So, the GAO recently released a report on the wireless industry and found that:

The biggest changes in the wireless industry since 2000 have been consolidation among wireless carriers and increased use of wireless services by consumers. Industry consolidation has made it more difficult for small and regional carriers to be competitive. Difficulties for these carriers include securing subscribers, making network investments, and offering the latest wireless phones necessary to compete in this dynamic industry. Nevertheless, consumers have also seen benefits, such as generally lower prices, which are approximately 50 percent less than 1999 prices, and better coverage.

Now, if you are a self-described “consumer advocate,” I would hope the bottom line here is pretty straightforward and refreshing: Prices fell by 50% in 10 years. That alone is an amazing success story. But that’s not the end of the story. The more important fact is that prices fell by that much while innovation in this sector was also flourishing.  Do you remember the phone you carried in your pocket — if you could fit it in your pocket at all — ten years ago?  It was a pretty rudimentary device.  It made calls and… well… it made calls.  Now, think about the mini-computer that sits in your pocket right now.  Stunning little piece of kit. It can text. It can do email. It can get Internet access. You can Twitter on it. Oh, and you can still make calls on it (but who wants to do that anymore!)

The point is, this is a great American capitalist success story that everyone — especially “consumer advocates” — should be celebrating.  So, what does Public Knowledge president Gigi Sohn have to say?

“These trends do not bode well for consumers, despite any benefits of the moment,” she told Ars Technica.

Wait, what?  Apparently no good deed goes unpunished. In the eyes of Public Knowledge, 50% price drops + stunning innovation = we need more regulation!  According to Ars, Gigi called for wireless net neutrality, text messaging regulation, an end to handset exclusivity, and more reasonable early termination fees.

What Gigi appears to be hung up on is the fact that, as the GAO reports, there has been undeniable consolidation in this sector since 2000. (Of course, that scale was essential to spreading faster networks nationwide).  But in Public Knowledge’s world, big is always bad.  All that counts is how atomistic competition is.  If we don’t have lemonade stands* on every corner, then, by God, to hell with the entire system, they say.  It makes no difference to them how well consumers did under that system . That’s the key take-away here.

But how asinine is this?  Again, isn’t consumer welfare what really counts?  Do we really care if we have 4 or 40 competitors? So long as prices are generally reasonable (or in this case constantly plummeting) and innovation is occurring at a healthy clip (which is certainly is here), then who cares how many players are out there?  Who’s to say to say that “X” is exactly the right number of competitors?  Markets determine these things. Public Knowledge apparently doesn’t like the fact that X currently is 4 instead of 40, or whatever it is they think meets their Goldilocks standard.  And, so, to get things just right, they would bring in the regulatory wrecking ball and have FCC bureaucrats start re-engineering this sector according to their own preferred design.

Oh, the rank hubris of it all!

Anyway, you’ll have to excuse me now.  Once I finish up this post to on my Droid (yes, I can blog on my fricking phone!!!!  How amazing is that, Gigi !!) I then need to get back to reading through my day’s Twitter stream (also on my phone) my RSS feeds (also via my phone) and then sort through the tens of thousands of games and apps in the Android marketplace to find my kids some new things to keep them entertained on a long car drive during vacation next week, where I will be using the Droid’s navigation system to find the hotel, while also searching for restaurants to eat at, while also…

Oh, you get the point.  Some people are just never happy.

P.S. To understand why “lemonade stand economics” are never going to work out well in high fixed-cost sectors like wireless, please see my post, “Wireless Networks & Lemonade Stand Economics.”   For more facts about how vibrantly competitive and innovative this sector is, please see:

• Wireless Innovation is Alive & Well: Two New Reports Set the Record Straight
• CTIA’s Refutation of Tim Wu’s 2007 Wireless Net Neutrality Paper
• The Fiercely Competitive Mobile OS & Device Markets

The nice folks at the New York Times “Room for Debate” feature asked me and a group of bright lights to discuss the Verizon-Google agreement on network neutrality regulation, as it stood at various points in the day.

Read the comments of Tim Wu, Lawrence Lessig, David Gelernter, Ed Felten, Jonathan Zittrain, and myself. Much of my comment owes credit to Tim Lee’s excellent paper “The Durable Internet.”

We’re all over the place, folks . . .

Update: Late addition: Gigi Sohn.

I sometimes enjoy picking nits with or lampooning our friend Scott Cleland, but today write to point out what an excellent job he did of advocating against net neutrality regulation last week on the NewsHour.

The set-up piece is interesting because of its government-centric take. Net neutrality, it says, is “a set of principles adopted by the Federal Communications Commission in 2005 that limits the ability of Internet providers to treat sites differently.”

The better view, I think, is that neutrality is one of “a set of technical principles that have been implicit in [the Internet’s] design since it began life.” Hey, NewsHour, giving the FCC credit for the neutral engineering of the Internet is like giving the rooster credit for the sunrise.

There’s a telling omission in the NewsHour’s telling of the Comcast Kerfuffle. See if you catch it:

The case began with actions by Comcast in 2007 to interfere with an online service called BitTorrent, a file-swapping site that allows consumers to swap movies and other material over the Internet, files that use a great deal of bandwidth. The FCC then told Comcast it could not block subscribers from using BitTorrent under the commission’s net neutrality rules.

Left out: Comcast had ceased interfering with BitTorrent before the FCC acted due to a variety of market pressures.

But take a look at the piece and Scott’s good advocacy in the discussion that follows the set-up:

Gigi Sohn, who I personally respect and who I agree with on many issues, reaches a bit far when she argues that Comcast degraded BitTorrent because it was a file-sharing site “unpopular with some folks in Congress and some folks elsewhere.” Collapsing net neutrality regulation and intellectual property issues may be good for Public Knowledge’s base, but it confuses many issues and weakens Public Knowledge’s arguments and support.

I think the record is pretty clear that Comcast degraded BitTorrent because of a conflict between the BitTorrent protocol and the DOCSIS protocol running on Comcast’s cable plant. (I know I can rely on comments to correct me or bring nuance to this claim.)

Neutrality was not a gift from government, and I don’t think making a mandate of a good engineering principle will improve the functioning of the Internet or the Internet ecosystem.

Today, Jim Harper and I took on Andy Schwartzman of Media Access Projects and Gigi Sohn of Public Knowledge in this New York Times online debate about, “Should Consumers Fear the Comcast Deal?”  Like other media critics, Schwartzman and Sohn adopt the gloom and doom tone that many worrywarts use when discussing the deal. Andy Schwartzman says “Comcast’s proposed acquisition of NBC Universal poses a genuine threat to free expression and diversity of speech in our democratic society.” And Gigi Sohn predicts that “With all that programming under its control, Comcast will have every incentive to take its shows off of the Internet and force consumers to buy a cable subscription to get online access to that programming.”

But as Jim Harper and I point out, we’ve heard such Chicken Little horror stories before. Whether it was AOL-Time Warner, News Corp-DirecTV, Sirius-XM, or whatever else, the story is always that a veritable media apocalypse awaits if the deals aren’t blocked.  But it just ain’t so. As I note in my response:

Back in the real world, the sky never fell — except on the merging companies! Just two years after the deal was announced, AOL-Time Warner had lost over $100 billion and Time Warner has now spun off AOL entirely. The News Corp.-DirecTV marriage ended in divorce after just three years. And Sirius-XM flirted with bankruptcy earlier this year as listeners continue to flock to other audio options. The moral of the story: markets worked. Shareholders abandoned bad deals, new niche markets developed, and innovative digital technologies continue to revolutionize media.

And as Harper notes in response to silly claims about restricting access to content or communications, “Comcast-NBC can no more impinge on communications among Internet users than AOL-Time Warner did.” Which is to say, not at all. They would be doomed if they tried to play such games. You can’t make money or retain viewers or customers by cutting off access to content or conduit. Finally, “the genuine threat to free expression and diversity of speech” is not Comcast-NBC, as Schwartman suggests, but a government big enough to crush media companies and control media platforms as if they were their playthings.

For more details about the actual historical record, check out my recent PFF white paper: “A Brief History of Media Merger Hysteria: From AOL-Time Warner to Comcast-NBC.”

Note: Here’s a second post I just put live at DrewClark.com. It refers to an upcoming conference, on Friday, October 3, sponsored by the Information Economy Project at George Mason University School of Law. It will be held at 8:30 a.m. at the National Press Club. Registration details are below.

In the United States, the regulation of broadcast radio and television has always been done under a different standard than the regulation of the print medium.

As Secretary of Commerce in the administration of President Calvin Coolidge, Herbert Hoover declared: “The ether is a public medium, and its use must be for a public benefit,” he said at the Fourth National Radio Conference, in 1925. “The dominant element for consideration in the radio field is, and always will be, the great body of the listening public, millions in number, country-wide in distribution.”

When Congress created the Federal Radio Commission in 1927, it decreed that broadcasting was to serve the “public interest, convenience and necessity,” and this standard was re-affirmed in the Communications Act of 1934. Several Supreme Court decisions — albeit decisions that have been much criticized — affirmed that broadcasting could and should be treated differently than the traditional “press.”

This differential treatment for broadcasting — versus the print medium, and also cable television — was underscored by the decisions in Red Lion Broadcasting Co. v. FCC (1969), which upheld the “Fairness Doctrine,” and also FCC v. Pacifica Foundation (1978), which upheld indecency rules for over-the-air broadcast television. The Fairness Doctrine required broadcasters to grant reply time to those who said their views were criticized.

The Fairness Doctrine upheld in Red Lion was premised on the notion that electromagnetic frequencies, being “scarce,” needed to be rationed through a government-granted license. (It took economist Ronald Coase to note that airwaves are no more scarce than pulp and printing presses.) Station owners were thus periodically licensed as “public trustees” and obligated to either air different points of view, or return their spectrum.

Hence the nascent broadcasting medium was never allowed to develop with the full panoply of First Amendment protections for opinion, commentary, and outright partisanship, as were newspapers. The Pacifica decision underscored this result, holding that George Carlin’s “Filthy Words” monologue, even though not obscene, could be banned by the Federal Communications Commission.

President Ronald Reagan took a dim view of broadcasting’s “specialness.” In the memorable words of his FCC Chairman, Mark Fowler, television is “just another appliance — it’s a toaster with pictures.” Fowler and his successor, Dennis Patrick, worked together with the D.C. Circuit Court of Appeals and finally killed the Fairness Doctrine in 1987. They argued that it chilled free speech, and the appeals court agreed that the agency was entitled to drop the doctrine. Notwithstanding two congressional pushes to overturn the FCC — vetoed by Presidents Reagan and the first President Bush — the Fairness Doctrine was never re-instituted.

But the issue of what else, specifically, broadcasters were required to do to fulfill their public interest obligations came to a head under President Clinton and FCC Chairman Reed Hundt. Hundt pushed for the imposition of a mandatory three hours a week of children’s television – a requirement contemplated by the Children’s Television Act of 1990.

The rise of digital television also complicated this inquiry. As I discussed in my blog post earlier today, “Do TV Broadcasters Have Obligations to the Public,” Congress chartered an advisory committee to consider this question. As part of the Telecom Act of 1996, Congress paved the way for a new allocation of radio-frequencies so that broadcasters could also transmit their signals digitally. But it also specifically inserted language in the act, stating:

Nothing in this section shall be construed as relieving a television broadcasting station from its obligation to serve the public interest, convenience, and necessity. In the [FCC’s] review of any application for renewal of a broadcast license for a television station that provides ancillary or supplementary services, the television licensee shall establish that all of its program services on the existing or advanced television spectrum are in the public interest.

But it would take a commission — specifically, the Advisory Committee on the Public Interest Obligations of Digital Television Broadcasters (“Gore Commission”) — to sort through and analyze those specific obligations.

Next post: What Were the Gore Commission’s Findings, and How Do they Apply to the Video Future?

Resources:

• “Charting the Digital Broadcasting Future,” the final report of the Advisory Committee on the Public Interest Obligations of Digital Television Broadcasters” [PDF]
• “Citizen’s Guide to the Public Interest Obligations of Digital Television Broadcasters“, Benton Foundation.

Conference Program:

A mini-conference • Friday, October 3, 2008, 8:30 a.m.The Gore Commission, 10 Years Later: Th e Public Interest Obligations of Digital TV Broadcasters in Perfect Hindsight

A mini-conference • Friday, October 3, 2008, 8:30 a.m. National Press Club, 529 14th St. NW, 13th Floor, Washington, DC

Note: Here’s a post I just put live at DrewClark.com. It refers to an upcoming conference that might be of interest to Tech Liberation readers. Make sure to follow the link to the bottom of the post for registration information for this FREE conference, to be held tomorrow, Friday, October 3, at 8:30 a.m.

If all goes according to plan, on February 17, 2009, television broadcasters will power down their analog transmitters. They will be broadcasting their signal only digitally.

After more than 20 years in the long transition to digital television, this might be considered progress. Now, millions of Americans are collecting vouchers from the Commerce Department to subsidize their purchase of converter boxes. These are the electronic devices that take the digital signals — and convert them back to analog — so that viewers without high-definition televisions can watch broadcast TV on their old sets.

What about the bigger questions? Is there any benefit to the public, or to consumers, from the transition to digital television? What about the vaunted visions of hundreds of broadcast channels, through multi-casting? What would be the new public-interest obligations, if any, of broadcasters? This question has definitely not been resolved.

It may come back to this question: what was the point of making this move to digital and high-definition television? I recounted some of this history in “Spectrum Wars,” a 2005 article in National Journal magazine:

[The National Association of Broadcasters] seized upon a new technology out of Japan called high-definition TV. Compared with the 45-year-old U.S. standard, the sharper, high-resolution images used twice as many lines on a television screen, and broadcasting a program required two television channels instead of one. For broadcasters, that was just the point: High-definition gave them a way to fend off the FCC’s effort to grab frequencies back and turn them over to other uses. The broadcasters lobbied the agency to postpone the spectrum reallocation [currently being considered for cellular telephones] and to study the new technology. The NAB worked its magic on Capitol Hill, inviting Japanese broadcaster NHK to Washington and rolling big-screen Sony TVs into a hearing in the Senate Caucus Room. Fear of Japanese competition was at fever pitch in Washington. Congress was stunned by the picture quality and frenzied at the prospect that the Japanese would outflank American manufacturers of televisions, just as they had done to the makers of videocassette recorders. Rep. Ed Markey, D-Mass., then-chairman of the House Commerce Telecommunications Subcommittee, took up their cause, and Congress pressured the FCC to leave the spectrum assignments alone on the condition that broadcasters develop HDTV. […] But there was still a problem. Existing TV broadcasting equipment could not send digital signals, and existing analog television sets couldn’t receive digital signals. Broadcasters would have to invest in new television cameras and towers for digital signals, and consumers would have to spend thousands of dollars apiece on new sets. During the transitional period, each broadcaster would need two channels, one for analog and one for digital. Broadcasters turned to Congress, now in Republican hands, and lobbied for a new compact: We’ll give you HDTV if you give us a second channel, for free, until Americans have made the switch. “It was understood that the channels would be loaned for a period of years to prevent consumers from losing television,” said Robert Seidel, vice president of engineering for CBS Broadcasting.

Congress initially approved a transition to digital in 1997, setting year-end 2006 as the target transition date. But a loophole rendered the 2006 irrelevant until congress revisited the issue and, on February 1, 2006, fixed February 2009 as the end-date for the transition.

In the intervening decade, the question of broadcasters’ public interest obligations has been intermittently revived. Most significantly, as a result of the 1996 Telecommunications Act, an Advisory Committee on Public Interest Obligations of Digital Television Broadcasters was created. It became popularly known as the “Gore Commission.”

Unlike other modes of communications, broadcasters are regulated as a “public trustee.” This means that they must meet certain obligations — by airing children’s television, or by including coverage of civic and political events, for example — that are not required of their counterparts on cable or the print medium.

At the time of the Gore Commission, one voice in the debate was Henry Geller, a former FCC general counsel who has continued to work on broadband matters as a private citizen. He was an FCC attorney before rising to general counsel in 1964-1970, later serving as an assistant to FCC Chairman Dean Burch, from 1970-1974, and then becoming the head of the National Telecommunications and Information Administration under President Carter, from 1978-1981.

In a 2000 hearing on the subject before Congress, Geller suggested the following (reprinted in Current magazine):

I urge you to consider the following: Scrap the public trustee content scheme, and treat broadcasting like its main rival, cable, which pays up to 5 percent of gross revenues for use of the public streets for cable rights-of-way (significantly, the public makes little or no distinction between cable and broadcast channels). By taking some modest fee from commercial broadcasters for their use of the public spectrum in lieu of the public trustee obligation, noncommercial television could be adequately funded to deliver high-quality public service programming. The objective is to obtain such programming, but since the government soundly cannot review for quality, we are dependent upon the broadcaster to present the high-quality public service programs. The noncommercial system has demonstrated that it will strive to do so; the commercial system, under fierce and growing competition, has no such history or incentive.

Geller instead suggested a 1 percent spectrum fee on gross advertising revenues, netting about $250 million at the time, and going to fund educational programming on public television

Geller also argued, with respect to political content:

There is one other recommendation to Congress—affording free time to candidates as an important part of campaign finance reform. The details of such an effort are of course to be fashioned by Congress. Since it would obligate broadcasters to allocate a relatively large amount of air time every two years (or perhaps issue vouchers for purchase of that air time), the free time provision, along with the above 1 percent figure in the educational field, would constitute the full broadcaster contribution in lieu of its present public trustee obligation. This would be a meritorious conclusion, because an educated and informed electorate is so vital to the proper functioning of our democracy.

Geller, together with two officials involved in the Gore Commission — Norman Ornstein and Gigi Sohn — will present their reflections at a forum TOMORROW, on Friday, October 3: “The Gore Commission, 10 Years Later: The Public Interest Obligations of Digital TV Broadcasters in Perfect Hindsight.” The event, to be held beginning at 8:30 a.m. at the National Press Club, will feature is sponsored by the Information Economy Project at George Mason University School of Law, of which I am the assistant director. The full program is available at http://iep.gmu.edu. Admission to the event is free and open to the public. To reserve your spot, please email Drew Clark at: iep.gmu@gmail.com.

Later today, I’ll be returning to this theme with two more blog entries in this spot:

• What Did the Gore Commission Accomplish?
• How Do the Gore Commission’s Finding Apply to Our Video Future?

Conference Program:

A mini-conference • Friday, October 3, 2008, 8:30 a.m.The Gore Commission, 10 Years Later: Th e Public Interest Obligations of Digital TV Broadcasters in Perfect Hindsight

A mini-conference • Friday, October 3, 2008, 8:30 a.m. National Press Club, 529 14th St. NW, 13th Floor, Washington, DC