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 | http://www.gilder.com/ | Issue 250.0/June 9, 2006

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HEADLINES:

▪ The Week / Net Neutrality: Just Another Layer of Lawyers
▪ Friday Feature / House Votes to Ease TV Licensing for Phone Companies
▪ Friday Blogger Bonus / Market Reaction to Zarqawi’s Death
▪ Readings /

A N N O U N C I N G :  The Gildertech Blog Logon to http://blog.gildertech.com/ to see what’s new.

 

The Week / Net Neutrality: Just Another Layer of Lawyers
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George Gilder mad the following observations about net neutrality in a podcast interview with Scott Cleland at NetCompetition.org, a subsidiary of Precursor.

“Net Neutrality is just another layer of lawyers. It’s nothing else.”

“We’ve tried regulation, and it didn’t work.”

“There will not be an adequate broadband economy in the United States if this current regulatory approach continues. It’s not the regional Bells who decide [investment in broadband networks]. It’s Wall Street who decides. Wall Street will decide whether they’re willing to support the stocks of the regional Bells as they make these risky and far-reaching investments of scores of billions of dollars in deploying fiber to homes and neighborhoods. If Wall Street says no, they won’t be able to do it; it doesn’t matter whether Google says “yes” and Microsoft says “yes” and eBay claps its hands – it won’t happen if conditions are created where these investments won’t yield a profit.”

Listen to the Full Podcast Interview:
http://blog.gildertech.com/

Related Reading from the www.gildertech.com subscriber message board:
George Gilder (06/07/06): What matters is not the neutrality but the net. There won't be any broadband net if no one can make money investing in it. Only if the net is narrow will allocation be needed. So ironically net neutrality laws are the most likely current cause of an un-neutral net.

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Friday Feature / House Votes to Ease Cable TV Licensing for Phone Companies
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The House of Representatives yesterday passed a bill making it easier for phone companies to offer video programming, bringing consumers a step closer to having more choices for their cable TV service.

The bill, which passed by a 321 to 101 vote, would allow companies such as Verizon Communications to get television franchises by applying to the Federal Communications Commission rather than by negotiating them one by one with thousands of municipalities.

The vote, a defeat for the cable industry, shifts attention to the Senate, where telecom analysts believe it will be harder to pass similar legislation this year.

The House bill would allow new video providers to obtain cable TV franchises 30 days after they file a request with the FCC. Currently, it can take months to negotiate franchises with municipalities.

 

Critics of the bill include cities and other localities, which resent the loss of control over the franchising process, as well as "net neutrality" proponents, who argue that the measure does not go far enough to preserve consumers' ability to get whatever content they want over the Internet.

"Net neutrality" advocates believe that phone and cable companies should be barred from blocking, slowing down or otherwise discriminating against the Internet content that flows over their networks. They fear network owners will cut deals to give some content providers priority delivery, putting those who don't pay for this at a disadvantage.

Phone and cable companies say they will not block Web sites but should be allowed to manage their networks -- which handle an ever-increasing amount of traffic -- and to charge more to those who want guaranteed fast delivery.

Read the complete article:

http://www.washingtonpost.com/wp-dyn/content/article/2006/06/08/AR2006060802087.html?nav=hcmodule

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Friday Blogger Bonus / Market Reaction to Zarqawi’s Death
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Rich Karlgaard (06/08/06): Market Reaction to Zarqawi’s Death

Sadly muted, as my colleague David Andelman points out here:
http://www.forbes.com/home/columnists/2006/06/08/zarqawi-terror-networks-cx_daa_0608terror.html

Strill, I contend that U.S. stocks are 20 percent undervalued, based on P/E ratios of 16 vs. a 5% ten-year U.S. Treasury note (which implies a fair value P/E of 20). Business fundamentals remain strong: record profits, record margins, record cash balances, record productivity.

So what does the market want? Two things:

1. Price stability. Greenspan left Bernanke holding the inflation bag. While Bernanke has much to learn about what to say to the press -- and what not to say -- he’s right about inflation. It is a worry. Our friend Brian Wesbury wishes Bernanke would hike the Fed funds rate to 6.0% sooner rather than later. Wesbury says the market will boom when gold hits $500 … a signal of Fed neutrality and price stability.

2. Cheaper oil. The answer here is two-part. One is Fed action to stop inflation (see above). As gold prices fall, so will oil. The other factor, of course, is stability in the Middle East. Which brings us back to Zarqawi’s death … an encouraging but not yet sufficient condition for Iraqi democracy and stability in Iran. Still, it’s a start, and here is a excellent take by the market intelligence firm, Strafor as summarized by Russell Redenbaugh (http://www.readingtheworld.com/).