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 $10/month? 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? -Declan (PS: Note Hundt's email address is rhundt@fcc.gov.) ********* (Keystroked by declan@well.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 -- rhundt@fcc.gov. 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 access. [...] "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] ###