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In response to the Washington Post article: Genachowski May be in Line for FCC Post
I asked my Economics of IP Networks list what they thought. Would it be a good choice?

Erik Cecil [See also] responded:

Great guy; very smart; fabulous experience - both in gov’t and business. I have no information, however, on Genachowski’s policy views, but am enough of a pragmatist to appreciate how hard the job of running any regulatory agency, much less the FCC, is for any individual. In that regard, he’d be a brilliant pick, but so too would every serious candidate. The field of potential candidates is impressive. All have much to commend them to the job.

My bigger concerns are policy. Underneath those concerns are uncertainty as to whether one pick or another represents a direction, philosophy, or approach that harmonizes with policy directions most here see as fundamental.

Accordingly, as heartened as I am to see many of the bright minds from the ‘96 band being brought back together, I think this group is agreed that we cannot change present circumstances via application of past solutions.

This became extremely apparent to me during the panel I moderated a couple of weeks ago in Denver. Valeria Alberola, a senior partner with investment banker Q Advisors floored the audience with a detailed analysis of where money is and where it is going (uh, towers (i.e. infrastructure) & applications top the EBIDTA multiples list by about 3x everything else).

Tim Brown, head of CU’s Integrated Telecom Program demonstrated how deeply flawed our wireless policies are, including pointing out detailed analyses showing that 75% of our spectrum in any market in the U.S. goes unused for more than a month at a time.

Chris Savage, as this list knows, demonstrated the death of the Chicago School of Economics and all that goes along with it. All three pointed to the fact that present approaches to regulation (and to be clear, I define “deregulation” as an approach to regulation) weighed like a giant anchor on money, innovation, policy, and practice.

(I followed up on the last point as a panelist on “Resolving and Litigating Interconnection Disputes” wherein I shared a presentation of a ground-level view of how to get things done and a slightly less ground level view on what happens in regulatory litigation, including a sub-part entitled “The Singularity Physics of Litigation”). Needless to say, I was in agreement with my earlier panel.

Long story short, one huge thing clear, leading to 2 minor conclusions:

HUGE: “The dogmas of the quiet past are inadequate to the stormy present…As our case is new, so we must think anew and act anew.” Abraham Lincoln

MINOR CONCLUSIONS:

1. The FCC problem is too complex to solve in 30,000 lifetimes if we continue to try to repair this thing from the inside of the bubble. Don’t believe me? two words: intercarrier compensation. two more: universal service. I’ll stop there.

2. The policy goal is ridiculously simple: fix infrastructure. Dirt or spectrum, it’s ours. Enable today’s people and today’s functionality, not 100 year old business & technological models, to define the edge. In other words, this has nothing to do with the “industry”, “telecommunications” or any of it’s relatively artificial regulatory definitions, all of which lead to incredible confusion, including the WSJ-sponsored madness we just saw re: Google.

To do otherwise is to condemn us to the same tugs of war over the same walled gardens for the same reasons between variously self-defined interest groups whose alliances and interests shift as fast or, often, faster (e.g. positions change but facts didn’t), than perceptions of value, market control, money, or jurisdiction. Even among the “new” groups I represented, I didn’t have much patience for that in 1996, but was hemmed in by a statutes & agencies simultaneously effecting change while preserving the status quo.

So the job - and it was an expensive and time consuming one - became one of jujitsu - exploiting unintended consequences at every turn. While this kind of Kung Fu Fighting on the mean streets of DC’s power corridors (”K Street Fight Club”) was a hell of a lot of fun for a young lawyer (and I’ll be honest - even after many such fights - sometimes it still is) it was pretty clear even then that the end game would look a whole lot like the beginning albeit with fewer standing.

Perhaps in 2009 we no longer have the luxury of moving forward and backward at the same time (”K Street Fight Club, II”). But if what the crowd wants is a sequel, I’ll bet they’ll have no trouble lining up the cast.

I have seen the future and it can work – if we can gather the vision and do the necessary integration. I was science editor at the John von Neumann Supercomputer Center from 1987 to 1990. Twenty years later, in mid November 2008 I attended Supercomputing 2008, in Austin Texas. Nothing can compare to first hand immersion. It was an Alice-like journey - popping down the rabbit hole and through the looking glass into a vision of a possible stunning future.

I met Harvey Newman of CalTech. Harvey is the architect and one of the principal builders of the global optical network that will collect the data for the Large Hadron Collider. We talked for close to two hours and Harvey agreed to join my Economics of IP Networks forum. On November 22 he wrote there:

“The focus on video as the motivation for true broadband [must be] temporary.”

“Network applications involving access to, and sharing of large volumes of binary data as the basis of information, and ultimately as a basis of knowledge, are highly developed, but are not so visible in the world of entertainment and social networking, as they are in the realm of research. But soon corporations will learn to follow in the footsteps of the research community to handle and benefit from the knowledge implicit in such datasets, whether for healthcare or for other business processes, or for new forms of education, that complement web-page and video (more traditional) ‘content’.”

“Even in the days when walls of your home are live displays (the walls themselves, as extensions of current OLED developments, not just screens), it will be the knowledge behind the images, and the ways they are used to inform and educate, as well as entertain, that will matter most.”

The possibilities are profound. I was able to renew an acquaintance with Kees Neggers and meet Cees de Laat for the first time. I met ever so briefly Ed Seidel who is the Director of Cyber Infrastructure at NSF and who understands the significance of what Cees de Laat and his colleagues are doing. I have about three hours of recorded
interviews with them and Harvey Newman. These will be the focus of the next two to three issues where we will talk about hybrid optical networks that will send light paths across heterogeneous network boundaries. There is a lot more work to be done – work that will take another four to five years. But, when it is finished, fiber connected end users will be able to use a GUI interface to build light path networks that will operate as a part of their application.

And there is no reason why, if the issues of authorization and authentication are solved, these optical hybrid networks could not be available almost universally. TCP/IP would be used much less, less electrical energy would be needed and –for the first time — the infrastructure would exist on which Google could truly deliver the world’s knowledge. This is happening in the Netherlands for sure. I am told it is happening in Japan. Will it happen in the US? Only if people like Kevin Werbach and Susan Crawford, Ed Seidel and many others are able to convince the new administration that it must put laying of open access dark fiber into the emerging public works program and to, like Japan did with NTT, achieve the unbundling of the incumbent’s networks.

In the United States this will involve some serious integration and education. But given access to Susan Crawford and Kevin Werbach, and other key folk — and the fact that for the first time since 1980 it should be possible to speak of the national interest without being laughed at – it should be possible here as well.

Lessons in Why National Fiber Infrastructure and
Carrier Unbundling Must Become Top Priority

On November 24, 2008 Bob Herbert wrote in the NY Times: “The idea that the nation had all but stopped investing in its infrastructure, and that officials in Washington have ignored the crucial role of job creation as the cornerstone of a thriving economy is beyond mind-boggling. It’s impossible to understand. Impossible, that is, until you realize that bandits don’t waste time repairing a building that they’re looting.”

Now that the looters have been removed from office we have an immense opportunity in telecom infrastructure if the right connections can be made.

CalTech physicist Harvey Newman summed up the situation to “arch-econ” with exquisite power when he said: “The focus on video as the motivation for true broadband [must be] temporary.”

As a fervent Obama supporter I was quite dismayed to hear Henry Rivera touted as FCC transition team leader last weekend. But just hours ago I was absolutely thrilled to see that the FCC transition team leaders are Susan Crawford and Kevin Werbach. I know both and both have been long term members of my Economics of IP Networks private mail list.

I posted this to my list immediately. One of the best responses came from David Weinberger

News so good that at first I thought it was a hoax.

Imagine an administration that values knowledge, curiosity, intelligence, the ability to listen, empathy, kindness…

Congratulations, Susan and Kevin!

Few things seem as intractable as the incumbent’s stranglehold on our communications future. At the FCC would be disposed to clean house and start over. Yet from a pragmatic point of view that might well take much more time and produce less desirable results. The following outlines the possibility that President Obama, by one or two appointments at the FCC, could set in motion forces where the FCC could begin to make positive changes in our miserable telecom environment. And let these forces work while he tackles the other very grievous issues we face

An Economics of IP Networks list member argued that it would be foolish to try to continue to work within the context of the 1934 communications act and within its 1996 revision. He closed by saying “We cannot solve this problem on the same level of consciousness that created it. An entirely new, expanded, and integrated view is necessary.”

Chris Savage replied

Maybe. But to paraphrase someone who was once famous, we don’t create a new communications environment with the statute we want; we create new a new communications environment with the statute we have.

Suppose one were to look at the ’34 Act from the following perspective: “What is the most I can accomplish under this piece of legislation to generate the end result that is most consistent with the public interest as it exists in 2009?”

Let me throw out some specific thoughts:

(1) Under Section 10 they can do more or less whatever they want in terms of regulating common carriage, or not;

(2) The whole end-to-end architecture of the ‘net means that it is entirely plausible (and maybe even more so than alternatives) to treat Internet connectivity as common carriage, if that made sense (which would, among other things, take care of net neutrality entirely, more or less subsuming it under Sections 201(b) and 202);

(3) To the extent that there is a monopoly on dirt or the things closest to it, it or those things can be more tightly regulated than the rest;

(4) Spectrum could be used in any number of licensed or unlicensed ways;

(5) Devices could be authorized with any number of propagation/interference characteristics. I’m sure there’s more, but you can see that we could be in a lot better place than we are, even with no new legislation.

So, with a tip o’ the keyboard to Bob A’s latest posts, I don’t actually think we have a fundamental statutory problem here (although obviously one could make vast improvements on the ’34 Act, as amended).

What we have is a failure of vision.

The economic forces acting on this industry are enormously powerful. Those forces will do what economic forces always do, which is to try to create a regulatory and market environment that causes money to flow from consumers to suppliers. Think of high-profit-and-revenue-to-suppliers situations as “gravity wells” in communications industry possibility space. We will always tend towards one of them; the question is, which one? One that’s really low (in terms of consumer benefits)? Or one that’s only a local minimum, sitting on top of a high plateau (in terms of consumer benefits)?

That’s where the idea of “smart regulation” comes in: we want to set up rules so that suppliers can make enough money to keep supplying while constraining them to do things they wouldn’t “naturally” do (or not to do things they would). In other words, keeping us on a plateau of consumer benefit, while suppliers maximize their profits from what is available on the plateau.

Until a month or two ago, at least in this administration, and even to some extent in the last, it would be a sufficient answer to such an outlandish claim – the claim that regulation can actually accomplish something good – to state that it amounted to interference with the workings of the market. In fact, the pervasive Chicago-school, let-the-market-work-because-it-always-knows-best meme was – like John McCain’s campaign – a casualty of the financial melt-down.

Unthinking deference to the market is, I assert, a dead ideology walking. It will stagger along for another quarter, or maybe – if the economic mess is a lot nicer than many now think – for another year. But there is now 20-30 years of very good, Nobel-Prize-winning economics (behavioral economics) that, when you think about it, pretty much guts the market-knows-best meme. See, e.g., Thaler & Sunstein, Nudge (2008) for a very readable explanation of why in the real world free-running markets won’t produce optimal results, at least in a number of circumstances. (I will leave as an exercise to the reader the explanation of why markets for things like connectivity are not likely to fall into the “markets can sort it all out” category.)

What this means is that there are now Nobel prize winners to throw back at Friedman, Baumol et al., when those who want to push us into a very deep gravity well say that the market demands it.

But that doesn’t necessarily mean that we will have the political will to resist the push.

The political will has to come from some economic force that stands to gain by disrupting the status quo – by, in effect, dragging us out of the gravity well. In times past (that is, the Computer II era) that alternative economic force was IBM. Now I’m thinking it’s probably Google, maybe Apple, maybe some others. Consumers per se just aren’t organized enough to effectively and relentlessly push for their own interests. That force has to come from someone (or set of someones) who will make skads of money if there is (nearly) ubiquitous, (relatively) cheap, (reasonably) neutral, (pretty) high bandwidth connectivity.

And that’s what troubles me most about the prospect of getting a new Commission that starts with an assumption, probably unstated, that we need to re-fight the same old wars. To the extent that we are on the cusp of something here, that something isn’t tweaking the boundaries between ILECs and cable, or cleaning up universal service; and it certainly isn’t about getting UNE pricing, or even interconnection pricing, right. That something is re-envisioning what the “public interest” in a “rapid, efficient, nationwide” communications system is, in 2009 and beyond. I would submit that it is commerce and person-to-person communication on an end-to-end basis. Focus on the ends. What’s in the middle ought to be transparent. To the extent it isn’t transparent, something isn’t working right. It might not be obvious what that something is, but still.

On the issue of the Commission itself, I think Chairman Martin is a nice guy and a smart guy and politically very astute. But from all I can tell he lacks any sort of coherent vision of what the communications environment should be. I have a very hard time seeing any unifying or animating principle in what he tries to accomplish (other than, maybe, “let the markets work,” as to which, see above). Hence he doesn’t pursue, or enact, any sort of program. He just does deals, more or less distinct from each other. So when things fall apart for him – as the just did on the intercarrier comp/universal service thing, and as they did earlier this year on the retention marketing fight – he ends up on the losing end of 4-1 votes. He doesn’t actually convince anybody; he either cuts a deal or he doesn’t, which is very different indeed.

All that said, and as important as I think this stuff is, I also believe what I said earlier, which is that President Obama will hit the ground in mid-January with much bigger and much more urgent problems to deal with. So in the absence of some below-the-radar, ground-up effort to ensure that the new, improved, Obama FCC as an appropriate vision for what this sector of the economy ought to look like, I fear we’ll just get more drift.

Frank Coluccio: With all due deference to both you, Bob A. and others here, it appears that you’re not giving due recognition to the rapidly changing landscape. Telecom (the service) is undergoing atrophy, and Internet has only begun to sprout. Yet most of the ’services’ once viewed as telecom are rapidly being assimilated as IP applications onto Internet.

Savage: No, I get that completely. And at the same time retail access to IP applications, at least for residential customers, is going from the let-a-thousand-flowers-bloom world of (say) 1999 to a duo-and-a-half-opoly (two arguably fat-enough wires and some possibility of unaffiliated not-quite-skinny wireless). The key question for the FCC in 2009 and forward, stripped of all the folderol, is whether that’s OK or not. If so, what’s all the fuss about? But if not, then we have to conclude that the regulatory policies that have led us here need work.?

Frank Coluccio: Take this to the extreme and you wind up with in short order is a piddly few telecom services, for which most of the legislation being discussed here is devoted, and a potentially wildly-raging environment that supports end point applications, including applications dressed up as telecoms. Now, I know that other factors come into play, which are usually found under the headings of program video and PSTN voice.

The latter two are “retail services”, in my opinion, are not a part of the high-speed Internet access component of bundled offerings (unfortunately, I still have to refer to the triple-play, as though the three were organically dependent on one another) that we should be paying more attention to. PSTN and Video need to be regarded separately from basic connectivity, and indeed decoupled from it as well, and perhaps those two services can be treated finally as the tenants of underlying transport systems that they actually are.

Savage: I agree that POTS and broadcast/cablecast video are becoming less and less central, if not quite yet irrelevant. (Heck, I’m too old to stay up and watch Saturday Night Live like I did when I was a kid, but I didn’t miss an episode this election season, thanks to my broadband connection. Plus an enormous amount of communication that would once have been POTS calls, either local or long distance, is now done via email.)

But you may, I think, have missed one of my legal points, which is that any communications lawyer worth his/her salt could, in very short order, write the FCC order that would withstand scrutiny in court and that would conclude with something like:

“XXX. For the foregoing reasons, as the Nation’s communications networks have evolved, as IP-enabled and traditional PSTN technology has developed, and as consumer and business uses of the Internet have changed, we hereby conclude that the functions of providing Internet access to those who connect to it – both consumers and information and service providers – and transporting communications via the Internet, are subject not merely to our Title I jurisdiction (which, alone, gives us ample regulatory authority with respect to these activities), but also to our jurisdiction under Section 706 of the 1996 Act; to our Title III jurisdiction (to the extent it is provided via wireless technology); to our Title VI jurisdiction (to the extent it is provided via cable systems); and, ultimately, to our Title II jurisdiction as well. This does not mean that we should, or will, regulate the provision of Internet access like old-style plain old telephone service. As described above, however, it does mean that we have the authority to ensure that the terms and conditions on which providers of Internet access deal with those who connect to the Internet, and with actual and potential competitors, are just, reasonable, nondiscriminatory, and in the public interest.”

This was my point about political will or lack thereof. When the dominant political meme is one of deregulation, government-as-incompetent-bumbler-interfering-with-brilliant-markets, etc. – which it has been at least since 1980 – then you look at the law and look for ways that it either allows you, or compels you, not to regulate. (In that regard Computer II was a brilliant piece of regulatory jujitsu, accomplishing broad public interest goals by compelling the deregulation of certain activities and certain market participants, but not others.)

But if the political meme is instead that intelligent regulatory policies can accomplish significant public interest goals (including those related to broadband), then the statute begins to look different and not so constraining.

I am not sitting here saying that the FCC should regulate “the Internet” under Title II. I am not, actually, even saying that it should do much different than it is doing now – if it/we/the country were to affirmatively conclude that where we are, and where we seem to be going on the issue of broadband access is basically OK. Again, note that I’m an old-timer and remember when only big shots had car phones, when the fastest modem you could buy was 9600 baud, when consumer email was something you did with fellow devotees on a closed system like Compuserve. Considering where we’ve come from, maybe a duo-and-a-half-opoly is OK.
But if it’s not OK, I am saying that we do not need a massive re-write of communications law to take steps to fix it.??

Frank Coluccio: So, what matters very much here is the framing one chooses to assume at the outset. Are we attempting, on the one hand, to preserve the status quo by repurposing many of the earlier constructs whose original reasons for being were to provide oversight for something that is a now dying, or, on the other hand, are we viewing the end game as an environment that is well suited for providing ubiquitous connectivity?

Savage: I agree that framing matters, and I think that re-framing is in order. What I am saying is that taking steps in light of, and to implement, the new framing does not actually require a major re-write of the Communications Act.

Internet Commerce in Visual Art
Start-up Offers a Software Based Brokering System to Enable Participants to Write Their own Licenses

October 31, Ewing, NJ The Internet has huge potential capability as a portal into the world of museums, fine art, historic photography and the like. To date, other than photo sharing systems like Flickr and Picasa, what can be seen of fine art is generally pictures that are so small in the context of ever larger and better displays as to provide for very frustrating experience. The reason for this failure is the problem of intellectual property.

This issue presents the first description of VisualArts Systems Inc, a start up with software that solves the intellectual property problem by letting museums, artists and photographers write their own licenses for commerce in the content on the internet. It has the advantage of offering a path to sustainability to programs like Taiwan about which we wrote five issues ago (July 2008).

read more

In response to a well written piece by Eric Krapf: “British Telecom (BT) led the charge into all-IP, next-gen networks. A £10 billion (US$18 billion at the time of writing) investment in its 21st Century Network (21CN) was announced back in 2004, and while there have been some glitches, changes of technology direction and delays along the way, the main objectives have been realized. IP infrastructures have significantly lower operating costs; annual savings will be £1 billion (U$1.8 billion) when the transition is complete and of course it’s the optimum way to deliver broadband services and applications. But more — much more — is needed to recoup that investment.”

One way — a very interesting way — was to market their 21CN knowledge and expertise to other telcos, but that doesn’t represent a long-term revenue stream. Another is through BT Global Services, which currently offers a broad range of IT services, including voice and data, in more than 170 countries. This business unit targets large, multi-national enterprises. One acid test of these global objectives and the ability to leverage that network can be seen in the U.S., which was a hard market for a UK carrier to crack. BT owns 28 MPLS nodes across the US and Canada, making up one of the larger MPLS networks in the region, and that footprint enables BT to partner with other heavyweight players who want to offer global communication services. For example, BT has agreements with other carriers that provide extended POP access in more than 500 locations. [Snip]

Hendrik Rood
wrote to my Economics of IP Networks list:

Message to earth,

The telco has already be reinvented. Many telco executives and people in the voice industry seem not yet to be that aware of it.

The reinvented telco can be observed when you look at the amount of messages processed daily on the “social networking” or “profile” sites, together with some varieties of (instant) messaging thrown in.

They are already an order of magnitude larger in volume at a much lower cost per message.

When I started to study the economics of naming and numbering systems, one of the prime findings was that, despite all the hoopla on the amount of money paid for a few very prominent domain names, the actual amount of money was linked to the prices telco’s charged for being assigned (blocks of) telephone numbers. Financial volumes in that business (in particular blocks of numbers for businesses) were much larger than those charged for keeping domain names up and running.

Ultimately, with VoIP becoming the ubiquituous replacement for the classic telco, the value of that application will be in the universal numbering system (with mobile phones alone nearing 3 billion still a larger namespace in use than a.o. the number of public IPv4 address space and much larger than the domain name space).

However the amount of people that subscribe to accounts on the various social networking sites is rapidly approaching to the amount of accounts in use with E.164 numbers in many western countries.

I am waiting for the point in time when one of the big social networking sites will take over the voice business of an incumbent telco.

I think that point in time comes when that telco will start to grasp that its main business has become operating an IP network and in some occassions running a radio-frequency network for its cellular services and it is loosing its competitive edge in marketing an application service platform that supports communications.

It might however be that a telco will retract itself into becoming a white label operator of voice services (a genuine wholesale business) to many social network communities supporting the far majority of communications traffic (dominated by people exchanging tags, twitters and other messages).

Number portability has made that shift possible in principle, but it still requires removing legislative barriers in most of the countries around the world. E.164 numbering is still a bit too connected to classic telco’s by having some routing aspects included in it.

But the key legislative barrier that currently obstructs a business model that puts the social networking sites in the communications driving seat and kick the telco’s out of that position is the large legacy of all kinds of unnecessary universal service legislation that is hung up to control of the numbering space and voice application.

The final stage of the telco reform revolution of the most recent decades will be in getting the ITU members (that are the Administrations, your governments) to grasp that they will have to dismantle the system that puts only telco’s in the distribution role of telephone numbers and allow social networking sites to get equal positions along (soft)switchless and (soft)switch based voice operators. Also direct assignment of E.164 numbers to end users will help.

Direct assignment to end users is still far away in many countries. It requires some serious decisions on who effectively has a claim on the E.164 numbering pools and how to organise the back-office processes and it will be a massive IT undertaking. It however requires in particular the willingness of Administrations to bypass vested interests of operators and voice service providers to serve end users by giving them control over E.164 numbers and then shop around with their number(s) for service providers, instead of relegating it to the industry.

In principle, legislation is already conceptually at that stage, but in actual thinking this is the last barrier to remove. E.164 numbering was effectively nationalised in the 1980s (USA and UK) and 1990s in most countries during the telco reforms, it is now one of the very few points were governments still inject themselves into the communications industry and it is a point where they leverage their influence to accomplish ’social objectives’ with issues like universal service, provisioning of white pages and other directories, emergency call centers, wiretapping, data retention (traffic data) and privacy aspects like caller ID.

So the ultimate reinvention of the telcos will still require some governmental/regulatory moves.

I think that willingness can be demonstrated in particular when governments will allow corporate users with large blocks of numbers (e.g. for their PABX-es) direct access (after a technical capability treshold test) to the Infrastructure ENUM databases that are now under development to replace the legacy SS#7/SCP databases based numbering portability infrastructure.

Hendrik —

P.S. I exclude one of the more peculiar bits of once instituted social objectives in the “telco system” like the “Jail Bit” that is specified and as far as I know was indeed in use in the American SS#7 to identifies calls from inmates made from jail phone boots to customer order taking call centers. My question today, is the “Jail bit” still revealed by advance signalling for incoming calls from jails to those call centers? Probably Fred Goldstein knows more about that peculiar “service”.

Viewing the Internet as an Economic System
With the Approaching End of Routable IPv4 a New Analysis Richly Informs Policy Makers of Consequences of Inaction

September 30, Ewing, NJ The end of routable IPv4 is an emerging problem involving a combination of technology and policy that we reported on a year ago. This problem is still unsolved and, a year from now, it may well hit the global Internet with the same kind of disruptive force that the credit crunch visited on the global economy in September 2008. The Internet addressing system, on which the delivery of packets depends, is running out of routable numbers. A new numbering system, the design of which was completed more than a decade ago, is not being implemented. The users and business sitting atop the rusty plumbing are, for the most part, unaware that their activities are headed into troubled waters.

This issue presents an introduction to Tom Vest’s new work on this problem. Tom has constructed a website populated with material that presents a framework for evaluating what is at stake. What readers will find there should cause it to be understood in a whole new way. With new understanding, one hopes that corrective action can happen. While engineers still debate best course of action, what follows should motivate strategic decisions by those with direct responsibility for guiding the course of the largest stake holders.

They speak of taking bad mortgages off the books. Problem is they can’t do that…everything is securitized, Sliced and diced good with the bad and then credit default swapped ten times…. ten layers of so called insurance. The total in mortgages is about 5 to 10 trillion. 700 billion will be gone over night with no help to anything. The problem is not so much bad mortgages as the lack of ability to value their assets which have been securitized into a puree that cannot be valued.

The problem is lack of liquidity because no one knows what these assets are really worth.

A huge part of the system must fail… giving 700 billion to Paulson as a blank check borders on treasonous.

A different aspect of the problem is the commercial credit markets…. commercial paper. It went from 3% to 5% last week. Whoopee. These dopes think they can buy their way out of a nose dive. Impossible except to postpone the inevitable. Suppose commercial paper goes to 10%? That will slow down a LOT of activity. But hey 25 years ago the prime peaked at over 20%.

Paulson is committing fraud with this legislation because he is taking money to address a problem that is not addressable.

Now if you want to nationalize the banking system and audit the books and value assets by fiat and then with revalued assets encourage lending and liquidity and use the 700 billion as a kind of FDIC liquidity repository…. that might be more responsible than this junket that will solve nothing and encourage a global flight from the dollar.

Paul Krugman has more authority than I and he is saying it well here.

Update one: a friend wrote - “Failing to act would certainly be treasonous, as the US especially (but the rest of the world as well) would likely be paying for the consequences for the next decade+, 1930s style. The only question is whether the supplicants will realize that even they don’t want a blank check — they’re going to need transparency as much as the rest of us are in order to recover confidence in their peers. The Japanese failed to understand this, and paid the price in the form of about +7-8 years of absolute stagnation.”

“Initially, transparency will make the severity of the crisis much greater, as the full scope and scale of the crime will be revealed to everyone, rather than to just a few industry insiders — but the duration will be shorter.”

I agree.

I have never been a fan of ICANN and between 1998 and 2000 wrote extensively against it. My most detailed essay may be retrieved here. ICANN was promoted as a wonderful experiment in industry self governance - an image that was skewered in Michael Froomkin’s landmark essay “Wrong Turn in Cyberspace.” Under the guidance of its law firm Jones Day it pushed back against the request of its only publicly elected Board member Karl Auerbach to inspect its financial records. Auerbach sued and won.

More recently it reached an agreement with Verisign giving Verisign an automatic 7% per year escalator on dot com registrations. This is worth tens of millions of dollars per year to Versign and to my knowledge there is no transparency behind this deal. My memory says that Verisign agreed to drop its lawsuit against ICANN over ICANNs stance against site finder.

The Board has long been criticized for being an out of touch rubber stamp for staff. (I know personally a couple of current board members who definitely are not. But these are not a majority.) Paul Twomey Icann president since 2003 I am told sets staff salary and as Icann finds ways to get millions and more millions to buy domain names

Now examination of ICANN Forn 990s show that ICANN has created enough of a firehose of income for Twomey to send employee salaries into the stratosphere.

In the USA we have the Predatory State while it is now joined by ICANN as the Predatory taxation agent for the internet.

Here is the source for the following

Read on.

Hi folks,

GuideStar.org published the IRS Form 990, for the years ending June 30,
2006 and June 30, 2007. They are available for free download in PDF
form (registration required).

Comparing the two statements, it’s clear that ICANN’s spending has gone
wild.

For the year ending 6/30/2006, there were 20 employees paid over
$50,000. The top 5 were:

Name, Compensation, Contributions to benefit plan/deffered
compensation

Andrew Savage $132,914 $15,120
Theresa Swinehart $122,556 $24,881
David Piscitello $109,371 $19,531
David Conrad $106,250 $15,000
Tim Cole $95,201 $20,967

Totals for Top 5 $566,292 $95,499

For the year ending 6/30/2007, there were 37 employees paid over
$50,000. The top 5 were:

Name, Compensation, Contributions to benefit plan/deffered
compensation

Andrew Savage $188,385 $17,152
David R. Conrad $184,150 $35,677
Theresa C. Swinehart $231,695 $34,249
Denise M. Michel $198,330 $49,160
Amy A. Stathos $183,008 $36,139

Totals for Top 5 $985.568 $172,377

This is an outrageous 74% increase year-over-year for total
compensation for the top 5.

Furthermore, Denise Michel managed to have an expense account for the
year ending 6/30/2007 of $130,465 (none of the other top 5 had an
expense account for that year). For the prior year, though, the TOTAL
for expense accounts and other allowances was $26,727 for the top 5
employees. Thus, an almost 400% increase in one year!

For the year ending 6/30/2006, Paul Twomey received compensation of
$459,244.44, employee benefits of $19,200 and an expense account of
$146,928.93. For the year ending 6/30/2007, though, through Twomey’s
company Argo Pacific, $722,079 was paid for total compensation, and
$219,345 for employee benefits.

Other key employees with year over year comparisons (where available):

Name Compensation for year ending 6/30/2006, Compensation for
year ending 6/30/2007, Percentage Increase

John Jeffrey $205,699.92 $275,560 +34%
Melanie Keller $115,250.07 $226,672 +97%
Paul Levins n/a $210,695
n/a
Kurt Pritz $189,335.16 $286,600
+51%

Other financial details (including spending on contractors, etc.) can
be seen in the PDFs, available for free at GuideStar.org.

The IRS Form 990 was designed to promote transparency, which also part
of ICANN’s mission. Frankly, the compensation committee has a lot of
explaining to do to explain this enormous increase in spending,
especially in a time of global economic weakness. ICANN is making
VeriSign’s 7% annual increases for .com registrants look tiny by
comparison. If instead ICANN was more frugal, cost savings can be
passed on to domain registrants, who ultimately fund (directly or
indirectly) nearly all of ICANN’s activities.

I would like ICANN to produce a report comparing these employee costs
to those of comparable employee grades at the NTIA or Department of
Commerce, over each period, or alternatively, other non-profit
corporation averages.

Sincerely,

George Kirikos
http://www.kirikos.com/

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