The Free State Foundation

On May 13, 2008, Free State Foundation President Randolph May announced the addition of five new members to the think tank’s Board of Academic Advisors. Like the initial group of Board members named in January, each of the new members is a distinguished scholar. The new members are: Ellen P. Goodman; Stan J. Liebowitz; Bruce M. Owen; Glen O. Robinson; and Steven S. Wildman. For the full press release, click here.

In a paper released on May 1, 2008 by The Free State Foundation, Bruce M. Owen, a member of FSF's Board of Academic Advisors and one of the country’s foremost regulatory economists, asserts that “regulation of the media reflects not merely broad acceptance of, but insistence on, political rather than market-determined outcomes.” In The Temptation of Media Regulation, Professor Owen demonstrates that there is no justification for the Federal Communications Commission to require unbundling of video programming at either the wholesale or retail level. With respect to the FCC’s current consideration of mandatory unbundling regulation at the wholesale level, after examining data from large and small suppliers of cable network programming, Professor Owen concludes: “Taken together, these studies offer striking evidence that it is not industry practice for suppliers to make ‘take-it-or-leave-it’ offers requiring small cable systems to take all or none of their networks….The FCC seems to be basing a proposal to regulate wholesale bundling of cable networks on a severe misapprehension of marketplace behavior.” Professor Owen is a member of FSF’s Board of Academic Advisors. He is the Morris M. Doyle Professor in Public Policy in the School of Humanities and Sciences and Director of the Public Policy Program at Stanford University and also Gordon Cain Senior Fellow at the Stanford Institute for Economic Policy Research. Previously, he served as the Chief Economist of the Antitrust Division of the U.S. Department of Justice and the White House Office of Telecommunications Policy. For the full news release, click here.

In a new study released by the Free State Foundation, Professor Dennis Weisman criticizes the Federal Communications Commission for in the past “crafting regulatory rules that focus on the control of market power rather than on unleashing the power of markets.” In his paper, “On Market Power and the Power of Markets: A Schumpeterian View of Dynamic Industries,” Professor Weisman poses this fundamental question: “[W]hether most economic regulation of the telecommunications industry – given the rapid rate of technological change and increasing competitive intensity – is still justified.”  He concludes it is not. Professor Weisman explains that, “it is important that policymakers recognize that some of the highest social costs of excessive regulation are likely to be those not directly observable: welfare losses from innovative new services and production processes that are not developed but would have been otherwise.” Read the full press release here.

In comments submitted on February 12, 2008 to the Federal Communications Commission in the broadband practices proceeding concerning network management practices, Randolph May, President, The Free State Foundation, declared, “it is imperative that the Commission proceed very cautiously so as not to be drawn in by the ‘back door’ into adopting net neutrality mandates that it thus far appropriately has avoided adopting on a general basis.” According to May, “if it does get drawn through the back door, the Commission will be on a very slippery slope towards abandonment of the successful policy it adopted in 2002 of creating a ‘minimal regulatory environment’ for broadband services.” The full press release is here.

On January 29, 2008, Free State Foundation President Randolph May announced the think tank's first Board of Academic Advisors. The panel’s members, each a distinguished scholar, are: Robert A. Anthony; Gerald W. Brock; Diane M. Disney; John F. Duffy; Richard A. Epstein; Alfred E. Kahn; John Mayo; James B. Speta; William Van Alstyne; Eugene Volokh; Dennis L. Weisman; and Christopher S. Yoo. The full press release announcing the Board is here.

In a major new scholarly paper, titled “Bundles of Joy: The Ubiquity and Efficiency of Bundles in New Technology Markets,” noted economists Stan Liebowitz and Stephen Margolis explain, in terms highly accessible for even the lay reader, why “market foreclosure, the principal efficiency concern with tying and bundling, is likely to be exceedingly rare.” The Free State Foundation study by Professors Liebowitz and Margolis is published as part of the “Perspectives from FSF Scholars” series, now entering its third volume. Based on their study, the scholars draw the following conclusions: (1) bundling not only occurs frequently, but “it is pervasive in the economy and is the dominant form of sales, for reasons that have to do with efficiencies of a simple and obvious nature: most goods are bundles;” (2) “the conditions required for tying or bundling to create monopoly power for reasons other than product improvement are very restrictive;” and (3) in light of the first two, all proposed unbundling restrictions “should require a demonstration of a high likelihood of actual exclusion and the absence of an efficiency defense.” More pointedly, Professors Liebowitz and Margolis conclude that “telecommunications policies that implement mandatory unbundling should be reconsidered or abandoned.” The press release accompanying the release of the study is here.

As part of its “FSF Distinguished Speaker Series” publications, on November 26, 2007, the Free State Foundation released the luncheon Keynote Address delivered by U.S. Representative Marsha Blackburn (R-TN) at the October 30, 2007, policy conference sponsored by the Free State Foundation and the Institute for Policy Innovation. In her remarks, Rep. Blackburn said: “It should be the free market that decides what works and what does not work, not government intrusion.  And, as the process unfolds, it is going to be critical for the United States Congress and for the Commission to hold the line on light touch regulation.  And to resist the urge to unbundle what is already working in the free market system.” Rep. Blackburn is a member of the House Committee on Energy and Commerce, as well as serving as Assistant Minority Whip and Communications Chairman for the Republican Study Committee in the House. She founded the Congressional Songwriters Caucus. The full keynote address is here.

The Free State Foundation and the Institute for Policy Innovation announce October 30, 2007 conference is set to explore net neutrality and other hot-topic communications policy issues. Senator Jim DeMint, Representative Marsha Blackburn, and FCC Commissioner Deborah Taylor Tate headline an outstanding group of conference speakers. Read the full press release here.  

The Free State Foundation and the Institute for Policy Innovation are co-sponsoring a conference--"The Federal Unbundling Commission?"--on Tuesday, October 30, 2007, on Capitol Hill. The conference will explore whether proposed or adopted regulations requiring broadband service operators to unbundle their networks, content, and applications constitute sound communications policies. Senator Jim DeMint and Rep. Marsha Blackburn, both leading advocates of free market-oriented communications law and policy reform and members of the congressional committees with oversight responsibilities over the FCC, will deliver keynote addresses. FCC Commissioner Deborah Taylor Tate will also deliver remarks. In addition to Sen. DeMint, Rep. Blackburn, and Commissioner Tate, the conference will feature many notable academic scholars and industry experts. For more details and registration information, click here.

Free State Foundation President Randolph J. May submitted comments on August 8, 2007, in the FCC's proceeding considering the regulation of special access services. The comments urged the FCC to consider the market-oriented regulatory principles advocated by FSF and take into account the ongoing technolical and marketplace developments "that are rendering the communications marketplace, including the special access segment, increasingly competitive." The full press release announcing the FCC comments is here.

In reaction to the FCC's action establishing rules for the 700 MHz auction, Free State Foundation President Randolph May released the following statement: “There is an old Chinese proverb to the effect that, ‘A journey of a thousand miles must begin with a single step.’ Today the FCC took not a single step, but rather a giant leap, on a journey backwards towards imposing a common carrier regulatory regime on broadband providers. Unless the open access 700 MHz mandate is reversed, it will be difficult, as net neutrality advocates surely will argue, to draw a line on a principled basis confining net neutrality mandates to one block of wireless spectrum. Too bad the FCC has now abandoned its longstanding position that broadband services should exist in a minimally regulated environment.” 

In a paper entitled Net Neutrality and Spectrum Auctions: Lessons from History, Free State Foundation Distinguished Adjunct Senior Scholar Richard A. Epstein opposes imposition of open access conditions in the FCC's 700 MHz auction. In a paper issued as part of the "Perspectives of FSF Scholars" series, Professor Epstein concludes: "Let the competitive bids in an unencumbered auction constitute the evidence of value.  If the FCC plays the conditions game, it will reduce both market and social value of the spectrum. The bottom line: The FCC should not impose any open access/net neutrality conditions in the 700 MHz auction.” According to Epstein, "No matter what Google, AT&T, or anyone else may think, this is one case in which the fewer the conditions, the stronger the property right.  Hence the following progression holds:  The stronger the property right, the greater the return from the spectrum to be auctioned, and the greater the enhancement of long-term consumer welfare.” Richard Epstein's esssay may be accessed here.

In a press release issued on July 19, 2007, Free State Foundation President Randolph May expressed concern that AT&T is now apparently embracing Google's plan that a portion of the soon-to-be auctioned 700 MHz spectrum be subject to a mandatory open access operating requirement. Read the full FSF press advisory here, and AT&T's statement here.  

In comments filed on July 9, 2007 at the Federal Communications Commission, Randolph May, President of The Free State Foundation, stated that in today’s dynamic, fast-changing digital communications environment, it is especially important that the Commission not take an unduly narrow view of what constitutes a relevant market for the purpose of assessing competitive impacts. According to May, “absent strong and reliable indications that a merger will harm consumers, if the FCC does take such an unduly narrow view under the rubric of its vague public interest authority, it is likely to stifle investment in new communications networks and innovation in new services and applications.” In that event, “consumers will be the ultimate losers.” Concluding his comments, May stated: “In considering the proposed merger of XM and Sirius, the FCC should have in mind the dynamic nature of the communications marketplace, including the competitive and rapidly-changing landscape of the audio services market. Because satellite radio providers compete for listeners with terrestrial broadcasters, Internet radio, cell phones and other wireless technologies, and portable music devices, the Commission should acknowledge the reality of this broader audio services and entertainment marketplace. An unduly narrow determination that satellite radio providers compete in a separate and distinct would have negative ramifications for the success of further regulatory reform efforts directed towards relaxation of the Commission’s ownership rules and elimination of other outdated regulatory requirements.”

In a study released on June 4, 2007, Randolph J. May, President, The Free State Foundation, concludes that the “continuing calls to re-regulate ‘special access’ services that the Federal Communication Commission already has determined should be subject to reduced regulation should be viewed with considerable skepticism.” In the study, entitled “Special Access and Sound Regulatory Principles: The Market-Oriented Case Against Going Backwards,” May examines special access services in the broader context of certain fundamental regulatory principles having to do with the circumstances under which it is appropriate to employ regulatory price controls versus reliance on market forces. The purpose of the paper is not to draw definitive conclusions concerning the competitiveness of any particular special access market, but to put the public policy debate surrounding special access into a broader context that is relevant to considering regulatory issues even beyond the case of special access. Read the full news release here.

FCC Chairman Kevin Martin has renewed his push for a government-mandated cable a la carte regime in which cable subscribers would be allowed to pick and choose the individual channels to which they wish to subscribe and maintains such a regime likely would be constitutional. In a commentary published on May 22, 2007 on CNET, entitled “The Constitution, A La Carte,” Randolph May, President of The Free State Foundation, responds: “By interfering with the discretion of cable operators to present their programming as they prefer, mandatory ‘a la carte’ very likely violates the First Amendment’s free speech guarantee.” May says, “the problem with Martin’s renewed push for a la carte—apart from serious matters of public policy raised by such direct government interference in a competitive marketplace—is that the government may not take an a la carte approach as to which constitutional provisions it chooses to follow.”


In testimony delivered on April 30, 2007 at a hearing before the New York City Council Committee on Technology in Government, Randolph J. May, President, The Free State Foundation, declared “net neutrality mandates would deter innovation and new investment, dampen competition, and decrease overall consumer welfare.” The Council Committee is considering a Resolution that calls upon the U.S. Congress to codify strong net neutrality principles. May testified that there is little dispute that there have been only a few isolated instances of claimed net neutrality-like abuses, and those have been quickly remedied. “In other words,” according to May, “the marketplace presently is working to protect consumers and the process of competition without Congress passing new laws.” Read the full press release here.

On April 16, 2007, Free State Foundation President Randdolph J. May published a commentary in CNET entitled, "Is Uncle Sam Serious About Sirius-XM?" In the essay, May says: "Keep a keen eye: the way in which this merger is handled will tell much about whether our government officials grasp how dramatically communications and information-services markets are changing." According to May, "there is a good argument that, in today's digital marketplace, the relevant market for purposes of assessing the [Sirius-XM] merger's impact is not the narrow satellite radio market, but rather a broader audio entertainment and information market." May concludes: "Increasing consumer choice depends on robust investment and innovation in new products and services. And robust investment and innovation ultimately depend on government officials appreciating that they should be wary of intervening in today's dynamic, increasingly competitive communications marketplace." 

Randolph J. May, President of The Free State Foundation testified on March 20, 2007 before the Senate Finance Committee and the House Economic Matters Committee of the Maryland General Assembly on identical bills which deny the Maryland Public Service Commission jurisdiction to regulate VoIP and other Internet-Protocol services.  In his testimony, which may be read in full here, May stated: “SB 864 and HB 1379 are simple but nevertheless very important bills. In essence, they make clear that the Maryland Public Service Commission has no jurisdiction to regulate Voice over Internet Protocol (“VoIP”) and other Internet Protocol-enabled (“IP-enabled”) services. This is a forward-looking, deregulatory approach which constitutes sound policy as well as sound law. Passage of these bills will help establish Maryland as a state with a regulatory climate that is conducive to the development, promotion, and growth of new broadband and Internet-related technologies and businesses.” See the full press release here.

In a new study released today by The Free State Foundation, Bruce M. Owen, one of the country’s foremost regulatory economists and public policy scholars, concludes that even if consumers faced the prospect of a last mile monopoly and discrimination in broadband services --“a doubtful proposition at best”-- still, “the sad lesson of history is that the ‘net neutrality’ remedy is far worse than the disease.” In his paper, The Net Neutrality Debate: Twenty Five Years After United States V. AT&T and 120 Years After the Act to Regulate Commerce, Professor Owen explains that net neutrality proponents “have simply resurrected the traditional but uncommonly naïve ‘common carrier’ solution to the threats they fear.” Calling on decades of experience studying communications and other regulated industries as a scholar and public servant, Owen says more than a century of economic and regulatory history demonstrates that “net neutrality policies could only be implemented through price regulation, an approach that has generally failed, in the past, to improve consumer welfare relative to what might have been expected under an unregulated monopoly.” See the full press release here.

On March 5, 2007, Senator Alex Mooney (R-District 3) introduced Senate Bill 995, the “Maryland Funding Accountability and Transparency Act of 2007” in the Maryland Senate. The bill is identical to House Bill 1252 introduced in the House of Delegates by Delegate Warren Miller (R-District 9A). The bill would require Maryland to establish a “single, searchable website, accessible to the public at no cost,” that allows Maryland citizens to easily track state funding of grants, loans, awards, and other forms of financial assistance. Randolph May, President of The Free State Foundation, lauded Senator Mooney and Delegate Miller for taking the lead in proposing legislation to bring more transparency and accountability to Maryland government: “In the age of the Internet, there is no reason why Maryland residents should not be able to readily track spending by their government by accessing one single state website that contains such spending information in easily searchable form. The proposed ‘Maryland Funding Accountability and Transparency Act’ is a ‘good government’ measure that should receive bipartisan support. After all, it’s the citizens’ tax dollars that the government is spending, and there is no reason why Maryland’s legislators should make citizens jump through hoops to find spending information that every citizen has a right to know.” Read the full release here. 

Randolph J. May, President of The Free State Foundation, presented testimony today to the Economic Matters Committee of the Maryland House of Delegates, which held a hearing on House Bill 1069, a so-called net neutrality bill.  In his testimony, which may be read in full here, May stated: “Enactment of the bill, which for the first time would regulate Internet access on a public utility-like basis, would be counterproductive and is unnecessary to protect Maryland consumers. Indeed, its passage ultimately would be quite harmful to consumers. In the process of attempting to mandate that the Net be neutral, the bill would, in fact, move in the direction of neutering the Net.”

On February 22, 2007, Delegate Warren E. Miller (R-District 9A), joined by 11 other co-sponsors, including Minority Leader Anthony O’Donnell and Minority Whip Christopher Shank, introduced House Bill 1252, the “Maryland Funding and Accountability and Transparency Act of 2007.” The bill would require Maryland to establish a “single, searchable website, accessible to the public at no cost,” that allows Maryland citizens to easily track state funding of grants, loans, awards, and other forms of financial assistance. Randolph May, President of The Free State Foundation, hailed the bill’s introduction, stating: “In the age of the Internet, there is no reason why Maryland residents should not be able to readily track spending by their government by accessing one single state website that contains such spending information in easily searchable form. HB 1252 is basically a ‘good government’ measure that should receive bipartisan support. After all, it’s the citizens’ tax dollars that the government is spending, and there is no reason why Maryland’s legislators should make citizens jump through hoops to find spending information that every citizen has a right to know.” Read the full FSF news release here.

In a new study released on February 19, 2007 by The Free State Foundation, Northwestern University School of Law Professor James B. Speta concludes that “net neutrality is the quintessential federal issue.” Professor Speta’s paper, Net Neutrality Is A Federal Issue, explains that applications and content on the Internet are distributed nationally and internationally. Almost never do users access only in-state websites. Furthermore, broadband Internet access providers have national footprints, design their networks based on national business practices, and advertise in national media. According to Professor Speta’s legal analysis, “the FCC has already defined what it considers to be the best net neutrality regime: a general statement of policies to be applied, if necessary, on a case-by-case basis.” For this reason, “State attempts to regulate in this area are therefore preempted.”

On January 18, 2007, the Bush Administration’s Office of Management and Budget released a thus far little noticed, but very significant bulletin establishing “good guidance practices” for Executive Branch agencies to follow when they issue guidances. Guidances typically take the form of policy statements, manuals, interpretations, memoranda, circulars, Question and Answers, and the like. Unlike rules issued in accordance with Administrative Procedure Act (APA) notice-and-comment requirements, guidance documents without any public notice or solicitation of public comment. In an essay entitled New Executive Order and OMB Bulletin Focus on Agency Guidance, Free State Foundation Senior Fellow Robert Anthony analyzes the new OMB bulletin and especially lauds its “insistence on the nonbinding effect of guidances,” calling this insistence “of signal importance.” As Professor Anthony, explains, because guidance documents are not generally promulgated in compliance APA notice-and-comment requirements, they cannot legitimately bind the public, even though they often use language that may lead the public and regulated parties to conclude otherwise. Emphasizing the importance to the rule of law of the new OMB Bulletin, Professor Anthony concludes: “It is not too much to say that a distinction between democracy and autocracy depends on whether government observes democratically-legislated authority and procedures when it places rights and obligations upon its citizens.  Our federal system, with some exceptions, requires APA notice-and-comment for rules of general applicability if they are to have the force of law – that is, if they are to be binding on members of the public.  Guidances that are not so promulgated cannot legitimately bind.”

In this commentary published by The Examiner on January 22, 2007, Free State Foundation Research Associate Trevor Bothwell urges Maryland to follow the lead of Senators Tom Coburn and Barack Obama at the federal level and put in place “a user-friendly, easily searchable, up-to-date database that allows Maryland taxpayers to readily track how the government is spending their money.” Last fall, on a bipartisan basis, Congress adopted the Federal Funding Accountability and Transparency Act sponsored by Senators Coburn and Obama. Bothwell says Marylanders too should have a web-based tool that allows them easily to perform searches on spending by state senator, delegate, county, agency, institution, or business to track those either dispensing or receiving taxpayer revenue. “Though it may not eliminate waste,” Bothwell states, “such a tool would at least cast sunlight on spending.” Read the full commentary here.

In a commentary published on January 21, 2007 in the Washington Times, Free State Foundation President Randolph J. May contends that two of 2006’s hottest communications policy topics—net neutrality and the AT&T-BellSouth merger---illustrate that “much communications policy thinking continues to rest on foundations that run against the grain of our constitutional culture.” The essay explains that the broadcast and common carrier regulatory paradigms that dominated communications policy thinking throughout the twentieth century, and which continue today to hold much sway, implicate First Amendment, Fifth Amendment, and separation of power values. “It may be understandable that in an era of limited competition, communications policies were adopted which strained constitutional norms,” May concludes. “But in today's era of information abundance, there is no reason to allow such counter-constitutional strains to persist. For anyone looking for a roadmap for reforming communications policy, the Constitution is a good starting point.” Read the commentary here.

Randolph J. May, President of the Free State Foundation, published a commentary on CNET on January 9, 2007, entitled, "Sidestepping the Net Neutrality Boondoggle." In the commentary, May commended Michigan for enacting new video franchise reform legislation, while rejecting an attempt to add a net neutrality mandate to the bill. May noted that, unfortunately, Michigan Governor Jennifer Granholm told Google founder Larry Page that Michigan would consider a bill to impose net neutrality mandates in 2007. In his commentary, May concludes: "In 2007, more states should join Michigan and the other nine states that already have enacted video franchise reform laws. But it is important they do so without adopting net neutrality mandates that, in effect, regulate the Internet and stifle new broadband investment." The CNET commentary may be accessed here.

In a new "Perspectives from FSF Scholars" published on January 8, 2007, Free State Foundation Guest Scholar Christopher Yoo critiques the merger process used by the Federal Communications Commission to review the AT&T-BellSouth merger. In order to get the merger approved, AT&T agreed on a "vonluntary" basis to the imposition of a new neutrality condition. Professor Yoo, who is Director of the Technology and Entertainment Law Program at Vanderbilt University, explains that the FCC's merger review process results in important policy issues being addressed without public scrutiny. He concludes: "Regardless of whether net neutrality is ultimately addressed by Congress or the FCC, this debate should be given the benefit of the complete administrative and legislative process. A policy issue of such importance deserves no less." Professor Yoo's commentary is here.

Free State Foundation President Randolph J. May argues in the most recent issue of the Federalist Society's Engage magazine that the imposition of net neutrality have serious First Amendment implications.  In his essay, May examines the First Amendment jurisprudence relevant to net neutrality mandates and concludes: "This is an instance in which greater appreciation for free speech values not only will be consistent with our constitutional heritage, but also will lead to sounder communications policy." Read the essay, "Infringing Free Speech in the Digital Age: Net Neutrality Mandates" here.

The Free State Foundation is proud to republish, courtesy of the San Diego Law Review, the very important article, “Liberty versus Property? Cracks in the Foundation of Copyright Law,” by FSF Distinguished Adjunct Senior Scholar Richard A. Epstein. For many years, intellectual property has been under attack by those who argue, among other things, that its protection is inconsistent with liberty. For example, it is contended that protection of copyrights violates the free speech rights of those who wish to use copyrighted material. In this essay, Professor Epstein concedes a natural tension between liberty and property. But ultimately he rejects the position that liberty and property—including intellectual property—are at odds. He does so only after painstaking examination of the strength of the claims of both liberty and property, and there is much wisdom to be gained from Professor Epstein’s intellectual discourse. Professor Epstein’s full biography may be found here. The full article may be found here.