In a blog post entitled “Buying regulation,” Susan Crawford wonders about the legality of the FCC reserve price scheme for the 700 MHz rules. (I.e., as long as the $4.6 billion reserve price is met for the much coveted C Block, then open access rules will apply. If the reserve price isn’t met, then the rules go away.) Crawford asks,
Think about it. How can the FCC condition regulations … on the payment of money? And then have the rules dissolve if it doesn’t get the money? This is such a pure quid pro quo – it’s government for sale. Completely screwy. But how do you say “completely screwy” in legalese?
Well, it is certainly a creative gambit by Kevin Martin to make Google put their money where their mouth is, and I don’t have an opinion about whether it’s technically legal. That said, I’m not sure it’s exactly a “quid pro quo.” It’s not as if the highest bidder gets their preferred rules applied to the spectrum block. One can conceive of AT&T, for example, winning the auction at a price above $4.6 billion and therefore being subject to rules it dislikes. What I think the scheme is meant to do is pacify Congress by addressing the concern that given the restrictive rules the spectrum block might fetch much less than the many billions Congress is anticipating (and probably has already spent).
In my comments to the FCC in the 700 MHz proceeding, I addressed the Commission’s insistence that the licensee of a national public safety spectrum license be a non-profit entity. At the time I said,
This is odd since there are several commercial communications companies with the comparative advantage and expertise in designing, building-out, and maintaining wireless broadband networks. A for-profit mission and quality service to first responders should not be considered mutually exclusive ideals.
The Commission’s 312-page final order cited my comment, but sadly as an example of the sort of proposal they weren’t going to adopt. Instead, they decided that they would create a license for 10 MHz of public safety spectrum (worth billions) and give it to a Public Safety Broadband Licensee. And who is the Public Safety Broadband Licensee? They have no idea, but in the Order they lay out the requirements for any entity who wishes to apply to be the Public Safety Broadband Licensee. These include,
- No commercial interest may be held in the licensee, nor may any commercial interest participate in the management of the licensee
- The entity must be non-profit
- The entity must be “broadly representative of the public safety radio user community”
Well, applications to be the Public Safety Broadband Licensee are due this Wednesday, and so far there’s only one applicant, an organization called the Public Safety Spectrum Trust Corporation (sorry, no website). If they are chosen as the Licensee, the PSST will help set the public safety requirements any bidder will have to satisfy in order to purchase the commercial-public safety shared D Block that will be auctioned in January. (Frontline has committed to bid, while Verizon has also shown an interest.) So who makes up the PSST? According to their recent press release,
The PSST Board of Directors is comprised of representatives of the following organizations: the American Association of State Highway and Transportation Officials (AASHTO); the Association of Public-Safety Communications Officials-International (APCO); the Forestry Conservation Communications Association (FCCA); the International Association of Chiefs of Police (IACP); the International Association of Fire Chiefs (IAFC); the International Municipal Signal Association (IMSA); the National Association of State Emergency Medical Services Officials (NASEMSO); the National Emergency Number Association (NENA); and the National Sheriffs’ Association (NSA).
That is, the lobbying groups for public safety. This is the first time I’ve ever heard of the lobbyists themselves potentially getting a license. Also, these groups supported the Cyren Call plan last year to reallocate spectrum from commercial to public safety use. Guess who they chose last week to be their “Public Safety Advisor“?
In his latest FT.com article, Tom Hazlett, professor of law and economics at George Mason University, points out that despite all the talk about the need for mandatory “openness” or wireless Net neutrality, Apple’s “walled garden” i-Phone model has spawned some serious innovation. He argues:
“One million customers bought iPhones in the first 79 days; analysts project 4.5m units sold in the first year. Hosting this Apple party is a curious way for carriers to lock out innovation. It is even more remarkable that critics could configure Apple’s entrepreneurship as an attack on creativity. They claim that only a device that is optimised for any application and capable of accessing any network is efficient.
They are wrong. What works best for consumers is a competitive process in which independent developers, content owners, hardware vendors and networks vie to discover preferred packages and pricing. When decision-makers compete for customers and answer to shareholders, a sophisticated balance obtains. The alternative proposition, business models voted on by regulators, is a recipe for stasis.”
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In today’s Wall Street Journal, Ben Charny has an article discussing why “Free Wi-Fi [is] Still an Elusive Goal.” He notes:
The same forces slowing development of single-city wireless Internet networks are now overwhelming their supersize versions that cover thousands of square miles and scores of municipalities. A telling example of the malaise can be found in Silicon Valley, where plans to provide free, high-speed wireless Internet access to 42 cities in an area of more than 1,500 square miles have come to a standstill, says Russell Hancock, the man in charge of the effort.
It was once thought that municipal wireless networks of all sizes could be supported through the sale of advertisements that appear during the free Internet sessions and the small fee paid by those who want a faster, ad-free Internet service. However, many cities with wireless networks say that there’s been little demand for their premium services and that technology issues have limited the networks’ reach. Moreover, while businesses were willing to invest in advertising on these single-city networks, they complain about very little return on their investment.
So, once again, we see that demand counts when it comes to broadband diffusion. That’s been a point that many of us made in the past when critiquing grand plans for muni wi-fi nirvana that all seemed to be premised on the “if-you-build-it-they-will-come” theory of economics. We’re now realizing the cost of that hubris. It’s one thing for private companies to be forced to eat the expense of over-estimating demand, it’s quite another when taxpayers might be on the line for the mistake.
USA Today reports that Municipal Wi-Fi plans across the nation continue to collapse under the pressure of economic reality. Schemes such as those proposed in Chicago and San Francisco simply don’t make good business sense, which is why they have been abandoned.
I don’t think citizens of these would-be wireless utopias should be upset over the loss of their Wi-Fi blanket, however. Most of these arrangements involved giving exclusive access to city rights of way to one company, creating a new generation of Ma’ Bells–a very dystopian vision. Getting in bed with the government is a bad idea for business, especially network industries, because as time goes by they lose their autonomy and become an atrophied public utility. So though Wi-Fi might give consumers more choice, it’s just another bad choice.
Read more in my piece recently published at American.com.
Verizon has sued to prevent the FCC from imposing the conditions Google sought in the 700 MHz auction. I don’t have an opinion on the merits, but I find Google’s complaining about it disingenuous.
Google sought competitive advantage through the regulatory process. One of its soon-to-be competitors is using the legal process to counter that.
Telecommunications providers have sought to work the regulatory and legal processes to their advantage forever. Google knows that, knew that going in, and adopted that mode of behavior in the 700 MHz auction. I can’t see where it has standing to complain of others engaging in that very same behavior.
Wrapping “consumer choice” around its effort to wring artificially high profit from the network it would operate doesn’t wash.
The Times of London recently reported that a London man had been arrested “on suspicion of illegally logging on to a wireless (Wi-Fi) broadband connection.”
Two officers saw the 39-year-old man sitting on a garden wall outside a home in Chiswick, West London. When questioned he admitted using the homeowner’s unsecured broadband connection from his position on the wall. He was arrested and the case was passed to the Metropolitan Police Computer Crime Unit. He was bailed to return in October and faces a fine or a jail term of six months, or both.
Detective Constable Mark Roberts gave warning that anyone caught illegally “hitching” or “piggy-backing” on to another’s wireless broadband connection could face arrest. “This arrest should act as a warning to anyone who thinks it is acceptable to illegally use other people’s broadband connections,” he said. “To do so potentially breaches the Computer Misuse Act and the Communications Act, so computer users need to be aware that this is unlawful and police will investigate any violation we become aware of.”
[The Wall Street Journal’s excellent business technology blogger Ben Worthen wrote about the case here and there are some really excellent comments following that story that you should check out.]
Our own Tim Lee has written about this issue here before in an essay entitled “In Defense of Piggybacking.” In that piece, which he later turned into a New York Times editorial, Tim argued that:
“…there’s absolutely nothing wrong with connecting to an unprotected network. True, it’s rude to saturate someone else’s pipe with massive downloads. But for casual Internet use—web browsing, email, or instant messaging—the bandwidth used is trivial. While it might seem weird or creepy to people not very familiar with the practice, once they become more familiar with it, I think people will realize how harmless it is.”
While I don’t believe anyone should be arrested for wireless piggybacking, I’m not sure I agree entirely with Tim’s view of things either since there may be some real harms that come to both users and service providers from uninhibited piggybacking / wireless squatting. Let me explain.
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We’ve talked about muni wi-fi problems here before. (Here, here, here, and here). Here’s another one to add to the list. The Chicago Tribune reports today that:
Chicago is curtailing its digital dreams, deciding to back away from municipal Wi-Fi service after failing to reach agreement with either of two companies that sought to build a wireless Internet network in the city. The move comes as municipal broadband wireless projects around the country face difficulties, and EarthLink Inc., a major player in the field, is re-evaluating its future in municipal Wi-Fi.
And here’s the key line from the piece:
[T]echnology is advancing and the cost of online access for consumers is declining so dramatically that Chicago has other avenues to promote more use of the Internet. As a result, the Wi-Fi deal lost luster when negotiations bogged down, according to sources close to the matter.
In other words, markets are working.
In July, I mentioned the interesting comparison chart that Verizon’s Link Hoewing put together comparing contracts, competition, coverage, prices, new services, and more in both the U.S. and European cellular markets.
If you’re interested in this subject, there’s a new report out by the American Consumer Institute entitled “Comparison of Structure, Conduct and Performance: U.S. versus Europe’s Wireless Markets.” The report finds that:
* The U.S. wireless market offers more choice and is less concentrated than any Western country’s wireless market;
* U.S. consumers use an average of 800 wireless minutes per month, while most European consumers use less that 200 minutes per month;
* U.S. wireless prices are the lowest in the world, with the exception of Hong Kong; and
* The combination of higher usage at lower prices presents compelling evidence that the overall consumer welfare derived from wireless service is higher in the U.S. than internationally.
“In summary, a comparison of international statistics suggests that the U.S. wireless market, in fact, leads its European counterparts, and the U.S. wireless market, compared to Europe, appears to be more competitive and vibrant. The contention that concentration leads to higher prices, lower usage and decreasing consumer welfare does not appear to be a U.S. problem, and furthermore, the contention that the U.S. lags the European market and needs some regulatory remedy is without empirical merit.”
Read the whole thing here.
David Robinson at The American said my last blog post on Wi-Fi was intriguing and asked me to write a piece for him. I can’t turn down a request for writing, so here it is. The piece is about the recent failure of the San Francisco Wi-Fi plan with Google and Earthlink. I also advance the argument that a public/private partnership to create Wi-Fi is a generally bad idea–the regulation that comes with Muni-Wi threatens to turn providers into utilities.
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