The Federal Communications Commission (FCC) made a power grab to control the Internet and there is a raging debate on both sides.  Rather than take a position to rollback the FCC action or let it stand, I offer a third alternative.  Shutdown the FCC.

The FCC should follow its sister agencies, the Interstate Commerce Commission (ICC) and the Civil Aeronautics Board (CAB) into the dustbin of history.  The very technology it is trying to regulate is, or perhaps has, made it irrelevant.

History

Regulation of telecommunications in the U.S. started with the Radio Act of 1912.  This was in direct response to the sinking of the Titanic, based on a lack of distribution of coherent radio signals along the east coast of the United States, preventing the ship’s distress signals from reaching the maritime safety officials.  It was through this act that Congress seized control of the electromagnetic spectrum for the first time.

The Communication Act of 1934 created the FCC.  The FCC, since then, has controlled the radio spectrum, television, telephones, cable, satellite and microwave communications, wireless communications, digital broadcasting and personal communications systems.  It also gave us the Fairness Doctrine, the Corporation for Public Broadcasting, and National Public Radio (NPR).  But the technology has advanced at such an incredible pace, this is an area where the free market is ready to show its strength over government regulation.

Technology

The key to a successful free market is competition and a free flow of information.  Of the distinct technologies above, notice how they have changed and increased competition.  I spent most of my technology career as a witness to these changes working in voice and data communications.  Telephone is nothing like it was in 1934.  The old circuit switched telephone network has been collapsed onto the data network.  You no longer have voice and data.  Now you have voice as data.

In the internet world, what moves around are data packets.  The data packets consist of a header and a payload.  As analogy think of a piece of mail.  What is inside the envelope is the payload.  What is written on the envelope is the header.  The header basically includes some address information and some information about options on how to handle the packet, or the envelope to continue our post office analogy.  Today, inside the envelope can be part of: an e-mail, a voice conversation, a web page, video, a data file, virtually anything you can digitize.  The header contains information on how to get it from one end of the network to the other.

The “Reason” for the FCC’s Action

The FCC has perceived that it is possible for a large company to exert power over smaller competitors or customers, to gain an advantage.  Therefore we need the government to be ready to step in and stop it if it happens or put rules in place to prevent it from happening.  They call this Net Neutrality.  This is a solution in search of a problem.  If we have learned anything from the 2008 financial disaster, it is the concept of crony capitalism, where the government joins with a few large corporations and cuts deals to cement and protect the dominance of the big boys.  It happened with the ICC and CAB; what makes us think it won’t happen here?  What we want is real capitalism, unfettered.

The players who make up the Internet tend not to have any interest in content.  One reason is that it takes time and computing power to “open the envelope and look inside” to determine what the content is and then make a decision what to do with it.  The second reason is that they want to move the data across their network as fast as possible and to do so, they want to spend as little time as possible reading the packet before moving it on.  To use our postal analogy, if they can look only at the Zip code to decide how to handle it that would be better than reading the entire address; if they can look only at the five digit Zip code rather than nine digits, that would be better; if they can look at only the first or second digit of the Zip code to make the routing decision, better yet.  The less time a packet is held to examine it, the less capital has to be invested in the infrastructure to move it and make up for lost time.

Competition

Back when the Communications act of 1934 was passed there was not a lot of competition, although there were a lot of individual providers they seemed to have their own niches, like radio stations.  The competition was for the airwaves.  But when you look at it today there is a lot of competition and more coming.  For example, I have my phone service, television service and Internet service all through my cable company.  It seems like once a week I get a solicitation from the local phone company offering to run fiber optics to my house and provide phone service, television and internet to replace my cable company.  Everyone in my house has an iPhone and when a call comes into the house phone we generally ignore it, as it is probably a solicitation.  If it’s important we’ll get a message and call back.  We have even considered eliminating the house phone altogether.  The next generation of wireless, 4G, is starting to roll out with a significant increase in bandwidth and that might be the death knell to wires to the house.

My cable company offers three levels of internet service.  The basic service is $29.95 per month and it provides 15 Mbps downstream and 2 Mbps upstream.  This is fine for my needs.  If not, for another $9.95 per month I can get 30 Mbps downstream and 5 Mbps upstream.  Need more?  For $55 per month over the basic, I can get 101 Mbps downstream and 15 Mbps upstream.  For the internet, all that really matters is bandwidth.  Everything else can be provided at the endpoints.  It should be like water or electricity.  It shouldn’t matter what I plan to use the water or electricity for, just get me as much as I need when I need it.

Regulation vs. Free Markets

An example that actually happened concerns Comcast and a product called BitTorrent.  BitTorrent is a peer-to-peer file sharing service.  Comcast is a cable based provider designed for fast downloads and slower uploads similar to the services provided by my cable company I mentioned above.  Some people use BitTorrent to share movies and music and use both the downstream and upstream equally.  This caused congestion problems for Comcast because the downstream and upstream had different capacities.   Comcast dealt with this during times of congestion by sending a signal to the BitTorrent service telling it to drop the connection.  This process not only affected the heavy file sharing users, but also affected other BitTorrent customers.  This was quickly picked up by the media.  Comcast couldn’t explain itself out of the jam it created.  Verizon jumped in and offered Comcast’s customers alternative service with more bandwidth if they switched over.  At the same time, tech wizards were figuring out ways to avoid the “hang up” message Comcast had been sending out.

Comcast backed away from its policy, negotiated an arrangement with BitTorrent to help make BitTorrent more efficient and Comcast promised to implement a traffic shaping regime by the end of 2008.  “By the time the FCC released a ruling on Comcast’s behavior in July, the issue had already been rendered a moot point by technological and market developments.”  To paraphrase a popular saying, “The Free Market will be half way around the world before the FCC gets its boots on.”

A Fond Farewell

With voice merging into data, with cable and telephone companies competing for customers, with wireless gaining ground on land lines in terms of speed and satellite adding to the mix, there is plenty of competition to keep each provider on its toes.  It is standard practice on the business side to connect to two or more Internet Service Providers (ISP).  The competition is there.  The other piece of the free market puzzle is to make sure that information about what is going on and who is providing what flows freely and the need for a government overseer goes away. News and information travels freely and very fast.

No matter what problem occurs, I have more faith in a Silicon Valley tech head to figure it out than a Harvard lawyer at the FCC.  In addition, the tech head can formulate a solution, test it, run a beta trial and roll it out before the FCC has figured out who to call as expert witnesses.  The Internet has provided tremendous innovation, throwing cold regulatory water on it is a very bad idea.

On the more sinister side of it we have the likes of Al Sharpton trying to get the FCC to start censoring Rush Limbaugh.  The free market laughed at what liberal Air America had to offer and so the progressives want the government to impose what they are incapable of achieving through free speech.  Also any expansion of government power is likely to lead to crony capitalism.  The progressives will tell you all day long they are doing it to protect the little guy, but in the end the fat cats, give boatloads of money to the politicians, then carve up the pie and the little guy either gets the bill or goes out of business.

To enjoy the riches of technological innovation that benefits us all, we should stand back and let the free market work its magic.  To our friends at the FCC, thank you for your service, your country is grateful to you.  Don’t forget to turn out the lights on your way out.

That’s my opinion; I’d like to know yours.  Please comment below.

There is an increasingly nasty battle brewing in the Republican race for the nomination to run against Democrat incumbent Tim Bishop in the First Congressional District in New York.  With jobs and the economy the number one issue across the nation, the petty personal attacks may result in potential Republican voters staying home in disgust.

In an excellent article in the Wall Street Journal titled, “New York’s GOP Never Learns,” Kim Strassel concludes her article by saying, “The effect has been to enrage and divide a New York party that should have bigger things on its mind. Say, winning this fall.” 

Chris Cox is trying to play catch-up to the front runner Randy Altschuler who has been actively campaigning for more than a year.  The difficulty for Mr. Cox is that his positions are not that different than those of Mr. Altschuler.  So, while Mr. Altschuler has been taking on the Democratic incumbent Tim Bishop and Bishop’s lockstep voting with Nancy Pelosi, Mr. Cox has resorted to attacking Mr. Altschuler.  Not to leave his flank unprotected, Mr. Altschuler has been forced to respond and now the race, with two weeks to go before the primary on September 14^th, has degenerated into a mudslinging contest.  There is a third candidate, George Demos, who is lobbing attacks from the rear with little effect.

Each candidate is calling themselves the “true conservative,” and Mr. Cox has garnered the support of the Suffolk County 9-12 Project the self-proclaimed “Largest Tea Party organization in Suffolk County.”  Mr. Cox’s father, Ed Cox, is the head of the New York State GOP.  Ms. Strassel reports that the senior Mr. Cox, backed Steve Levy over Rick Lazio for governor to curry favor with the Suffolk County GOP chairman to back his son.  It is all the kind of backroom political dealing that have attracted a rush of newcomer candidates and put incumbents of both parties on the endangered species list.

The Tea Party Endorsement

What caught my eye was the endorsement of the Suffolk County 9-12 Project and the announcement by Bob Meyer, co-founder.  He gave as one of his primary reasons that, Randy Altschuler was one of those people, “getting rich off the backs of hardworking Americans by outsourcing their jobs.”  That sounds more like Jimmy Hoffa, Andy Stern, or Barack Obama’s class warfare than any Tea Partier I know.  A commenter on the 9-12 Project’s site, Judyann Joyner added, “Randy is credited with the creation of ‘white collar sweatshops in India.’”  Pretty strong stuff.  I don’t know if Ms. Joyner or Mr. Meyer visited the company that Mr. Altschuler co-founded in India, but Business Week magazine did.

“The lights burn day and night in the gleaming glass-and-chrome building that towers over a leafy street in the southern Indian city of Madras. Here at OfficeTiger, 1,500 young men and women peer into computers 24 hours a day, analyzing and processing U.S. Securities & Exchange Commission reports and other documents drawn up by lawyers and bankers on Wall Street. Walking the floor, sometimes even at 3 a.m., is 34-year-old co-founder and co-Chief Executive Joseph Sigelman.”

Just because the office operates 24 hours per day, don’t be conned into thinking the same people are at their desks 24 hours a day.  “Gleaming glass-and-chrome building that towers over a leafy street,” yup, sounds like a hellhole to me.  Business Week added, “Indeed, OfficeTiger is the only successful startup in India’s $5 billion outsourcing industry that is owned and managed by a U.S. entrepreneur.”  So we have an American company making money in India, in what seems to be a rather large and competitive field, and this is a bad thing?  Since when did conservatives turn into protectionists?  But what about the jobs they replaced?  Okay, let’s examine that. 

You have some Wall Street firms that are in a competitive business.  A young entrepreneur comes up with an idea to reduce operating expenses by having an external company handle routine clerical tasks that are not one of the firm’s key competencies, that is, people don’t buy that firm’s services because of their typing skills.  The company outsources and reduces costs.  By reducing costs, they prosper and grow; by growing they create more high skill jobs like lawyers, accountants, financial analysts, IT people, etc.  Perhaps even some of the former typists, because of their computer skills can move up the ladder to spreadsheets, and databases.  Do some people lose their jobs, yes, just as buggy whip makers lost their jobs when the automobile came on the scene.  Okay, let’s shift to India.

In India white collar jobs are created; their standard of living improves; they buy consumer goods like iPods and iPhones and their offices need sophisticated IT equipment from companies like Cisco Systems which grow companies like Apple and Cisco creating jobs in the U.S. We live in a global economy and if we want prosperity and peace, the best way to get there is through free markets.  Even Mr. Cox in the policy section of his website blames government policies for companies outsourcing jobs overseas.  If it is the government’s policies that make these jobs uncompetitive here and Mr. Cox knows it, why is Mr. Altschuler wrong for reacting to it and helping American companies that use these services remain competitive?

After selling Office Tiger to RR Donnelly, Mr. Altschuler started another company in the U.S., CloudBlue, that recycles old IT equipment.  So we have an entrepreneur that has started a couple of companies that have created jobs around the world and that makes him a villain?  Perhaps Mr. Meyer should go back and read some of the quotes on his own website:

“You cannot legislate the poor into freedom by legislating the wealthy out of freedom.” – Dr. Adrian Rogers

“I have a right to life, liberty, and the pursuit of happiness.” – Thomas Jefferson

Mr. Meyer’s key criticism of Mr. Altschuler smacks of the government picking winners and losers.  This business is okay, but not that one.  If your business creates jobs overseas that is bad, but if it creates jobs here it is okay.  Well, Mr. Altschuler has done both and he has firsthand experience doing so, which is what we sorely lack in Washington.  If the strategy of Mr. Cox continues, including creating another party, the TaxPayer party, to run on and split the vote further, Mr. Cox might as well mail his strategy over to the Bishop campaign as I am sure they will find it very useful in the general election.  Not my cup of tea.

The focus should be on defeating the out of control spenders in Congress who got us into this mess, not fighting each other to the death and let the incumbent waltz back into office.  The time is now.  Mr. Cox should focus on what he would do as a Congressman that is better than Tim Bishop and Mr. Altschuler.  If he can’t articulate that, he should drop out.  He is not going to win a lot of support by throwing mud at his fellow Republicans.

Note: In the spirit of full disclosure I have done some volunteer work for the Altschuler campaign

For nearly eight years we heard the left scream, “Bush Lied!” over the decision to invade Iraq.  One decision and the same refrain repeated over and over again.  Where is the scrutiny of the truth police where President Obama is concerned?

In his State of the Union address he took the unprecedented step of calling out the Supreme Court and encouraging his minions to give that rebuke a standing ovation.  Shameful.  This is not to say that Obama cannot criticize other branches of government, but there is a time and a place.  When Joe Wilson called out “LIAR!” during a previous speech by President Obama he was roundly criticized and rightly so.  Not for the criticism, but for the time and the place.  Joe Wilson called the president to apologize.  Did Obama do the same?

The timing of the act was bad enough, but the accusation he made was not true, as Samuel Alito could be seen saying, if you can read lips.  In the midst of his constitutional duty to report to Congress on the State of the Union, he uses a blatant lie to attack his guests. But that wasn’t all.  His speech was sprinkled throughout with falsehoods, not least of which was his statement on jobs.

Counting the Uncountable

To try to put a positive spin on his porkulus bill, he had to make up a statistic that no reputable economist can endorse, “jobs saved”.  In his State of the Union speech and on the Sunday morning talk show circuit, Obama and his team talked about 2 million jobs created or saved. But they weren’t all on the same page, some said 1.8 million, but regardless it is blatant dishonesty.

Jobs created is a real statistic.  As a small business owner I can tell you that when you hire someone there are a number of government agencies that you have to report it to and you have a deadline in which to do so.  There is also some paperwork involved when you eliminate a job.  But I have never, never had to report to any agency when I thought about eliminating a job and then changed my mind.  After all wouldn’t that be the definition of a job saved?

If I never thought about eliminating the position, then the job is not “saved” it just continues to exist.  If I thought about eliminating the position and did so, it would not be a job “saved” it would be a job eliminated, no?  So it is this two step process of thinking about the action and then not following through that could reasonably be thought of as a “job saved”.  How do you measure that thought process?  Hiring someone is an observable action.  Eliminating a job is an observable action.  Saving a job are two related thought processes not externally observable, they can only be “reported” by the decision maker and it cannot be independently verified.  Is that the kind of statistic upon which you want your government to base billions of dollars in spending decision?   The only added feature of Obamanomics is that some money changes hands.  Money that comes from you, dear taxpayer, and goes to the businessman.  Can you see why such a statistic is ridiculous?

Which One Is It Mr. President?  Mr. Biden? Anyone?

Let’s pretend for a moment that “jobs saved” is a real statistic.  If the president has a figure in his head of 2 million jobs created or saved, and for the aforementioned reasons the number of jobs created is a hard number reported to some agency, then the number of jobs saved should be a matter of simple math.  2 million minus the number of jobs actually created equals the number of jobs saved.  So why not report it as such?  100,000 jobs created and 1.9 million jobs saved, for example.  Why lump them together?  Because when you lump them together its harder to tell how big of a lie the president is telling.

Stimulus recipients previously reported that they had directly “created or saved” 640,329 jobs by Sept. 30, but their filings were criticized after it emerged that some people had reported saving jobs when they had actually spent the money on pay raises or paying employees who were not in danger of being laid off.

In December, the White House Office of Management and Budget changed its guidance, telling recipients they should start counting every worker whose salary was funded with stimulus money, rather than guessing whether the jobs would have existed in the absence of the federal plan. Opponents of the program accused the administration of “moving the goal posts” to make the plan appear more successful. — Wall Street Journal, Latest Stimulus Report Fuels Jobs Pressure, Feb. 1 2010

So companies using stimulus money to give people raises was counted as jobs saved!  We have 10%-17% of our workforce idled and taxpayers are being fleeced to give people raises and this administration is calling that successful policy.  When do we start firing people in this administration?  How about Janet Napolitano?  How about Eric Holder?  or are we saving their jobs too so that the numbers look good?  The other reports are just as galling: $1000 purchase of a lawn mower is credited with saving jobs;  using stimulus money to purchase boots with each boot (left and right) being counted as a job saved because someone had to make the boots; stimulus money going to create jobs in Congressional districts that do not exist.  Does anyone have any confidence that this administration has a clue about how to run a government?  This is beyond embarrassing.

The Next Stimulus

But fear not, since the first stimulus was so successful, President Obama is teeing up the next one, but don’t worry this one is only $100 billion.  Doesn’t that just make you feel warm all over?