2010 Annual Report

2010 ANNUAL REPORT

PHOENIX CENTER FOR ADVANCED LEGAL & ECONOMIC PUBLIC POLICY STUDIES 5335 Wisconsin Avenue, NW, Suite 440 Washington, D.C. 20015 Tel: (+1) (202) 274-0235 ● Fax: (+1) (202) 318-4909 www.phoenix-center.org

PRESIDENT’S MESSAGE

2010 again proved to be another the merits of FCC’s Chairman Julius Genachowski’s proposed “Third Way” extremely productive year for the Phoenix approach to broadband regulation. In Center, so much so that all of our many addition, we were honored that FCC accomplishments and accolades cannot be Commissioner Robert McDowell was able to summarized here. join us to offer his thoughts on this important As always, the Phoenix Center’s published issue. As an added bonus, as a direct result work was prodigious. For example, in 2010, of this workshop, the Broadband Credibility the Phoenix Center published three POLICY Gap was accepted for publication in the PAPERS, two POLICY BULLETINS and eight winter issue of COMMLAW CONSPECTUS. POLICY PERSPECTIVES. We are also proud to We are also pleased to report that the report that no less than twelve of our papers Phoenix Center’s Annual U.S. Telecoms were published, or accepted for publication, Symposium was also another phenomenal in a variety of leading academic journals. In success. In addition to presenting panels addition, I was delighted to write an essay on comprised of some of the leading experts Article III for a wonderful project called from academia, industry and senior officials “Constituting America” which encourages from the White House, the Federal Trade everyone to read and learn about the Commission and the Federal Constitution and the Federalist Papers. Communications Commission, we were Along the same line, I was selected to be a co- delighted to bestow upon FCC Commissioner chair of the FEDERAL COMMUNICATIONS LAW Meredith Attwell Baker the Phoenix Center’s JOURNAL committee by the Federal prestigious annual Jerry B. Duvall Public Communications Bar Association. Service Award. The Phoenix Center also again had a large The Phoenix Center’s research also continued media presence in 2010. Phoenix Center staff to make a significant contribution to the authored op-eds in various national media dialectic in 2010. For example, Phoenix outlets such as the FORBES.COM and CNET. Center Chief Economist George Ford In addition, Phoenix Center staff appeared on continued to be in the top 1% of authors several national radio shows to discuss our downloaded on the Social Science Research research, and we were cited prolifically in the Network, while I remained in the top 2% of national and international press as well as in authors downloaded. The General the blogosphere. Accountability Office also cited to our We also held two phenomenal events this Broadband Adoption Index. Finally, Phoenix year. Center research was cited extensively by the Federal Communications Commission in The first event we held was a workshop to their National Broadband Plan and in the 14th discuss PHOENIX CENTER POLICY PAPER NO. CMRS Competition Report. The FCC also took 40, The Broadband Credibility Gap. Featuring the highly unusual step of dedicating a several former FCC officials (including the lengthy post on their official blog about General Counsel, Deputy General Counsel PHOENIX CENTER POLICY BULLETIN NO. 25, and Chief of Staff) present at the time the Jobs, Jobs, Jobs: Communications Policy and Commission affirmatively declined not to Employment Effects in the Information Sector. classify advanced services as a common carrier service under Title II of the Once again, not a bad year… Communications Act, the panelists discussed — Lawrence J. Spiwak, President

PHOENIX CENTER 2010 ANNUAL REPORT 1 PHOENIX CENTER PUBLICATIONS

The Phoenix Center continued to and Employment Effects in the Information Sector (October 2010). publish a prodigious amount of scholarly research in 2010. As always, all of the PHOENIX CENTER POLICY PERSPECTIVES Phoenix Center’s research is available free on the Phoenix Center’s web page and on the The Phoenix Center’s POLICY PERSPECTIVES Social Science Research Network. SERIES is designed to provide a forum for its individual members to express their personal PHOENIX CENTER POLICY PAPER SERIES views on current policy developments. The Phoenix Center published the following The Phoenix Center’s POLICY PAPER SERIES POLICY PERSPECTIVES in 2010: seeks to provide an in-depth analysis of the current regulatory and political paradigms,  PHOENIX CENTER PERSPECTIVE NO. 10-01, as well as to provide constructive and well- Internet Use and Job Search: More Evidence reasoned solutions to the problems of the (January 2010); day. In 2010, the Phoenix Center issued the following POLICY PAPERS:  PHOENIX CENTER PERSPECTIVE NO. 10-02, Sabotaging Content Competition: Do  PHOENIX CENTER POLICY PAPER NO. 39, Proposed Net Neutrality Regulations Internet Use and Job Search (January 2010); Promote Exclusion? (March 2010);

 PHOENIX CENTER POLICY PAPER NO. 40,  PHOENIX CENTER PERSPECTIVE NO. 10-03, The Broadband Credibility Gap (June 2010); Non-Discrimination or Just Non-Sense: A and Law and Economics Review of the FCC’s New Net Neutrality Principle (March 2010);  PHOENIX CENTER POLICY PAPER NO. 41, Wobbling Back to the Fire: Economic  PHOENIX CENTER PERSPECTIVE NO 10-04, Efficiency and the Creation of a Retail Market Substantial Profits in the Broadband for Set-Top Boxes (December 2010). Ecosystem: A Look at the Evidence (April 2010); PHOENIX CENTER POLICY BULLETIN SERIES  PHOENIX CENTER PERSPECTIVE NO. 10-05, The Phoenix Center’s POLICY BULLETIN SERIES Fabricating a Broadband Crisis? More is designed to provide a forum for Evidence on the Misleading Inferences from responding to breaking policy issues in a OECD Rankings (July 2010); shorter period of time than our PHOENIX CENTER POLICY PAPER SERIES. The Phoenix  PHOENIX CENTER PERSPECTIVE NO. 10-06, Center published the following POLICY Be Careful What You Ask For (Redux): A BULLETINS in 2010: Comment on the New America Foundation’s Mobile Price Metrics (November 2010);  PHOENIX CENTER POLICY BULLETIN NO. 24, Evaluating Broadband Stimulus and the  PHOENIX CENTER PERSPECTIVE NO. 10-07, National Broadband Plan: Establishing Endogenous Sunk Costs, Quality Expectations for Broadband Rankings Competition and Welfare: A Technical Note (March 2010); and (December 2010); and

 PHOENIX CENTER POLICY BULLETIN NO.  PHOENIX CENTER PERSPECTIVE NO. 10-08, 25, Jobs, Jobs, Jobs: Communications Policy The Impossible Dream: Forbearance After the Phoenix Order (DECEMBER 2010.

PHOENIX CENTER 2010 ANNUAL REPORT 2 CONTRIBUTING TO THE PUBLIC DIALECTIC

In 2010, Phoenix Center scholars again  The Broadband Adoption Index: Improving Measurements and Comparisons of continued to make numerous contributions Broadband Deployment and Adoption, 62 to the public dialectic in a wide variety of FEDERAL COMMUNICATIONS LAW forums. JOURNAL 343 (2010); WEB TRAFFIC:  Quantifying the Cost of Substandard Patents: On average, the Phoenix Center’s web page Some Preliminary Evidence, 12 YALE received approximately 1,200 hits a day in JOURNAL ON LAW & TECHNOLOGY 240 2010. (2010);

SIGNIFICANT APPOINTMENTS AND  Separating Politics from Policy in FCC TESTIMONY: Merger Reviews: A Basic Legal Primer of the “Public Interest” Standard, 18 COMMLAW  Phoenix Center Chief Economist Dr. CONSPECTUS 329 (2010); George Ford remains in top 1% of authors downloaded on the Social Science  Tort Liability For Software Developers: A Network and Phoenix Center President Law & Economics Perspective, 27 JOHN Lawrence J. Spiwak remains in top 2% of MARSHALL JOURNAL OF COMPUTER AND authors downloaded on the Social Science INFORMATION LAW 199 (2010); Research Network;  The Pricing of Pole Attachments:  Phoenix Center Chief Economist Dr. Implications and Recommendations, 9 George Ford continues to serve on REVIEW OF NETWORK ECONOMICS 3 (2010); Connect Alabama by direct appointment of the Governor;  Broadband Credibility Gap, forthcoming COMMLAW CONSPECTUS (2010);  Phoenix Center Chief Economist Dr. George Ford invited to participate in  An Investigation into the Relationship of broadband researcher workshop Retail Gas prices on Oil Company sponsored by National Profitability, forthcoming APPLIED Telecommunications and Information ECONOMICS (2011); Administration; and  The Need for Better Analysis of High  Phoenix Center President Lawrence J. Capacity Services, forthcoming JOHN Spiwak appointed co-chair of FEDERAL MARSHALL JOURNAL OF COMPUTER AND COMMUNICATIONS LAW JOURNAL INFORMATION LAW (2011); committee of the Federal  Broadband Efficiency Index, forthcoming Communications Bar Association. INTERNATIONAL ECONOMIC JOURNAL ACADEMIC PUBLICATIONS (2011);

In 2010, the Phoenix Center had no less than  Expanding the Digital Divide: Network twelve of its papers published, or accepted Management Regulations and the Size of for publication, in leading academic journals: Providers, forthcoming JOURNAL OF APPLIED ECONOMY (2011); and  A Valley of Death in the Innovation Sequence: An Economic Investigation, 18  Broadband Expectations and the Convergence RESEARCH EVALUATION 343-356 (2009); of Ranks, forthcoming TELECOMMUNICATIONS POLICY (2011).

PHOENIX CENTER 2010 ANNUAL REPORT 3 OP-EDS: and Convergence, and Congressional Testimony of Phoenix Center Chief  Bright Lines, Big Problems, FORBES.COM; Economist George S. Ford passim;  The FCC’s Disingenuous “Third Way” on  FCC’s National Broadband Plan cites to Broadband, CNET. both PHOENIX CENTER POLICY PAPER NO. SPEECHES AND CONFERENCE PARTICIPATION 34, The Pricing of Pole Attachments: Implications and Recommendations and the Once again, Phoenix Center staff was asked Phoenix Center’s report prepared for the to present our research at a variety of forums, United States Department of Commerce including: entitled: A Valley of Death in the Innovation  Pike and Fisher Broadband Policy Sequence: An Economic Investigation; Summit;  FCC cites to PHOENIX CENTER POLICY  ITIF Debate on Broadband Rankings; PAPER NO. 19, The Positive Effects of Unbundling on Broadband Deployment in  Broadband Breakfast Club debate on Net the Phoenix Forbearance Order; Neutrality;  Finally, we note that the FCC also took  Texas Policy Institute conference on Net the highly unusual step of dedicating a Neutrality. lengthy post on their official blog about PHOENIX CENTER POLICY BULLETIN NO. OTHER CONTRIBUTIONS: 25, Jobs, Jobs, Jobs: Communications Policy  Lawrence J. Spiwak authored an essay on and Employment Effects in the Information Article III (Federal Judiciary) for a Sector. wonderful project called “Constituting PHOENIX CENTER WORKSHOP ON THE America” which encourages everyone to “Broadband Credibility Gap” read and learn about the Constitution and the Federalist Papers. In July 2010, the Phoenix Center held a workshop to discuss PHOENIX CENTER POLICY SIGNIFICANT CITATIONS IN THE LITERATURE PAPER NO. 40, The Broadband Credibility Gap.  The Phoenix Center was also prolifically Featuring several former FCC officials cited in the academic literature in 2010. (including the General Counsel, Deputy According to Westlaw, the Phoenix General Counsel and Chief of Staff) present Center’s research was cited to at least ten at the time the Commission affirmatively times in various academic journals. declined not to classify advanced services as a common carrier service under Title II of the SIGNIFICANT CITATIONS BY POLICYMAKERS Communications Act, the panelists discussed As always, policymakers continued to rely the merits of FCC’s Chairman Julius heavily on Phoenix Center research in 2010. Genachowski’s proposed “Third Way” By way of example: approach to broadband regulation. In addition, we were honored that FCC  Congresswoman Doris Matsui cites Commissioner Robert McDowell was able to PHOENIX CENTER POLICY PAPER NO. 39, join us to offer his thoughts on this important Internet Use and Job Search. issue. As an added bonus, and as a direct result of this workshop, the Broadband  Federal Communication Commission’s Credibility Gap was accepted for publication 14th CMRS Report cites both PHOENIX in the winter 2010 issue of COMMLAW CENTER POLICY PAPER NO. 21, Competition CONSPECTUS. After Unbundling: Entry, Industry Structure

PHOENIX CENTER 2010 ANNUAL REPORT 4 IN THE NEWS…

In 2010, the Phoenix Center’s work and  IP CARRIER staff were cited prolifically by major news  MULTICHANNEL NEWS and trade media outlets around the world, including:  NATIONAL JOURNAL

 ASSOCIATED PRESS  NETWORK WORLD

 AMERICAN BAR ASSOCIATION JOURNAL  NEW YORK TIMES

 BIG GOVERNMENT  NORTH JERSEY.COM

 BROADCAST ENGINEERING  NATIONAL PUBLIC RADIO

 BROADBAND CENSUS  PC WORLD

 BROADCASTING AND CABLE  POLITICO

 CITIZEN-TIMES  RAPID TV NEWS

 CNBC  SATELLITE WEEK

 COMPUTER WORLD  TECH DAILY DOSE

 COMMUNICATIONS DAILY  TELECOM A.M.

 COMMUNICATIONS AND STRATEGIES  TELECOMMUNICATIONS REPORTS (IDATE)  TR DAILY  CONGRESS DAILY  U.S. FEDERAL NEWS  CONNECTED PLANET  U.S. NEWS AND WORLD REPORT  CONSUMER ELECTRONICS DAILY  VON NEWS  EUCLID INFOTECH  WASHINGTON INTERNET DAILY  ENTERPRISE NETWORKING  WASHINGTON TELECOM NEWSWIRE  FIERCE CABLE  WEBPRONEWS  FORBES  WIRELESS WEEK  FOX NEWS (editorial by Steve Forbes) RADIO:  THE HILL  AMERICA’S MORNING NEWS  HUDSON REPORTER  NATIONAL PUBLIC RADIO (KPPC LOS  IEEE SPECTRUM ANGELES)

PHOENIX CENTER 2010 ANNUAL REPORT 5 ANNUAL U.S. TELECOMS SYMPOSIUM AND JERRY B. DUVALL PUBLIC SERVICE AWARD

On December 2, 2010, nearly 100 The Symposium ended with the presentation of the Phoenix Center’s Annual Jerry B. people from government, academia, industry Duvall Public Service Award to Federal and the media joined the Phoenix Center for Communications Commission Commissioner its 10th Annual U.S. Telecoms Symposium at Meredith Attwell Baker. The Duvall Award the University Club in Washington, D.C. does not seek to recognize the recipient’s This year’s Symposium theme was Promoting personal politics; rather, the Duvall Award Investment, Innovation and Jobs and the goes to the policymaker who most discussions were both substantive and lively. demonstrated the “political courage in, and The Symposium kicked off with the contribution of analytical rigor to, the United traditional “Economists’ Panel.” This year, States telecoms policy debate.” Given the Economists’ Panel included Dr. Tim Commissioner Baker’s long track record of Brennan, Professor of Economics—University promoting sound and principled of Maryland, Baltimore Campus; Dr. policymaking, we can think of nobody who Jonathan Baker, Chief Economist—Federal epitomized this standard more in 2010. Communications Commission; Dr. Joe

Farrell, Chief Economist—Federal Trade Commission; and Dr. George Ford, Chief Economist—The Phoenix Center. As always, the panel was moderated by Dr. Jerry Duvall, Honorary Phoenix Center Chief Economist Emeritus and current FCC International Bureau Chief Economist.

After the Economists’ Panel, we were extremely privileged to welcome Blair Levin, the former Executive Director of the FCC’s National Broadband Plan as the keynote speaker of the Symposium.

The second panel was entitled “Promoting Innovation, Investment, and Jobs.” Panelists included Dr. Paul de Sa, Chief, Office of Strategic Planning and Policy Analysis— Federal Communications Commission; Dr. Michael Mandel, Visible Economy, LLC and Wharton Mack Center for Technological Innovation; Phil Weiser, Senior Advisor for Technology and Innovation—The White House; and Michael Rollins, Managing Director—Citi Investment Research & Analysis.

PHOENIX CENTER 2010 ANNUAL REPORT 6 YEAR IN PICTURES

PHOENIX CENTER 2010 ANNUAL REPORT 7 RESEARCH INTERESTS FOR 2011

2011 promises to bring a wide variety of and how internet use reduces “discouragement” for unemployed Americans. complex broadband and technology policy We intend to continue with such research in challenges. In our continuing spirit of 2011. contributing positively to the dialectic, the Phoenix Center has a series of research projects NETWORK NEUTRALITY: underway designed to educate the public and policymakers on the impact of broadband and Although the Federal Communications technology policy. As always, our research Commission issued “Open Internet” rules at agenda is flexible, thus allowing us to adapt the end of 2010, these rules do not mark the quickly depending on the tenor and focus of end of the debate. In 2011, we intend to the debate at the time. scrutinize the FCC’s rules with a critical eye, as well as to monitor and contribute to the debate SPECTRUM POLICY: as it evolves.

By all accounts, there is a looming “spectrum ALLVID: crisis.” However, while there is broad consensus to make more spectrum available, As part of the National Broadband Plan, the the more difficult and politically sensitive Federal Communications Commission question is who gets the new spectrum? In announced plans to initiate a proceeding to 2011, we intend to study the complex issue of mandate new technology, known as “AllVId”, spectrum caps and the policy consequences of to further the Commission’s statutory the trade-off between the desire for new responsibilities under Section 629 of the entrants in the market against the potential Communications Act. Building on prior efficiency gains from allowing existing players research, the Phoenix Center expects to to acquire additional spectrum. Given the analyze the costs and benefits of the proposed presence of spillover effects and the high fixed rules (expected February-March 2011). and sunk costs associated with the industry, our preliminary results indicate that few firms EVALUATION OF BROADBAND STIMULUS with more spectrum may be socially optimal. As part of the American Reinvestment Act and SPECIAL ACCESS: Recovery Act, Congress allocated approximately $7.2 billion for broadband The FCC has highlighted access to backhaul infrastructure and adoption programs. In and special access lines, particularly in rural 2011, the preliminary data will start to become areas, as a potential focal point of the National available, and we intend to utilize such data to Broadband Plan. As to be expected, some measure the effectiveness of the program. argue that these prices are “too high”, while others contend that prices reflect competitive RETHINKING BROADBAND REGULATION levels. Building on prior research, the Phoenix In 2010, we authored a paper exposing the Center intends to contribute actively in this numerous analytical flaws in the FCC’s new debate. “market power” test used to determine BENEFITS OF BROADBAND: whether forbearance is warranted under Section 10 of the Communications Act. Given The Phoenix Center has, in the past, issued the profound defects in the FCC’s approach, it several papers on the benefits of broadband. is clear that a new paradigm to analyze when These papers include examinations of how regulation is appropriate is certainly due. Internet use reduces depression in the elderly,

PHOENIX CENTER 2010 ANNUAL REPORT 8 MISSION STATEMENT

The Phoenix Center for Advanced Long-Term Goals: Legal & Economic Public Policy Studies is a (1) The Phoenix Center seeks to demonstrate non-profit 501(c)(3) educational and research that consumer welfare is best enhanced organization that studies broad public-policy by promoting free markets, competition, issues related to governance, social and and individual freedom and liberty. economic conditions, with a particular emphasis on the law and economics of (2) The Phoenix Center’s seeks to remind telecommunications and high-tech industries. stakeholders that it is crucial to avoid political hyperbole and instead approach Founded in 1998, the Phoenix Center’s public policy with the analytical rigor and mission is to maximize consumer welfare by solemnity it deserves. promoting free markets, competition, and individual freedom and liberty. (3) The Phoenix Center seeks to promote public confidence in the democratic The Phoenix Center achieves this goal by process, government’s institutions and in providing an honest and credible new voice the free enterprise system. in the public dialectic by supporting objective, solutions-based academic research (4) The Phoenix Center seeks to foster an to the forefront that is unencumbered by environment where citizens can openly political hyperbole or agendas and is instead and vigorously debate today about what well grounded in fact, law and economic kind of a world they want to live in theory. tomorrow.

The “ideal of democracy rests on the belief that the view which will direct government emerges from an independent and spontaneous process. It requires, therefore, the existence of a large sphere independent of majority control in which the opinions of the individuals are formed.”

– Friedrich von Hayek

PHOENIX CENTER 2010 ANNUAL REPORT 9