Category: regulation

FCC Publishes Net Neutrality Rules, Lawsuit Filed Immediately

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This is not a surprise.

The two most common types of broadband providers in the United States, telcos and cable companies, have predicated their business models on monopoly power and the extraction of rents.

Net neutrality closes off a potential sources of rent, hence the lawsuit:

While the Federal Communications Commission passed its net neutrality rules on February 26, they weren’t published in the Federal Register until today.

The publication means a couple of things: the rules go into effect 60 days from today, and parties that oppose the rules have 10 days to file lawsuits against the FCC. Almost immediately after publication, a trade group representing ISPs called USTelecom filed suit in the US Court of Appeals for the District of Columbia Circuit.

USTelecom’s petition said the FCC’s ruling is “arbitrary, capricious, and an abuse of discretion” and “violates federal law, including, but not limited to, the Constitution, the Communications Act of 1934, as amended, and FCC regulations promulgated thereunder.”

You may recall that this same group sued the FCC over the net neutrality rules last month. That was done just in case the 10-day deadline could be applied after the rules were posted to the FCC’s website, which happened before publication to the Federal Register. In either case, the initial challenge is mostly a procedural matter; detailed briefs laying out a legal argument against the FCC’s rules will probably come this summer.

Thankfully, the DC Court of Appeals, (technically the United States Court of Appeals for the District of Columbia Circuit), the most likely venue for a suit, has become significantly less right wing with recent judicial appointments.

I expect this to end up at the Supreme Court though.

New York City Wants to Treat Financial Advisers Like Cigarettes

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Basically, they are suggesting that financial advisers be labeled like cigarettes:

Last week, New York City Comptroller Scott Stringer unveiled a new plan to regulate financial advisers, the first of its kind, that tries to protect the average investor from advisers who don’t have to put their clients’ best interests first.

Currently, the regulations that apply to financial advisers have a carve out for broker-dealers who can give financial advice but don’t have to act as what is called a fiduciary. What that means in practice is that they can recommend investment products to their clients that serve to make them more money but aren’t necessarily the best or right option for their clients. A recent White House report estimates that this conflicted advice costs workers who invest their savings about $17 billion each year.

Stringer has proposed that New York State pass legislation that would require financial advisers to disclose whether or not they are fiduciaries and whether or not they have to put a client’s interests ahead of their own. Brokers, financial planners, and retirement advisors who don’t follow the fiduciary standard, which means put their clients’ interests first, would have to state at the outset: “I am not a fiduciary. Therefore, I am not required to act in your best interests, and am allowed to recommend investments that may earn higher fees for me or my firm, even if those investments may not have the best combination of fees, risks, and expected returns for you.”

“Like putting a warning label of a package of cigarettes, this would be a warning label for people who want to protect their life savings,” Stringer told ThinkProgress. “If you’re working for a company that’s about the company’s product and not about your client, we want you to own up to that.” The rule, he pointed out, wouldn’t say that these advisers can dole out advice to those who want it, but that they have to clarify the standard they follow.

………

States can’t have a stronger fiduciary standard than the federal regulations. But they do have the authority to regulate disclosure. Stringer’s proposal, while not as strong as the federal one, could have an impact. “The disclosure they’ve proposed is pretty stark, which improves the chances that it would be effective,” Roper said. “At least it’s not a bunch of legalese.” The average investor, usually someone seeking out advice for retirement planning, should be able to understand the warning label that Stringer has laid out.

That clear language could steer people away from investors who may not serve their needs. “This might make them think…maybe I should go ask someone else,” Hiltonsmith said. “It could actually change the market a little bit and drive people toward fiduciary advisers.”

Seeing as how the financial industry makes a lot of its money by exploiting these ambiguities, I can understand how they will oppose this tooth and nail.

Clearly, Regulatory Capture is a Myth

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What a regulator fellating the industry looks like

Matt Taibbi weighs in on comments made by Andrew Bowden, the SEC’s Director of the agency’s Office of Compliance Inspections and Examinations, at a Stanford Conference of private equity.

Bowdon’s comments are best described as obsequious, and unfortunately for him, it was caught on video:

This is courtesy of Yves Smith over at Naked Capitalism, who’s been following the strange story of SEC Examination chief Andrew Bowden’s evolving position on financial corruption for a while.
That story blew up recently in a remarkable public appearance by Bowden, in which the would-be enforcement official cravenly compliments the industry he supposedly polices and then — get this — jokingly puts forward his own son as a candidate for a job in private equity. On video. You won’t see a more brazen example of regulatory capture anywhere.

Some brief backstory. Just a little under a year ago, Bowden, the SEC’s Director of Compliance Inspections and Examinations, gave a speech that was remarkably, unusually critical of the Private Equity field. Bowden had conducted a study of the Private Equity business and found that over half of the companies they looked at were guilty of ripping off their clients:

By far, the most common observation our examiners have made when examining private equity firms has to do with the adviser’s collection of fees and allocation of expenses. When we have examined how fees and expenses are handled by advisers to private equity funds, we have identified what we believe are violations of law or material weaknesses in controls over 50 percent of the time.

To fully explain what Bowden is talking about here would require a much longer article, but the basics go something like this.

Private Equity reptiles like Mitt Romney make their living borrowing huge sums of money, millions and billions, from investors called “limited partners.” They then take that borrowed money and acquire companies with that cash, sometimes with the company’s consent, sometimes without it.

The ostensible object of the exercise (at least, this is the way folks in the Private Equity business would describe it) is to make money for the limited partners by acquiring flawed firms, turning them around, and channeling the profits from the reborn target firm back to the investors.

However, from another point of view, the more immediate object of the exercise is to make money for the Private Equity firm. This can be achieved in virtually countless ways once these takeover parasite-pirates have latched on to their target. But the most reliable way of making cash is to soak the acquired company for huge masses of fees, both legit and not.

………

Anyway, last year, Andrew Bowden at the SEC found that over half of the PE/LBO firms he looked at were doing something wrong with fees.

………

The scam here, as Yves Smith points out, is that the investors think that the Private Equity firm is paying for these managers, while in fact they’re being paid for by the acquired company. As Smith says, this scheme essentially robs the investors:

From an economic perspective, every dollar that comes out of a portfolio company this way is effectively stolen from the limited partner investors, since they would otherwise have the first claim on the portfolio companies’ cash flows.

All of which is a complicated way of saying the following: Takeover Artist Jerks use hidden fees to rip investors off.

Last May, Bowden, a senior SEC official, described this problem as almost epidemic. The SEC looked at 150 companies and over half were guilty of something.

A year later? They’re not so worried.

It raised some eyebrows over the course of last summer and fall when the SEC did not follow up on Bowden’s remarks.

Even some Private Equity trade publications began to wonder aloud where the beef was, noting that “there hasn’t been much additional commentary” from the SEC since Bowden’s aggressive speech last May.

Bowden himself seemed to walk back some of his comments in an interview last September. “Anecdotally,” he said, “I would say there have been some changes in the behavior on the part of funds and investors and that’s all for the good.”

Anecdotally? It is a very odd thing to hear a regulator in the middle of a granular, industry-wide examination say that he’s heard that things are getting better. Regulation by rumor is not your typical enforcement MO.

By this month, Bowden had achieved a complete 180, telling a conference of PE professionals that their business was just “the greatest.”

This is Bowden on March 5th, on a panel for PE and Venture Capital issues at Stanford. Check out how he pooh-poohs the fact that his SEC has seen “some misconduct,” before he goes on to grovel before his audience:

………

Not the usual posture you’d expect from an enforcement official. He likes the Private Equity business! They make a lot of money! They help people! And that thing about half of those businesses committing fee abuses, that’s just “some misconduct” we found last year. No big deal!

It got worse, though:

Bowden: And so my view on the small ones is, I still think this is one of…I tell my son, I have a teenaged son, I tell him, “Cole, you want to be in private equity. That’s where to go, that’s a great business, that’s a really good business. That’ll be good for you.”

So for me personally, as we share our opinions…

Questioner [interrupting] I’d love to hire your son, by the way. That’s a deal.

Bowden’s comments certainly raised a few eyebrows. The LA Times wrote quite critically about them, as did a few other outlets.

There are some people who will say it’s easy to overreact to something like this. If you listen to the tape, Bowden makes his comments in a joking manner, and everyone laughs. It’s not like he brought his son onstage and had him hand out resumes after the speech.

But no government regulator with his or her head screwed on correctly would ever go near a joke like that in public. Even if it’s not what it very much appears to be, it sounds incredibly bad.

And, worse, it reveals an attitude that’s absolutely poisonous among regulators, this fawning worship of people on Wall Street who maybe break a few rules, but that’s okay, because they make tons of money! Can you imagine Elliott Ness giving a speech gushing over what nice cars Al Capone drives? It’s revolting.

It’s not necessary for regulators to hate the greedy bottom-liners who go around toying with peoples’ jobs and livelihoods using borrowed money.

It’s not even necessary for regulators to hate those same rich takeover artists for paying half the taxes of most ordinary people, because our bought-off government refuses to close the loophole that allows Mitt Romney to call the money he makes “carried interest” instead of income.

We don’t need regulators to be out to get anyone. But is a healthy indifference too much to ask? Do we really need for even the regulators to slobber over these people?

Even if what he said was a joke, the fact that he could make this statement in a room full of potential targets for his investigations, it is a slam dunk for regulatory capture.

I don’t know if Andrew Bowden is particularly good at his job.

At this point, I don’t care.

His head needs to be metaphorically put on the end of a pike as a warning to others.

Fire him now.

How the Creators of Bitcoin Blew It, Part LXIX

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The good folks come up with yet another problem with Bitcoin, this one deriving from a complete lack of understanding of hundreds of jurisprudence.

This could mean that if a Bitcoin holder has a claim against them, and makes a purchase or a money transfer with Bitcoin, whoever received the funds may be legally required to return the money, even if the person is many transfers down the chain of custody:

At cryptocurrency and fintech conferences, FT Alphaville often hears Bitcoin enthusiasts make the assertion that Bitcoin is superior to fiat currency because it eliminates debt from the monetary system.

But this, of course, is a fallacy.

Bitcoin may have the potential to create a fully-funded reserve system, but it certainly doesn’t eliminate debt from any system.

At best, Bitcoin’s public ledger records a transfer of digital access rights in the eyes of the clearing network. It does not, however, record or see the terms and conditions of that transfer.

Indeed, as far as the clearing network is concerned all it knows is that a transfer has occurred. Party A’s wallet has been debited while party B’s wallet has been credited.

This is something akin to witnessing a physical coin being passed from one hand to the other. Yet what the process doesn’t do is log the conditionality of the transfer — which is still the subject of private agreement and contract law.

……… [snipped a Soprano’s based loan sharking example]

As far as contract law is concerned, even if Satoshi Dice received the bitcoin in good faith from Soprano’s debtor, Soprano himself (despite his unorthodox shake-down tactics) retains a right to seize his property back. And if they passed it on, he can pursue the next party. And so on. Especially since the bitcoin network makes it so easy to follow the trail due to the public nature of the ledger. Eventually, if the coin ends up with a high-value investor or institutional account whose identity is known to the system a formal claim can be made by means of the judicial system.

It’s these sorts of preceding property claims that the bitcoin system not only fails to eliminate, but arguably empowers by making the paper trail so incredibly transparent. But to what degree is the law really on Tony Soprano’s side when it comes to his claim? (And we’re not referring to his violent retrieval methods, which obviously remain illegal.)

George K Fogg at law firm Perkins Coie has been thinking about the problem of past claims (or liens) on bitcoins for nearly 14 months now.

His conclusion: under the United States’ UCC code (uniform commercial code) as long as bitcoins are treated as general intangibles, no high value investor can be sure that an angry Tony Soprano won’t show up one day to claim that the bitcoins they thought they received in a completely unencumbered manner are actually his. In fact, it’s only if and when Tony Soprano publicly renounces his claim to the underlying bitcoin collateral he is owed that the bitcoins stand a chance of being treated as unencumbered. Until then, a hot potato claim risk exists for every future acquirer of Soprano’s bitcoin.

Indeed, given the high volume of fraud and default in the bitcoin network, chances are most bitcoins have competing claims over them by now. Put another way, there are probably more people with legitimate claims over bitcoins than there are bitcoins. And if they can prove the trail, they can make a legal case for reclamation.

………

The irony of all this for anti-government minded Bitcoin investors is that it’s only by transferring bitcoins into the established financial system that they can be sure to be protected from outstanding Tony Soprano claims on their bitcoin.

As Fogg notes:

My libertarian friends have a belief they have created something that is outside of any statutory governance, and my response is you have created something novel that can help in transferring value across borders but you can’t pretend that the UCC doesn’t exist and because it does exist it affects bitcoin. Bitcoin is governed by the UCC. You can be an ostrich and pretend that it’s not covered by it, or you can address that it is in fact covered by the statute and find a way to solve the problem.

What a surprise.

A security is created by some libertarian idiot who thought that it could be used to leave our society for Galt’s Gulch.

Not so much.

STEM Shortage, My Ass!

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For years, various industries have claimed that there is a shortage of STEM (Science, Technology, Engineering, and Math) employees in asking for training subsidies and visas (H-1B and L-1).

People on the other side have observed that colleges and universities are pumping out more than enough graduates, and that the lobbying for subsidies for companies to hire STEM workers in order to drive the cost (wages) of technical employees down.

Well, it appears that notwithstanding the claims of a worker shortage STEM graduates cannot find jobs:

All credible research finds the same evidence about the STEM workforce: ample supply, stagnant wages and, by industry accounts, thousands of applicants for any advertised job. The real concern should be about the dim employment prospects for our best STEM graduates: The National Institutes of Health, for example, has developed a program to help new biomedical Ph.D.s find alternative careers in the face of “unattractive” job prospects in the field. Opportunities for engineers vary by the field and economic cycle – as oil exploration has increased, so has demand (and salaries) for petroleum engineers, resulting in a near tripling of petroleum engineering graduates. In contrast, average wages in the IT industry are the same as those that prevailed when Bill Clinton was president despite industry cries of a “shortage.” Overall, U.S. colleges produce twice the number of STEM graduates annually as find jobs in those fields.

In the face of these stark facts, we now see several studies that seem to be desperate Hail Mary passes, using rather unconventional means to find “shortages.” Some analysts do this by expanding the definition of STEM jobs – traditionally those involved in innovation, discovery and development – to include air conditioning technicians and even some retail jobs to make the case that this workforce is large and growing. Without any coherent meaning, such analyses now serve only rhetorical purposes to advance particular legislation.

Cries that “the STEM sky is falling” are just the latest in a cyclical pattern of shortage predictions over the past half-century, none of which were even remotely accurate. In a desert of evidence, the growth of STEM shortage claims is driven by heavy industry funding for lobbyists and think tanks. Their goal is government intervention in the market under the guise of solving national economic problems. The highly profitable IT industry, for example, is devoting millions to convince Congress and the White House to provide its employers with more low-cost, foreign guestworkers instead of trying to attract and retain employees from an ample domestic labor pool of native and immigrant citizens and permanent residents. Guestworkers currently make up two-thirds of all new IT hires, but employers are demanding further increases. If such lobbying efforts succeed, firms will have enough guestworkers for at least 100 percent of their new hiring and can continue to legally substitute these younger workers for current employees, holding down wages for both them and new hires.

The problem is not that there is a shortage of tech workers, it’s that employers want them on the cheap, so they can spend the money of obscene bonuses for upper management, stock buybacks, and lobbying Congress.

F%$# that.

Time to Panic!!!!!!!!

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The finance world is freaking out because the latest Federal Reserve statement has dropped the word, “Patient,” from the text. (See here, here, and here)

It’s not a change in policy, it’s simply making a bit more likely that will make a statement that they might change policy some time in the future, or, as Fed Chair Janet Yellen said, “Just because we removed the word ‘patient’ doesn’t mean we’re going to be impatient.”

It’s kind of a tempest in a teapot.

FCC Net Neutrality Order Rolls Out

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Seriously. What can I do but point you to the telecommunications regulatory deity Harold Feld comments regarding the final rule.

The short version of this is:

  • The rules go to the Office of Information and Regulatory Affairs (OIRA) for a review under the paperwork reduction act, but this likely just a formality, taking 1-2 weeks.
  • The rule should be published in the Federal Register in the next 2-6 weeks.
  • It will technically go into effect 60 days after publication.
  • Law suits will almost certainly be filed after publication in the Federal Register and before it takes effect, and it is also likely that litigants against the FCC would request an injunction.
  • The court hearing this will likely be the DC Circuit.

My guess is that would end up at the Supreme Court, though SCOTUS might simply refuse to hear the case, and let the district or appellate court decision stand.

It’s Bank Failure Friday!!! (on Sunday)

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And here they are, ordered, and numbered for the year so far.

  1. Doral Bank En Espanol, San Juan, PR

Full FDIC list

I’m not sure how much this bears on banking for the rest of the US.

I am vaguely aware of issues with the Puerto Rican economy, particularly with regard to their budget and debt service for their state owned enterprises.

So, here is the graph pr0n with last few years numbers for comparison (FDIC only):

Supreme Court Rules that Industry Dominated Regulatory Panels Can Be Sued for Antitrust Violations

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In North Carolina, the State Board of Dental Examiners is pretty much run by and for dentists.

When non-dentists started offering cheaper tooth whitening services, the board shut them down.

The Supreme Court has allowed state governments to engage in anti-competitive actions for over 70 years, and the question here was whether a something like the North Carolina State Board of Dental Examiners, where the inmates were running the asylum, deserved deserved immunity from antitrust enforcement.

The Supreme Court, and the answer was no:

State licensing boards composed of market participants do not enjoy automatic immunity from antitrust laws, the Supreme Court ruled on Wednesday. The decision in North Carolina Board of Dental Examiners v. Federal Trade Commission affirms the Fourth Circuit and deals a setback to an increasingly common form of regulation.

 State action antitrust immunity

 Since 1943, certain forms of state action have been immune from the antitrust laws. Accordingly, state legislatures may pass laws with anticompetitive effects. Several important Supreme Court cases since then have addressed the doctrine of state action immunity and helped to define its contours, particularly as it applies to actions outside state legislatures.

 Antitrust immunity generally covers non-state actors only if the state both (1) clearly articulates the anticompetitive policy, and (2) actively supervises the policy. This case deals with the second requirement. If a professional licensing board is a state agency, must another state actor supervise the agency in order for the agency to be immune from the antitrust laws?

 The dental board

In North Carolina, the legislature delegated regulation of dentists to a dental board. By state law, practicing dentists must fill a majority of the seats on the dental board.

This type of “self-regulation” is common among state licensing boards. But it has the natural tendency to become anticompetitive. Members of a guild frequently want to keep insiders in, keep outsiders out, and prop up the profession. A broad range of modern professions fall under professional licensing boards, including not just doctors, lawyers, and dentists, but also interior designers, real estate agents, floral designers, and hair braiders.

 In this case, the dental board tried to exclude non-dentists from the market for teeth-whitening services after dentists complained about the low prices non-dentists charged for teeth whitening. It sent threatening letters to non-dentists who offered teeth-whitening services and even encouraged mall operators to kick out kiosks used for teeth whitening.

The dental board’s actions were not supervised by any state officials from North Carolina other than the members of the dental board itself. On these facts, the FTC took action against the dental board. The FTC and the Fourth Circuit both rejected the dental board’s attempt to invoke the defense of state action immunity.

 No immunity for the dental board controlled by dentists

In a six-to-three opinion written by Justice Anthony Kennedy, today the Supreme Court affirmed the Fourth Circuit, holding that the dental board is not immune from the antitrust laws.

The Court’s opinion explains that even though the dental board is an agency of the state, its actions must still be supervised by the state in order to enjoy antitrust immunity. The “formal designation given by the States” does not itself create immunity. Here, the board is controlled by market participants in the same occupation that the board regulates. “When a State empowers a group of active market participants to decide who can participate in its market, and on what terms, the need for supervision is manifest.”

Where this might be most significant is in boards for doctors and state bars.

I am reminded of the case of Closings, Inc. in Massachusetts, which attempted to offer low cost closings for house sales in the commonwealth.

The state bar banned them, even though they employed lawyers to do the work, nominally because they were a corporation, rather than a partnership, and the state courts agreed.

What is was really about was that they were offering services for less than half what the law firms were charging, and as a result, they had achieved a 40% market share, and the lawyers did not want to lose what was easy money for what was a routine operation that should never have required a law degree.

These days, with a plethora of services that offer assistance for routine legal services online, I hope that we see a number of complaints filed against state bars.

FCC Does the Right Thing, Part Two

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The Federal Communications Commission today voted to preempt state laws in North Carolina and Tennessee that prevent municipal broadband providers from expanding outside their territories.

The action is a year in the making. FCC Chairman Tom Wheeler announced in February 2014 his intention to override state laws designed to protect private cable companies and telcos from public sector competition. Wheeler took his cue from the federal appeals court ruling that overturned net neutrality rules; tucked away in that decision was one judge’s opinion that the FCC has the authority to preempt “state laws that prohibit municipalities from creating their own broadband infrastructure to compete against private companies.”

Nineteen states have such laws, often passed at the behest of private Internet service providers that didn’t want to face competition. Communities in two of the states asked the FCC to take action. The City of Wilson, North Carolina and the Electric Power Board (EPB) of Chattanooga, Tennessee filed the petitions that led to today’s FCC action. Each offers broadband service to residents and received requests for service from people in nearby towns, but they alleged that state laws made it difficult or impossible for them to expand.

“You can’t say you’re for broadband and then turn around and endorse limits on who can offer it,” Wheeler said today. “You can’t say, ‘I want to follow the explicit instructions of Congress to remove barriers to infrastructure investment,’ but endorse barriers on infrastructure investment. You can’t say you’re for competition but deny local elected officials the right to offer competitive choices.”

States have given municipalities the authority to offer broadband but made it difficult with tons of bureaucratic requirements, he said. “The bottom line is some states have created thickets of red tape designed to limit competition,” he said. Local residents and businesses are the ones suffering the consequences, he argued, pointing to members of the two communities in the audience.

For most internet users, this may have a more noticeable impact than the FCC’s net neutrality (Title II) decision, because in most of the United States, there is no meaningful competition, and so consumers are ripped off and abused by the telcos and the cable companies.

Their local monopoly status is why the big cable companies are free to behave in a manner that has made them the most widely loathed companies in America.

To rephrase Lily Tomlin, “So, the next time you complain about your cable service, why don’t you try using two Dixie cups with a string? We don’t care. We don’t have to. We’re the cable Company.”

FCC Does the Right Thing, Part One

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The Federal Communications Commission today voted to enforce net neutrality rules that prevent Internet providers—including cellular carriers—from blocking or throttling traffic or giving priority to Web services in exchange for payment.

The most controversial part of the FCC’s decision reclassifies fixed and mobile broadband as a telecommunications service, with providers to be regulated as common carriers under Title II of the Communications Act. This decision brings Internet service under the same type of regulatory regime faced by wireline telephone service and mobile voice, though the FCC is forbearing from stricter utility-style rules that it could also apply under Title II.

The decision comes after a year of intense public interest, with the FCC receiving four million public comments from companies, trade associations, advocacy groups, and individuals. President Obama weighed in as well, asking the FCC to adopt the rules using Title II as the legal underpinning. The vote was 3-2, with Democrats voting in favor and Republicans against.

Chairman Tom Wheeler said that broadband providers have the technical ability and financial incentive to impose restrictions on the Internet. Wheeler said further:

The Internet is the most powerful and pervasive platform on the planet. It is simply too important to be left without rules and without a referee on the field. Think about it. The Internet has replaced the functions of the telephone and the post office. The Internet has redefined commerce, and as the outpouring from four million Americans has demonstrated, the Internet is the ultimate vehicle for free expression. The Internet is simply too important to allow broadband providers to be the ones making the rules.

This proposal has been described by one opponent as “a secret plan to regulate the Internet.” Nonsense. This is no more a plan to regulate the Internet than the First Amendment is a plan to regulate free speech. They both stand for the same concepts: openness, expression, and an absence of gate keepers telling people what they can do, where they can go, and what they can think.

Wheeler also said putting rules in place will give network operators the certainty they need to keep investing.

In May 2014, the Wheeler-led commission proposed rules that relied on weaker authority and did not ban paid fast lanes. Wheeler eventually changed his mind, leading to today’s vote.

Commissioner Mignon Clyburn, the longest-tenured commissioner and someone who supported Title II five years ago, said the net neutrality order does not address only theoretical harms.

“This is more than a theoretical exercise,” she said. “Providers here in the United States have, in fact, blocked applications on mobile devices, which not only hampers free expression, it also restricts innovation by allowing companies, not the consumer, to pick winners and losers.”

Clyburn convinced Chairman Tom Wheeler to remove language that she believed was problematic.

“We worked closely with the chairman’s office to strike an appropriate balance and, yes, it is true that significant changes were made at my office’s request, including the elimination of the sender side classification, but I firmly believe that these edits have strengthened this item,” she said.

Clyburn, Google, and consumer advocacy groups told Wheeler that language classifying a business relationship between ISPs and Web services as a common carrier service could give ISPs grounds to charge online content providers for access to their networks. This language was removed, but service that ISPs offer to home and business Internet users was still reclassified as a common carrier service. FCC officials believe this classification alone gives them power to enforce net neutrality rules and oversee network interconnection disputes that affect consumers.

In response, Verizon issued their dissent to the FCC, in Morse code, dated 1934, which is either a little bit clever, or a little bit lame.  (I am still trying to figure out which.)

I was wrong when I predicted that former cable company lobbyist, and current FCC Chairman would cave to cable company f%$#ery, and I am immensely pleased to be wrong.

Quote of the Day

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………Because right now, we have one goal in life: don’t be the Seahawks. We are running down the clock here, and this is not the time to try for a fancy play. We want to run the damn ball over the goal line and score our touchdown. That means we all huddle together and drive for that last few inches in the final seconds.(emphasis original)

—Harold Feld on how to deal with the FCC’s upcoming vote on net neutrality

It’s a good point, and a rather topical way of using that old aphorism, “The perfect is the enemy of good enough.”

I May Have Been Wrong About Former Cable Company Lobbyist Tom Wheeler

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It now appears that the FCC will preempt bans on municipal broadband, and rule that broadband service is a telecommunications service, preserving net neutrality:

A Federal Communications Commission proposal to preempt state laws that harm municipal broadband projects are being made official this week, with Chairman Tom Wheeler circulating a draft decision to his fellow commissioners, The Washington Post reported today. The commissioners are expected to vote on the matter on February 26, the same day they are likely to vote for new net neutrality rules.

Municipal broadband operators in Tennessee and North Carolina petitioned the FCC to preempt state laws that prevent them from expanding to nearby communities that want Internet service. Wheeler plans to invoke the FCC’s authority to remove barriers that prevent broadband investment and competition.

and

The chairman of the Federal Communications Commission this week is widely expected to propose regulating Internet service like a public utility, a move certain to unleash another round of intense debate and lobbying about how to ensure so-called net neutrality, or an open Internet.

It is expected that the proposal will reclassify high-speed Internet service as a telecommunications service, instead of an information service, under Title II of the Communications Act, according to industry analysts, lobbyists and former F.C.C. staff members.

The change, the analysts and others say, which has been pushed by President Obama, would give the commission strong legal authority to ensure that no content is blocked and no so-called pay-to-play fast lanes exist — prohibitions that are hallmarks of the net neutrality concept.

I had figured that Wheeler was another Obama revolving door sellout.

While this is not a done deal, and the devil is, as always, in the details, I am pleasantly surprised.

Also, thanks to the FOUR MILLION people who made their voices heard against “Cable Company F%$#ery”.

This would not have happened without them.

Inside Baseball, but it is the Supreme Court

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Like many other courts, the Supreme Court can also mete out discipline against misbehaving lawyers who are/were before it.

The court has now decide to make the disciplinary docket public:

Beginning on February 1, the Supreme Court will publicly disclose documents on actions it is considering or taking to discipline lawyers who are members of its bar, a process long shielded in privacy, the Court announced on Tuesday. Currently, that file is treated as confidential, although final disciplinary actions are made public along with regular orders on pending cases. In the new arrangement, attorneys involved in a case may ask to keep their response confidential, in whole or in part.

 Under the new disclosure policy, the Court’s announcement made clear, public availability of that docket will be the general rule. It will apply to documents filed after February 1. But if there are reasons to keep an attorney’s response confidential, that will be considered on a case-by-case basis, if sought by the lawyer involved. Typically, a lawyer is notified that potential disciplinary action is being considered by way of a “show cause” order, to which the lawyer then has a chance to respond and to argue against a disciplinary order.

 One of the Court’s most noteworthy disciplinary cases now unfolding involves a “show cause” order issued on December 8, involving a Washington, D.C., attorney, Howard Neil Shipley. The order told him to respond within forty days on why he should not be sanctioned for his handling of a specific petition for review. There was no explanation of why that document may have involved a breach of either the Court’s rules or ethical rules. The petition at issue was rambling and, at several points, nearly incoherent. There was an indication that a non-lawyer may have had a central role in its drafting.

The reason that this is significant is that it is highly likely that this change in policy will work it way down to lower courts, and the law “profession” is sorely in need of sunlight on issues of ethics, which is typically handled ways that serve members of the state bars more than the interest of their clients.

The filing in question was in Sigram Schindler Beteiligungsgesellschaft MBH v. Lee, (copy and paste is your friend) a patent case, and it appears that the filing was basically gibberish.

Someone on/around SCOTUS has decided that there is a significant possibility that much of the brief was written by the holder of one of the patents at issue, and that Mr. Shipley simply put his name on it without any meaningful review.

Still, it’s kind of weird.

FCC to Marriott: Go Cheney Yourself

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The FCC just made it clear to hotels and convention centers, you block WiFi, and there will be sanctions:

After Marriott blocked Wi-Fi hotspots in parts of its hotels, the FCC sent a stern warning: don’t even think about trying that again.

“The Communications Act prohibits anyone from … interfering with authorized radio communications, including Wi-Fi,” said FCC Chairman Tom Wheeler in a statement. “Marriott’s request seeking the FCC’s blessing to block guests’ use of non-Marriott networks is contrary to this basic principle.”

Wheeler pointed out that the FCC’s Enforcement Bureau fined Marriott (MAR) $600,000 for blocking Wi-Fi, and said the agency will fine other hotels if they try anything similar.

After being fined, Marriott petitioned the FCC to change the Communications Act so that it could block access to Wi-Fi devices in its conference spaces. The hotel chain said it needed to block Wi-Fi hotspot access in conference centers because attendees could launch cyberattacks on the company’s network or disrupt Wi-Fi service for the conference or guests.

Many customers were outraged by the petition, claiming that Marriott’s request for a conference center Wi-Fi ban was a veiled attempt to ban access in hotel rooms and lobbies as well.

Of course it was.

Overpriced phone and internet has been a major profit center for hotels, and they are eager to find ways to get that money back.

The law is pretty simple though:  Civilians operating radio jammers is illegal.

In fact, it’s illegal for most law enforcement as well.

So Much for “Safe” Vaping

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It turns out that E-Cigs are pumping outs lots of formaldehyde.

So much for safe smokes:

Vapor produced by electronic cigarettes can contain a surprisingly high concentration of formaldehyde — a known carcinogen — researchers reported Wednesday.

 The findings, described in a letter published in the New England Journal of Medicine, intensify concern about the safety of electronic cigarettes, which have become increasingly popular.

 ………

 He [David Peyton, one of the researchers] calls it “masked” formaldehyde because it’s in a slightly different form than regular formaldehyde — a form that could increase the likelihood it would get deposited in the lung. And the researchers didn’t just find a little of the toxicant.

 “We found this form of formaldehyde at significantly higher concentrations than even regular cigarettes [contain] — between five[fold] and fifteenfold higher concentration of formaldehyde than in cigarettes,” Peyton says.

 And formaldehyde is a known carcinogen.

 “Long-term exposure is recognized as contributing to lung cancer,” says Peyton. “And so we would like to minimize contact (to the extent one can) especially to delicate tissues like the lungs.”

So, yes, FDA regulations is a good idea, and applying the same smoking bans to E-cigs as for the old fashioned cigarettes is an even better one.