Another regulatory folly -- flourescent light bulbs

The energy bill passed by Congress contains a regulatory imposition right up there with legislating the amount of water in toilets. By 2014, the incandescent bulb invented by Thomas Edison will disappear, and the only light bulbs sold will be the new small fluorescent bulbs that are only made in China. The EPA has issued three pages of detailed instructions on what to do if one of these, which contains mercury, breaks -- evacuate the room, and turn off the air conditioning, among other things. For an entertaining speech by Congressman Ted Poe of Texas on the House floor about this fiasco, see You Tube.

More on Cellphone termination fees

The Competitive Enterprise Institute issued a statement today on the FAA hearing on cellphone termination fees, noting, as I did yesterday, the impact such a change would have on cellphone prices. The statement is as follows:

Washington, D.C., June 12, 2008—Today the Federal Communications Commission will hear testimony on “early termination” fees for customers who cancel their mobile phone, cable or Internet service contracts early. Critics of telecom service providers will charge that long-term contracts with cancellation fees are unfair, but in reality, such contracts help more people afford a higher-quality range of products.

In the case of mobile phones, many companies provide customers with low-cost or even free phones in return for customers agreeing to a service contract, often of one to two years. That agreement puts better phones in the hands of customers at every price level, while bringing into the market many who could otherwise not afford a phone at all.

Since the provider is counting on the future revenue from the contract as part of the bargain, they include the early termination fee as insurance that they won’t subsidize the equipment costs of customers only to have them immediately jump to other carriers offering yet other deals.

Moreover, despite opposition to early termination fees in the mobile phone market, they’re nothing new. Aside from telecom services, consumers have long had the choice of signing long-term contracts that involve early cancellation charges. Renters typically sign 12-month apartment leases, and are usually required to pay a breakage fee if they back out of their lease early. Similar contract clauses are often found in fitness center memberships and automobile leases.

In all of those cases, we expect consumers to figure out for themselves what is and what is not part of the contract they’re signing. As long as any potential fees are disclosed at the time of the agreement, they’re simply part of the deal. In the case of a provider attempting to levy a fee that wasn’t part of the original agreement, that’s a case for small claims court, not the further federal regulation of an entire industry.

FCC to Hold Hearing on Regulating Cell Phone Termination Fees

The FCC will hold a hearing tomorrow, June 11, on whether to take over jurisdiction of cell phone termination fees, which are not subject to state regulation. The major cell phone companies are, of course, in favor of this proposal, which as been promoted particularly by Verizon, because it would eliminate regulation by 50 pesky state governments, in exchange for a single regulator at the federal level. It would also preempt class actions, several of which have apparently been filed. See Wall Street Journal article, May 24, 2008.

Of course, regulation of termination fees would simply result in increased costs to consumers. Cell phone companies have justified termination fees as enabling them to offer low-cost or free cell phones to consumers. If termination fees are restricted, the costs of telephones and telephone service would undoubtedly increase. See also Open Market.org.

FAA Proposes Three Year Term for Aircraft Registrations, But Does Not Address Major Underlying Issue.

In February, the FAA issued a Notice of Proposed Rulemaking that would change the current system of registration of aircraft for an indefinite period of time to one that would have a three-year term for each registration (73 Fed. Reg. 10701, February 28, 2008). FAA's rationale for the change appears reasonable -- the current system does not work well, with the result that an enormous number of listings in the registration database contained incorrect information. As the FAA stated:

How accurate are the records today?

Since the annual registration eligibility
requirement ended in 1978, many
aircraft have left service, been sold, or
had owners who moved without
reporting their change of status or
address. Of the more than 343,000
aircraft registered, an estimated 104,000,
or about one-third, are possibly no
longer eligible for registration. Over the
last several years:

• 17,000 aircraft have been reported
as sold by their former owners without
the purchasers making application for
registration (with about 15,900 being in
the ‘‘sale-reported’’ category for more
than 6 months);

• 4,700 have started registration
without completing the requirements
(with about 2,100 being in the
‘‘registration-pending’’ category for
more than 12 months);

• About 30,100 aircraft are known to
have bad addresses well beyond the 30
days allowed for reporting changes;

• Almost 14,700 aircraft have had
their Certificates revoked due to bad
addresses, but remain in the system to
prevent reassignment of their U.S.
registration number (N-Number) until
the FAA is positive the aircraft is no
longer operating with that N-Number;

and

• Up to 41,000 additional
unidentified aircraft are estimated to be
inactive or possibly no longer eligible
for registration.

Comments were filed last week, primarily by scheduled carriers who argued that they were not causing the problem, and therefore should not have to change the three-year system. The Air Transportation Association filed a seven page, single-spaced, Comment (aren't DOT pleadings still required to be double space?) claiming that the new system would be a substantial administrative burden, primarily because it would be so difficult for the new registration certificate to catch up with the aircraft. This is important because it is an FAA requirement that the registration certificate be physically maintained in the equipment. This really does seem like a makeweight argument -- there is no doubt that airlines can establish administrative procedures for handling registrations.

ATA seems to missed its main argument -- rather than complaining about the burden of processing paper, it should have suggested that the paper itself be eliminated. In this Internet age, why do we need to keep paper copies of registration documents anywhere? Or at least, why do we need registration documents anywhere except in one central location at each carrier. Elevators have inspection certificates, but they are never on the elevator -- they are kept in the office and available for inspection. Why not the same procedure for aircraft registration certificates?

The simple procedure would be for the FAA to maintain an aircraft registration database, available on the Internet, so that anyone who sees an aircraft number on a plane can input it into the database, and get complete registration information. There is simply no need in this Internet age for a piece of paper to be carried on the aircraft.

It would be nice if the FAA were to create an Internet-based registration system. There would be no more need for paper forms -- the registrant would simply fill out the form on the Internet, and the data would go directly into the FAA database. There, it would be available to all FAA personnel and to anyone who inquired in the database without a particular aircraft. Perhaps FAA can create a next-generation registration statement instead of patching the current system.

Ratings Agencies to Cuomo: "Don't Throw Me into that Briar Patch"

New York State Attorney General Andrew Cuomo announced an agreement with the three major ratings agency that would supposedly reform their ratings practices on mortgage-related securities. Under the agreement, the ratings agencies, Standard & Poor's, Moody's, and Fitch would be paid for their ratings, even if they had no agreement with the security issuer or underwriter. This will presumably increase their independence because they will no longer have to compete for the business. Such competition is supposedly bad because it leads the rating agencies to shade their ratings to please their customers. Now the customers will be forced to pay everyone.

Wall Street Journal article is here; New York Times article is here.

What a deal! Competition is reduced, if not eliminated. It doesn't matter if another ratings agency has a reputation for greater objectivity, or more technical competence -- if I provide a rating, I get paid. And another provision of the agreement requires public disclosure of the fees received by all ratings agencies -- now I know how much my competitors are charging. After we see everyone's prices on a few transactions, it will be much easier to gently lead prices higher, particularly in such an oligopolistic market.

What could Cuomo's office have been thinking? The ratings agencies have achieved results that they could never achieve under the antitrust laws. And they achieved this without even having to pay a fine. It is not at all clear from the Attorney General's press release what law they are alleged to have violated. Cuomo appears to simply have wanted to restructure the market. Cuomo's press release thanks the SEC for their cooperation -- doesn't anybody at the SEC have any understanding of competition, either.

TSA Adopts Another Dim-Witted New Policy

While being wanded at Hartford yesterday, I discovered that the TSA is apparently adopting another policy designed primarily to inconvenience passengers. The agent asked me to take off my wristwatch. When I said that was a new one, he said it was standard operating policy. When I suggested that it couldn't be because it never happened to me anywhere else in the country, including the trip to Hartford from DFW, he called over a supervisor, who put both my watch and my wallet back through the machine -- a slight penalty for the temerity of inquiring about a new policy. After my wanding was completed, she talked to the agent and then explained to me that it was a new policy that would be implemented in a few weeks, and that they were selectively practicing the new policy at this time. If this is correct, expect to take your wristwatches off every time you go through security.

This raises again the basic question why TSA insists on a uniform search policy matter no matter how unlikely a person is to be a security risk. Because of my knee replacement, I get wanded as a 70-year-old white-haired guy every time I go through security, just as thoroughly as a swarthy 25-year-old swarthy Mediterranean type. What a waste of time and money. My understanding is that Norm Mineta insisted on such uniform treatment, in part because of his background in a Japanese internment camp in World War II. However, he is long gone from DOT, and it is time to take another look at that policy. It is economically wasteful, and distracts agents from examining persons who would appear to be much more likely to be a terrorist. I am sure that there would be interest groups who would scream that any deviation from uniformity in search is discriminatory. However, in this instance, discrimination is entirely rational.