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Legalized extortion by any other name

CNET News.com's Washington watcher, Declan McCullagh, gets behind the Senate Commerce Committee's approval of a controversial bill.

Members of the U.S. Senate heroically leapt into action last week by preventing cell phone companies from adding your mobile number to directory assistance without your permission.

Right?

In reality, the Senate Committee on Commerce, Science & Transportation's approval of the Wireless 411 Privacy Act bill was an exercise in frivolity and futility. All six of the cellular providers that are creating the 411 directory repeatedly have pledged to abide by a strict "opt in" standard for the service, which could launch in 2005.

Steve Largent, a former congressman who's now head of the Cellular Telecommunications & Internet Association, attempted to pacify the feckless committee members a day before the vote, stressing that "the only way a number will be listed is if the customer specifically asks that it be made available."

Largent's plea didn't work. The committee's Democratic members, joined by two Republicans, decided that the feds needed to force the cellular industry to do, well, precisely what the cellular industry was already doing.

By approving the bill, the committee members reversed what should be a legislature's normal procedure: to wait until there's a problem before rushing to regulate. That reversal would be bad enough by itself, but some senators chose to engage in some unfortunate scaremongering in the process.

Take Sen. Chuck Schumer, D-N.Y., who solemnly predicted that Americans' cell phone bills will "skyrocket because telemarketers will now easily be able to solicit them on the go." Wyoming Republican Mike Enzi warned that "the wireless industry is on the verge of introducing a telephone directory with phone numbers for every person who subscribes to a mobile phone service."

Well, no. Again, only people who opt in and voluntarily choose to have their numbers listed will be included in the 411 directory. Both senators should have known better.

So why did the Senate Commerce Committee approve an unnecessary bill? "I guess you'd have to ask the 12 senators who voted for the proposals," says John Walls, who works for Largent as CTIA's vice president for public affairs. "We tend to agree with the 10 who did not, thinking that it was unnecessary and that consumers are the ultimate regulators and should be given the opportunity to make their minds up for themselves." (Verizon Wireless, for instance, has promised that none of its subscribers will be added to the directory assistance database.)

Two explanations
A simple explanation for the vote is that the senators like excuses to grandstand in front of the television cameras and jawbone about protecting consumers. Another explanation is more disturbing: that our elected representatives are engaging in what amounts to legalized extortion.

Perhaps there was a legitimate reason to approve the Wireless 411 Privacy Act. But so far nobody's suggested one.
"Politicians will enact legislation or press for regulation that they suspect will cause problems," says Don Boudreaux, chairman of the economics department at George Mason University. "They know that the people who are affected by the problems will come to them, begging that the problem be solved and contributing to their re-election efforts. Economists have a term for it: rent extraction...It's particularly likely when the issue is one that can be portrayed in sound bites and very quick headlines as something good. 'I voted to require opt-in'--that sounds good. It doesn't sound suspicious on its face."

Boudreaux and other scholars, including Northwestern University's Fred McChesney, have documented how politicians have painstakingly made some areas of the law--like the tax code--especially convoluted and then have proceeded to rewrite portions every year or two. The repeated tinkering and high stakes, the argument goes, guarantee a constant flow of political tribute.

It's surely no accident that Fritz Hollings, the top Democrat on the Commerce Committee and backer of the 411 bill, receives two-thirds of his campaign contributions from outside his home state of South Carolina. The two biggest contributors have been communications firms and lobbyists--precisely the areas of the law that Hollings can affect through his committee job.

Perhaps there was a legitimate reason to approve the Wireless 411 Privacy Act. But so far, nobody's suggested one, which leaves us with the alternative explanation--and the unflattering picture it paints of today's political process.