerships such as the AT&T-Apple iPhone with the Bell System’s vertically integrated supply chain monopoly that the Carterfone decision ended. On the contrary, the wireless industry is a successful, functional marketplace, supporting hundreds of hardware and software manufacturers all bidding and negotiating competitively for carrier business. The benefits of this competition are passed onto consumers. Agreements that allow one company “first dibs” on what it hopes will be the next trendy product are not barriers. Instead, they open the door to opportunities for innovation and differentiation.

In a recent post Alex references some bullet points from a recent Financial Services Forum report. The first points out that globalization has boosted living standards quite a bit; the second highlights America's trade deficit.

But the first point should render the second just about meaningless. If living standards are rising, why fret so much about trade deficits?

During the 1930s, the US "enjoyed" a trade surplus every year besides 1936. But those old days weren't exactly good.

From a 2001 paper by Cato's Daniel Griswold:

A survey of the U.S. economy since 1973 confirms that, by almost any measure—economic growth, employment, industrial production, poverty reduction—the economy has performed better in years in which the trade deficit rose than in years in which it shrank.

Related: If things are so great, why do I feel so lousy? Part 5

Two days ago, the Financial Times published an article based on a recent FT/Harris poll that supposedly proves people of rich countries are “backlashing” against globalization. Upon close inspection, however, the conclusions drawn from the poll are superficial and over-speculate opposition to globalization.

When looking at the full poll results, it is apparent that people hold an intricate view of globalization that is not adequately reflected by the poll and misrepresented in the article. The article reports that:

citizens of rich countries are looking to governments to cushion the blows they perceive have come from the liberalisation of their economies to trade with emerging countries.

Nevermind the fact that no question in the poll addressed trade with emerging countries. Only one question addresses the role of government in solving apparent problems of globalization, and that question dealt with the EU’s role. Individual governments were not addressed at all relating to the impacts of globalization. As well, the results show that people are weary of government intervention in the economy, with many across national boundaries believing the government is currently too large.

As well, while majorities of respondents in each country responded that globalization had an overall negative effect on their country, pluralities and majorities of respondents also believed that ‘free competition’ should be a goal of the European Union. This goes to show that people support the act of globalization, but have been taught to blame the name globalization for so many downfalls.

This leads in to the second problem with drawing significant conclusions from this poll: what people say and what people do are entirely different. While people say that they think globalization has negatively impacted their country, people in the countries polled clearly have a demand to wear more foreign fashion, feast on fast food or take countless trips abroad for family vacations. Indeed, consider these findings from a recent Financial Services Forum report:

-Living standards in the United States are $1 trillion higher per year than they would have been absent decades of globalization. This translates into an average gain of at least $10,000 per U.S. household per year.

-The overall U.S. trade deficit of $763.6 billion in 2006 masked a sizable services-trade surplus of $72.5 billion that partly off set a goods-trade deficit of $836.1 billion.

- A March 2007 WSJ/NBC poll found that 39% of Americans believe that trade agreements have helped the U.S. and 28% believe they have hurt the U.S.

-Global engagement fosters high productivity in American industries, but typically with substantial churn at the level of individual firms, with pervasive shutdown of inefficient plants and even entire companies.

-Looking ahead, a move to global free trade and investment in both merchandise and services will generate large gains for the United States and for the rest of the world as well. Annual U.S. income could be upwards of $500 billion higher; this translates into average gain of at least $5,000 per household per year still to be realized.

-From the mid-to-late 1970s to the mid-to-late 1990s, the real and relative earnings of less-skilled Americans was poor relative to both economy-wide average productivity gains and also the earnings of their more-skilled counterparts.

I doubt many people polled are opposed to these sorts of benefits they have experienced. All this report shows in the end is that globalization is still a dirty word. Good thing people still enjoy being prosperous in their actual lives.

Rent-seeking is the economists' term for the economically inefficient use of the political system by special interests to win subsidies (or favorable regulations) that help those special interests secure higher profits. Here's how it's worked for one group in North Carolina.

In a Pulitzer Prize-winning series in 1995, the Raleigh News-Observer showed how the hog farming industry, led by one Wendell H. Murphy a former state senator whose hog farm at the time was the biggest in the nation, donated hundreds of thousands to state and federal law makers of both parties to win favorable treatment of the state's then-growing hog industry.

The Pork PAC and individual hog producers gave candidates for the N.C. General Assembly at least $57,309 in 1993-94. Given the size of the industry, that's a lot.

$60,000 is also a lot because state races tend to be low budget affairs.

Favorable treatment came in the form of exemptions from state sale taxes for hog and poultry farms and certain exemptions for hog farms from environmental regulations. (Whatever one thinks of the efficacy of environmental regulations, one should be concerned about special exemptions doled out to favored industries.)

But hog farms have their special problems, and the rapid growth of them in the 1990s drew attention to one.

Although dated, the News Observer series on hog water describes some of the problems.

The hog industry has its answer to this problem. And, of course, it involves more subsidies to the hog industry. First, in exchange for "voluntarily" switching to more environmentally friendly waste disposal systems, hog farmers will receive state subsidies. And the state is looking at the conversion of methane from hog waste into energy in a dubious scheme that involves a $2 million state subsidy.

Telecom business analysts continue to express more disappointment with municipal wireless. Market research firm Forrester Research, has identified basic flaws in municipal business models and Craig Settles, who increasingly comes across as a reluctant advocate of municipal wireless, continues to find fault with the way cities continue to view muni wireless as a ticket to free Internet services.

In the wake of decisions by Anchorage, Alaska, and Corona, Calif. to scrap muni wireless projects after their partner, MetroFi, said it could not offer free service, Carol Wilson at Telephony looks at new research in the first what she promises to be a series on the potential and pitfalls of municipal wireless.

Here’s some of what Wilson reports:

Those two situations reflect a new market reality that muni Wi-Fi isn’t about “free, free, free,” said Craig Settles, president of Successful.com, and author of the report, which was sponsored by [the International Economic Development Council].

“The market shouldn’t have gone in that direction in the first place,” he said. “A lot of cities saw other cities getting a Wi-Fi network, seemingly for free, and thought ‘We have to have one, too.’ Rational planning took a back seat in a number of cities. And the ones that went down the path of having everything for free are having the moment when the hens come home to roost. You can’t make money with this business model.”

The cities most likely to fail, Settles said, are those that put resources into building a network in the expectation that it will both attract new businesses, and generate income from consumer use.

Turning to the Forrester report (executive summary here), Wilson talks to author Sally Cohen, who addresses a key miscalculation cities are making—focusing on outdoor coverage when most WiFi use occurs indoors.

“Most of today’s consumer public Wi-Fi use happens indoors,” Cohen states in her report. “When using public Wi-Fi away from home, most consumers access the Net in public indoor spaces, such as hotels, office buildings, airports and train stations. Yet most municipal networks are designed to cover only public outdoor spaces, where most of today’s users don’t go online. In order for the wireless signal to reach the interiors of local businesses or homes, most muni networks require the purchase of additional equipment, a consideration that is likely not obvious – and thus potentially confusing – for potential consumer customers.”

Finally, Cohen addresses how muni networks are failing in closing the digital divide, a reason used to justify the heavy borrowing and spending needed to build them.

Another misconception, which both reports address, is that muni Wi-Fi can close the digital divide by making broadband access available to lower-income residents. Instead, Cohen reports, the people using public Wi-Fi are early adopters, who tend to be young, tech-savvy men with higher-than-average incomes.

The weekend edition of the Wall Street Journal includes an editorial on "Gridlock in the Air" -- which chronicles the troubles of air travel today. Tucked away in the next to last paragraph the editorial briefly (and completely gloss over) a possible solution:

If Congress decided instead to privatize the whole system, as Britain, Canada, Germany and other countries have done in whole or part

Of course, Reason's own Bob Poole has been saying this for years. Most recently in a 2007 report titled "The Urgent Need to Reform the Air Traffic Control System."

Google declared today it will commit to bidding a minimum of $4.6 billion for a chunk of the 700 MHz spectrum the FCC is getting set to auction – that is, if the FCC sets the terms of the auction in Google’s favor.

For the past week, the rhetoric’s been heating up over the prospect of the FCC setting a “neutrality” rule for a portion of the spectrum. Google, along with Frontline Wireless and Skype, has been pressing regulators to impose an “open device/open applications” rule on the winner.

Such a rule would prevent a service provider from locking phones and other devices to its network, and from controlling the use of software and applications by requiring certification. The introduction of the Apple iPhone, which thus far works only with AT&T’s wireless network, has become something of a poster child for the neutrality camp.

Throwing out a huge dollar figure might yet be a bold move to leverage the voices in favor of Internet regulation. Still Google risks irking regulators by suggesting that they can be “bought,” even when the beneficiary in this case is the U.S. Treasury.

Already CTIA, the wireless trade group, is stoking this perception in its statement.

“If Google is willing to commit almost $5 billion dollars for spectrum that it wants encumbered with various requirements, then let it win that spectrum in a competitive auction and choose that business model. Google and its allies, with their collective market capitalization approaching half a trillion dollars, don't need a government handout at taxpayers' expense. The competitive wireless industry welcomes all new entrants, but no company should be able to buy a custom-fit government regulation that suits their particular business plan.”

The size of the dollar figure also attracts the question why Google wants this spectrum so badly. That invites stories such as this Dow Jones article that frames the regulatory dispute in the context of Google’s self-interest.

These “negotiations in the press” are likely to continue until FCC Chairman Kevin Martin formally says what he thinks. Martin seems to have been communicating his position to a number of the companies that plan to participate, stoking rumors and think tank gossip as to what which way he’s going to fall. Last week, reports said he was leaning toward neutrality. This week, it doesn’t seem so certain. Stand by for more rhetoric.

Doing their small part to quench the nationwide thirst for information on the virtues of bottled water versus tap water, today NBC announced expert taste-testers' evaluation of water in 12 affiliate cities. The best: Salt Lake City, followed by Boston and Columbia, SC. New York City water was deemed too good to compete in the test.

What coverage of this soft news stunt didn't highlight was that, interestingly enough, one tap water sample was pronounced by the taste-experts to be suitable only for washing a car, while another was considered not even good enough to shower in. The origins of the three failing tap waters were not revealed.

Although the Columbia tap water was reported to have a "hint of peach," none of the tap waters tested were mandarin orange flavor, no doubt to Geoff Segal's considerable disappointment.

Salt Lake City tap water is also not winning over local firefighters, who earlier this week criticized Mayor Rocky Anderson's direction to city staff (issued last fall) to cut bottled water purchases from their budgets.

It is worth noting that tap water from the 12 cities had to be bottled and shipped for NBC's test. Water connoisseurs outside of South Carolina will have to wait for the precious stuff to show up on the supermarket shelf.

Today's Wall Street Journal has an indepth article on London's congestion charge in the Weekend Journal.

London Mayor Ken Livingstone introduced the fee in 2003 to relieve the city's traffic jams, and expanded the zone in February. Since its introduction, the congestion charge has reduced traffic, prompted people to use public transportation and cut pollution.

Now, a number of U.S. cities including Dallas, Miami, Minneapolis-St. Paul and San Diego are considering congestion charges on busy roads or highways. San Francisco is discussing a congestion charge for its downtown, one of the busiest traffic zones in the country. Officials from the San Francisco County Transportation Authority have been to London numerous times to study its scheme, says Tilly Chang, the authority's deputy director of planning.

Of course, the London charge was also the model for New York City's plan, likely aborted by opposition in the New York State General Assembly.

I've often heard this turn of phase to refer to municipal operations of golf courses i.e., the only time middle class Americans receive anything from government is on the golf course. The issue raised its ugly head in Jackson, Mississippi yesterday where the mayor nixed a plan to privatize two local golf courses.

Seems the courses were a major drain on resources - losing about $300,000 annually. The private operator had offered to pay the city $10,000 a year to run the course and give the city 5 percent of profits. City officials estimated that the contract would have saved the city about $105,000 annually -- even though to me it seems like a savings of $300k in losses and a gain of at least $10k in new revenues.

Eitherway it was golfers who stood in the way of privatization....what always confuses me is why is government in this business to begin with? Perhaps even more unsetteling is that I wrote about this back in 2003 and its still happening!

Lisa Snell wrote a great study on golf course privatization a few years back -- check it out here.

The New York Times city blog is reporting that a deal has been brokered between Mayor Bloomberg, Gov. Spitzer, and the NY General Assembly permitting the city to move forward with its congestion pricing plan.

Bloomberg's office released a statement that says in part:

“This agreement to move forward with congestion pricing marks a critical milestone in our efforts to make PlaNYC a reality, and to provide a better quality of life for us and for future generations of New Yorkers. By moving forward in our effort to clean our air and fight congestion, we will help our economy, improve public health and make critical improvements to our public transportation system.

So many of them are illegal, so they've already shown that they have no respect for our laws. Plus they're
young, poor, and can barely read--you just know they're out their stealing stereos or worse.

We've heard that before, and it is true that being young, poor and uneducated is usually associated with higher levels of crime. But a new paper by Kristin Butcher and Anne Piehl finds that immigrants are actually much more law abiding than the native born:

We have shown that immigrants have substantially lower institutionalization rates than natives, and that this differential has grown over the timer period that institutionalization expanded. In 2000, male young adult immigrants are institutionalized at one-fifth the rate of comparable native-born Americans. Although immigrants continue to be much more likely than natives to have low levels of education, this has not caused institutionalization rates to rise. In fact, when we predict the institutionalization rate for immigrants based on the experience of natives, we find that the observed rate is one-tenth of the predicted one.

Bryan Caplan puts it like this: "[I]f immigrants acted like otherwise similar natives, they were be ten times as criminal as they actually are."

Free version of paper here; newer NBER version here.

Can we at least harangue immigrants for stealing our jobs and depressing our wages? A recent PPIC paper says no:

This issue of California Counts examines the effects of the arrival of immigrants between 1960 and 2004 on the employment, population, and wages of U.S. natives in California. Among the study’s principal findings: 1) There is no evidence that the influx of immigrants over the past four decades has worsened the employment opportunities of natives with similar education and experience, 2) There is no association between the influx of immigrants and the out-migration of natives within the same education and age group, 3) Immigration induced a 4 percent real wage increase for the average native worker between 1990 and 2004, 4) Recent immigrants did lower the wages of previous immigrants.

PPIC study available here.

Related: How immigration boosts wages

Related: Queueless on Immigration

The elevated toll lanes on Tampa's Lee Roy Selmon Expressway just turned a year old. No doubt there's lots to like about the facility, but I certainly hope it's not the best thing to ever hit Tampa:

It's probably the best thing that's ever happened here," said LaSchael Parks, who lives in Brandon and travels to Tampa daily to attend evening classes at South University near downtown. "There's no way I'd get there as fast as I do without it."

When the expressway opened July 18, the Tampa-Hillsborough County Expressway Authority estimated that 6,000 vehicles would use the road each weekday by October. That prediction was close to reality: 5,989 vehicles traveled the reversible lanes each weekday that month.

A year later, about 16,000 vehicles pass under the toll gantries on any given weekday, authority spokeswoman Sue Chrzan said.

More here; via HonoluluTraffic.com

Related: Why Tampa's "best thing ever" might work in Oahu

UPDATE: Thanks to Peter Samuel for the correction. The Tampa facility wasn't privately financed.

A recent article in the Arizona Republic on the impact of Proposition 207 (see my recent post here) is chock full of misinformation and is a not-so-subtle attempt to undermine the eight-month-old property rights law. Space and time don't permit a thorough fisking of the piece, so I'll focus on a few key spots.

The first three paragraphs offer a clue to the direction of the piece right off the bat:

A new state law billed as a property rights safeguard has dealt a blow to residents and city leaders who want to save old neighborhoods, create shopping districts or influence what is built in their communities.

Hardly. Prop 207 hasn't done anything to restrict cities' ability to plan, create special districts, and the like; rather, it merely holds them accountable for the impacts of these planning decisions on the property rights of affected landowners. Citizens now have a form of relief if cities and counties adopt zoning changes and land use regulations that devalue private property. Nothing in the measure precludes or prevents governments from regulating land use; it simply offers aggrieved landowners a remedy, either via compensation for property devaluation or exemption from the regulation at hand.

Little in Proposition 207 dealt with eminent domain: the power cities have to force property owners to sell.

This is pathetically false. In fact, the Institute for Justice played a key role in helping craft the eminent domain provisions of the bill, and according to their recent state report card on eminent domain reform (in which Arizona got a B+), they write that:

The Private Property Rights Protection Act [Proposition 207] accomplished many necessary eminent domain reforms. Most importantly, the initiative significantly limited the scope of activities that could qualify as a public use. [...] The next step is to include these protections in the state constitution.

Here are what I've found to be the most significant changes to Arizona eminent domain law under Prop 207:

• Prohibiting the use of eminent domain for economic development purposes;
• Narrowly defining the term “public use” to include only (1) use by the general public or by public agencies; (2) uses involving the creation or functioning of utilities; (3) acquisition to eliminate direct threats to public health or safety; and (4) acquisition of abandoned property.
• Requiring determinations of “blight’ to occur on a parcel-specific (i.e., property-by-property) basis;
• Requiring that local governments must offer to locate and purchase a comparable home for landowners whose primary residences are taken through eminent domain, though landowners may instead choose to receive monetary compensation.

Not exactly "little to do with" eminent domain, eh?

Back to the AZ Republic article...

Via the Alliance for School Choice press release:

In a significant victory for Keystone State families, the Pennsylvania legislature last night approved a $16 million increase in the state’s Educational Improvement Tax Credit (EITC) program, the largest increase in the program’s history.

The program provides tax credits to companies that contribute to scholarship-granting non-profit organizations. Last year, more than 33,000 Pennsylvania children benefited from EITC-related scholarships. In a vote that passed by significant margins and with bipartisan support, the legislature increased funding for the program from $59 million to $75 million. The program’s new funding levels are: $44.7 million for scholarships, $22.3 million for innovative educational programs in public schools, and $8 million for pre-Kindergarten scholarships.

Via the Alliance for School Choice press release:

In a significant victory for Keystone State families, the Pennsylvania legislature last night approved a $16 million increase in the state’s Educational Improvement Tax Credit (EITC) program, the largest increase in the program’s history.

The program provides tax credits to companies that contribute to scholarship-granting non-profit organizations. Last year, more than 33,000 Pennsylvania children benefited from EITC-related scholarships. In a vote that passed by significant margins and with bipartisan support, the legislature increased funding for the program from $59 million to $75 million. The program’s new funding levels are: $44.7 million for scholarships, $22.3 million for innovative educational programs in public schools, and $8 million for pre-Kindergarten scholarships.

Randolph May at the Free State Foundation takes Google and Frontline to task for their blatant rent-seeking efforts to rig the 700-MHz spectrum auction by demanding that the FCC mandate winners adhere to wireless network neutrality. Worse, Google is pleading poverty! Seems it claims not to have the “resources” to be able bid head-to-head with the wireless service providers. Apparently, the company’s found a sympathetic ear from FCC Commissioner Jonathan Adelstein, who says he “takes very seriously” Google’s assertion that it just won’t be able to participate in the auction unless the rules are changed to, in effect, devalue the spectrum for the incumbents while increasing its value for Google, which wants to use a different business model.

As May points out, Google’s “poor little us” approach is especially galling.

“I remain confused. Google has a market cap today of $173 billion dollars. What exactly are the economic barriers that prevent a company with a $173 billion market cap from participating in a clean auction? Obviously, an existing provider has certain advantages over a new entrant: a customer base, rights-of-way, a marketing team, a back office operation, and so forth. But for a company that tells the FCC in comments that its daunting "self-defined mission" is to "organize all of the world’s information," is it really too much to expect that Google can figure out how to address what it calls operational barriers? If necessary, some of those presently assigned to organizing the world's information can be temporarily detailed to getting a new service provider, Googlecom, with a great brand name and a loyal customer following, up and running.

“I am not surprised that Commissioner Adelstein is sympathetic to jerry-rigging the auction rules by imposing net neutrality/open access/unbundling rules to give Google, Frontline, and others say they need to participate and win the auction. Frankly, I don't expect the Bush Administration-appointed FCC Chairman, Kevin Martin, or the two Republican commissioners, who ought to be free market-oriented, to succumb to the managed competition temptation.”

Unfortunately Martin, who gives cursory interest to aspects of telecom policy that don’t involve increasing media censorship, seems to have fallen for the Google/Frontline poverty plea hook, line and sinker.

As a bonus, see Holman Jenkins' column on Google’s rent-seeking in today’s Wall Street Journal (subscription required).

Courtesy of Human Events - The Top Ten Highest Paid Union Bosses

#1 G. William Hunter, Executive Director, NBA Players Association, $2,185,446
#2 Eugene Upshaw, Executive Director, NFL Players Association, $2,064,526
#3 Donald M. Fehr, Executive Director, MLB Players Association, $1,000,000
#4 Jimmy Warren, Financial Treasurer, Steelworkers and AFL-CIO, $825,262
#5 Gregory J. Hessinger, Chief Executive Office, Screen Actors Guild, $803,399
#6 Alan Eisenberg, Executive Director, Actors and Artists, AFL-CIO Branch, $720,743
#7 Jay Roth, National Executive Director, Directors Guild of America, $686,673
#8 Don Hunsucker, President and CEO, United Food and Commercial Workers Union Local 1288, $679,949
#9 John McLean, Executive Director, Writers Guild, West Headquarters, $650,402
#10 Gerald McEntee, President, State, County and Municipal Workers, $629,291

An article on Chinese computer maker Lenovo caught my eye today in the Wall Street Journal. Lenovo is opening up an international advertising hub in Bangalore, India. This is significant for two reasons.

First, its another indicator that China is truly embracing an outward, global outlook. It's indigenous businesses see themselves as global players, not just Chinese companies serving a burgeoning market. Part of this is recognizing that the best talent is not necessarily home grown:

Lenovo's India team will help dream up global marketing campaigns aimed at dozens of countries, including the U.S., France and Brazil, though not China. Marketing for the IBM Thinkpad line -- the quintessentially American brand that Lenovo inherited in 2005 when it purchased the personal-computer arm of International Business Machines Corp. -- will be handled mostly by the Bangalore hub.

Second, the move says as much about Globalization's economic impacts as anything else. The world, as Tom Friedman points out over and over again, is truly flattening:

Lenovo's decision reflects the continuing erosion of the geographic hierarchies that have long ruled the advertising industry. "The old model was you think it up in New York or London and send it around the world," says Shelly Lazarus, chairman and chief executive of WPP Group PLC's Ogilvy & Mather Worldwide, Lenovo's longtime ad agency, which is a partner in developing the India hub. "Now we have to be able to think it up anywhere. As our clients are thinking about their brands more globally, we've had to adjust our model."

The city [of Santa Cruz] has created the position of global warming coordinator at up to $80,000 a year to help prevent climate change, guide Santa Cruz in transportation and land-use decisions and get the community involved in the effort.

Interested applicants better hustle--the city plans to have the position filled by the end of August.

More here.

Santa Cruz was also at the vanguard on medical marijuana:

A year and a half ago, when council members in the beachfront community decided to create the nation's first municipal department to distribute medicinal marijuana, SNL had a field day. "The new agency will be called the Santa Cruz Department of Kevin's Van," SNL's Amy Poehler quipped on "Weekend Update."

Article here.

Forget all of the public service announcements you’ve heard for the last three decades, the children of this country need you to smoke

We’re referring, of course, to the current proposal to fund the State Children's Health Insurance Program through increased taxes on cigarettes.

The tax increase on cigarettes (1$ per pack) is nothing compared to what cigar smokers face: up to $10 of tax per cigar. You read correctly – per cigar, not box of cigars.

A study from the Heritage Foundation found that, among other problems with the proposal, to produce the revenues that Congress needs to fund SCHIP expansion through such a tax would require 22.4 million new smokers by 2017

Earlier, we reported on how this proposal actually hurts the poor more than it helps them. Here’s Reason’s report on why tobacco taxes are a terrible idea.

CNBC reported this morning on the Sierra Club’s new area of attack on human welfare: water, specifically bottled water. Apparently, the Sierra Club believes that companies searching for clean water sources for human beings are committing an egregious sin against Mother Nature. Their website includes this foreboding warning: “Nestle has at least 75 spring sites around the country and is actively looking for more.” Horrifying, indeed.

In a recently published brochure, the Sierra Club has this to say about its position:

The bottled water industry promotes bottled water as a healthy, trendy drink, without mentioning that it can cost 1,000 times as much as tap water. The Sierra Club believes that all people should have access to affordable, clean drinking water.

While I do not personally value water at a dollar a bottle, and I certainly question how much purer bottled water is compared to tap, others do value it that much, and I’m sure they realize they’re paying a little more than they would for tap. The Sierra Club should not pretend as though it actually cares about maximizing access to clean water supplies when the majority of its material and obvious concern is with the production of plastic and growth of industry. What it means that “all people should have access to affordable, clean drinking water” is that people should stay away from the environment, even when trying to access the basic sustenance of life.

Perhaps what is even more incomprehensible is their plan of action for resolving these problems. One solution to bottled water they list is for people to “[u]se containers that you can refill with tap water when you are away from home”. It seems to me that plastic bottles don’t disintegrate when you add water to them. In fact, they serve as very nice containers for future water use that I know many of my friends actually use them for.

So what is the Sierra Club really saying? “By drinking clean water you kill the environment. Stop drinking water.”

For more information on the issue, check out this previous Reason blog.

Secretary of Labor Elaine Chao penned an oped on union transparency, disclosure, and accountability. Here it is in its entirity.

At the Department of Labor, we’ve made a point of doing more, better and with less. Among the standout performers is the Office of Labor-Management Standards (OLMS). Established in 1959 to protect union members from union corruption, OLMS was hamstrung from the get-go, saddled with inadequate regulatory power and woefully insufficient manpower. It has been nearly 50 years since OLMS was created, but it is only recently that the agency has had the backing it needs to even begin to fulfill its mission of protecting union members from union corruption. Now that effort is threatened as Congress singles out this anti-corruption agency for budget cuts.

After severe cutbacks in the 1990s, OLMS began rebuilding in 2001. Although still significantly below 1980s staffing levels, in the past six years OLMS investigators and auditors have referred cases to U.S. Attorneys resulting in 775 convictions and over $70 million in restitution for union members.

In 2003, the union financial disclosure form (LM-2) was revised for the first time since 1959. For the first time in history, unions were required to make meaningful disclosures of their finances. For instance, America’s teachers – who make, on average, $47,800 annually – now can know that the President of the leading teacher union (National Education Association) makes five times as much they do ($272,000). He certainly has not been left behind. Union members are also discovering the extent to which their dues money is funding lavish trips for union officials to luxury resorts and other expensive perks, political activities and items unrelated to collective bargaining.

Many union officials vociferously opposed this increased disclosure of union finances. Compliance cost estimates were wildly exaggerated to argue against the new requirements. The AFL-CIO claimed that it would cost unions “more than $1 billion” and the AFL-CIO alone would spend $1 million to comply. In fact, filling out the new disclosure form cost the AFL-CIO $54,150.

Unions had $22 billion in assets in 2005 – riches built on the dues deducted from the paychecks of union members. Union members are entitled to know where their money is going. Congress is all for boosting the Securities and Exchange Commission’s budget so it can ride herd on businesses. But OLMS -- the unions’ equivalent of the SEC -- is on the chopping block. Every other Department of Labor enforcement agency – all targeted at businesses – is getting a budget increase. Less than one-tenth of one percent of the department’s budget goes to OLMS, the one federal entity charged with protecting union members from union corruption, and it is the one singled out for budget cuts.

Anyone who is wondering what they may soon be missing should go to www.unionreports.gov.

Just not here. Despite promises, and attempts, of reform and an overhaul of the current system the door to real reform remains closed. We're forced to accept rising prices (a second consecutive increase this year) and poor service.

We're behind the times here. Take Japan, for example, who will begin privatizing its postal services in under three months - despite strong political opposition.

We covered the issue in our 2005 Annual Privatization Report, highlighting some of the other countries that have privatized their postal services -- including, Germany, France, and New Zealand.

If you're familiar with Reason you're most likely familiar with Indiana Governor Mitch Daniels and his quest for efficient government. In the first three years of his first term Daniels has leased the Indiana Toll Road, entered into a massive welfare modernization that will save the state $100 million a year, pushed performance based management programs, and initiated enterprise wide competitive sourcing. For all of that he's usually beat up in the press and given little or no chance at winning reelection, usually because of these positions. that is, until now.

After all, how can a guy win a second term when he has:

-- Leased the Indiana Toll Road to a bunch of foreigners. Never mind that the state got $3.8 billion -- as a cash advance -- it otherwise never would have seen.
-- Privatized some parts of state government. Never mind that it resulted in a savings to the state.

-- Tried unsuccessfully to privatize the Hoosier Lottery.

-- Angered a bunch of folks by closing several state vehicle license bureau branches. Never mind that it resulted in a savings that brought greater efficiency to the other branches.

-- Pushed local government to become more efficient and reduce reliance on property taxes.

Here's hoping that Daniels can show that being bold, innovative, and willing to privatize won't cost him an election.

Ted Balaker and Sam Staley have an oped in today's New York Times that argues the city should be looking at road capacity expansions, even in Manhattan, rather than relying exclusively on transit and law enforcement approaches to transportation management. The full articles is here.

As sampling:

Blocking the box isn’t a law enforcement issue that Mayor Bloomberg can address by simply having traffic agents mete out punishment. It’s a traffic management issue that represents political neglect of the road network. Drivers aren’t letting their cars sit in the cross hairs of oncoming traffic out of spite. They don’t relish the cursing, honking and fist shaking aimed at them. Like everyone else in the standstill, they’d prefer to be moving. But there’s just nowhere to go.

and

For decades, officials have failed to upgrade the road network to keep up with a swelling population. Mayor Bloomberg has said that the city will grow by 900,000 people by 2030; if this neglect continues, it will generate even more gridlock. Over the next 20 years city forecasters expect automobile traffic to grow by 10 percent and freight traffic to increase by 64 percent. But of the mayor’s 16 major transportation recommendations in the city’s long-range plan, not one would significantly increase the road system’s capacity.

Say what you will about FCC Chairman Kevin Martin, at least he’s consistent. After making clear his plans to be the nation’s TV nanny by extending broadcast content restrictions to cable TV, Martin now shows he has no misgivings about meddling in functional, competitive markets.

Martin is leaning in favor of using the upcoming 700 MHz spectrum auction to impose network neutrality regulation thus far rejected by the FTC, Congress (last year) and several state legislatures, not to mention Martin’s bosses at the White House. And Martin is embracing neutrality for wireless, the most competitive telecom sector right now. Tacitly, he is endorsing Frontline’s bizarre and self-serving perspective that the wireless market is somehow monopolistic and exploitive. Martin apparently agrees with Frontline in that the U.S. does not have any “open” wireless networks (What’s WiFi then?).

Over at Precursor.com Scott Cleland writes:

FCC Chairman Martin's surprising proposed open access/net neutrality regulations for the 700 MHz auction, threaten to broadly chill the broadband investment necessary to deliver broadband deployment to all Americans.

• Chairman Martin apparently has chosen to abandon over a decade of bipartisan free-market Internet policy and adopt a new more regulatory "managed competition" broadband policy advocated by new House Chairman Ed Markey, who has strongly praised Chairman Martin for his support for net neutrality regulation/open access.
• The real world effect of this unwarranted core policy flip flop is to introduce new and very substantial policy, legal and investment uncertainty into what had been a very stable economic growth environment.
o Chairman Martin is making the heroic assumption that he can massively interfere with market forces and heavily subsidize untested and likely uneconomic business models with no unintended consequences on investment or economic growth in the critical broadband sector.

Chairman Martin has now emphatically embraced the core economic principle of former FCC Chairman Reed Hundt's Frontline Proposal (and Frontline's Google gaggle of investors), which is that market forces will not and cannot promote sufficient "competition" so the government must regulate and "manage competition" (i.e. mandate prices, terms and conditions -- either directly or indirectly) to ensure consumer welfare.

The move is yet another instance of Martin reversing earlier statements and policies. Cleland points out that only last year Martin praised wireless competition. “The competitive marketplace for wireless services is continuing to bring consumers more choice, better services and lower prices.” This is reminiscent of Martin’s sudden call for a la carte cable pricing, when, a year earlier, he endorsed an FCC finding that said a la carte cable was not always economically feasible.

Martin is taking on the worst attributes of government bureaucrat: vanity and arrogance. The past months have seen him declare himself arbiter of cable business models, censor-in-chief and now, supreme central planner of wireless competition and services.

Too bad the price of this folly will be paid by American consumers and investors.

Drug Czar John Walters wants you to think of the federal marijuana eradication effort in California like a ground war against guerrilla terrorists. As quoted in the Redding Record Searchlight:

The nation's top anti-drug official said people need to overcome their "reefer blindness" and see that illicit marijuana gardens are a terrorist threat to the public's health and safety...people who plant and tend the gardens are terrorists who wouldn't hesitate to help other terrorists get into the country with the aim of causing mass casualties.

It is true that illegal marijuana cultivation on public lands continues to have a significant environmental toll, which Walters noted in his statement. But the drug czar isn't likely to rally the troops in California by obliterating any remaining distinctions between the War on Drugs and the War on Terror. The take-away message is clearly that when you're fighting a losing battle in hostile terrain, sometimes you need to re-examine the premise of the fight. Now would be a good time.

UPDATE: The Office of National Drug Control Policy posted the Record Searchlight story to their blog and called it "a good story," so, yes, Walters really did mean to say those crazy things.

Steve must be too shy to post his latest op/ed, this one in the Detroit News on the crappy idea of taxing phones to give the legislature more money to spend.

He opens:

The Michigan House of Representatives will vote soon on a proposed public safety surcharge of $1.35 on all phone bills to fund a variety of law enforcement programs -- most of which have nothing to do with telecommunications. But what's even worse is that this tax will diminish access of Michigan individuals and businesses to phones and the Internet, making them less productive and competitive compared to other states.

Read the rest here.

The power if the market is best illustrated by the personal computer.

By now you may have seen this 1982 article by James Fallows in The Atlantic on computer technology. The article is making the rounds of the blogosphere. Fallows is writing about the awesome computer he purchased in 1979 for $4,000 and still used at the time he wrote the article.

The article is hilarious for its amazement at the power of what we now think of as truly primitive technology.

But the real power of the article is that it gives us the clearest example of how a generally free market has made us "wealthier" by producing better products, more cheaply, and more efficiently. Consider that $4,000 in 1979 dollars is the equivalent of roughly $8,500 in today's dollars. For that high price, Fallows got a computer with a green-and-black screen, a cassette tape drive (to save his documents) and 48k of memory. The each tape held 100k of documents.

Today's American consumer can purchase a personal computer for $1,000, or about 1/8th the price of a 1979 computer. According to W. Michael Cox, senior vice president at the Dallas Fed, 1 MIPS (1 million instructions per second) of computing power in 1980 cost just over 41 weeks of labor time to purchase. By 1997, 1 MIPS of computing power could be purchased with the equivalent of 9 minutes of work.

The power of the market is its ability not just to increase wages, but to dramatically increase the choices and purchasing power of those wages.

Today I attended the Atlas Foundation’s monthly International Thursday. It was a great event with individuals from a variety of backgrounds both in the audience and on the panel speaking about the prospects of liberty in the international arena. As a place to learn about the prospects of liberty from abroad, the Atlas Foundation is a great source.

One of the interesting points brought up was by panelist Damian Merlo ( at the Otto Reich Associates). He pointed out that while corruption plagues most countries in the Western hemisphere, it can be combated by companies who are dedicated to follow the rule of law. One example he provided was how a national government demanded 20% of a project’s budget in a South American country for it to move forward (beyond any legal permit fees or anything like that). How did Otto Reich Associates challenge this? They did not give in, they did not negotiate, they did not try any complex scare tactics. They simply asked to meet with the President of the country to discuss the project. As soon as the request was made, the extortion demand went away and their meeting was a friendly “we’re glad we both have the country’s interests in mind.” A mere acknowledgement that corruption is taking place and desire to bring it to light even between the government and the business was enough to make it go away.

But perhaps the highlight of the event came at the end when Alexandre Pesey, the Directing General (if the translation was butchered, I apologize) of L’Institut de Formation Politique in France pointed out that there is hope yet for his country to combat socialism. President Nicolas Sarkozy has been an advocate of liberty in the country and won his last election by a large margin of voters. Not only that, but he is a conservative candidate who supports a new economic model for France that eases government restrictions on work. Referring to discussions with many people on a one-on-one basis in France, he said that dissatisfaction with the extreme economic limitations in the country is rising significantly and the national debt is becoming so overwhelming that people are beginning to worry. Will France completely reform in the next five years? Obviously not. But the recent history of the country shows promise towards a freer society.

Rent-seeking described the process of leveraging government regulations to one’s own business advantage. It exploits laws that limit or prohibit competitive entry on artificial grounds.

For years, the U.S. telephone industry was one giant rent-seeking hotbed. For almost a century, AT&T was guaranteed a monopoly. It alone owned the phones and everything in the national network. Regulations barred any other company from providing competitive telecommunications services or introducing any piece of equipment into the network without AT&T’s approval. And AT&T never approved the attachment of any device made by anyone other than AT&T.

That rule was struck down in 1968 by the landmark Carterfone decision, which said that as long as a terminal device met certain basic standards, AT&T must allow it to connect. It is because of that decision we can plug modems, PCs, fax machines and phones of all types into the phone jack in our wall.

Now comes Skype, which is invoking the Carterfone decision in an effort to get Congress and the FCC to regulate the way wireless phones and services can be sold and packaged. The company, which made its name by creating a discounted PC-to-PC phone service using peer-to-peer techniques, wants to expand into wireless services with what apparently are low-cost, scaled-down wireless phones and terminal devices that can tap into any wireless network.

It’s one thing to say the nation needs a faster wireless network. It’s another to demand the government hand you the spectrum purely on your say-so that you can build one.

That essentially is the plan Frontline Wireless has cooked up. Reed Hundt, former chairman of the Federal Communications Commission, as vice chairman of the wireless start-up, has been evangelizing on the merits of a national high-speed wireless network that any device could access. By contrast, he calls the current GSM and CDMA cellular networks “pokey,” a value judgment, to be sure. Arguable as the data communications capabilities of wireless networks are, GSM EDGE and CDMA EV-DO, used by AT&T and Verizon Wireless, respectively, and worldwide by international wireless carriers, are commercial state-of-the-art. And it’s not as if Frontline is sitting on technology that’s ready to go.

Hundt believes that Frontline’s simple claim of technical superiority should be good enough for it to get a pass at the FCC’s upcoming 700 MHz spectrum auction. Protesting that, as a start-up, it can’t compete against the financial resources of incumbent wireless companies in a straight-up auction, it has asked the FCC to exclude current license holders or, alternatively, set aside a portion of the spectrum for Frontline on “public interest” grounds.

CNBC is running a week long series by Scott Cohen on the best states to do business. Yesterday, Utah was profiled as the 3rd best state in their rankings, mainly for quality of life reasons. That prompted a debate on Clean Air, and whether we need to get people out of our cars to clean it up. (The debate featured the Reason Foundation.) See the 5 minute video clip here.

Columnist Holman Jenkins writes about Mayor Michael Bloomberg's congestion priceing initiative in today's Wall Street Journal.

Jenkins credits Bloomberg with a shrewd political campaign to get the program passed, but, drawing on London's experience, thinks its really little more than an attempt to penalize drivers:

The issue isn't cameras but networks of cameras, combined with software to extract information from the pictures and match it with information held in databases. On top of it all, the issue is an overpowering political incentive to use the system to extract more and more money from motorists (many of them out-of-state voters).

He also raises legitimate and troubling questions about the surveillance systems needed to implement these programs and the degree to which they are used to monitor and enforce the smallest of traffic infractions. In London, which uses 6,000 video cameras to monitor drivers in the congestion charging zone, half the tickets issued by mail are far speeding within 10 miles of the posted speed limit. Thousands are being cited for minor offenses such as using their cell phone in their car. Now London Mayorr Ken Livingston is attempting to increase the charge for SUVs to limit green house gases.

Few would question, as a matter of economics, the usefulness of road pricing to ration scarce capacity. Patrick DeCorla-Souza and his team at the Federal Highway Administration have done yeoman's work promoting such thinking (they prefer the term "value pricing"). But far above the pay grade of these professional enthusiasts is whether Americans should accept the electronic surveillance these schemes always seem to necessitate.

Transformers actress Megan Fox talks dope:

Did you go through an experimental phase?

I wanted to try several things and make an informed decision, but I didn’t enjoy anything other than marijuana. I don’t even think of it as a drug–it should be legalized.

More here.

So says Roger Snoble, head honcho of LA transit.

He's referring to the jazzy mixed use development that's broken ground on Hollywood & Vine. Sure the city strapped on the eminent domain boot and kicked out dozens of business owners, but at least the new residents will be liberated from auto-oppression, right?

It's a vision expressed frequently by local government officials, who see building large mixed-use developments next to mass transit lines as a key solution for not just the region's traffic congestion but also its spread-out geography and reputation for being unfriendly to pedestrians.

In Los Angeles alone, billions of public and private dollars have been lavished on transit-oriented projects such as Hollywood & Vine, with more than 20,000 residential units approved within a quarter mile of transit stations between 2001 and 2005.

But there is little research to back up the rosy predictions. Among the few academic studies of the subject, one that looked at buildings in the Los Angeles area showed that transit-based development successfully weaned relatively few residents from their cars. It also found that, over time, no more people in the buildings studied were taking transit 10 years after a project opened than when it was first built.

How nice that the LA Times reporters didn't get light headed from all the bubbly and rosy rhetoric that was a-flowing at the highly publicized pep rally for the W Hotel complex.

The Times decided to examine driving habits at four apartment and condominium complexes that have already been built at or near transit stations in South Pasadena, North Hollywood, Pasadena and Hollywood.

Reporters spent two months interviewing residents, counting cars going out of and into the buildings and counting pedestrians walking from the projects to the nearby train stations.

The reporting showed that only a small fraction of residents shunned their cars during morning rush hour. Most people said that even though they lived close to transit stations, the trains weren't convenient enough, taking too long to arrive at destinations and lacking stops near their workplaces. Many complained that they didn't feel comfortable riding the MTA's crowded, often slow-moving buses from transit terminals to their jobs.

Moreover, the attraction of shops and cafes that are often built into developments at transit stations can actually draw more cars to neighborhoods, putting an additional traffic burden on areas that had been promised relief.

LAT article here.

The reporters might have also cited Travel by Design, by Marlon Boarnet and Randall Crane:

Surprisingly, there is little credible knowledge about how urban form influences travel patterns . . . Given the enormous support for using land use and urban design to address traffic problems, it was somewhat surprising…to find the empirical support for these transportation benefits to be inconclusive and their behavioral foundations obscure. Prior evidence on the link between design and travel is difficult to interpret and tells us relatively little about the behavioral nature of the problem and thus provides a weak foundation for policy advice.

Sunday, when Boeing unveiled their 787 Dreamliner, BBC News had this to report:

While even environmentalists welcome the attempts to make planes greener, they don't think the 787 is going to do much to reduce the impact of aviation on climate change.

They believe that fuel-efficient planes are simply going to allow airlines to carry the same number of passengers, more cheaply. And that allows them to cut ticket prices - which in turn will encourage more of us to fly.

The new design uses carbon fiber composite instead of aluminum construction, so it is lighter, allows for better cabin air pressure and quality, bigger windows, and improved fuel efficiency. According to Boeing, the result is a 20 percent reduction in carbon dioxide emissions over the standard midsize jets, using just one gallon of fuel per seat per 100 miles of travel. At that rate, some trips currently made by car would certainly be faster, cheaper and more fuel-efficiently made by plane.

And environmentalists are grumbling? Who are these environmentalists? (Presumably, they also favor capping fuel economy standards so that we aren't tempted to drive increasingly fuel-efficient cars?)

The BBC news report implies that the National Environmental Trust was the source of the Boeing 787 pessimism, but I didn't find anything on their website to that effect. I was also relieved, a bit, by an internet search that mostly turned up statements from environmentalists praising the new design. (More than one half-facetiously mentioned it would be a great way to get to the next Live Earth concert.) A contrary voice was the Coventry (UK) Green Party, who complain that the Dreamliner isn't a "green victory" because, among other reasons, the factory used to build it is the largest building in the world.

Luddites, please, hitch your wagon elsewhere. Strange reports from the BBC aside, environmentalists everywhere should celebrate technologies that simultaneously improve mobility and environmental performance.

This should be out of an Onion story.

But alas, it is another chapter in the ongoing saga of sudents and parents versus dumb school board policies.

Via the Dallas News

At least the school board for Dallas Unified came to their senses and rescinded the policy. But as reported below, there are school districts in America that require students to use clear or mesh backpacks to fight violence and crime in their schools. Oye. My kids started school on Monday and I did not notice a selection of clear packbacks at Target and Staples.

Clear-backpack policy rescinded by DISD

05:39 AM CDT on Tuesday, July 10, 2007
By KENT FISCHER / The Dallas Morning News
kfischer@dallasnews.com

Dallas public school students will not have to tote their books in clear backpacks after all this coming school year.

Dallas ISD board members have decided to rescind the policy, which they had only recently put into place. The change means that kids can go back to using their old backpacks.

The board changed its mind because two board members were absent from the May meeting when the 4-3 vote was taken. Those two board members said they would have voted against clear backpacks, defeating the policy.

Administrators had favored the clear backpacks, saying they would help make campuses safer and student security checks faster. Campuses around the country, including some in Royse City and Garland, have outlawed backpacks that are not mesh or clear.

The scariest thing is that four school board members voted for the policy, meaning they really believe that clear backpacks will have a substantial effect on school safety.

VIA the Los Angeles Times

The Belmont Learning Complex was envisioned as one of a kind. It would combine the city's first new high school in nearly 30 years with housing and retail development — extras that could raise money to help cap construction costs at about $45 million.

When the school opens in 2008, at least nine years behind schedule, it will indeed make history — with its cost. The final tab will top $400 million, almost certainly claiming the title of America's most expensive high school, and there will be no retail or housing.

The school, now called Vista Hermosa, was conceived in a school district that at the time lacked the expertise to build schools. The Los Angeles Unified School District has since put together the nation's largest school construction program, but the hemorrhaging continues at Belmont. Recent work expected to cost about $111 million will reach nearly $200 million instead.

For all the money spent, "they probably could have built three more high schools, maybe four," said City Councilman Ed Reyes, who represents the area. "That's a very painful reality. I think 70% of the cost was not necessary."

My take on the dismal state of California's school construction process here.

More than $1 Billion in federal spending on nutrition programs has NOT reduced childhood obesity.

The federal government will spend more than $1 billion this year on nutrition education:

It emphasizes fresh carro