Out of Control

The Utah state auditor’s office has opened an investigation into iProvo’s finances after receiving a tip that the municipal broadband operation was owed nearly $1 million from its retail partners.

iProvo is a fiber-to-the-home network owned and operated by Provo’s city electric department. Retail sales of phone, cable TV and high-speed Internet service are handled by three local companies—Veracity Communications, MStar and Nuvont Communications. According to the Salt Lake Tribune, Veracity and Nuvont denied being in arrears. MStar officials, however, did not return calls from the reporter.

This would not mark the first time iProvo had trouble with a retail partner. Its first year of business was hampered by poor performance of HomeNet, which ultimately went out of business.

The retailer woes are only the latest for iProvo. In December, the operation reported that it was $614,000 in the red for the first four months of its fiscal year, which began July 1. That comes on top of several million in losses since its launch in 2005.

See coverage here and here.

No one follows the telecom policy scene long before coming across the broadband penetration statistics issued regularly by the Organization for Economic Cooperation and Development (OECD).

For those just tuning in, the OECD places the U.S. 15th in the world in terms of per capita broadband penetration with 22.1 lines per hundred users. According to the OECD, Denmark leads the word with a penetration of 34.3 per hundred. Over the past few years, the U.S. rank has been steadily falling. Meanwhile, the OECD consistently reports the U.S. users pay more on a per-megabit basis for service than foreign counterparts.

The numbers have been controversial, being as they rely on data provided by governments and don’t measure the broadband penetration among businesses or the effect of wireless. That the stat tends to be used as a club for policy activism (“The U.S. ranks 15th, therefore the government should…[insert your favorite government telecom program here]”), served as the impetus behind a rather informative panel on broadband metrics at yesterday’s State of the Net Conference in Washington, which discussed ways to better measure broadband penetration and use and provide context for the OECD numbers.

Taylor Reynolds, communication analyst and economist for the OECD himself admitted concern that the U.S. media reports the ranking in isolation of a number of other OECD metrics, many of which reflect positively on the U.S. Among those include the amount of areas in the U.S. where broadband service is available, and, most pointedly, that in the U.S, broadband use is not capped—that is, users are not limited to the amount of broadband use within a given month. The average bit cap in the OECD is 10 gigabytes, after which additional charges kick in. In terms of content, 10 gigs amounts one season of half-hour TV episodes downloaded from a service such as iTunes.

Bit caps are a critical counterpoint to the lower per-megabit prices many European and Asian users pay for broadband – and suggests that their low-price regime requires rationing. This would be expected whenever government interferes with market pricing, in this case creating a demand glut by urging service providers (in some cases companies in which the government maintains a financial stake) to keep prices artificially low.

Ordinarily environmental impact reports (EIRs) are sad affairs, with neighbors bitterly fighting neighbors and visions of the future pitted against memories of the past—but if the City of Oakland is forced to complete an EIR on their proposed ban on non-biodegradable plastic grocery bags, I’d anticipate the results as eagerly as a playoff between two favorite teams.

Oakland was one of many cities that took note after San Francisco banned non-biodegradable plastic bags last year (that ban went into effect in November). The “Coalition to Support Plastic Bag Recycling,” represented in court by Downey Brand LCC, has since sued on the grounds that the City of Oakland failed to take into account the environmental impacts of the ban, as required by public agencies under the California Environmental Quality Act.

A Bay Area News Group report boils the case down to whether or not the ban on plastic bags will increase use of paper bags:

"It's not speculation," said Michael Mills, an attorney for the coalition. "Everyone knows that paper-bag use is going to increase, but no one knows by how much. That's the exact reason, your honor, to do the EIR.” […] "There's no evidence that more paper bags will be used," said Kevin Siegel, the attorney who represented the city in court. "There are only arguments that more paper bags will be used."

The Coalition also cites the cost of biodegradable (plant-based) plastic bags contaminating the recycling stream for conventional petroleum-based bags.

For their part, the city alleges that the EPA report supporting the environmental superiority of plastic bags, commonly referenced in this debate, has recently been pulled from the EPA website. (Their supposition that the EPA report was withdrawn “presumably because it is unreliable, unsubstantiated, and/or not credible” is plausible; as I noted last year, EPA’s recommendation in the fluorescent vs. incandescent light bulb debate was unreliable, unsubstantiated, and/or not credible, and that report seems to have disappeared from their website--though it is still available elsewhere.)

Alameda County Superior Judge Frank Roesch is expected to rule on the case in the next couple of weeks. If the city is required to do an EIR on their bag ban, they should be compelled to do a full life-cycle analysis of all the options--taking into account the energy requirements and pollution created in the manufacture of conventional plastic, paper, and other grocery bags (an analysis that makes paper look decidedly bad), the different utility of each bag, consumer behaviors in reusing and recycling each type of bag, and the end-cycle impacts of litter on wildlife (the calculation that favors paper bags). Ban impacts on resource use are complicated and widespread. One example: there are hundreds of thousands of dogs in the Bay Area (the metro area is rumored to have one of the highest number of dogs per capita in the nation) and—at least until we successfully make the transition to heating our homes with dog waste—the majority of pet owners reuse a substantial number of plastic bags… you don’t have to do the math, but you should get the idea.

New York, Los Angeles, and numerous other municipalities nationwide that have considered plastic bag regulations since San Francisco’s landmark ordinance have for the most part backed away from all-out bans and opted for more voluntary strategies, as they should. In the policy toolbox, a product ban is as blunt and unwieldy a tool as you can pick.

(Update) Comments on the comments:

The merit of an environmental review of the plastic bag ban shouldn't be judged purely on the motives of the industry group bringing the suit. (On the same token, I'll take the comment by "Bag Monster Buster" seriously even though it appears that the post was only intended to sell the product that that individual has a personal interest in.)

Compact reusable bags such as the one being peddled in that post are typically made of non-recyclable petroleum-based polypropylene, and are not without environmental impacts of their own. Since Oakland's ban is likely to increase use of paper bags, and increase purchases of plastic bags (as our math-savvy dog owner has indicated below) AND increase purchases of polypropylene reusable bags, I'd say all of that belongs in the EIR. While they're at it, how about calculating the extra gas burned by people making extra trips to pick up the "green" shopping bags they've left at home?

Another note: though companies like ChicoBag claim that they recycle their bags after they're no longer wanted for shopping, this is stretching the truth. Paper and conventional plastic grocery bags are well-suited for closed-loop recycling--meaning a used bag can be processed back into a new bag. What they do at ChicoBag is more aptly termed "downcycling"--re-purposing the material for a lesser use, such as stuffing or insulation.

The point of all this is that, from an environmental perspective, there is a time and a place for use of each of these types of bags, and a ban on one type *necessarily* means that consumers are forced to use resources less efficiently in certain circumstances.

The town of Oro Valley, Ariz., has backed off a demand that a 71-year-old resident register his blog as a political action committee after he used it to endorse two candidates who were running against incumbents.

A number of attorneys in Arizona, including Clint Bolik with the Goldwater Institute, agreed the town was completely out of line and that Art Segal, whose blog, www.letorovalleyexcel.blogspot.com, is often critical of local government policies and activities, is well within his First Amendment rights to support of any local candidate.

Bloggers such as Segal are not required to register with the government to express an opinion unless they cross the boundary into financial support, Bolick told the Arizona Daily Star.

“His blog is not a political action committee,” the attorney said. “He is simply a citizen expressing his political views.”

The clear intent of the town was to silence political opposition, Bolick said.

Oro Valley changed its mind after awkwardly defending the move, claiming that, upon receiving a complaint about the site from an anonymous citizen, local election law required it to demand Segal register. Yet one check of the rules and officials would have learned that they don’t apply to bloggers.

What’s good is that, in the end, it’s another case where Internet blogging is afforded First Amendment protections. Blogging is a legitimate form of journalism and commentary. There have been more organized attempts to silence bloggers by attempting to argue that they are not truly “media” of not “professional journalists.” Witness Apple’s lawsuit to close down Think Secret, which excelled at doing exactly what I and my one-time Electronic News colleagues were encouraged to do week after week—scoop insider company and product news. Apple “won” that suit by succeeding in closing the site. Or was it simply that Nicholas Ciarelli, who as a 13-year-old had Apple’s PR people tearing their out, grew up and had other things to do, like attend Harvard, reportedly with some cash from the Apple settlement?

So, on some level, it’s gratifying to see a town’s attempt at blogger intimidation turn out to be acknowledged for the petty power play it was.

The whole affair left Segal — who said he has given no money to the candidates he endorsed months before hearing from the town — with a bad taste in his mouth.

The resources that town officials spent trying to strong-arm him into compliance would have been better used to address issues important to Oro Valley residents, he said. "It's just another example of the wastefulness that this town has shown a propensity to do on much too many occasions," Segal said.

Okay, it's official--the 2007 housing market was a disaster. The National Association of Realtors estimates that single family homes sales dropped 13 percent for the year, and housing prices declined 1.8 percent. The Associated Press reports:

That was the first annual price decline on records going back to 1968. Lawrence Yun, the Realtors' chief economist, said it was likely that the country has not experienced a decline in housing prices for an entire year since the Great Depression of the 1930s.

Odds of a recession are now pegged about about even, but the indicators are volatile. Third Quarter 2007 growth was humming along at a robust 4.9 percent and then cooled down to about 1 percent for the Fourht Quarter. It's anyone's guess what the First Quarter of 2008 will bring.

Nevertheless, AP reports:

There is a concern that the housing and credit troubles could be enough to push the country into a full-blown recession. After global stock markets experienced a sharp sell-off earlier this week, the Federal Reserve announced a bold three-quarter point cut in a key interest rate and held out the promise of more rate cuts to follow.

But, how likely is it that the housing sector will trigger a recession? Our take on this can be found here in Reason's recent web commentary.

Michael Barone has an excellent column in today's issue of The American examining how the voting public perceives that status of the economy. In past decades, both Republicans and Democrats tended to agree on whether the economy was good or bad. In recent years, however, that's changed. Even during periods of robust economic growth (e.g., 2002-2006), Democrats tended to rate the economy much worse than Republicans.

Then, after the election of George W. Bush, the divergence between the two parties expanded into a chasm. It began to widen during the recession of March-November 2001, and it widened much more as the economy recovered and resumed low-inflation growth. By early 2006, a time of vibrant economic growth, 56 percent of Republicans said the economy was excellent or good, while only 28 percent of independents and 23 percent of Democrats agreed.

Thus,

There is a divergence here between Democrats’ and independents’ assessments of their personal economic condition, which have generally been positive, and their assessments of the economy as a whole. It’s hard to resist the conclusion that when Democrats—and, in 2004-2006, independents—were responding to questions about the condition of the economy, they were actually responding, “I am a Democrat,” or, more emphatically, “I hate George W. Bush.

In the end, Barone says, economic policy is much more likely to reflect the partisan interests of the candidate rather than an objective assessment of economic conditions.

Hand ringing over the supply of oil has prompted more than one politician, planner and pundit to push for "alternative" energy sources. Most of this politicization of the energy industry is driven by concerns over so-called "peak oil". Peak oil is the theory that we have already tapped into the world's supply of oil to the point we can not sustain current or future consumption levels. So, oil will become less and less scarce, forcing rising energy prices and, for some, the collapse of oil-based economies (e.g., the industrialized world).

A new report from Cambridge Energy Research Associates shows why "peak oil" is largely irrelevant.

As reported in the newpapers The Australian Business in an article published 19 January 2008:

A landmark study of more than 800 oilfields by Cambridge Energy Research Associates has concluded that rates of decline are only 4.5 per cent a year, almost half the rate previously believed, leading the consultancy to conclude that oil output will continue to rise over the next decade.

A more interesting point was made by Peter Davies, BP's chief economist:

The optimistic view of the world's oil resource was also given support by BP's chief economist, Peter Davies, who dismissed theories of "Peak Oil" as fallacious. Instead, he gave warning that world oil production would peak as demand weakened, because of political constraints, including taxation and government efforts to reduce greenhouse gas emissions.

Thanks again to our friends at the National Center for Policy Analysis for bringing this new study to our attention through their Daily Plicy Digest.

Investor's Business Daily had a great editorial on the recent proposal to hike the gas tax. They point out that less than 60% of the gas tax revenue goes to "essential" roadwork. The rest goes to pork (10%) and transit (30%).

They write:

Worse, no longer are revenues from the federal gasoline tax dedicated solely to building and maintaining the interstate highway system. That changed in 1983, when a little more than a 10th of revenues were used for mass transit. That has now tripled to 30%.

But that doesn't mean that 70% of the gas tax is dedicated to paying for our highway infrastructure. One-tenth of federal transportation spending is pork. In the last transportation bill, more than 6,000 pet projects costing $24 billion drained money away from where it was needed.

....

At the end of the day, a mere 60% of the revenues are left for essential road work. If that's not enough, lawmakers could have an immediate 67% increase in funds if they would only devote all the revenues from the gasoline tax to valid road projects.

Thanks to NCPA's Policy Digest for making sure the editorial didn't slip through the cracks. You can subscribe to NCPA's pithy daily update on policy news here.

You could knock me down with a feather: New York's Democratic Governor Eliot Spitzer – a big government liberal best known for using dirty tactics to terrorize political opponents and company CEO’s – proposed a bold new plan to cap property taxes in his recent state-of-state address. The plan, which seeks to impose a "fair and effective cap" on school taxes in New York, is remarkable for two reasons: One, it has been proposed by a big government liberal. Two, it will drive teachers unions, a key Democratic constituency, totally bonkers. But the governor seems unfazed. He insists that though the cap is a “blunt instrument,” it is necessary to force “hard choices and discipline when nothing else works” to rein in wasteful spending by schools.

Ronald Reagan couldn't have said it better!

Read New York Post columnist, E.J. Mcmahon’s, take here: http://www.nypost.com/seven/01102008/postopinion/opedcolumnists/eliots_excellent_idea_804389.htm?page=2

Comcast CEO Brian Roberts today became the first cable company CEO to address the annual Winter Consumer Electronics Show, emphasizing the role public broadband networking has in the delivery of sophisticated consumer information and entertainment platforms that leverage technology and content from multiple sources.

Broadband networks, as I’ve written often, are part of a much larger value chain for service. Each year it gets more and more difficult to categorize what the cable and telephone companies as merely infrastructure companies. Yet there continues to be a naive belief by city governments that they can easily duplicate cable TV service.

According to the CES press release, here's the bar Comcast is going to set for competitors this year:

“Roberts announced the end of an era for set-top boxes, and proclaimed a new generation for two-way platforms with the introduction of an OpenCable platform called tru2way. Panasonic president Toshihiro Sakamoto joined Roberts on stage to announce their co-creation of AnyPlay, the first portable DVR and DVD combination with tru2way capability. Roberts also announced that more than 1,000 HD choices will be available for the portable device in 2008.

”With the help of American Idol's Ryan Seacrest, Roberts debuted Fancast, a launch pad for the convergence of the PC and television, creating a personalized television experience. The individualized site links quickly and easily to content on the television, Internet, DVDs or in theaters. With the use of wideband instead of broadband, Fancast is able to download a two-plus hour HD movie in four minutes. It is the first site where consumers can find, watch and manage all their video content in one place.”

Yet the cities like Provo, Utah, and Lafayette, La., forge on, spending millions on their own broadband and cable TV systems, insisting to local taxpayers that simply because they are using fiber-to-the-home, they will easily match or succeed the quality and quantity of commercial broadband service. It doesn’t work that way. Service providers are competing on the strength of the service packages. So expect more head-scratching and puzzlement from the muni crowd as 2008 turns into another bum year for municipal broadband.

In another ill-conceived government effort, no doubt designed “for the children,” the Middletown, R.I., school district plans to place RFID chips in the backpacks of school kids to track when they get on and off the school bus.

The idea has the American Civil Liberties Union, not to mention the usual anti-RFID crazies, riled up. I don’t like the idea either, but for different, and I hope simpler, reasons.

Look no further to find that the company supplying the technology to the trial is run by the brother of the Middletown school district’s facilities director. That alone is reason to spike the plan.

Steven Brown, executive director of the ACLU Rhode Island chapter, is right when he calls the plan “a solution in search of a problem.” Even if you think RFID tracking is a good idea, the Middletown approach is hardly efficient – all the chip will record is when a child got on and off the school bus. (What about kids who walk or carpool to schools?) And even then, what’s really being tracked is the backpack, not the kid. Given the upper-middle class paranoia that fuels such government-sponsored "let's-track-our-children" ideas (Middletown neighbors tony Newport), it's easy to imagine the cross-departmental chaos a group of mischievous 10-year-olds could create simply by exchanging their backpacks. Above all, this plan should be opposed simply because it is poor use of taxpayer money. It won’t make children any safer. It’s a matter of local government officials letting themselves be seduced by tech sizzle.

What’s regrettable is that ideas like this bring the tinfoil helmet crowd out of the woodwork declaring that RFID is an automatic identity theft and privacy threat. While we should be careful about proposals to use impose RFID for personal tracking (even for our own “safety and security”), it has many beneficial applications. Yet hysteria over the technology has already seen efforts such as California’s ill-conceived proposal (vetoed by Gov. Schwartzenegger), to ban all commercial investment or development of the technology within the state.

Much of this legislative action is based on misperceptions over what RFID can and cannot do. For more clarity, see my post from about a year ago.

The issue of collecting and processing search engine data, as well as other Web surfing habits, by ISPs from users stands to be an emerging issue in 2008. Essentially companies like Google, Yahoo as well as others like NebuAd are developing the ability to process information they collect from you and (for lack of a better word) deduce your interests, primarily for advertising purposes. Some government agencies have begun to take notice. NebuAd, as the ClickZ story reports, is already discussing the capabilities of its behavior tracking and ad targeting software with the Federal Trade Commission.

Concerns about this concept were implicit in some of the opposition to the Google-Doubleclick merger, but I believe the complexity was lost on both sides.

This issue bears watching into the new year because it will pit those concerned about privacy against enterprises looking to expand a potential universe of buyers. The line between welcome promotion and unwanted intrusion is always moving, and it can vary from individual to individual. Some will happily sacrifice a chance to save on groceries in order to avoid having purchases tracked through a supermarket card club.

Stay tuned.

Last Saturday night’s game between the New England Patriots and the New York Giants, which saw the Pats battle back from a 12-point deficit to achieve a perfect 16-0 season record, drew 34.5 million viewers, according to Nielson estimates, making it the most watched regular season pro football contest since 1995.

Viewership got its biggest boost from a late decision by the NFL to allow CBS and NBC to simulcast its feed from the NFL Network.

Those following the issue recall that the NFL originally had reserved this game for exclusive broadcast on the league-owned NFL Network. Problem was the league hit negotiation snags with the two of the largest U.S. cable companies, Comcast and Time Warner Cable, over how the channel would be carried on their systems. Comcast placed the channel on a higher-priced tier of all-sports channels, not on its “expanded basic” tier as the NFL wanted. Expanded basic is the standard 80-to-100 channel line-up that includes ESPN, Discovery Channel, Turner Classic Movies, History Channel and such. A similar dispute kept the NFL and Time Warner from reaching any deal. Therefore the NFL Network was not available to Time Warner customers.

Though perhaps a less frequent target than Wal-Mart, whiny do-gooder types love to slam Starbucks as a vampiric predator preying on mom-n-pop stores to sustain its global expansion. Problem is it's not true, according to researcher Taylor Clark:

Ever since Starbucks blanketed every functioning community in America with its cafes, the one effect of its expansion that has steamed people the most has been the widely assumed dying-off of mom and pop coffeehouses. Our cities once overflowed with charming independent coffee shops, the popular thinking goes, until the corporate steamroller known as Starbucks came through and crushed them all, perhaps tossing the victims a complimentary Alanis Morrisette CD to ease the psychic pain. In a world where Starbucks operates nearly 15,000 stores, with six new ones opening each day, isn't this a reasonable assumption? How could momma and poppa coffee hope to survive? But [L.A. Coffee Bean and Tea Leaf storeowner Herb] Hyman didn't misspeak—and neither did the dozens of other coffeehouse owners I've interviewed. Strange as it sounds, the best way to boost sales at your independently owned coffeehouse may just be to have Starbucks move in next-door.

That's certainly how it worked out for Hyman. Soon after declining Starbucks's buyout offer, Hyman received the expected news that the company was opening up next to one of his stores. But instead of panicking, he decided to call his friend Jim Stewart, founder of the Seattle's Best Coffee chain, to find out what really happens when a Starbucks opens nearby. "You're going to love it," Stewart reported. "They'll do all of your marketing for you, and your sales will soar." The prediction came true: Each new Starbucks store created a local buzz, drawing new converts to the latte-drinking fold. When the lines at Starbucks grew beyond the point of reason, these converts started venturing out—and, Look! There was another coffeehouse right next-door! Hyman's new neighbor boosted his sales so much that he decided to turn the tactic around and start targeting Starbucks. "We bought a Chinese restaurant right next to one of their stores and converted it, and by God, it was doing $1 million a year right away," he said.

. . . .

[...] In its predatory store placement strategy, Starbucks has been about as lethal a killer as a fluffy bunny rabbit. Business for independently owned coffee shops has been nothing less than exceptional as of late. Here's a statistic that might be surprising, given the omnipresence of the Starbucks empire: According to recent figures from the Specialty Coffee Association of America, 57 percent of the nation's coffeehouses are still mom and pops. Just over the five-year period from 2000 to 2005—long after Starbucks supposedly obliterated indie cafes—the number of mom and pops grew 40 percent, from 9,800 to nearly 14,000 coffeehouses. (Starbucks, I might add, tripled in size over that same time period. Good times all around.) So much for the sharp decline in locally owned coffee shops. And prepare yourself for some bona fide solid investment advice: The failure rate for new coffeehouses is a mere 10 percent, according to the market research firm Mintel, which means the vast majority of cafes stay afloat no matter where Starbucks drops its stores. Compare that to the restaurant business, where failure is the norm.

Like the common Wal-Mart refrain, here's yet another case where the conventional wisdom is way off base.

Ken Orski at Innovation Briefs wrote this interesting essay on the future of investment in US ports infrastructure.
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Until now, most of the debate about the need to expand public infrastructure has centered on highways– partly because growing congestion on the nation’s highways has highlighted the need to increase road capacity, and partly because a highly publicized event – the collapse of the I-35 bridge in Minneapolis– has focused public attention on the need to reconstruct many of our aging roads and bridges.
A December 3-5 conference in Coral Gables, Florida, organized by Infocast, has thrown a spotlight on another class of infrastructure assets, namely ports and intermodal facilities. Judging by the large number of senior executives from port authorities, shipping concerns and the financial community taking part in the conference, the challenge of expanding port and intermodal infrastructure is resonating strongly with operators, shippers and investors alike. A keynote address by former Transportation Secretary Norman Mineta and the presence of senior officials from U.S. DOT underscored the importance which the public policy community attaches to the ports issue.

The conference took place against a background of forecasts that predict a veritable "tsunami" of maritime cargo swamping U.S. port facilities in the years ahead. In the past 5 years container trade in North America has increased at an annual rate of 6.8%. As a consequence of the rapidly expanding global trade, maritime cargo is predicted to soar by 50% by 2015, from 48 million TEUs in 2005 to 72 million in 2015. (TEU stands for "twenty-foot equivalent unit," a standard measure of container capacity). By 2020 North American ports and their associated intermodal systems will be severely congested, with demand exceeding current capacity by as much as 200% assuming current productivity and growth levels, predicts John Vickerman, a well-known and respected expert in the planning and design of port, intermodal and freight logistics facilities.

How should U.S. ports respond to this challenge? Some observers suggest that the capacity problem could be alleviated if port authorities placed operations on a 24/7 basis, as many foreign ports do. But there are good reasons why that would be impractical in the case of U.S. ports, claims Brooks Royster, former director of the Port of Baltimore. These constraints include local regulation and work rules limiting hours of operation, inadequate labor pool of longshoremen, and the need for some slack time to perform routine maintenance. Only Asian ports (notably Singapore and Hong Kong) exceed the productivity of our own ports, Royster contends, and then only because many of them are transshipment ports that do not have to move containers "through the gate" as is the case with destination ports like ours.