Closed Internet: The End of Open-Access Architecture

Here is an article by Elliot Cohen (Web of Deceit: How Internet Freedom Got the Federal Ax, And Why Corporate News Censored the Story). It explains how a (sadly under-reported) recent Supreme Court decision has grave implications for our current democracy friendly, open-access Internet. Here is a bit about the decision:

On June 27, 2005, in a 6 to 3 decision (National Cable & Telecommunications Association vs. Brand X Internet Services) the United States Supreme Court ruled that giant cable companies like Comcast and Verizon are not required to share their cables with other Internet service providers (ISPs). The Court opinion, written by Justice Clarence Thomas, was fashioned to serve corporate interests. Instead of taking up the question of whether corporate monopolies would destroy the open-access architecture of the Internet, it used sophistry and legally-suspect arguments to obscure its constitutional duty to protect media diversity, free speech, and the public interest.

The central problem is that the corporations controlling the major nodes of the Internet will no longer have to allow independent ISPs onto their systems. The law had required these corporations to do that ("common-carriage" law). So now companies like Verizon and Comcast can begin to monopolize the Internet. The only ISPs available will be their ISPs. Smaller independent ISPs will not be able to compete. The large cable companies will then have control over what you have access to. The end of open-access Internet is upon us. You will not have access to non-corporate controlled, independent sources of information. What you will have access to will be up to these corporations -- a private decision -- guided, of course, by their private interests. They will be able to filter what you have access to. Take a look at what China is doing right now with the Internet, and you will get an idea of what could happen to us.

It is very sad that there has been very little media coverage of this, if any. A very important decision has been made about the architecture of the Internet, and there has been no significant public debate about it. That is sad because the decision could have extremely negative consequences for our democracy.

So what will you do when you see these private corporations slowly closing the open-access architecture of the Internet?

GOP Opportunity Zone in New Orleans: Naomi Klein Article

Naomi Klein gives a picure of what Bush (and company) would like to do to rebuild New Orleans. There seems to be a good opportunty to clean out New Orleans of undesireable elements and make it more corporate friendly, and more friendly to those with money. It will be easier to do that when the right people are in the city. Anyway, the first item that follows is a bit from a DemocracyNow! interview with Naomi Klien where she talks about some points in her article. Her article can be seen here (The Nation): Purging the Poor The second item that follows is a list of actions that the Republican Study Committee would like to do in New Orleans. Some of the actions are odd, like "Allow drilling in the Arctic National Wildlife Refuge," or "Make the entire affected area a flat-tax free-enterprise zone." I'm sure that you can figure it out for yourself. (A link to this list is at The Nation web site at Naomi's article.)

Part of a DemocracyNow! intereview with Naomi Klien:

NAOMI KLEIN: Yeah. There are two key documents that people should really take a look at. We're going to have them up on The Nation website and I'm sure we can have them up on Democracy Now! as well. There's two documents. They come from the same people, and they're connected. The first one comes from the Republican Study Group, which is the caucus of Republican lawmakers in Congress, headed by Mike Pence. It is called the “Pro Free Market Ideas for Responding to Hurricane Katrina and High Gas Prices.” It comes out of a meeting that took place at the Heritage Foundation on September 15th, where people from the Heritage Foundation and other right-wing think tanks got together with the Republican Study Group members, and they brainstormed thirty-two policy demands to package in as hurricane relief. And we have already seen several-- this is why I think it should be taken extremely seriously, is that the first of the demands is automatically suspending Davis-Beacon prevailing wage laws in disaster areas.

So it's pretty clear that the people making this list have a direct line to President Bush. Because that's already been adopted by presidential decree. The second is to make the entire affected area “flat tax-free enterprise zone”. This is Bush's “Gulf Opportunity Zone” idea, making the whole region a sort of “Club Med” for corporations to have every tax break they have ever dreamed of. But it goes on. This is where we, I think, need to get ready.

They use the excuse of Katrina to talk about everything from opening up drilling in the Arctic Wildlife Refuge to subsidizing -- this is an incredible, incredible one of their demands -- they want to subsidize oil exploration, saying that the corporations won't fund this themselves. And then there's things that we have heard about like they don't want money to be going directly to public schools for displaced children who are affected by the hurricane. They want it to go into school vouchers. This is already happening.

So it’s a transfer of wealth from the public realm, a huge transfer of wealth from the public realm into private hands. So you have this on the one hand. They issued this on September 13. It's already being adopted into law on several levels. And then they come up with another document that actually just came out yesterday, which is the Republican Study Committee's ideas of how to pay for all of these corporate subsidies that they have demanded.

They say, “look, we cannot do this -- we cannot pay for so-called “hurricane relief,” and it has very little or nothing to do with the families that were affected by the hurricane; in fact, it's going to hurt those families.) They say, “the only way we can afford this is if we make some radical cuts to the budget.” They issue another document, the “RSC Budget Options for 2005”, which says “here's where we are going to make the cuts”. Once again, you have the radical re-victimization of the very people who the money was intended for.

Their demands are things like: suspend Medicaid's prescription drug coverage. But more than that, you know, I mentioned the thing that got me was -- I mentioned the fact that they're demanding subsidization for Big Oil for exploration that they won't pay for. In this other document where they talk about how they're going to find the money for all of this corporate welfare, they say that they should cut all programs, all federal research programs, into sustainable energy sources. So, here you have the issue that's really at the core of this disaster, which is global warming and fossil fuels. They're subsidizing big oil and cutting funding to any alternative energy source research.


posted September 23, 2005
GOP Opportunity Zone
Naomi Klein
This is a list of "Pro-Free-Market Ideas for Responding to Hurricane Katrina and High Gas Prices," circulated by the House Republican Study Committee. Attributions included where available.


Automatically suspend Davis-Bacon prevailing wage laws in disaster areas. (Reps. Marilyn Musgrave, Colorado, Tom Feeney, Florida, Jeff Flake, Arizona)

Make the entire affected area a flat-tax free-enterprise zone. (Rep. Paul Ryan, Wisconsin)

Make the entire region an economic competitiveness zone (comprehensive tax incentives and waiving of regulations). (Rep. Todd Tiahrt, Kansas)

Immediate, first-year business expensing in lieu of depreciation for all assets, both personal property and structures (buildings) in the affected areas.

Allow net operating loss carry-backs for affected residents and businesses going back as many years as is needed to actualize the NOL.

For residents and businesses located or investing in the affected area, their 2005 and 2006 capital gains and dividends rate should be zero.

Individuals in the affected area should have a Section 911 (overseas earned income) exclusion that is uncapped.

Waive the death tax for any deaths in the affected area between August 20, 2005-December 31, 2005.

Provide limited liability protection for construction contractors who voluntarily provide services or equipment before a government contract is finalized. (Rep. Gary Miller, California, Rep. Tom Cole, Oklahoma)

Repeal or waive restrictive environmental regulations, such as NEPA, that hamper rebuilding. (Heritage Foundation)

Waive penalties for early withdrawals from tax-advantaged savings (like IRAs and 401k accounts). (Heritage Foundation)

Eliminate any regulatory barriers and other disincentives that block faith-based and other charitable organizations from engaging in the recovery and reconstruction process. (Orthodox Union, Heritage Foundation)

Increase the amount of rehabilitation tax credits by 30 percent in census tracts where the greatest poverty exists, and for smaller projects where raising capital for reconstruction is the most difficult, and where there is the most critical need for housing and neighborhood reinvestment. (Rep. Phil English, Pennsylvania)

Allow non-itemizers to deduct chartable contributions to disaster relief. (Rep. Ron Paul, Texas)

Give school-choice vouchers for displaced children. (Rep. Ted Poe, Texas)

Provide tax (and other such) incentives to lenders if they provide funding for school and other construction.

Reduce, suspend, or eliminate tariffs on Canadian lumber, Mexican cement, and other materials used for new construction.

Permit an additional advance refunding for all governmental bonds issued by or on the behalf of entities contained in the disaster area as declared by the president.

Eliminate the volume cap for private-activity bonds in the disaster area and permit the use of private-activity bonds for all transportation-related infrastructure in the disaster area.

Eliminate the income and home price limitation for mortgages funded by tax-exempt mortgage revenue bonds for a five-year period.

Allow a non-profit corporation to issue tax-credit bonds--which provide a return in the form of a federal tax credit--and allocate the proceeds for school rehabilitation and reconstruction.

Streamline the environmental hurdles to building new oil refineries. (Rep. John Shadegg, Arizona)

Make it easier for small refineries to increase capacity. (Kansas's Tiahrt)

Allow more offshore oil drilling. (Texas's Poe)

Pay the royalties for new offshore oil drilling to the local governments nearest to shore. (Rep. Dana Rohrabacher, California)

Allow drilling in the Arctic National Wildlife Refuge.

Temporarily suspend the gas tax. (Arizona's John Shadegg)

Permanently reduce the gas tax.

Waive or repeal gas formulation (e.g. oxygenation) requirements under the Clean Air Act and related regulations. (Heritage Foundation)

Encourage the production of renewable fuels (biodiesel, ethanol.)

Encourage private-market projects to recover usable energy from oil shale.

Strengthen the existing investment tax credit for Enhanced Oil Recovery (using modern technology improvements to extract oil from previously unavailable sources) in section 43 of the IRS Code.

Oil Profit Margins: Still Unjustified Subsidies to the Oil Industry

When debating oil profits, one should keep in mind the difference between oil profits and profit margins. Those defending the oil industry's profits will refer to profit margins, not profits. I'm not an expert in economics, but, as I try to explain, even if one talks about profit margins, the oil companies are making out outlandishly well. Their profit margins are soaring, too, which means that their costs are not going up. Still the White House has given them billions in tax breaks to encourage oil development. In the past, like in 1980, after a rise in oil prices and company profits, Congress approved a windfall profits tax on oil companies. But no such tax is on the agenda now. Tax breaks are on the agenda.

Despite the fuel crisis and the fact that consumers are seeing record-high gas prices, oil companies are now enjoying record-high profits. In fact, ExxonMobil just made the most profit for any quarter for any company ever. For example, this is on the Democracy Now! web site:

ExxonMobil Sees Record $10B 2nd Quarter Profits
Oil giant ExxonMobil is expecting to report profits of over $10 billion over the past quarter -- making it the most profitable single quarter for any company ever. This means ExxonMobil averaged making over 4.5 million dollars every hour for the past three months. During that same period gas prices shot up to record highs. Meanwhile the Energy Department is warning consumers in the Northeast to expect their winter heating bills to jump over 30 percent.

Also, here is a bit from a Boston Herald news item:

Exxon's $10B fill-up: Cashing in on crunch
By Brett Arends
Wednesday, September 7, 2005 - Updated: 04:27 PM EST
Oil companies came under new fire yesterday when it emerged that ExxonMobil's profits are likely to soar above $10 billion this quarter on the back of the fuel crisis.
That's $110 million a day, and more net income than any company has ever made in a quarter. It's also a stunning 69 percent increase over the same period a year ago and a 34 percent jump from the $7.6 billion Exxon made just last quarter.
``Do you realize President Bush has just given a tax break to ExxonMobil?'' thundered Rep. Ed Markey (D-Malden). ``Of all the companies in the history of the world that needed a tax break, this month, ExxonMobil should be at the bottom of the list.''

But those defending the industry's high profits will point out that one must look at profit margins, not profits. According to them, profit margins (measured roughly as net income or profit divided by sales or total revenue) provide a more relevant and accurate measure of a company or an industry's health, and also provide a useful way of comparing financial performance between industries large and small. Profit margins tell one how much profit a company makes on a dollar of sales. So, for example, a 5% profit margin says that the company makes 5 cents in profit for every dollar in sales.

Profits reflect the size of an industry, but they're not necessarily a good reflection of financial performance. The profit margin falls when company costs go up and eat into revenue (sales). The oil industry is probably the world's largest industry. Its revenues are large, but so are its costs, both the cost of finding and producing oil and the costs of refining, distributing and marketing it. It turns out that the oil industry's profit margins are usually about average compared with all other industries. I have found that the typical profit margin for ExxonMobil is about 5%-6%. The profit margins of banks and the pharmaceutical industry, for instance, is much higher, like 20%.

The oil industry is termed a "capital intensive" industry because so much of its work requires the expenditure of millions and sometimes billions of dollars even for a single project. Here are some examples based on actual costs compiled by the American Petroleum Institute:

$1.5 billion for a deep-water offshore platform.
$2 billion for offshore and onshore natural gas project facilities.
$400 million for a refinery modernization or revamping.
$1 million for a new service station.
$2 million for a large aboveground distribution terminal storage tank.
$1.1 million per mile of new pipeline constructed on land.

For some info from the oil industry, see:
Conoco Philips site on oil profit margins

So the debate about oil profits should be put in terms of profit margins. But profit margins have about doubled for ExxonMobil. Exxon Mobil had a profit margin of about 10 percent. As I understand it, they usually make around 5%-6%. So it seems that even in terms of profit margin, the oil companies are doing outlandishly good.

In light of great profits margins, it seems that there needs to be a justification for giving oil companies billions of dollars of tax breaks for oil production. High profit margins mean that oil companies have the money to boost oil production on their own. The last thing they need are tax breaks, especially if you believe in free market capitalism. Instead, we seem to get a shining example of corporate welfare.

Lawmakers who opposed the recent tax legislation said that the oil profit reports are evidence that the subsidies are not needed. Rep. Edward Markey, D-Mass., said oil companies are asking for subsidies at the same time they're "shaking money from out of (consumers') pockets at the gas pump." "I'm sure that they are chuckling at the continued support that they receive from the Republicans on these subsidies," Markey said.

But supporters of subsidies said that oil prices eventually will fall and the energy legislation is designed to encourage production even when that happens. "Profits aren't always up," said Rep. Joe Barton, R-Texas, chairman of the Energy and Commerce Committee. "There are lots of times the oil market is different and the profits are down or non-existent."
(See A recent Washington Post article)

So the reason for the subsidies is that they are necessary for times when profits are down or non-existent. But this hardly seems like a good justification for the subsidies. The fact that profits may go down in the future is not a good reason for giving subsidies now, when profits and profit margins are soaring. Their view seems to be that no time is a good time not to give big subsidies to the oil industry.

The Corporation: Jeremy Rifkin

Regarding the movie, The Corporation, the second CD has 40 interviews on it. This makes the movie a great educational experience. The interviews cover a wide range of individuals. They range from reformers to revolutionaries and to those who are just in the thick of things. There are very familiar people like Milton Friedman, Noam Chomsky, and Michael Moore. But the interviews introduced me to many people and ideas that deserve serious attention. One such person seems to be Jeremy Rifkin (fellow at the Wharton School's Executive Education Program at the University of Pennsylvania and president of the Foundation on Economic Trends in Washington, DC). He was a very articulate speaker in the movie and in his interview. His ideas were very thought provoking. So I looked him up, and he has about 16 books out, some of which are best sellers. One of his latest (international) best selling books is The European Dream. In it he gives a historical and philosophical account (but a very concrete account) of what he calls the "American dream" and how the "European dream" is slowly eclipsing it. I'm in the middle of reading that now. Anyway, Rifkin has good ideas, and he seems able to explain his thoughts in a commanding and straightforward way.

He seems to have some other informative books, especially one about the hydrogen economy called The Hydrogen Economy, which I have not read. Apparently, the US government is moving to help develop hydrogen power. I have to do more work on this one, but Bush has signed into law legislation putting billions of dollars into hydrogen development. The great thing about hydrogen power is that it does not pollute (because water is its side product). Activists are upset because Bush mainly is pursuing what they call "black hydrogen," which is hydrogen that is produced through dirty technologies, like through fossil fuels and nuclear power. Instead, activists like Rifkin want to pursue what they call "green hydrogen," which is hydrogen that is acquired through clean, non-polluting, non-nuclear, and non-fossil-fuel technologies (like biomass). Anyway, one should keep in mind this hydrogen revolution. I don't know much about it. I know that there is much going into the development of hydrogen fuel cells. Some buses in London (as an experiment) were run on hydrogen with great success. Also, there has been much talk (you have to look for it) about mining the moon because there is a tremendous amount (for an almost endless supply) of hydrogen on the moon (in the form of H3). Anyone who can get this hydrogen will be the next Saudi Arabia, I guess. When it comes to the moon, there is the problem of private property and ownership. There is talk about the moves that have to be made to undermine treaties so that massive private profits can be made off of the moon.

The Corporation: The Documentary

The Corporation is a great documentary by Mark Achbar, Jennifer Abbott, and Joel Bakan. Joel Bakan also wrote a book called "The Corporation." The book complements the movie. Achbar was one of the creators of Manufacturing Consent: Noam Chomsky and the Media. (Manufacturing Consent is a classic film. Everyone should see it.) The Corporation investigates the genesis, nature, problems, and realities of the modern corporation. The movie has good visuals. The creators hardly ever just let scenes go by without doing something clever and creative with the visuals. The content of the film is great, dealing with what I think is one of the most important issues of our time: corporate power. One of the main points that has stuck with me is that, through a series of questionable maneuvers, corporations have acquired the status of legal persons, having more rights than real people. Also enshrined in law (the details of which I am ignorant) is that these immortal legal persons must put the interests of their stockholders above all other concerns. In other words, the corporation must, by law, put the pursuit of profit (for its stockholders) above, say, the common good. So the stockholders can prevent a CEO from putting, say, environmental interests or community interests, over profits. As the economist Milton Friedman says, the corporation has no social responsibility at all. It has a legal responsibility, however, to maximize profits for its owners. Those who run the corporations may be nice people, very moral people, but in their instututional role they are required to act like egoists, doing whatever maximizes the corporation's interests. And that often means that their institutional role requires them to act like monsters. One bad consequence of this egoism is that, if the cost benefit analysis shows that the expected utility of breaking a law pays more than following the law, then the correct business decision is to break the law. It is easy to understand why there is an incredible amount of corporate crime. Another thing to realize, though, is that this corporate structure is not a law of nature. The existing corporate structure exists because we have willingly (more or less) created it. Corporations exist by the consent of the people. If we want to change the structure, then we can do it. If a corporation deserves the death penalty, then we can and should revoke its charter.