Adding to the general clamor, Scott Wallstein of the Progress and Freedom Foundation has released an analysis of TIm Wu’s study endorsing neutrality regulation of wireless networks. Among other things, he points out that the history of the kind of access regulations Wu endorses is not a happy one, pointing to the UNE fiasco. He also raises a good point regarding Wu’s call for carriers to work together to create clear unified standards–arguing that getting acceptable standards is harder than Wu implies. In fact, Wallstein points out, Wu decries one of the leading standards that has been developed, WAP.
Overall, Wallstein concludes that competition in this market is healthy, stating that “the wireless industry is robustly competitive and exhibits scant evidence of a market failure. Consumers consistently benefit from increasingly lower prices and more features.”
Worth reading.
Wow, we’ve really been piling on Tim Wu’s new paper. Having read it, I’m inclined to think that we didn’t quite give him enough credit.
With my libertarian hat on, I’m still far from convinced that regulations of the wireless market is either necessary or beneficial. But wearing my geek hat, I think it’s worth noting that Wu does an excellent job of documenting a real problem. Along some dimensions, the wireless marketplace is fiercely competitive and consumers are benefitting from lower prices and better service. But along other dimensions—especially next-generation data services—the current state of the market leaves much to be desired.
Admitting to the existence of these sorts of problems obviously puts us as libertarians in a bit of an awkward position. The argument for limited government is easiest to make when we can simply argue that whatever’s happening in the marketplace is working perfectly. So our first instinct is to just reflexively defend whatever the current incumbents are doing. But the reality is that even in a competitive market, the incumbents are far from perfect.
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Last year, as the net neutrality wars raged, the wireless industry by and large stayed out of the line of fire. It firmly opposed regulation, no question of that, but the debate almost exclusively focused on telephone companies and cable company broadband services. Now here comes Tim Wu–a prof at Columbia University and father of the term “net neutrality”–with a paper (to be presented this week to the FTC) arguing that wireless telephone service should be comprehensively regulated under net neutrality principles based on those applied the old Bell System.
This is a major escalation of the neutrality war, promising to change the character and dynamics of the entire debate.
I have always thought that one of the weak points of the argument for network neutrality last year was its over breadth. At its core, the argument for neutrality regulation boils down to a claim that broadband markets are not competitive. Yet, proposals for regulation virtually–no, skip the virtually, they never made exceptions for competitive elements of this market–such as wireless broadband.
Certainly, I thought, it wouldn’t be too long before someone proposed carving out wireless from regulation, so as to focus public attention away from this innovative and fast-growing market. Instead, Wu’s paper goes in the opposite direction–arguing that the wireless industry is in dire need of regulation.
It’s a bold argument. But completely wrong. And, it the end, one that may hurt the entire neutrality regulation effort, by showing how–once unleashed–few will be safe from its reach.
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I haven’t had time to read Tim Wu’s new paper, but something struck me from reading Hance’s summary. Wu describes the wireless market as “a textbook oligopoly with four major players, premised on a bottleneck resource.” That didn’t strike me as being quite right, so I did a quick check on Wikipedia. Wu is right that the four largest carriers are AT&T, Verizon, Sprint, and T-Mobile. But these are not, as he implies, the only carriers. If Wikipedia is to be believed, at least, Alltel is #5 with 15 million customers in 36 states. U.S. Cellular is #6 with 5.7 million customers in 26 states. There are also a variety of smaller carriers. Most of them are Mobile virtual network operators piggy backing on networks owned by the big four, but you’ve also got Cellular South, Centennial Wireless, and SunCom, all of which appear to be non-trivial wireless carriers, although none of them come close to being national networks.
And then we must keep in mind that many customers still use landlines through their Baby Bell or cable company for their phone service. The Baby Bell option doesn’t add much competition since most people have either Verizon or AT&T for a Baby Bell. But most peoples’ cable companies are independent companies, and I don’t believe that Qwest owns any of the major wireless providers.
So depending on how you count, and what part of the country you’re in, the average consumer has between 5 and 8 choices for wireless phone service. Update: Oops, I meant to say “phone” here–including cable and Baby Bells as options
Now that’s obviously not as competitive as say, the PC industry. But it’s certainly comparable to a lot of industries we don’t generally think of as problematic. Your average metropolitan area only has 3 or 4 major supermarket chains, for example. Obviously, it’s always nice to have more competition, and we should be looking at policies that might open up the market to more players. But 5 to 8 major providers strikes me as a reasonably healthy industry by almost any standard.
The siren call of Cyren Call seems to have gone a bit flat yesterday. Morgan O’Brien, the company’s founder, testified Thursday to the Senate Commerce Committee on his plan to give 30 MHz of spectrum to public safety agencies, rather than go through with a planned auction. According to Anne Veigle in Communications Daily (subscription), senators were less than impressed. “This is creating a new FCC, isn’t it?” asked Vice-chair Ted Stevens (one FCC presumably being more than enough). Former FCC chair Michael Powell, in a letter to Stevens, was even harsher. “Follow the money,” Powell wrote: “Who is going to benefit the most, those in uniform who are sworn to serve or those in suits who are set to profit?” The theme was picked up by Senator McCaskill of Missouri. “I’m assuming that this proposal is predicated on the idea that it will make a profit,” she said to O’Brien. That probably wasn’t the aspect of the plan the telecom entrepreneur wanted to stress. All in all, it doesn’t sound like it was a good day for Cyren Call.
Yesterday I explained that in my view first responders don’t need more spectrum to address their interoperability problem, but instead a different approach to using the spectrum they already have. So if Congress shouldn’t allocate more spectrum for public safety, what should it do to address the problem?
Cyren Call is absolutely right about a lot of things: That we should opt for national networks, rather than 50,000 individual and incompatible radio systems for each locality or agency. That everyone benefits when public safety spectrum is shared with commercial users (as long as first responders have priority). That given the opportunity, the private sector will build public safety networks that first responders can subscribe to. Where Cyren Call goes wrong is in insisting that we need new spectrum to achieve this.
What Congress can do is very simple. Open up spectrum already allocated for public safety and allow private companies to build networks on that spectrum. Allow the FCC to assign spectrum allocated for public safety to commercial carriers (like Verizon or Cyren Call or whoever) directly. Require in the licenses1 that the carrier build a network up to public safety specs. Allow the carriers to sell excess capacity to commercial users, but ensure that first responders have priority. Voila, commercial provision of public safety communications. Don’t want to stop there? There’s more Congress can do.
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While debate rages over what to do with the frequencies soon to be vacated by broadcasters (see the last post), another debate is raging over what to do about those using them now. At issue: whether to subsidize converter boxes for millions of old TVs in basements and kitchens that will be made obsolete by the February 2009 analog cut-off.
In late 2005, Congress authorized up to $1.5 billion for such converter boxes. Last year, the Department of Commerce proposed rules for the program, concluding that households with cable TV should not be eligible for assistance (on the sensible ground that they will not lose access to TV). Now there’s word that the Department of Commerce is planning to reverse itself, and let cable households get in on the program. The rationale: many of these households have third and fourth television sets that are not hooked up to cable.
Commerce has been under pressure from–among other places–Congress to include these forgotten basement televisions in the program. In particular, a November letter from John Dingell and 19 other members positively waxed poetic about the issue: stating that millions of consumers would be “disenfranchised” and that the original Commerce plan “disadvantages the poor, the elderly, minority groups, and those with multiple analog television sets in their home.”
Maybe it’s just me, but I had never thought of “those with multiple television sets in their home,” as an oppressed minority. And “disenfranchise”? This isn’t voting rights, it’s television. In fact, its not even that–its the right to a third TV in your basement. In fact, its the right not to have to pay $50 (the expected price of a converter box) to get that third TV in your basement to work.
This is the sort of thing that gives Washington a bad name. I fulminate more on this in a just-released Heritage paper.
Stay tuned (well, at least until February 2009).
Jerry Brito said it all yesterday, in his excellent post on the Cyren Call plan to reallocate 30 Mhz of spectrum to public safety, instead of auctioning it as has long been planned. His conclusion is exactly right: Public safety needs spectrum reform, not more spectrum.
Earlier this week, I beat that same drum in a paper released by Heritage called “Cyren Call and Siren Calls,” pointing out that recent rule changes by the FCC may provide public safety users many of the claimed benefits of the Cyren Call plan, with no additional spectrum allocation. My conclusion:
“The FCC’s decision is not a cure-all for the problems of public safety communications. But it is an important step, not least because it shows that reform does not necessarily require massive new resources. The most important reforms are those that allow existing resources to be used in smarter and more effective ways. As is often the case, better does not have to mean more.”
Ahead of tomorrow’s Senate Commerce Committee hearing on public safety communications, the Consumer Electronics Association released a report (PDF) it commissioned from Criterion Economics analyzing the Cyren Call plan. The report concludes that the Cyren Call plan would upturn Congress’s carefully crafted DTV transition scheme. It also calls into question whether the private sector would build a more expensive broadband network than it would otherwise have to in order to meet the more rigorous needs of public safety.
Like I said, the study was commissioned by a special interest and it should be read in that light. (And by all means, read it yourself and make up your own mind.) However, the study does outline some basic facts that support something I’ve been saying for a long time: public safety communications does not need more spectrum, what it needs is spectrum reform. Here’s a sampling from the report:
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I’ve written on this blog before about Cyren Call, Nextel founder Morgan O’Brien’s venture to create a national wireless broadband network for first responders. Its plan calls for 30 MHz of spectrum in the 700 MHz band that are slated for auction. A couple of months ago the FCC turned down Cyren Call’s petition, saying Congress’s instructions were quite clear and the Commission didn’t have the authority to refuse to auction the spectrum. Morgan O’Brien spoke at the symposium we held late last year and hinted that he was already working on getting Congress to approve his plan. (Video here.)
Well, today comes word that John McCain has signed on to the Cyren Call plan. This is especially newsworthy since the Senate will soon take a look at the recently passed House bill to implement the 9/11 Commission’s recommendations. As I explained earlier today, that bill addresses first responder communications, but doesn’t mention new spectrum for public safety. McCain said he plans to introduce legislation in the near future to assign the 30 MHz to the Public Safety Broadband Trust the Cyren Call plan calls for. I’m not convinced you need 30 MHz of spectrum to create a viable network, and so I’m not sure it’s time to remove spectrum from efficient allocation by auctions. Verizon hinted a while back that they could do it in just 12 MHz of the 24 already slated for public safety, and the FCC is currently taking comments in a proceeding to create just such a network in 12 MHz. Comments are due on Feb. 26. Note to Verizon: Now would be a fine time to make details of your plan public.
The other problem I see is that the Cyren Call/McCain plan would create one monopoly provider. The FCC plan has the same problem. If it can be done in 12 MHz, why not create two competing networks in the 24 MHz of spectrum already allocated for public safety?
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