Articles by Steven Titch

Steven Titch (@stevetitch) is an independent telecom and IT policy analyst. His policy analysis has been published by the Reason Foundation and the Heartland Institute and covers topics such as municipal broadband, network neutrality, universal service, telecom taxes and online gambling. Titch holds a dual Bachelor of Arts degree in journalism and English from Syracuse University. He lives in Sugar Land, Texas. He burns off energy running 5K races, is an avid poker player, and likes to mellow out in cellar jazz bars.

Some 77 percent of wireless phone users who use their phones for online access say slow download speeds plague their mobile applications, according to a new survey from the Pew Internet and American Life Project. Of the same user group, 46 percent said they experienced slow download speeds at least once a week or more frequently (see chart below).












While the report, published last week, does not delve into the reasons behind the service problems, it does offer evidence that users are noticing the quality issues wireless congestion is creating. Slow download speeds are a function of available bandwidth for mobile data services. Bandwidth requires spectrum. The iPhone, for instance, uses 24 times as much spectrum as a conventional cell phone, and the iPad uses 122 120 times as much, according to the Federal Communications Commission FCC Chairman Julius Genachowski.  As more smartphones contend for more bandwidth within a given coverage area, connections slow or time out. Service providers and analysts have warned that the growing use of wireless smartphones and tablets, without an increase in spectrum, would begin to degrade service. There have been plenty of anecdotal instances of this. Pew offers some quantitative measurement.

While technologies such from cell-splitting to 4G offer temporary fixes, the quality issue will not be fully addressed until the government frees up more spectrum. While the FCC hasn’t helped much by blocking the AT&T-T-Mobile merger and joining with the Department of Justice in delaying the Verizon deal to lease unused spectrum from the cable companies, at least the agency has acknowledged the problem. Right now, as Larry Downes reported last week, the National Telecommunications and Information Agency (NTIA), which has been charged with the task of identifying spectrum the government can vacate, is stalling.  It would be nice to see the FCC apply the aggressiveness it brings to industry regulation to getting NTIA off the schneid. At the same time, the Commission needs to put aside its ideological bent and do what it can to make more spectrum available in the short term.

Yesterday brought a spate of news reports, many of them inaccurate or oversimplified, about a settlement the U.S. Attorney’s office in Manhattan reached with two major international Internet poker sites—PokerStars and  Full Tilt Poker.

The buried lead–and very good news for online poker players–is that Internet poker site PokerStars is back in business. Manhattan U.S. Attorney Preet Bharara ended his case against the site and it is now free to re-enter the U.S. market when states begin permitting Internet gambling, which could start as early as this year in states such as Nevada and Delaware.

The three-way settlement itself  is rather complicated. Full Tilt Poker will have to forfeit all of its assets, at this point mostly property, to the U.S. government. PokerStars will then acquire those forfeited Full Tilt Poker assets from the feds in return for its own forfeiture of $547 million. PokerStars also agreed to make available $184 million in funds in deposits held by non-U.S. Full Tilt players, money players believed was lost.

The U.S. government seized these funds on April 15, 2011 when it shut down Full Tilt, PokerStars and a third site, Absolute Poker, on charges of money laundering. The date has become known as Black Friday in the poker community. Specifically, the three sites were charged with violation of the 2006 Unlawful Internet Gambling Enforcement Act (UIGEA), which prohibited U.S. banks from transferring funds to off-shore Internet poker and gambling sites. To combat the measure, sites such as PokerStars and Full Tilt began using payment processors that allegedly lied to U.S. banks about their ties to gambling sites. Although this would be fraud under the letter of the law, the U.S. government never claimed payment processors stole money from players or banks and no evidence suggests they did.

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The U.S. Senate holds hearings Wednesday on the so-called Market Fairness Act (S. 1832), which would be better dubbed the “Consumer and Enterprise Unfairness Act,” as it seeks to undo a critical requirement that prevents states from engaging in interstate tax plunder.

In a series of court decisions that stretch back to the 1950s, the courts have consistently affirmed that a business must have a physical presence within a state in order to be compelled to collect sales taxes set by that state and any local jurisdiction.

That meant catalogue and mail order businesses were not required to collect sales tax from customers in any other state but their own. The three major decision that serve as the legal foundation for this rule, including Quill v. North Dakota, the case cited most frequently.

Quill left room for Congress to act, which indeed it is doing with the Market Fairness Act. The impetus for the act has nothing to with the catalogue business, however. Rather, it’s the  estimated $200 billion in annual Internet retail sales, a significant portion of which escapes taxation, that’s got the states pushing Congress to take a sledgehammer to a fundamental U.S. tax principle that has served the purpose of interstate commerce since 1787.

That year, of course, is when the U.S. Constitution replaced the Articles of Confederation. One of the flaws of the Articles was that it permitted each of the states to tax residents of others. Rather than get the budding nation closer to the nominal goal of confederation, it was endangering the expansion of vital post-colonial commerce by creating 13 tax fiefdoms and protectorates. The authors of the Constitution wisely addressed this by vesting the regulation of interstate commerce in the federal government.

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Proponents of higher taxes have taken to calling the exemption that out-of-state online shoppers enjoy a “loophole,” as if it were an unintended flaw in two established court rulings that addressed the power of one state to tax residents of another.

My latest commentary at looks at the so-called Marketplace Fairness Act, a bill that the House Judiciary Committee has scheduled for hearings tomorrow. The bill aims to help states collect sales taxes on out-of-state purchases, typically made via catalogue or, to an ever-greater extent, the Internet. Two Supreme Court decisions, Quill vs. North Dakota and National Bellas Hess vs. [Illinois] Department of Revenue, both of which pre-date Internet shopping, protect out-of-state consumers from the taxman’s reach.

As I write:

Editorials and op-eds supporting the bill, such as in the Arizone Daily Star and the Chicago Sun-Times, say it will close a “loophole” that allows Internet purchases to escape taxation. This is akin to saying the Supreme Court’s Miranda decision is a loophole for defendants to escape prosecution. No doubt some overzealous prosecutors may think so, but in truth, Miranda sharpened and affirmed the right of due process already present in the Fourth and Fifth Amendments. Likewise, in Quill and Bellas Haas, the courts sharpened and affirmed the Constitution’s commerce clause that prevents one state from taxing residents of another.

Seeing it as counterproductive to an interdependent economy, the Founders did not want states plundering each other’s residents and enterprises with taxes. Yet that’s exactly the environment the Marketplace Fairness Act sets up. New York State can tax residents of Illinois and the Prairie State can tax Hoosiers.

In doing so, the Marketplace Fairness Act ignores the constitutional underpinnings of the Quill and Bellas Hess decisions and treats the Internet sales tax issue as a procedural issue when the in fact the constitutional bar is set much higher. The giveaway, however, is the portion of the bill that requires states to simplify their state tax collection procedures before launching cross-border taxation. It’s an unusual quid pro quo, perhaps because Congress has to offer states the prerequisite of a buy-in. That’s because any attempt to impose a tax collection structure wholesale on the states would likely face a constitutional challenge on 10th Amendment grounds of state’s rights.

In reality, the states, struggling as they are with debt crises of their own making, are angling for a greater piece of the $200 billion Americans are spending with Internet merchants each year. Of course, not all of this goes untaxed; on-line retailers who have brick-and-mortar stores within a state must collect tax from residents in that state. Besides creating a mess of competing state tax grabs, this law stands to increase paperwork and complexity for thousands of small online businesses and catalogue firms, who would now be obliged to calculate taxes on some 11,000 sales tax jurisdictions throughout the country. Whether or not it’s “simplified” in line with some Congressional definition, it still stands to be the burden as noted in Quill and Bellas Hess.

But all the talk of loopholes, level playing fields and what does or does not constitute a “burden” diverts attention from the real issue. The Marketplace Fairness Act is not about the Internet, e-commerce, the marketplace or fairness–it’s about what the Constitution says about the power of state governments to tax citizens beyond their borders.

It’s come to this. After more than a decade of policies aimed at reducing the telephone companies’ share of the landline broadband market, the feds now want to thwart a key wireless deal on the remote chance it might result in a major phone company exiting the wireline market completely.

The Department of Justice is holding up the $3.9 billion deal that would transfer a block of unused wireless spectrum from a consortium of four cable companies to Verizon Wireless, an arm of Verizon, the country’s largest phone company.

The rationale, reports The Washington Post’s Cecilia Kang, is that DoJ is concerned the deal, which also would involve a wireless co-marketing agreement with Comcast, Cox, Time Warner and Bright House Networks, the companies that jointly own the spectrum in question, would lead Verizon to neglect of its FiOS fiber-to-the-home service.

There’s no evidence that this might happen, but the fact that DoJ put it on the table demonstrates the problems inherent in government attempts to regulate competition.

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I suppose there’s something to be said for the fact that two days into DirecTV’s shutdown of 17 Viacom programming channels (26 if you count the HD feeds) no congressman, senator or FCC chairman has come forth demanding that DirecTV reinstate them to protect consumers’ “right” to watch SpongeBob SquarePants.

Yes, it’s another one of those dust-ups between studios and cable/satellite companies over the cost of carrying programming. Two weeks ago, DirecTV competitor Dish Network dropped AMC, IFC and WE TV. As with AMC and Dish, Viacom wants a bigger payment—in this case 30 percent more—from DirecTV to carry its channel line-up, which includes Comedy Central, MTV and Nickelodeon. DirecTV, balked, wanting to keep its own prices down. Hence, as of yesterday, those channels are not available pending a resolution.

As I have said in the past, Washington should let both these disputes play out. For starters, despite some consumer complaints, demographics might be in DirecTV’s favor. True, Viacom has some popular channels with popular shows. But they all skew to younger age groups that are turning to their tablets and smartphones for viewing entertainment. At the same time, satellite TV service likely skews toward homeowners, a slightly older demographic. It could be that DirecTV’s research and the math shows dropping Viacom will not cost them too many subscribers.

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Delaware looks ready to become the second state after Nevada to authorize Internet poker as a gambling bill was approved this week by the state senate 14-6 with one senator abstaining.

In the wake of the Department of Justice’s Dec. 23, 2011 memo that for all intents and purposes said there were no federal statutes prohibiting intrastate online wagering on anything save sports, several states. Including Iowa, New Jersey and California, have started moving on legislation that would permit Internet poker, other casino games, and online purchasing of lottery tickets for residents and visitors inside their borders.

Poker players across the country would welcome the chance to play online once more. The Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006 did not make Internet poker illegal outright, but by prohibiting U.S. banks from conducting transactions with off-shore gaming sites, made it extremely difficult for U.S. players to open or maintain accounts with legitimate sites such as Bovada, Bodog and PartyPoker.

With legislation moving along, most gaming industry analysts see Internet poker becoming a reality in at least one or two states by the end of this year.

While the topic of online gambling is still controversial, poker is just one more place where the Internet has had an impact. Before the World Wide Web, you either had to live in Nevada or New Jersey (even in states that had casino gambling, not every casino had a card room) to play regularly. For most who did play, poker was a friendly diversion within a family or social circle.

In broadening poker’s appeal, the Internet also changed the nature of the game. These changes fully manifested themselves when Chris Moneymaker won the main event of World Series of Poker (WSOP) in 2003. Moneymaker was the first world champion to have qualified for the tournament at on line site. The WSOP was the first major live tournament he played. The bulk of his experience and expertise was acquired through online play.

In honor of developments in Delaware and elsewhere, and keeping in mind that the main event of the 2012 World Series of Poker begins July 7, and because it’s Friday afternoon, let’s look at four ways the Internet has changed poker significantly from the game your parents knew. For our purposes here, we will keep things in the context of Texas Hold ‘Em, today’s most popular poker game.

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In his syndicated column yesterday, Leonard Pitts, Jr. bemoaned the decision by the New Orleans Times-Picayune to cut back its print edition to three days a week, and attacked the sentiment, most recently expressed by former Alaska Gov. Sarah Palin, who might herself been quoting Matt Drudge, that the Internet allows “every citizen to be a reporter and take on the powers that be.”

Pitts immediately attacks the comment on the basis of its source, Palin. Then he wanders further from the point by conjuring the truly unpleasant conditions under which reporters, Picayune staffers no doubt among them, labored to ensure news got out in the weeks following Hurricane Katrina’s devastation of the Gulf Coast.

One night I had the distinct honor of sleeping in an RV in the parking lot of the Sun Herald in Gulfport, Miss., part of an army of journalists who had descended on the beleaguered city to help its reporters get this story told. The locals wore donated clothes and subsisted on snack food. They worked from a broken building in a broken city where the rotten egg smell of natural gas lingered in the air and homes had been reduced to debris fields, to produce their paper. Shattered, cut off from the rest of the world, people in the Biloxi-Gulfport region received those jerry-rigged newspapers, those bulletins from the outside world, the way a starving man receives food.

Yet nothing in this rather self-important prose tells us what’s so irreplaceable about printed newspapers as a platform for news delivery. Instead, we get a straw man.

Palin’s sin–and she is hardly alone in this–is to consider professional reporters easily replaceable by so-called citizen journalists like Drudge. Granted, bloggers occasionally originate news. Still, I can’t envision Matt Drudge standing his ground in a flooded city to report and inform.

One can say the same thing about Bill Maher, Keith Olbermann or Wolf Blitzer. Yet, come the next disaster, there’s no reason not to expect the same dedication from a handful of individuals who are driven to place themselves in the middle of an adverse, if not outright dangerous, event just to document first-hand what is happening. Only this time they have the cheap video cameras, battery operated laptops and cellphones with wireless Internet connections. The news will get out.

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Thanks to TLFers Jerry Brito and Eli Dourado, and the anonymous individual who leaked a key planning document for the International Telecommunication Union’s World Conference on International Telecommunications (WCIT) on Jerry and Eli’s inspired site, we now have a clearer view of what a handful of regimes hope to accomplish at WCIT, scheduled for December in Dubai, U.A.E.

Although there is some danger of oversimplification, essentially a number of member states in the ITU, an arm of the United Nations, are pushing for an international treaty that will give their governments a much more powerful role in the architecture of the Internet and economics of the cross-border interconnection. Dispensing with the fancy words, it represents a desperate, last ditch effort by several authoritarian nations to regain control of their national telecommunications infrastructure and operations

A little history may help. Until the 1990s, the U.S. was the only country where telephone companies were owned by private investors. Even then, from AT&T and GTE on down, they were government-sanctioned monopolies. Just about everywhere else, including western democracies such as the U.K, France and Germany, the phone company was a state-owned monopoly. Its president generally reported to the Minster of Telecommunications.

Since most phone companies were large state agencies, the ITU, as a UN organization, could wield a lot of clout in terms of telecom standards, policy and governance–and indeed that was the case for much of the last half of the 20th century. That changed, for nations as much as the ITU, with the advent of privatization and the introduction of wireless technology. In a policy change that directly connects to these very issues here, just about every country in the world embarked on full or partial telecom privatization and, moreover, allowed at least one private company to build wireless telecom infrastructure. As ITU membership was reserved for governments, not enterprises, the ITU’s political influence as a global standards and policy agency has since diminished greatly. Add to that concurrent emergence of the Internet, which changed the fundamental architecture and cost of public communications from a capital-intensive hierarchical mechanism to inexpensive peer-to-peer connections and the stage was set for today’s environment where every smartphone owner is a reporter and videographer. Telecommunications, once part of the commanding heights of government control, was decentralized down to street level.

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Count me among those who are rolling their eyes as the Department of Justice initiates an investigation into whether cable companies are using data caps to strong-arm so-called “over-the-top” on-demand video providers like Netflix, Walmart’s Vudu and and YouTube.

The Wall Street Journal reported last week that DoJ investigators “are taking a particularly close look at the data caps that pay-TV providers like Comcast and AT&T Inc. have used to deal with surging video traffic on the Internet. The companies say the limits are needed to stop heavy users from overwhelming their networks.”

Internet video providers like Netflix have expressed concern that the limits are aimed at stopping consumers from dropping cable television and switching to online video providers. They also worry that cable companies will give priority to their own online video offerings on their networks to stop subscribers from leaving.

Here are five reasons why the current anticompetitive sturm und drang is an absurd waste of time and might end up leading to more harm than good.

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