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FCC's Hundt calls for univ service for Net, nixes iphone regs

To the FCC's Reed Hundt, the Internet community is "governmentally
challenged." But then, the commission's chairman honestly believes
that FCC stands for "Friendly to Computer Communications."

Yeah, right.

That's what he said in a speech this week. The FCC faxed it to me
today after I returned from a Cato Institute conference -- where,
ironically enough, we spent a day talking about private ordering of
the Net. The concept makes a kind of intrinsic sense to me: who needs
government subsidies for Net connections when an account is just

The first half of the fax was mangled, thanks to the FCC's
anything-but-high-tech communications technology, so I shoved it in my
pocket and went for pizza with folks from the conference -- Eugene
Volokh, Charles Platt, Duncan Frissel, Alan Lewine, Solveig Bernstein,
and Brian LaMacchia. We chatted -- surprise! -- about the Feds' future
Net-regulation attempts.

When I got home and unfolded the fax, I found I could read the second
half. It was horrific. While Hundt did say he'd keep the FCC's hands
off of Net-telephony, he called for universal service for the Net.

Universal service is bad, from an economic perspective, for the same
reason that any subsidy scheme is bad: you're taking money out of one
part of the economy and pushing it into another. It's also vulnerable
to DC lobbyists in tasseled cordovan loafers descending on Capitol
Hill calling for more cash.

Hundt's scheme is more damming than it looks at first. In his speech,
Hundt calls for reconsidering how the FCC will "vote next year on a
new universal service funding mechanism."

This slush fund isn't funded from general taxpayer revenues. The 1996
Telecom dereg act directs the FCC to rework the payment mechanism that
feeds the universal service fund that all phone service providers must
pay into. It does things like make urban customers pay more to
subsidize rural telephone service. Companies that are eligible for
subsidies suck cash from the fund -- and of course lobby for more
along the way.

Now Hundt seems to want to wire schools from this fund. (And what
else? He doesn't quite say.) To replace the money from the account,
the FCC has to grab more from phone companies, which means higher
phone bills.

Does this make sense or what?


(PS: Note Hundt's email address is [email protected])

********* (Keystroked by [email protected]ell.com)

Reed Hundt speech excerpts:

"My hope is that the power of the Internet will forcedrive our
two-point FCC agenda -- competition in communications and public
benefits from communications. That's why we've resisted all efforts to
bring Internet communication within the out of date regulatory scheme
we have inherited at the FCC.

"The challenge now is for the govenmentally challenged Internet
community to figure out how to talk to the FCC on this subject and
what to say? After all, FCC stands for Friendly to Computer
Communications. After all I'm the first FCC chairman ever to be on the
Net -- so let me know -- [email protected] What should our policies for
bandwidth growth look like?

"Now I'd like to move on to the second aspect of Hundt's Law, which is
that everyone needs access to the Internet, either at home, at school,
or in a library. Metcalfe's Law only applies when people can access
the network, and if they know how to take advantage of the network
access that is available to them... So even if we are successful in
meeting the bandwidth challenge, we must still ensure that there is


"The investment to network our schools and libraries is so small and
the payoff so large. Look at the math... Can it be that we have a 700
billion-dollar-a-year information technology industry and yet we can't
afford to give every teacher the tools we give every shipping clerk at
Wal Mart? Or that we could afford to network every classroom by the
beginning of the next century, but somehow we just neglected to do it?
At the FCC we will vote next year on a new universal service funding
mechanism... The challenge I'm talking about is to provide bandwidth
and access to all Americans, but especially in kids in classrooms...

[Note that the 'we" paying for the shipping clerk's network is a
private corporation spending its own money. But the second "we" is the
government spending netizens' money. Guess the FCC can't tell the
difference. --Declan]