Wireless & Spectrum Policy

Obama Wants to Tax Your Cell Phone

by on February 26, 2009 · 19 comments

Looks like we can count on another tax landing on our cell phones soon thanks to the taxaholics in the Obama Administration.  According to Jeff Silva of RCR Wireless:

Though details on the Obama budget are few and far between, some information was made available. The administration estimates that spectrum license fees would raise $4.8 billion over the next 10 years.

Don’t be fooled into thinking that wireless carriers will just eat those fees.  Those fees will be coming to bill near you soon in the form of another stupid government tax burden on our wireless phones.

You know, because we’re not already paying enough in taxes on our phones.

(P.S.  I’m actually a little surprised that the “progressives” in this administration would support this proposal since a tax on mobile phones will end up being about as regressive as taxes can get.)

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Wide of the Mark

by on February 3, 2009 · 9 comments

Wall Street Journal columnist Gordon Crovitz writes that

In Japan, wireless technology works so well that teenagers draft novels on their cellphones. People in Hong Kong take it for granted that they can check their BlackBerrys from underground in the city’s subway cars. Even in France, consumers have more choices for broadband service than in the U.S.??

The Internet may have been developed in the U.S., but the country now ranks 15th in the world for broadband penetration. For those who do have access to broadband, the average speed is a crawl, moving bits at a speed roughly one-tenth that of top-ranked Japan. This means a movie that can be downloaded in a couple of seconds in Japan takes half an hour in the U.S. The BMW 7 series comes equipped with Internet access in Germany, but not in the U.S.

Then he adds that the economic stimulus package before Congress will not fix the real reason the U.S. now ranks 15th in the world for broadband penetration because

nothing in the legislation would address the key reason that the U.S. lags so far behind other countries. This is that there is an effective broadband duopoly in the U.S., with most communities able to choose only between one cable company and one telecom carrier. It’s this lack of competition, blessed by national, state and local politicians, that keeps prices up and services down.

A couple of observations come to mind.

One is that the U.S. has the most successful wireless market in the world. Cellphone calls are significantly less expensive on a per minute basis in the U.S. (6 cents per minute) than in France (17 cents) or Japan (26 cents), according to the FCC’s latest analysis of wireless competition (Table 16). U.S. mobile subscribers continue to lead the world in average voice usage by a wide margin.

The explanation for why fourth generation wireless technology is further along in Japan than it is here would have to include the fact that the Japanese government years ago decided to make leadership in 4G wireless technology a national priority and invested heavily with taxpayer money (see, e.g., this).

This is a form of industrial policy, which involves picking winners and losers, and it is how the Japanese do things. Back in the late 1980s or early 1990s the Japanese government decided Japan needed to be the world-leader in high-definition television, which prompted some in our own government to argue we couldn’t afford to let that happen, so we needed a public-private partnership and a national high-definition television transition plan (which some now want to postpone).??

The good news is that AT&T, Clearwire and Verizon Wireless have all successfully acquired spectrum for the rollout of their own 4G services over the next couple years without government subsidies and oversight.??

Continue reading →

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DTV Transition Delay Fails to Pass House

by on January 28, 2009 · 7 comments

S. 328, the DTV Delay Act, did not receive the 2/3 majority needed to pass in the House under the procedure known as “Suspension of the Rules.” Here’s the roll call vote – 258 for passage, 168 against. It was introduced and passed in the Senate Monday.

It would pass a straight up-or-down vote, but House leadership evidently miscalculated the level of support the measure enjoys.

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National Nightmare To Be Delayed

by on January 27, 2009 · 7 comments

Yesterday, the Senate unanimously approved legislation to delay the transition to digital TV to June 13. The House is expected to follow suit as soon as this afternoon.

Under current law, television stations would cease broadcasting analog signals on February 18, potentially inconveniencing dozens of Americans who rely on over-the-air signals and have yet to purchase a subsidized converter box. “They’ve had several years to do so, but who could blame them for getting distracted?,” asks Joel Johnson. “Television has been pretty awesome over the last few years.”

Members of Congress, fearful of a flood of telephone calls following the switchover, are taking the matter seriously. “I warn those who would stand in the way, who dismiss my sense of urgency, that should they force us to keep to our current course, it is the American public who will bear the brunt of their opposition,” said Sen. John Rockefeller, sponsor of the legislation. “We owe our citizens so much more than this.”

Rockefeller is adament that Congress will not allow any further delay past June 13.

But, say observers, even that date is not carved in stone. In the weeks leading up to the switchover, Newsweek and the Consumers Union are expected to track down and interview “at-risk consumers” unprepared for the transition, which may spark further congressional action. Without still more months of heavy public-service advertising on the transition, they are expected to argue, “rural, low-income and elderly citizens across the country could be left with blank television screens.”

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The Unfinished Spectrum Revolution

by on January 16, 2009 · 11 comments

It has been suggested that the American wireless market is a “textbook oligopoly” in which the four national carriers have little incentive to innovate or further reduce prices. I’m more sympathetic to this argument than some libertarians, but over at Techdirt Carlo offers some evidence that competition is alive and well in the wireless marketplace. For a while, the national carriers have offered unlimited voice and text messaging services for around $100/month. Carlo notes that a couple of regional carriers that focus on the low end of the market and have less comprehensive coverage maps have started offering unlimited connectivity for as little as $50/month. The latest development is that Sprint’s Boost Mobile unit is joining the $50/month flat rate club.

Jim Harper has made the point in the wired broadband market, but it deserves to be made here too: competition happens along multiple dimensions. Consumers have different trade-offs between price and quality, and so products with different feature sets and price points often compete directly with one another. There may be only four national carriers, and the regional carriers may not be able to offer service that the typical consumer finds comparable to the offerings of the national networks, but that doesn’t mean the regional carriers are irrelevant. Offering a bargain option at the low end of the market really does put pressure on the margins of the tiers above them. As long as there are some AT&T and Verizon customers who would be willing to put up with spotty coverage in exchange for a lower phone bill, AT&T and Verizon will have an incentive to cut their prices over time.

Of course, we could use more wireless competition. But we also shouldn’t lose sight of how much good the spectrum that’s already been auctioned off has done. It’s hard to create competitive telecom markets. For all of its flaws, the mobile industry is a real success story. And the solution to the flaws is to continue what we started 15 years ago: auctioning off more spectrum and creating real property rights in the airwaves.

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Cellular Socialism

by on January 12, 2009 · 15 comments

A regular communist—I mean, columnist—for the Toronto Star, Canada’s largest daily newspaper, asks in an op/ed: “Is a cellphone a basic human right?”  Shockingly, her answer is… yes!

She’s green with envy that, for once, the U.S. has out-socialism-ed Canada (the land of polite, democratic socialism) with SafeLink Wireless, “a program that provides eligible people with a free cellphone and 68 minutes a month of free airtime for the period of one year. It includes texting, voicemail, call waiting and caller ID.”

SafeLink was the brainchild of Miami-based TracFone Wireless Inc., the largest prepaid cellphone company in the U.S. As a purely prepaid provider, TracFone has always aimed at the market’s lower end.

“A telephone service, just in general, is not a privilege, it’s a right, and we feel it’s a corporate responsibility to provide it,” says José Fuentes, TracFone’s director of government relations. “Everyone should be in contact, should have the opportunity to get a phone call, especially if it’s an employer.”

Someone might want to tell the saintly José that his company isn’t offering SafeLink out of the goodness of their collective, corporate heart, or because they feel a moral obligation to do so.  Nope, they’re sucking at the teet of the FCC’s great hidden welfare fund:

SafeLink is subsidized by the FCC’s Universal Service Fund, which requires all phone companies – or their customers, if they pass it on to them – to contribute via a monthly $1.25 to $1.50 addition to their bill, like the new 25-cent 911 fee in Canada. The fund reimburses TracFone $10 of the $13.50-per-user monthly cost.

I’d bet good money that SafeLink will make a lot more than $3.50 per user each monthly by selling additional airtime.

One might think that subsidizing cell phone service is good public policy.  Indeed, direct subsidies probably do less to distort the market than, say, requiring private companies to cross-subsidize free service for some users at the expense of others.  But, please, if you’re going add to my cell phone bill for your pet welfare projects, spare me the sanctimonious nonsense about cell phone service being a “right” like, say, life, liberty or the pursuit of happiness.  Continue reading →

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Is the DTV Transition Dog About to Jump its Leash?

by on January 10, 2009 · 10 comments

PFF’s President Ken Ferree wrote a great piece over on the PFF blog (reprinted below) calling for Obama to stay the course on the DTV transition.  Always quick with the bon mot, Ken makes particularly apt use of a very funny anecdote from David Hackett Fischer’s excellent new biography of Samuel Champlain, the fascinating founder of Quebec.

*   *   *

The Obama Transition Team apparently has asked Congress to postpone the long-planned, and long-overdue, DTV transition beyond February 17th.  It is not clear, at least to your humble correspondent, whether the request is intended primarily to provide political cover to the new Administration in the event the transition does not proceed smoothly, or whether this is a serious effort to delay the recovery of a large swath of analog television spectrum.  If it is the former, the effort is completely understandable and likely prudent.  If the latter, however, the request is misguided and counterproductive at a time when technology policy should be driven by the needs of the Twenty-First Century rather than those of the last.  In either case, however, Congress should abjure any inclination to accede to the Team Obama’s request.

In the 16th Century French Court, there was a titled position known as the “Picqueur de Chiens de la Chambre du Roy” – roughly, “Chief Whipper of Dogs in the Royal Kennel.”  As one of the early advocates for bringing the DTV transition to a speedy and firm conclusion, I feel obliged to serve a function akin to Picqueur de Chiens de la Chambre du Roy and use the cane to make sure the DTV dog does not break heel and bolt. Continue reading →

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The Right Way to Allow Cell Phone Jammers – And the FCC’s Way

by on January 8, 2009 · 40 comments

Adam Thierer noted in mid-December that the FCC was considering allowing the experimental use of cellphone jammers in prison.  The FCC just issued (PDF) a Special Temporary Authorization to allow the DC Department of Corrections to test a cell phone jamming technology.

This technology sounds like an excellent solution to a serious problem:  The illicit use of cell phones inside correctional facilities by prisoners across the country.  In particular, the technology appears to be “directional,” meaning that unlike traditional jammers, which simply block signals within a certain radius around the jammer, this technology appears to be capable of blocking signals inside the confines of a particular room or building.  In fact, I’m sure millions of Americans would love to see such technologies implemented in cinemas, theatres, and other performing arts venues across the country.  I, for one, am tired of having the exquisite acoustic delicacies of Bach interrupted by annoying ring tones, such as  the (painfully) immortal “Who Let the Dogs Out?”

So Much for The Rule of Law

But there’s one important problem: The FCC isn’t waiving a rule here against cell phone jammer. unless I’m missing some subtle statutory quirk, they’re essentially “waiving” a statute—specifically 47 U.S.C. 333:

No person shall willfully or maliciously interfere with or cause interference to any radio communications of any station licensed or authorized by or under this chapter or operated by the United States Government.

You don’t need to be an administrative lawyer to know that agencies can’t just ignore acts of Congress—no matter how good the policy reason for the waiver is. That’s a big part of what the “rule of law” means.  Period.  Do not pass ‘Go’.  Do not collect $3,101.09 (today’s equivalent of $200 in 1935, when Monopoly debuted).

Fortunately, as noted in the WSJ article Adam cited, at least one legislator realizes this and thinks it’s worth fixing:  U.S. Rep. Kevin Brady (R., Texas) told the Journal that his office is “drafting the necessary legislation to remove this outdated FCC roadblock.”  The FCC, of course, sped right past that particular roadblock.  But then, what should we expect from an agency that has, under its outgoing (and none-too-soon!) chairman Kevin Martin, simply disregarded statutory limits on its authority when it found Comcast in violation of the agency’s non-binding net neutrality principles this summer?  (My PFF colleague Barbara Esbin has eloquently condemned this violation of the rule of law in, “The Law is Whatever the Nobles Do: Undue Process at the FCC” (PDF).)

Now, when Congress considers this question, let us hope that they draw the right lesson from this episode:   Whatever the wisdom of outright bans on particular technologies, writing such bans into statutes is a really bad idea.  At least if such decisions were left up to regulatory agencies, they would have the flexibility to decide when to depart from a general ban.  Thus, the best approach would be to repeal the ban altogether.   Continue reading →

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How Many Competitors Is Enough?

by on December 18, 2008 · 14 comments

Adam’s recent post on Free Press’s hysteria over media consolidation reminds me of the left’s general tendency to move the goalposts when it comes to market concentration in communications markets. Over the last quarter century, we’ve gone from a world in which there were honest-to-goodness monopolies in the telephone and cable markets to a “duopoly” where the former monopolies invaded one another’s turf, to a world of much greater competition as mobile companies entered the telephone market and satellite companies entered the video market. Yet as I noted last year, Free Press chairman Tim Wu characterizes the wireless market—with its four national carriers and several regional ones—as a “textbook oligopoly.” Indeed, one often gets the impression that the arguments of pro-regulation scholars are the same as those they would have made 20 years ago with “monopoly” replaced by “oligopoly.”

Now, I’m sympathetic to the argument that a “duopoly” is insufficient competition, and that regulators should at least take a close look at the behavior of firms that comprise one half of a duopoly. I think libertarians’ tendency to laud the broadband marketplace as a free-market nirvana is a bit misguided. However, I find the language of “oligopoly” much harder to swallow. While more competition is better, there are plenty of industries with 4-6 players that few people regard as problematic. The wireless business is extremely capital-intensive, so it’s not that surprising that there are relatively few restaurant chains.

But the tendency to shift from “monopoly” to “duopoly” to “oligopoly” while deploying essentially the same arguments does make one wonder if there’s any amount of competition that the good people at Free Press regard as sufficient. And it seems that Adam has found the answer. Having 55 major players in a market is the very definition of cutthroat competition. The notion that 55 firms can constitute a “bottleneck” that significantly curtail the flow of information to consumers is just silly. And of course the 55 figure is totally arbitrary. The media are a long tail business, and they could have included a lot more firms if they hadn’t set their cutoff at $100 million in revenues. For example, their chart misses Hubbard Broadcasting, which owns around a dozen broadcasting stations concentrated in the upper midwest. So if you’re a Twin Cities resident who doesn’t like what Clear Channel, News Corp and the rest are producing, you can tune in to KSTP’s TV station and talk radio station for a perspective that’s not controlled by the “Big 55.”

Ultimately, I think the moral of the story is that for some advocates of media regulation, it really has nothing to do with competition. Whether there are 1, 2, 4, 8, or 55 competitors, they continue to believe that there’s too little government regulation of communication. When the number is small, it makes a convenient talking point, but they go right on making the same arguments when the number of competitors gets ridiculously large.

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Steve Schultze on why the AWS-3 spectrum censorship plan will fail

by on December 4, 2008 · 4 comments

I was about post something more regarding why Kevin Martin’s AWS-3 spectrum filtering plan will fail, but I can’t say it any better than Steve Schultze does here:

Martin also recently leaked the fact that he is proposing that adults can verify their identity to avoid the porn filter initially mandated for all users of of the no-fee service. I helped author some comments to the FCC explaining why this filter was a bad idea, so an opt-out mechanism could theoretically be a good development… if age verification were viable, and if you thought that adults were eager to identify themselves as possible porn-lovers, and if we assumed that all adults had credit cards. In short, filtering is not a great option even with those caveats.

Exactly. Also, don’t forget about that little thing called the First Amendment! This plan would almost certainly be challenged on 1A grounds. (Also, here’s a filing I signed on to that critiques the filtering plan).

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