Government Regulation on Port 80: Shoreline: issues

What's the problem underneath the problem? What needs to change for the problem to get solved?

Government involvement in business.

Washington's Ten Thousand Commandments - 2003 | 2004 (175K .pdf)
An Annual Snapshot of the Federal Regulatory State
by Clyde Wayne Crews Jr.
Cato Institute

The exact cost of federal regulations can never be fully known. Firms generally pass along to consumers some of the costs of the taxes they are required to pay. Similarly, some of the costs of regulations, although generally imposed on businesses, get passed on to consumers. But governmental and private data exist on scores of regulations and the agencies that issue them, as well as on regulatory costs and benefits, some of which can be compiled in a way that makes the regulatory state more comprehensible to the public. That is the purpose of the annual Ten Thousand Commandments report, some highlights of which appear below.

July 2003	July 2004
The 2002 Federal Register contained an alltime record 75,606 pages, a nearly 9 percent increase over 2001.	The 2003 Federal Register contained 71,269 pages, a 6 percent decrease from 2002’s alltime record 75,606 pages.
In 2002, 4,167 final rules were issued by agencies.	In 2003, 4,148 final rules were issued by agencies.
In the 2002 Unified Agenda, agencies reported on 4,187 regulations that were at various stages of implementation throughout the 50-plus federal departments, agencies, and commissions.	In the 2003 Unified Agenda, agencies reported on 4,266 regulations that were at various stages of implementation throughout the 50-plus federal departments, agencies, and commissions, an increase of 2 percent from the previous year.
Of these 4,187 regulations now in the regulatory pipeline, 135 are “economically significant” rules that will have at least $100 million in economic impact. Those rules will impose at least $13.5 billion yearly in future off-budget costs.	Of the 4,266 regulations now in the regulatory pipeline, 127 are “economically significant” rules that will have at least $100 million in economic impact. Those rules will impose at least $12.7 billion yearly in future off-budget costs.

Regulatory costs are more than twice the $375 billion budget deficit.

Regulatory costs of $869 billion are equivalent to 7.9 percent of U.S. gross domestic product, estimated at $10,980 billion for 2003.

Federal regulatory costs of $869 billion combined with outlays of $2,158 billion bring the federal government’s share of the economy to some 27 percent.

Regulatory costs also exceed all corporate pretax profits, which were $665 billion in 2002.

Regulatory costs exceed estimated 2003 individual income taxes of $849 billion, and are far greater than corporate income taxes of $143 billion.

Lawrence Lessig

Lawrence Lessig suggests that the struggle is between old control and new control. Old business models vs new business models. He sees a third way: less control, much less.

Definitions

Established facts

The Issues

Who are the players?

What are the prominent issue statements?

Any issue as broad as regulation is made up of sub-issues and underlying issues and larger issues.

Help us untangle this complex situation by clearly stating the prominent regulation issues in debatable terms.

What are the prominent positions?

Excerpt, summarize, and link to the partisan advocacy positions on regulation taken by the players.

Have you ever made a tape of your favorite songs to enjoy in your car stereo? Have you ever bought a CD and ripped it to your portable MP3 player? If so, you should know that recent changes to copyright law have been used to take away your personal use rights to the media you legally acquire. That means that activities like making mixes or copying music to a portable player are quickly being restricted or prevented. DigitalConsumer.org is doing something about it. We are advocating a Consumer Technology Bill of Rights that will positively assert a consumer's rights to fair use.

CEI High Tech Briefing Book 2001
A Free-Market Guide To Navigating Tech Issues In The 107th Congress
by James V. DeLong and Jessica Melugin
Competitive Enterprise Institute, January 1, 2001

Government can indeed provide grease to lubricate the joints of the economy, but too much existing and proposed regulation is produced by special interests, conceived in ignorance, or both. These regulations become not grease but superglue that cements the status quo, deters investment, and prevents innovation.

In Tech Briefing 2001: A Free Market Guide to Navigating Tech Issues in the 107th Congress, CEI’s experts apply this perspective to 20 topics that are high on the current national agenda. Each chapter briefly describes the technology behind the issue, outlines the policy debate, and offers CEI’s view of the policy. Endnotes provide sources for factual statements and guideposts for further research.

The Policies

Examples of publicly posted regulation policies

FCC

FCC Moves to Allow More Opportunities for Consumers Through Voice Services Over The Internet.

FCC Proposes Rules for Broadband Over Power Lines to Promote Broadband Service to Underserved Areas and Increase Competition.

Broadband: Establish regulatory policies that promote competition, innovation, and investment in broadband services and facilities while monitoring progress toward the deployment of broadband services in the United States and abroad.

Spectrum: Encourage the highest and best use of spectrum domestically and internationally in order to encourage the growth and rapid adoption of new technologies.

Media: Revise media regulations so that timely development and delivery of new technologies is encouraged, media ownership rules promote competition and diversity in a comprehensive, legally sustainable manner, and the migration to digital modes of delivery is facilitated.

Homeland Security: Provide leadership in evaluating and strengthening the Nation’s communications infrastructure, in ensuring rapid restoration of that infrastructure in the event of disruption, and in ensuring that essential public health and safety personnel have effective communications services available to them in emergency situations.

Competition: Support the Nation’s economy by ensuring there is a comprehensive and competitive framework within which the communications revolution can continue so that all consumers can make meaningful choices among and have equal access to communications services.

Modernize the FCC: Emphasize performance and results through excellent management, develop and retain independent mission-critical expertise, and align the FCC with dynamic and converging communications markets.

With Congress poised to begin a rewrite of the 1996 Telecommunications Act next year, a former Federal Communications Commission official today praised the Act for helping to usher in "a new era of innovative capabilities". But he called for new reforms, claiming the Act "did not go far enough in eliminating impediments to innovation and investment in technologies such as broadband networks." Among his recommendations: four sets of changes that would likely require restructuring of the FCC itself.

"Communications policy should favor competition, not competitors - meaning we should favor a process that generates real benefits for consumers, rather than merely protecting categories of providers," Progress & Freedom Foundation Senior Fellow Kyle Dixon told a Washington policy conference today. Toward that end, he proposed "fundamental elements of telecommunications reform designed to spur investment and innovation in 'Big Broadband'."

Dixon made his comment during a panel discussion sponsored by the New America Foundation, "Innovators and Incumbents: Can Telecom Reform Bring Big Broadband to Every U.S. Home and Business?" Among his recommendations:

- A "targeted, market-based approach that regulates substitute services in the same way."

- "Substantial curtailment of state and local regulatory authority over broadband services."

- "A prohibition on economic regulation of broadband services, including specific prohibitions on 'sharing', 'open access' and 'net neutrality' mandates."

- "Major reform of the Universal Service program and associated inter-carrier compensation regimes to reduce the amount of direct and indirect subsidy flows... focus[ing] any remaining subsidies on support of those truly in need... "

Dixon served as Special Counsel for Broadband Policy to FCC Chairman Michael Powell, as well as Deputy Bureau Chief in the FCC's Media Bureau.

The Progress & Freedom Foundation is a market-oriented think tank that studies the digital revolution and its implications for public policy. It is a 501(c)(3) research & educational organization.

Although the FCC doesn’t regulate the Internet or Internet service providers, it enforces the Children's Internet Protection Act (CIPA), passed in 1998.

Cable modem service is properly classified as an interstate information service and is therefore subject to FCC jurisdiction. The FCC determined that cable modem service is not a "cable service" as defined by the Communications Act. The FCC also said that cable modem service does not contain a separate "telecommunications service" offering and therefore is not subject to common carrier regulation.

liberates cable companies from the more stringent common carrier regulations that govern most telecom companies -- cable modems vs DSL

prevents local governments from creating and selling separate franchises for cable ISPs or levying higher fees on cable companies that market broadband services

leads to cable company control over pricing and over the content their customers can receive via broadband

FTC

The Federal Trade Commission enforces a variety of federal antitrust and consumer protection laws. The Commission seeks to ensure that the nation's markets function competitively, and are vigorous, efficient, and free of undue restrictions. The Commission also works to enhance the smooth operation of the marketplace by eliminating acts or practices that are unfair or deceptive. In general, the Commission's efforts are directed toward stopping actions that threaten consumers' opportunities to exercise informed choice. Finally, the Commission undertakes economic analysis to support its law enforcement efforts and to contribute to the policy deliberations of the Congress, the Executive Branch, other independent agencies, and state and local governments when requested.

In addition to carrying out its statutory enforcement responsibilities, the Commission advances the policies underlying Congressional mandates through cost-effective non-enforcement activities, such as consumer education.

This report provides a detailed overview of the body of economic research that is relevant to the Internet and Internet-based markets. The report provides an introduction to Internet technology and history and addresses four topics in particular: a) different methods of pricing user access, b) the pricing of goods and services sold via the Internet, c) network effects and firm behavior, and d) taxation of electronic commerce. Drawing on recent Internet-related economic scholarship, and more traditional studies of pricing practices and market structure, the report considers some possible antitrust implications for firms operating in this rapidly changing marketplace, as well as pointing to areas for future research.

Citations for articles about regulation policies

The weapon of choice for Bush-era Web regulation is the Federal Trade Commission (FTC), and its press office was very busy last week.

Force Analysis

How is regulation affected by the driving and restraining forces of the Internet?

driving forces

small, fast, cheap

visual: multimedia

networked: big pipes

embedded: almost invisible

universal: everyone has them; international

ubiquitous: always on, everywhere

intelligent

easy to use

trusted

standardized

Manufacturers' group says cost for a TV could go up $250.

Dissatisfied with the speed at which the industry is going digital, the Federal Communications Commission (FCC) voted Thursday to require television manufacturers to have digital tuners on all sets by July 2007.

restraining forces

current laws supporting multinational corporations' business models and continued revenue streams.

Role of Government

Debate rages over the government's role in determining the future of the Web

At any moment, gigabytes of information are in flight over wires, optical cables, and satellite links. What makes the Internet so special is that its magic is available to all. A small company with a $60 DSL line can transact business with a behemoth that pays $20,000 each month for a DS-3. The explosive growth of the Internet is not only a creation of a boom economy, but also of carefully constructed government regulation.

The Competitive Enterprise Institute is dedicated to demonstrating that free market processes and other private initiatives are superior to government intervention in advancing the interests of both producers and consumers. It serves as both a think tank, creating intellectual ammunition to support free markets, and an advocacy group, putting that ammunition to use in persuasive ways. CEI has long been active in the areas of antitrust and government regulation. The Project on Technology & Innovation is extending the Institute's efforts into new territories, including antitrust in high tech and network industries, privacy, e-commerce, intellectual property, and telecommunications.

Electronic government has taken its place as an essential component of the public sector agenda. In its fourth year, the E-Goc Conference is the only event focused exclusively on E-Government policy, implementation, and technology.

High-Tech Priorities
by House Speaker J. Dennis Hastert (R-IL)
Comdex Chicago Public Policy Forum, April 2, 2001

Broadband policies should promote competition and innovation. While we need to strictly enforce access to the old world copper phone lines, we should not put these railroad-era requirements on new technologies. Failure to understand these principles will cause investment capital to dry up, and hurt the future of the information age.

speech by Lou Gerstner, CEO of IBM
OECD Ministerial Conference
Ottawa, Canada, October 8, 1998

Now, there's a faction inside the information technology industry that .. concludes there's no role for government in crafting any policy framework for electronic commerce. I disagree.

Don't count on running your e-commerce business from a sunny beach right through to your retirement!

As new technologies and globalization transform the communication and information landscape, economies and governments are in transition and media policies are being constructed and reconstructed worldwide. National and international bodies are currently debating the regulations and protocols that will determine the media world we will live in.

Yet much of this debate is happening behind closed doors, and when it's not, it might as well be for all the attention it receives. All too often the forces shaping the media and the issues at stake do not get enough attention, even among would-be media reformers.

The most important reason that investors are shying away from investing in broadband is the regulatory uncertainty.

The Telecommunications Act of 1996, with its backward-looking focus on correcting the market problems of a bygone era, has been a failure.

Many will feel that there is no urgency for governments to transform for the eEconomy. All I can say is that all through history the dinosaurs never see it coming!

Republicans want to subsidize high-speed Internet services for rural America. It's either good policy - or corporate welfare. ... Republican lawmakers are touting a solution to America's economic woes that is more FDR than GOP: a government program to subsidize the spread of broadband Internet services to the nation's hinterlands.

A growing number of Republicans are convinced that such a scheme, which they call the new-economy version of the New Deal's rural electrification program of the 1930s, would promote business in the heartland while helping technology companies sell everything from computers to digital movies. "It's like one of those job-creation programs. It would drive growth ahead in places in the country that wouldn't get broadband for decades," says New York Rep. Amo Houghton, sounding suspiciously like a Democrat.

entry and exit policies

This paper provides a theory that explains why government allow free entry and selectively promote entry under certain conditions and deter entry under other conditions. The analysis also identifies conditions under which optimal policy requires that large-scale entry is freely permitted and small-scale entry is deterred. In our model, policymakers use entry policy to strategically shift rents away from foreign producers toward domestic producers and consumers.

Since it may be socially beneficial to subsidize entry by both domestic and foreign firms, we explore the optimal means of promoting entry under complete and incomplete information concerning the entrant's marginal and fixed costs. Under complete information, welfare can be maximized by a two-part subsidy mechanism consisting of a per-unit output subsidy in combination with a lump-sum subsidy or tax. Under incomplete information, the policymaker has incentive to treat domestic and foreign entry differently in setting an optimal entry subsidy. With respect to domestic entry, the policymaker can eliminate any potential welfare losses due to incomplete information if the entrant can be induced to act as a Stackelberg leader. Otherwise, the policymaker may undersubsidize domestic entrants with high marginal costs and oversubsidize entrants with low marginal costs. In the case of foreign entry, the presence of incomplete information implies that entry is undersubsidized.

Virtual State

Developing countries, which still produce goods derived from land, continue to covet territory. But where the products of land no longer determine market and power relationships, a new form of state is being born: the virtual nation, a nation based on mobile capital, labor, and information. The virtual state is a political unit that has downsized its territorially based production capability and is the logical consequence of emancipation from land. Virtual states and their associates would rather plumb the world market than acquire territory.

In its pure form -- an ideal model toward which many states are tending -- the virtual state carries with it the possibility of an entirely new system of world politics. In the past, when military conflict and the desire for territory determined relations between nations, the main flow between countries consisted of armies. Future flows will be largely economic as capital, technology, manpower, and information move rapidly among states. In the long term, national access to international factors of production can replace the need to control additional land.

Dynamic Competition

Will the price of everything be negotiable in the future? The Internet at least will move commerce in that direction. The law of supply and demand is highly theoretical in offline trading, since buyers typically are ignorant of the relative value of a commodity. The seller is in command. But in a market of more perfect information, a decided gift of the Internet, buyers are empowered to make a more informed bid for products in which they have an interest.

Dynamic pricing - a sophisticated term for environments where prices are not fixed - is a hot topic circulating Internet companies these days. Auction sites, now spreading like kudzu on the Web, are the leading edge of this trend.

Internet retailers using strategic pricing for the Web are more likely to attain long-term success. ... Slightly higher prices for products sold on the Internet can boost profits, because as long as a product is priced within an appropriate range, there is no impact on customer response.

The concept of dynamic pricing, commonly used in market economies and auctions, and popularized on the Internet by eBay, Priceline, eWanted, and Mercata, has extended beyond the consumer market. The Internet Exchange model is rapidly being used by both buyers and sellers in the B2B arena across a variety of industries to gain efficiencies in apparent supply, to eliminate information inequity, and to create new intermediaries and business models. One of the arenas of the online world that is changing most quickly is the marketplace. Nowhere is this more obvious than in the Internet Exchange, a term that refers to a set of websites used to sell goods at auction. Exchange members meet to buy and sell goods for a market price, negotiating according to a set of rules. In the process, they are creating a new power dynamic between buyers and sellers. Dynamic pricing is going to control a dramatically increasing proportion of transactions on the Internet.

Electronics shoppers accustomed to buying online, have a "new experience" awaiting them: sites that practice dynamic pricing. This means participating in group buying and a variety of auction styles and approaches (Dutch, English, Silent, one-hour, 24 hour, etc.), including the reverse auctions where a need is listed and sellers bid for consumers' business.

These options offer consumers a great deal of flexibility, but are at odds with the experience that typifies Gomez’s top ranked Internet electronics stores.

So to help consumers evaluate the differences, Gomez Advisors is now rating and ranking Internet buying services sites.

Increase sales and margins for traditional and multi-channel retailers by optimizing prices to meet enterprise goals. We are the first company to apply the proven principles of revenue management to retail pricing processes.

Dynamic Pricing by Software Agents
Jeffrey O. Kephart, James E. Hanson, and Amy R. Greenwald
IBM Institute for Advanced Commerce, March 20, 2000

The potential impact of widespread shopbot usage on prices, the price dynamics that may ensue from various mixtures of automated pricing agents (or ``pricebots''), the potential use of machine learning algorithms to improve profits, and more generally the interplay among learning, optimization, and dynamics in agent-based information economies. These studies illustrate both beneficial and harmful collective behaviors that can arise in such systems, suggest possible cures for some of the undesired phenomena, and raise fundamental theoretical issues, particularly in the realms of multi-agent learning and dynamic optimization.

iDine.com, Yougottaeat.com and Dinnerbroker.com aim to increase "customer traffic in off-peak hours by offering...discounts." Or "offer to get consumers tables during traditionally hard to book periods...for a surcharge.

Dynamic pricing—by which different customers, based on what the retailer thinks they will pay, are charged different prices for the same product—is currently regarded by e-commerce gurus as one of most rewarding promises of online retailing. “Dynamic pricing is the new reality, and it’s going to be used by more and more retailers,” Vernon Keenan, a San Francisco Internet consultant told the Washington Post. “In the future, what you pay will be determined by where you live and who you are. It’s unfair, but that doesn’t mean it’s not going to happen.”

Many e-tailers agree with Keenan’s claim that dynamic pricing is definitely in the cards, but not everyone believes it’s unfair. Some online merchants would argue that if certain customers are willing pay a higher price for a product, there’s nothing wrong with taking their money and giving a discount to others, whose lifestyle or buying habits suggest that they won’t.

The value propositions of dynamic pricing, in its variety of forms, gain added importance at two critical touchpoints in the enterprise value chain: sourcing and selling. Given the emergence of interactive networks and the rapid evolution of e-commerce capabilities, dynamic pricing provides an attractive business solution that drives bottom-line results through increased revenues, lower costs, and improved processes.

Sell your excess inventory and suddenly hot products through a dynamic pricing channel. Develop a special Web site or area of your site to unload products quickly, with the prices constantly changing to reflect supply and demand.

Is the day just around the corner when Internet retailers change their prices based on how badly you want something?

... the Internet’s "new economics," where information asymmetries are reduced, if not eliminated, and competition is driven first by price.


issues and policies for exploring webs


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modified: September 7, 2004 by Douglas Anderson http://RicciStreet.net/port80/shoreline/regulation.htm

Regulation

The Problem