August 2005

Salon is reporting the FCC Chaiman Kevin Martin has been meeting privately with numerous religious and “pro-family” groups to coordinate to “address racy content on cable and satellite television.” One of those who sat in on these meetings, Rick Schatz, president of the National Coalition for the Protection of Children and Families, told Salon that during these meetings “[Martin] said the free rein of cable and satellite and satellite radio is not acceptable,” and that Martin is “committed to seeing something is done during his tenure.”

This comes as no surprise, of course. While things have been quiet for the past few months, most industry watchers agreed that the reason for the delay on this front was that the pro-regulatory forces were quietly planning their attack on cable and satellite. As the Salon article makes clear, censorship proponents know they have an uphill battle and are tightly coordinating their efforts to radically expand the scope of federal indecency law.

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Google lately seems to be taking on the world. A year ago it launched Google desktop, putting it in competition with mighty Microsoft. Version 2 was introduced last week. But in the same week, the firm also launched Google Talk – the first venture into communications for Google. Technically, by most accounts, the service isn’t groundbreaking–its a somewhat basic instant messenger service. Economically, however, the move caused some tremors, signalling increased competition in a number of markets.

On the first level, Google Talk pits Google head-to-head with Yahoo and other IM providers. Its hard to believe that only a few years ago policymakers were wringing their hands over a feared AOL monopoly over the market. The Yahoo-Google struggle, being played out in other arenas such as search engines, is particularly worth noting.

Importantly, Google Talk (like most other IM services) now allow voice conversations as well as text. This puts Google squarely in the competition with VoIP providers such as Vonage and Skype. Importantly, Google doesn’t yet allow connections from the Internet to the traditional public switched network, but such a move would be relatively easy for the Googlites. And, with connections to the public switched network, Google becomes a competitor as well to incumbent telephone systems. In other words, Google–which a few years ago was just a good search algorithm, is now (or soon will be) in competition with the likes of Verizon and SBC.

Just one more piece of evidence that telephony is not in Kansas anymore. Competition is here, and more is coming–from increasingly unlikely places.

Televangelist Pat Robertson recently made news with some fairly stupid comments about “taking out” Venezuelan president Hugo Chavez.

Many critics rightly condemned Mr. Robertson’s suggestion that the United States should consider assassinating leaders of state with which we do not agree. In this case, it’s particularly outrageous since (a) Chavez has said nothing to threaten America directly, and (b) even if he had, it would not qualify as grounds for assassination. After all, it’s just Venezuela we’re talking about here. I don’t think we need to worry about them sending an armada up to invade us anytime soon.

But as stupid as it was for Rev. Robertson to suggest assassination as a solution to whatever “problem” it is Mr. Chavez poses, I certainly think he has the right to raise the issue and debate it with others. But apparently another Reverend doesn’t agree. Rev. Jesse Jackson says that the Federal Communications Commission should fine Rev. Robertson for his comments. “The FCC must have some standard on the advocacy of violence,” Jackson said.

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The recent decision by the Internet Corporation for Assigned Names and Numbers (ICANN) to delay deciding whether to approve the .xxx top-level domain signals what could be yet another debate about “indecency” over communication networks. This time, it’s about the structure and content of the Internet, not the broadcast airwaves. And because it’s the Internet that will be impacted by debate concerning “indecent” content, international sovereignty and cultural integrity is at stake. The fear is that supposedly independent technical standards bodies will be hijacked by governments wanting to restrict the free flow of content.

But the U.S. is not alone in its apprehension over what it considers to be illegitimate content. Brazil and France were worried about a .xxx TLD. Indeed, Internet communications spill over national borders, connecting and uniting people everywhere. Other countries fear that cultural fragmentation and the violation of national sovereignty will result from increased interconnection.

The World Society of the Information Summit (WSIS – pronounced Wiss Iss) will hold a meeting this November. And on the verge of it governance policy issues are heating up, and as I say in my recent C:\Spin policy article, ICANN and other Internet governance bodies should have accountability, but not necessarily political accountability to the U.S. or UN. These organizations have a role in deciding on the technical specifications that will encourage the free exchange of information, not limit it.

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Do you want to know what the future of television might look like? Then you need to be reading this amazing new column by Diane Mermigas on Hollywood Reporter.com. Few analysts have their finger on the pulse of the modern media industry like she does.

Mermigas begins her column by noting that “with television’s traditional food chain being shaken to its core by technological innovations, industry players on both sides of the content equation are groping for ways to use technology-driven changes to their advantage. But getting there means sifting through some fairly weighty questions that have no easy answers and rewriting the status quo.”

She notes, however, that even if traditional television operators are willing take a stab at rewriting the status quo, the challenge will be formidable in light of the radically expanding universe of media inputs from which consumers can choose. “With television becoming only one, albeit important, spoke in the multimedia wheel, broadcast and cable players are beginning to see the possibilities for leveraging the value of their content elsewhere. They must.”

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TechCentralStation.com ran a piece of mine today on the Ensign telecom reform bill. The gist: the proposal is a good step in the right direction. And, importantly, it gets the long-stalled telecom reform show moving. Of course, actually getting reform passed will a lot harder than some thought at the beginning of this year.

Here it is.

There’s been a lull in the indecency wars so far in Chairman Kevin Martin’s short tenure at the FCC–no fines have been assessed this year, compared to $7.9 million in fines in 2004. That may soon change. Mediaweek reports that the FCC has hired Penny Nance, an anti-pornography advocate and founder of the Kids First Coalition, to serve an an advisor on the issue. Nance will work from the FCC’s Office of Strategic Planning and Policy Analysis (an office that historically been focused on economics, and not involved in indecency issues.)

It’s too early to say what the appointment means. There’s some speculation that the Commission is preparing to act on a new set of indecency complaints.

When called by MediaWeek, Nance declined an interview, saying “I can’t talk now.” That leaves open the obvious question: “Who can talk now?” Stay tuned.

The FCC has finally put an end to the dubious 1990s experiment with “unbundling” DSL services. Or, to put it a little bluntly, the FCC has decided it will no longer expropriate the infrastructure of the Baby Bells to be used at government-mandated prices by their competitors.

Various liberal commentators, such as Matt Yglesias have painted unbundling as a noble Clinton-era experiment that was allowed to wither on the vine under the Bush administration. Had the Republicans continued the Democrats’ vigorous efforts on behalf of competition, the theory goes, we would now have a healthy, competitive broadband marketplace.

Matt points out that Southeast Asia enjoys better broadband service than the United States and suggests that Japan and South Korea pursued “open access” policies like those the FCC is now abandoning, while the United States has dropped the ball.

But that line of argument doesn’t make very much sense. If you’re Verizon, and you know that you will be required to “share” any new infrastructure you build with your competitors, you are unlikely to spend very much money upgrading your infrastructure. And if you’re one of those competitors, you have little reason to build competing infrastructure when you have guaranteed “access” to Verizon’s infrastructure at government-mandated prices. Hence, although you might have some “competition” in downstream services, “open access” policies are going to retard the build-out of new infrastructure in the “local loop.”

You can see this dynamic in Matt’s own backyard. A couple of years ago, Verizon began rolling out its fiber-to-the-premises service in select cities including Northern Virginia. They did so only after receiving assurances from the FCC that any new fiber infrastructure would not be subject to unbundling rules. You can also see it at work in the cable market: today, some cable companies are offering 6 Mbit services. When I had a cable modem 3 years ago, the best I could get is 1.5 Mbit.

Now, Matt points out that other countries have even faster service. He says we’re falling behind. I have to admit I haven’t studied the telecom markets in Japan and South Korea in any detail, so I can’t say what other differences might explain the discrepency. A couple of things come to mind. One is that, obviously, higher-density cities will have an easier time rolling out new services. Another is that, because Japan and South Korea industrialized fairly recently, the wires in the ground are likely to be newer than those in the United States, making rollout of faster services more practical. It’s also possible that cultural factors come into play. Japan and South Korea are intensely literate and gadget-happy societies. South Korea is obsessed with video games the way we’re obsessed with football. It’s possible (although I’m by no means claiming that I know enough to say it’s true) that Japan and South Korea have more broadband users because they have more nerdy people.

In any event, if your goal is to spur investments in new infrastructure, the first step must be to insure that the company that invests capital reaps the profits from that investment. It’s hard to see how “open access” rules could possibly accomplish that. Once the dust has settled from the well-deserved death of “unbundling,” we should have a thorough debate about how best to lower barriers to entry to the broadband market, so that companies can more easily build infrastructure (especially wireless infrastructure) to compete with the incumbents. But the debate must start with the principle that the government should respect the rights of companies who invest in infrastructure to profit from their investments, rather than “unbundling” them and giving “access” to other companies who have not bothered to make such investments.

Econ professor Marius Schwartz just wrote a short, yet incredibly useful analysis of competition in the Internet backbone space. You can find the AEI-Brookings publication here, but if you want the summary version it’s this: there is tons of competition and the SBC/AT&T merger won’t change that.

And here’s one bit you won’t want to miss regarding the Verizon merger:

Thus SBC/AT&T and Verizon/ MCI together would have less than 30% of Internet traffic. To put this in context, at the time of the Sprint merger, MCI by itself had a larger share–but still was unable to impose interconnection charges on fully eleven competitors!

Cross-posted from Sonia Says.