Articles by Hance Haney

Hance Haney is Director and Senior Fellow of the Technology & Democracy Project at the Discovery Institute. Haney spent ten years as an aide to former Senator Bob Packwood (R-OR), and advised him in his capacity as chairman of the Senate Communications Subcommittee. He subsequently held various positions with the United States Telecom Association and Qwest Communications. He earned a BA in history from Willamette University and a JD from Lewis and Clark Law School in Portland, Oregon.


More this week on the efforts of Reed Hastings of Netflix to reignite the perennial debate over network access regulation, courtesy of the New York Times.  Hastings is seeking a free ride on Comcast’s multi-billion-dollar investment in broadband Internet access.

Times columnist Eduardo Porter apparently believes that he has seen the future and thinks it works: The French government forced France Télécom to lease capacity on its wires to rivals for a regulated price, he reports, and now competitor Iliad offers packages that include free international calls to 70 countries and a download speed of 100 megabits per second for less than $40.

It should be noted at the outset that the percentage of French households with broadband in 2009 (57%) was less than the percentage of U.S. households (63%)   according to statistics cited by the Federal Communications Commission.

There is a much stronger argument for unbundling in France – which lacks a fully-developed cable TV industry – than in the U.S.  As the Berkman Center paper to which Porter’s column links notes on pages 266-68, DSL subscriptions – most of which ride France Télécom’s network – make up 95% of all broadband connections in France.  Cable constitutes approximately only 5% of the overall broadband market.  Competition among DSL providers has produced lower prices for consumers, but at the expense of private investment in fiber networks.

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The airline would not let coach passenger Susan Crawford stow her viola in first class on a crowded flight from DC to Boston, she writes at Wired (Be Very Afraid: The Cable-ization of Online Life Is Upon Us).

Just imagine trying to run a business that is utterly dependent on a single delivery network — a gatekeeper — that can make up the rules on the fly and knows you have nowhere else to go. To get the predictability you need to stay solvent, you’ll be told to pay a “first class” premium to reach your customers. From your perspective, the whole situation will feel like you’re being shaken down: It’s arbitrary, unfair, and coercive.

Most people don’t own a viola, nor do they want to subsidize viola travel. They want to pay the lowest fare. Differential pricing (prices set according to the differing costs of supplying products and services) has democratized air travel since Congress deregulated the airlines in 1978. First class helps make it possible for airlines to offer both lower economy ticket prices and more frequent service. Which is probably why Crawford’s column isn’t about airlines.

For one thing, Crawford seems to be annoyed that the “open Internet protections” adopted by the Federal Communications Commission in 2010 do not curtail specialized services — such as an offering from Comcast that lets Xbox 360 owners get thousands of movies and TV shows from XFINITY On Demand. As the commission explained,

“[S]pecialized services,” such as some broadband providers’ existing facilities-based VoIP and Internet Protocol-video offerings, differ from broadband Internet access service and may drive additional private investment in broadband networks and provide end users valued services, supplementing the benefits of the open Internet. (emphasis mine) Continue reading →

Cecilia Kang of the Washington Post reports that

the telecom industry is forcing policymakers to re-examine what has long been a basic guarantee of government – that every American home should have access to a phone, along with other utilities such as water or electricity.

Industry executives and state lawmakers who support this effort want to expand the definition of the phone utility beyond the century-old icon of the American home to include Web-based devices or mobile phones.

The quid pro quo for a monopoly franchise was an obligation to provide timely service upon reasonable request to anyone, subject to regulated rates, terms and conditions.  The Telecommunications Act of 1996 eliminated the monopoly franchise, but the obligation to serve remains in the statute books of most states.  Telecom providers, aka carriers-of-last-resort (COLR), are stuck with the quid without the quo.

This has become a problem as more and more consumers are “cutting the cord” in favor of wireless or VoIP services.  AT&T, for example, has lost nearly half of its consumer switched access lines since the end of 2006.  However, most of the loops, switches, cables and other infrastructure which comprise the telephone network must be maintained if telecom providers have to furnish telephone service to anyone who wants it within days. Continue reading →

When the federal government torpedoed the AT&T/T-Mobile USA merger in December pursuant to the current administration’s commitment to “reinvigorate antitrust enforcement,” it created a new client in search of official protection and favors.

It was clear there is no way T-Mobile – which lost 802,000 contract customers in the fourth quarter – is capable of becoming a significant competitor in the near future.  T-Mobile doesn’t have the capital or rights to the necessary electromagnetic spectrum to build an advanced fourth-generation wireless broadband network of its own.

T-Mobile’s parent, Deutsche Telekom AG, has been losing money in Europe and expected its American affiliate to become self-reliant.  In 2008, T-Mobile sat out the last major auction for spectrum the company needs.

The company received cash and spectrum worth $4 billion from AT&T when the merger fell apart, from which T-Mobile plans to spend only $1.4 billion this year and next on the construction of a limited 4G network in the U.S.  But it must acquire additional capital and spectrum to become a viable competitor.

Unfortunately, every wireless service provider requires additional spectrum. “[P]rojected growth in data traffic can be achieved only by making more spectrum available for wireless use,” according to the President’s Council of Economic Advisers.  Congress recently gave the FCC new authority to auction more spectrum, but it failed – in the words of FCC Chairman Julius Genachowski – to “eliminate traditional FCC tools for setting terms for participation in auctions.”

Everyone fears it will take the FCC years to successfully conduct the next round of auctions while it fiddles “in the public interest.”  That’s why Verizon Wireless is seeking to acquire airwaves from a consortium of cable companies, and why T-Mobile will do anything to stop it.

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Congress freed up much-needed electromagnetic spectrum for mobile communications services Friday (H.R. 3630), but it set the stage for years of wasteful lobbying and litigating over whether regulators should be allowed to pick winners and losers among mobile service providers.

The wireless industry has thrived in the near absence of any regulation since 1993.  But lately the Federal Communications Commission has been hard at work attempting to change that.

A leaked staff report in December helped sink AT&T’s attempted acquisition of T-Mobile.  And the commission has taken the extraordinary step of requesting public comments on an agreement between Comcast and Verizon Wireless to jointly market their respective cable TV, voice and Internet services, beginning in Portland and Seattle.  Nothing in the Communications Act prohibits cable operators and mobile phone service providers from jointly marketing their products.

FCC Chairman Julius Genachowski objected to a previous version of the spectrum bill which, among other things, would have prohibited the commission from manipulating spectrum auctions for the benefit of preferred entities.  The limitation was removed, and Sec. 6404 provides that nothing in the legislation “affects any authority the Commission has to adopt and enforce rules of general applicability, including rules concerning spectrum aggregation that promote competition.

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AT&T and T-Mobile withdrew their merger application from the Federal Communications Commission Nov. 29 after it became clear that rigid ideologues at the FCC with no idea how to promote economic growth were determined to create as much trouble as possible.

The companies will continue to battle the U.S. Department of Justice on behalf of their deal.  They can contend with the FCC later, perhaps after the next election.  The conflict with DOJ will take place in a court of law, where usually there is scrupulous regard for facts, law and procedure.  By comparison, the FCC is a playground for politicians, bureaucrats and lobbyists that tends to do whatever it wants.

In an unusual move, the agency released a preliminary analysis by the staff that is critical of the merger.  Although the analysis has no legal significance whatsoever, publishing it is one way the zealots hope to influence the course of events given that they may no longer be in a position to judge the merger, eventually, as a result of the 2012 election.

This is not about promoting good government; this is about ideological preferences and a determination to obtain results by hook or crook. Continue reading →

Futurists have been predicting for years that there will be diminished privacy in the future, and we will just have to adapt. In 1999, for example, Sun Mcrosystems CEO Scott McNealy posited that we have “zero privacy.” Now, Wall Street Journal columnist Gordon Crovitz is suggesting that technology has the “power to rewrite constitutional protections.” He is referring to GPS tracking devices, of all things.

The Supreme Court is considering whether it was unreasonable for police to hide a GPS tracking device on a vehicle belonging to a suspected drug dealer. The Bill of Rights protects each of us against unreasonable searches and seizures. According to the Fourth Amendment,

The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.

In the case before the Supreme Court, U.S. v. Antoine Jones, the requirement to obtain a warrant was not problematic. In fact, the police established probable cause to suspect Jones of a crime and obtained a warrant. The problem is, the police violated the terms of the warrant, which had expired and which was never valid in the jurisdiction where the tracking occurred. Therefore, first and foremost, this is a case about police misconduct. Continue reading →

Is it “insane” for free market oriented thinkers to support the AT&T/T-Mobile merger?  Although AT&T says there are five choices of wireless providers to choose from in 18 of 20 major markets, Milton Mueller argues that 93 percent of wireless subscribers prefer a seamless, nationwide provider.  If the merger is approved, there would only be three such providers.

A market dominated by three major providers is neither competitive nor noncompetitive as a definitional matter.  Factual analysis is necessary to determine competitiveness.

And it may be premature to conclude that there is no competitive significance either to the fact there are over a hundred providers currently delivering nationwide service on the basis of voluntary roaming agreements that are common in the industry, or to assume that the possibility the FCC will double the amount of spectrum available for wireless services will not impact the structure of the industry.

The trouble with antitrust generally is the possibility that government will choose to protect weak or inefficient competitors, thus preventing meaningful competition that attracts private investment which leads to innovation, better services and lower prices.  Antitrust is supposed to protect consumers, not politically influential producers.  Although this sounds simple in theory, it can get confusing in practice.  As free market oriented thinkers, we do not want government picking winners and losers.

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Julius Genachowski is in a hurry.

He is arguing that the commission must act quickly to “restore the longstanding deregulatory—as opposed to ‘no-regulatory’ or ‘over-regulatory’—compact” that governed broadband Internet access services prior to a recent court decision.  Such an approach is urgently needed to “restore the status quo,” he claims.

If the Federal Communications Commission cannot regulate the Internet, it may die.   The telephone and television industries are declining, whereas communications industries which the FCC monitors to some extent but does not regulate, e.g., the Internet backbone, broadband Internet access and wireless, are thriving.  The Internet, which the FCC cannot regulate, is subsuming legacy communications services which the commission can regulate.  That spells doom for legacy regulation.  Career regulators are worried.

Genachowski’s plan would reclassify broadband as a “telecommunications” service subject to blunt, onerous, industrial-era regulation under Title II of the Communications Act of 1934 – which governs common carriers – and then forbear from enforcing most of Title II’s heavy-handed provisions.

Broadband services haven’t been subject to Title II regulation for several years, so reclassification would not restore the status quo.   It would harken back to a bygone era.

Broadband services provided by cable operators have thrived in the absence of common carrier regulation since before 1999, when William E. Kennard (designated FCC chairman by President Bill Clinton) declared:

If we’ve learned anything about the Internet in government over the last 15 years, it’s that it thrived quite nicely without the intervention of government.

If fact, the best decision government ever made with respect to the Internet was the decision that the FCC made 15 years ago NOT to impose regulation on it. This was not a dodge; it was a decision NOT to act. It was intentional restraint born of humility. Humility that we can’t predict where this market is going.

Though under significant pressure to do so, Kennard refused to regulate broadband services provided by cable operators like the broadband services provided by telecommunications carriers.  In 2005 and 2007, respectively, the commission finally admitted that neither telecommunications carriers nor wireless providers provided broadband services that met the statutory definition of a “telecommunications” service under Title II, either.

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While the FCC considers whether to impose nondiscrimination and transparency regulation to all forms of broadband Internet access, Public Knowledge is proposing to subject broadband services to the same pervasive, overlapping, heavy-handed regulatory framework as century-old telephone service (see this and this) — a framework which a former FCC chairman during the Clinton Administration described as a hopeless “morass.”

PK is worried the U.S. Court of Appeals for the D.C. Circuit might rule in a pending case that the FCC doesn’t have jurisdiction to regulate broadband. The group also is fretting over a recent observation by AT&T that, “with each passing day, more and more communications service migrate to broadband and IP-based services,” leaving the public switched telephone network (“PSTN”) and plain old telephone service (“POTS”) we all grew up with “as relics of a by-gone era.” Continue reading →