Broadband & Neutrality Regulation

What Does It Mean to Declare Broadband a “Human Right,” and What Are the Costs?

by on October 18, 2011 · 4 comments

Freelance journalist Laurence Cruz was kind enough to call me recently looking for comment on whether broadband should be considered a human right. Well, actually, he probably didn’t have many options. If you do a quick search on the topic, you’ll find an endless stream of essays in favor of the proposition.  Then, somewhere in the mix, you’ll find a few dissenting rants I’ve penned here in the past. So I’m getting used to playing the baddie in this drama.

Cruz’s essay is now up over at “The Network,” which is Cisco’s technology news site. Here’s what I had to say in opposition to the proposition:

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Public Interest Groups Across Spectrum Oppose Net Neutrality Regulation, Too

by on October 7, 2011 · 0 comments

Yesterday’s Wall Street Journal’s story on the legal challenge to Net Neutrality regulation opens as follows:

Efforts by public interest groups to get a legal challenge to the Federal Communications Commission’s new “net neutrality” rules heard somewhere other than the U.S. Court of Appeals for the D.C. Circuit belly-flopped Thursday when the D.C. Court won the case in a random lottery.

I’ve responded with the following comment:

The first sentence of this article reinforces the common misconception that “public interest” groups support net neutrality regulations while only corporations oppose them.

In fact, many large corporations have supported these regulations, while a wide array of public interest, non-profit groups oppose the FCC’s net neutrality regulations. Those include a variety of free market groups such as TechFreedom (my own think tank), the Competitive Enterprise Institute, FreedomWorks and Americans for Tax Reform, but also left-leaning civil liberties groups such as the Electronic Frontier Foundation, which called the FCC’s rules a “Trojan Horse” for other regulation because they set a dangerous precedent that would give the FCC broad powers in other areas, such as content regulation or copyright.

If a Democratic FCC can invent the authority to issue Net Neutrality rules, an FCC Chairman appointed by a socially conservative president could implement the agenda of censorship advocates such as the Parents Television Council’s founder Brent Bozell—which might explain why those groups have supported the Net Neutrality regulation.

FCC Commissioner Robert McDowell demolished the idea that these Internet regulations would serve the “public interest” in a scathing dissent when the FCC issues these illegal rules. He emphasized that real net neutrality problems could be handled first through mediation processes and, if necessary, through consumer protection and antitrust laws.

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Strengths and Weaknesses in the FCC Chairman’s USF Speech

by on October 6, 2011 · 1 comment

Federal Communications Chairman Genachowski previewed the universal service reform plan the commissioners are discussing in a speech today.

The speech offers a masterful summary of the myriad inefficiencies created by the current universal service subsidies and intercarrier compensation payments. Most of the examples highlight plain old-fashioned waste. The universal service program collects billions of dollars from telephone subscribers, then simply wastes a goodly portion of it by subsidizing telephone competition in places where unsubsidized service from cable or satellite already exists, subsidizing multiple mobile wireless competitors, and subsidizing local phone companies that have little incentive for cost containment because they are still subject to rate-of-return regulation. The intercarrier compensation system uses per-minute charges to collect billions of dollars from telephone subscribers and hands it to phone companies that sometimes charge as little as $8 a month for phone service. There’s also a race to game this system as the companies that benefit seek new ways to inflate the regulated charges they collect, and the companies that pay seek clever ways to avoid paying.

It’s a powerful brief for reform. Never thought I’d live to see the day whan an FCC chairman would say so many things that are substantiated by economic research.

Nevertheless, a few parts of the speech give me cause for concern about the solutions the FCC commissioners may be discussing.

First, the chairman claims that 18 million Americans live in areas without access to broadband — up from the 14 million estimated in the National Broadband Plan.  The size of this figure suggests to me that the FCC is still over-estimating the number of people without access by defining “broadband” as a speed fast enough to exclude 3G wireless, many small rural Wireless Internet Service Providers, and satellite. Absent an adjustment in the definition of broadband, the subsidy program will be larger than it needs to be, and so telephone consumers will pay excessive universal service charges. Continue reading →

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Net Neutrality goes to Court…Again

by on October 4, 2011 · 1 comment

On NPR’s Marketplace this morning, I talk about net neutrality litigation with host John Moe.

Nearly a year after the FCC passed controversial new “Open Internet” rules by a 3-2 vote, the White House finally gave approval for the rules to be published last week, unleashing lawsuits from both supporters and detractors.

The supporters don’t have any hope or expectation of getting a court to make the rules more comprehensive.  So why sue?  When lawsuits challenging federal regulations are filed in multiple appellate courts, a lottery determines which court hears a consolidated appeal.

So lawsuits by net neutrality supporters are a procedural gimmick, an effort to take cases challenging the FCC’s authority out of the D.C. Circuit Court of Appeals, which has already made clear the FCC has no legal basis here.

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ABA Roundtable Discussion Tomorrow on the AT&T/T-Mobile Merger

by on September 26, 2011 · 0 comments

[Cross posted at Truthonthemarket]

As I have posted before, I was disappointed that the DOJ filed against AT&T in its bid to acquire T-Mobile.  The efficacious provision of mobile broadband service is a complicated business, but it has become even more so by government’s meddling.  Responses like this merger are both inevitable and essential.  And Sprint and Cellular South piling on doesn’t help — and, as Josh has pointed out, further suggests that the merger is actually pro-competitive.

Tomorrow, along with a great group of antitrust attorneys, I am going to pick up where I left off in that post during a roundtable discussion hosted by the American Bar Association.  If you are in the DC area you should attend in person, or you can call in to listen to the discussion–but either way, you will need to register here.  There should be a couple of people live tweeting the event, so keep up with the conversation by following #ABASAL.

Panelists:
Richard Brunell, Director of Legal Advocacy, American Antitrust Institute, Boston
Allen Grunes, Partner, Brownstein Hyatt Farber Schreck, Washington
Glenn Manishin, Partner, Duane Morris LLP, Washington
Geoffrey Manne, Lecturer in Law, Lewis & Clark Law School, Portland
Patrick Pascarella, Partner, Tucker Ellis & West, Cleveland

Location: 
Wilson Sonsini Goodrich & Rosati, P.C. 1700 K St. N.W. Fifth Floor Washington, D.C. 20006

For more information, check out the flyer here.

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Net neutrality: Doing the Numbers

by on September 26, 2011 · 7 comments

For Forbes this morning, I reflect on the publication late last week of the FCC’s “Open Internet” or net neutrality rules and their impact on spectrum auctions past and future.  Hint:  not good.

An important study last year by Prof. Faulhaber and Prof. Farber, former chief economist and chief technologist, respectively, for the FCC, found that the last-minute imposition of net neutrality limits on the 700 MHz “C” block in the FCC’s 2008 auction reduced the winning bid by 60%–a few billion dollars for the Treasury.

Yet the FCC maintained in the December Report and Order approving similar rules for all broadband providers that the cost impact of these “prophylactic” rules would be minimal, because, after all, they simply endorse practices most providers already follow.  (And the need for the new rules, then, came from where?)

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Top 10 Antitrust Fallacies to Watch for at Today’s Google Antitrust Hearing

by on September 21, 2011 · 8 comments

by Berin Szoka & Geoffrey Manne

In advance of today’s Senate Judiciary hearing, “The Power of Google: Serving Consumers or Threatening Competition?,” we’ve assembled a list of fallacies you’re likely to hear, either explicitly or implicitly:

  1. Competitors, not Competition.  Antitrust protects consumer welfare: competition, not competitors.  Competitors complain because a practice hurts them, but antitrust asks only whether a practice actually hurts consumers. The two are rarely the same.
  2. Big Is Bad. Being big (“success”) isn’t illegal.  Market share doesn’t necessarily create market power.  And even where market power does exist, antitrust punishes only its abuse.
  3. Burden-Shifting. Google, like any defendant, is presumed innocent until proven guilty.  So Google’s critics bear the burden of proving both that Google has market power and that it has abused that power to the detriment of consumers.  Yet, ironically, it’s Google at the table defending itself rather than the antitrust agencies explaining their concerns.
  4. Ignoring Error Costs. The faster technology moves, the greater the risk of a “false positive” and the more likely “false negatives” are to be mooted by disruptive innovation that unseats incumbents.  Thus, error costs counsel caution.
  5. Waving the Magic Wand.  Google’s critics often blithely assume that Google is “smart enough to figure it out” when it comes to implementing, or coping with, a wide range of proposed remedies.  But antitrust remedies, like all regulation, must be grounded in technological reality, and we must be realistic about real-world trade-offs.

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Can Any T-Mobile Buyer Pass an Antitrust Test?

by on September 12, 2011 · 2 comments

[Cross-posted at Reason.org]

In the wake of the Department of Justice’s lawsuit to stop the merger of AT&T and T-Mobile USA, there has been some discussion about where T-Mobile would end up if the government effort proved successful.

While debate continues whether a merged AT&T-T-Mobile would harm consumers, there is no disputing that T-Mobile itself is mired in business problems. For all the DoJ’s concern that T-Mobile remain in the market as a low-priced alternative for consumers, the company is short of the cash necessary to expand infrastructure at a pace to remain technologically competitive. Blocking the AT&T deal would not necessarily keep Deutsche Telekom, T-Mobile’s German parent, from seeking other buyers. Last week, Dave Goldman of CNN Money summed the situation up in “Without AT&T, T-Mobile is a White Elephant.” The facts he lays out are among the reasons the merger makes sense.

Yet let’s assume for a minute that the DoJ is successful in stopping the merger. A number of pundits both from both the business and the policy side have suggested other potential buyers could rescue T-Mobile. Sascha Segan at PC Magazine provided a good summary here.

Segan was just one of many analysts who pointed to Google, Apple and Comcast (or a cable company consortium) as potential T-Mobile buyers. There are numerous reasons as to why these companies might or might not make a bid. Yet what I find interesting the way several critics of the AT&T deal are almost giddy with the idea that one of these companies might jump at T-Mobile, noting that the entry of a deep-pocketed non-carrier might be a good development for the consolidating wireless industry.

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iPhone, Android and the Rest: at the Mercy of Local Zoning Boards

by on September 8, 2011 · 2 comments

For CNET this morning, I have a long article reviewing the sad recent history of how local governments determine the quality of mobile services.

As it  turns out, the correlation is deeply negative.  In places with the highest level of user complaints (San Francisco, Washington, D.C.), it turns out that endless delays or outright denials for applications to add towers and other sites as well as new and upgraded equipment is also high.  Who’d have thought?

Despite a late 2009 ruling by the FCC that put a modest “shot clock” on local governments to approve or deny applications, data from CTIA and PCIA included in recent comments on the FCC’s Broadband Acceleration NOI suggests the clock has had little to no effect.  This is in part because the few courts that have been asked to enforce it have demurred or refused.

Much of the dithering by local zoning boards is unprincipled and pointless, a sign not so much of legitimate concerns over safety and aesthetics but of incompetence, corruption, and the insidious influence of  outside “consultants” whose fees are often levied against the applicant, adding insult to injury. Continue reading →

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The Spectrum Argument Lives, Debunking Letter-Gate, and Why the DOJ Is Still Wrong to Try to Stop the AT&T/T-Mobile Merger

by on September 2, 2011 · 615 comments

Milton Mueller responded to my post Wednesday on the DOJ’s decision to halt the AT&T/T-Mobile merger by asserting that there was no evidence the merger would lead to “anything innovative and progressive” and claiming “[t]he spectrum argument fell apart months ago, as factual inquiries revealed that AT&T had more spectrum than Verizon and the mistakenly posted lawyer’s letter revealed that it would be much less expensive to expand its capacity than to acquire T-Mobile.”  With respect to Milton, I think he’s been suckered by the “big is bad” crowd at Public Knowledge and Free Press.  But he’s hardly alone and these claims — claims that may well have under-girded the DOJ’s decision to step in to some extent — merit thorough refutation.

To begin with, LTE is “progress” and “innovation” over 3G and other quasi-4G technologies.  AT&T is attempting to make an enormous (and risky) investment in deploying LTE technology reliably and to almost everyone in the US–something T-Mobile certainly couldn’t do on its own and something AT&T would have been able to do only partially and over a longer time horizon and, presumably, at greater expense.  Such investments are exactly the things that spur innovation across the ecosystem in the first place.  No doubt AT&T’s success here would help drive the next big thing–just as quashing it will make the next big thing merely the next medium-sized thing.

The “Spectrum Argument”

The spectrum argument that Milton claims “fell apart months ago” is the real story here, the real driver of this merger, and the reason why the DOJ’s action yesterday is, indeed, a blow to progress.  That argument, unfortunately, still stands firm.  Even more, the irony is that to a significant extent the spectrum shortfall is a product of the government’s own making–through mismanagement of spectrum by the FCC, political dithering by Congress, and local government intransigence on tower siting and co-location–and the notion of the government now intervening here to “fix” one of the most significant private efforts to make progress despite these government impediments is really troubling.

Anyway, here’s what we know about spectrum:  There isn’t enough of it in large enough blocks and in bands suitable for broadband deployment using available technology to fully satisfy current–let alone future–demand.

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