During the 1970’s, I remember a bumper sticker that summed up the prevailing anti-colonial attitude that had developed during the late 1960’s: “U.S. Out of North America.”
That sentiment reflects nicely my activities this week, which include three articles decrying efforts by regulators to oversee key aspects of the Internet economy. Of course their intentions—at least publicly—are always good. But even with the right idea, the unintended negative consequences always overwhelm the benefits by a wide margin.
Governments are just too slow to respond to the pace of change of innovations in information technology. Nothing will fix that. So better just to leave well enough alone and intercede only when genuine consumer harm is occurring. And provable.
The articles cover the spectrum from state (California), federal (FCC) and international (ITU) regulators and a wide range of truly bad ideas, from the desire of California’s Public Utilities Commission to “protect” consumers of VoIP services, to the FCC’s latest effort to elbow its way into regulating broadband Internet access at the middle milel, to a proposal from European telcos to have the U.N. implement a tariff system on Internet traffic originating from the U.S.
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(Adapted from Bloomberg BNA Daily Report for Executives, May 16th, 2012.)
Two years ago, the Federal Communications Commission’s National Broadband Plan raised alarms about the future of mobile broadband. Given unprecedented increases in consumer demand for new devices and new services, the agency said, network operators would need far more radio frequency assigned to them, and soon. Without additional spectrum, the report noted ominously, mobile networks could grind to a halt, hitting a wall as soon as 2015.
That’s one reason President Obama used last year’s State of the Union address to renew calls for the FCC and the National Telecommunications and Information Administration (NTIA) to take bold action, and to do so quickly. The White House, after all, had set an ambitious goal of making mobile broadband available to 98 percent of all Americans by 2016. To support that objective, the president told the agencies to identify quickly an additional 500 MHz of spectrum for mobile networks.
By auctioning that spectrum to network operators, the president noted, the deficit could be reduced by nearly $10 billion. That way, the Internet economy could not only be accelerated, but taxpayers would actually save money in the process.
A good plan. So how is it working out?
Unfortunately, the short answer is: Not well. Speaking this week at the annual meeting of the mobile trade group CTIA, FCC Chairman Julius Genachowski had to acknowledge the sad truth: “the overall amount of spectrum available has not changed, except for steps we’re taking to
add new spectrum on the market.” Continue reading →
Frederick Jackson Turner (1861-1932)
On Fierce Mobile IT, I’ve posted a detailed analysis of the NTIA’s recent report on government spectrum holdings in the 1755-1850 MHz. range and the possibility of freeing up some or all of it for mobile broadband users.
The report follows from a 2010 White House directive issued shortly after the FCC’s National Broadband Plan was published, in which the FCC raised the alarm of an imminent “spectrum crunch” for mobile users.
By the FCC’s estimates, mobile broadband will need an additional 300 MHz. of spectrum by 2015 and 500 MHz. by 2020, in order to satisfy increases in demand that have only amped up since the report was issued. So far, only a small amount of additional spectrum has been allocated. Increasingly, the FCC appears rudderless in efforts to supply the rest, and to do so in time. Continue reading →
When the federal government torpedoed the AT&T/T-Mobile USA merger in December pursuant to the current administration’s commitment to “reinvigorate antitrust enforcement,” it created a new client in search of official protection and favors.
It was clear there is no way T-Mobile – which lost 802,000 contract customers in the fourth quarter – is capable of becoming a significant competitor in the near future. T-Mobile doesn’t have the capital or rights to the necessary electromagnetic spectrum to build an advanced fourth-generation wireless broadband network of its own.
T-Mobile’s parent, Deutsche Telekom AG, has been losing money in Europe and expected its American affiliate to become self-reliant. In 2008, T-Mobile sat out the last major auction for spectrum the company needs.
The company received cash and spectrum worth $4 billion from AT&T when the merger fell apart, from which T-Mobile plans to spend only $1.4 billion this year and next on the construction of a limited 4G network in the U.S. But it must acquire additional capital and spectrum to become a viable competitor.
Unfortunately, every wireless service provider requires additional spectrum. “[P]rojected growth in data traffic can be achieved only by making more spectrum available for wireless use,” according to the President’s Council of Economic Advisers. Congress recently gave the FCC new authority to auction more spectrum, but it failed – in the words of FCC Chairman Julius Genachowski – to “eliminate traditional FCC tools for setting terms for participation in auctions.”
Everyone fears it will take the FCC years to successfully conduct the next round of auctions while it fiddles “in the public interest.” That’s why Verizon Wireless is seeking to acquire airwaves from a consortium of cable companies, and why T-Mobile will do anything to stop it.
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Two weeks ago, I penned a column for Forbes about the astonishing rise and fall of BlackBerry (“Bye Bye BlackBerry. How Long Will Apple Last?”), which somehow became the most widely-read and retweeted thing I’ve ever written in my life. I argued that BlackBerry’s story — indeed, the story of the entire U.S. smartphone sector — is the living embodiment of Schumpeterian creative destruction. Joseph Schumpeter’s “perennial gales of creative destruction” are blowing harder than ever in today’s tech economy and laying waste to those who don’t innovate fast enough, I argued, and nowhere is that more true than in the smartphone sector. I noted how, just five years ago, “BlackBerry” was virtually synonymous with “smartphones” and was considered one of the tech titans that seemed destined to dominate for many years to come. But now the BlackBerry’s days appear numbered and its parent company Research In Motion Ltd. is struggling for its very survival.
But there’s another company that I ignored in that essay that was also perched atop the mobile handset hill for a long time: Nokia. Here’s the horrifying opening lines from a Wall Street Journal story today about the company (“Nokia Crisis Deepens, Shares Plunge“):
Nokia Corp., long the biggest name in the cellphone business, is scrambling to stay relevant in the smartphone age. On Wednesday the company warned things will get worse before they get better, saying that competitors are rapidly eating into its sales in emerging markets such as China and India. Nokia also said its newest phone in the U.S. had a software glitch that is preventing some users from connecting to the Internet, marring its attempt to fight into the world’s most important smartphone market. The company’s American depositary shares slid 16% to a 15-year low of $4.24 in New York. Its market capitalization now stands at $16 billion, down from $90 billion five years ago.
It gets worse from there. The article continues on to document Nokia’s gradual slide and notes that, “like BlackBerry maker Research In Motion Ltd., Nokia is trying to re-establish its relevance in a market dominated by Apple Inc.’s iPhone and Google-powered devices. Both Nokia and RIM are working on new devices they hope will make a splash, even as Apple and Android work on improvements of their own.”
To put into context how remarkable this rapid reversal of fortunes is, you need to try remember what life was like just five years ago: Continue reading →
Unshackling a market from obsolete, protectionist regulations can be a very challenging undertaking, especially when the lifeblood of a regulated industry is at stake. The latest push for regulatory reform to encounter the murky waters of modernization is the “Next Generation Television Marketplace Act.” The ambitious and comprehensive bill, introduced by Rep. Steve Scalise and Sen. Jim DeMint in their respective chambers of Congress, aims to free up the broadcast television market. The federal government’s hands have been all over this market since its inception, overseen primarily by the FCC, pursuant to the Communications Act.
The Next Generation Television Marketplace Act (“DeMint/Scalise”) is a bold and laudable bill that would, on the whole, substantially free up America’s television marketplace. But one aspect of the bill—its abolition of the retransmission consent regime—has sparked a vigorous debate among free marketers. This essay will explain what this debate is all about and why policymakers should think twice before getting rid of retransmission consent.
Toward a Free Market in Television
The DeMint/Scalise bill takes an axe to many of the myriad rules that stand in the way of a free market in television programming. As Co-Liberator Adam Thierer recently explained on these pages, the bill’s many provisions would among other things get rid of the compulsory licensing provisions in the Copyright Act that empower government to set the rates cable and satellite (“pay-TV”) providers must pay to retransmit distant broadcast signals. It would eliminate the “network non-duplication” rule, which generally bars pay-TV providers from carrying out-of-market signals that offer the same programs as local broadcasters. The bill would also end the “must-carry” rule that forces pay-TV providers to retransmit certain local broadcast signals without receiving any compensation.
These are just a few of the many provisions of the DeMint/Scalise bill that would substantially reform the Communications and Copyright Acts to foster a free video marketplace and bring television regulation into the 21st century. (For a more in-depth assessment of the positive aspects of the DeMint/Scalise proposal, see Adam’s informative Forbes.com essay, Toward a True Free Market in Television Programming; Randy May’s superb Free State Foundation Perspectives essay, Broadcast Retransmission Negotiations and Free Markets;” and Bruce Owen’s FSF essay, The FCC and the Unfree Market for TV Program Rights.)
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On CNET today, I have a longish post on the FCC’s continued machinations over LightSquared and Dish Networks respective efforts to use existing satellite spectrum to build terrestrial mobile broadband networks. Both companies plan to build 4G LTE networks; LightSquared has already spent $4 billion in build-out for its network, which it plans to offer wholesale.
After first granting and then, a year later, revoking LightSquared’s waiver to repurpose its satellite spectrum, the agency has taken a more conservative (albeit slower) course with Dish. Yesterday, the agency initiated a Notice of Proposed Rulemaking that would, if adopted, assign flexible use rights to about 40 Mhz. of MSS spectrum licensed to Dish.
Current allocations of spectrum have little to do with the technical characteristics of different bands. That existing licenses limit Dish and LightSquared to satellite applications, for example, is simply an artifact of more-or-less random carve-outs to the absurdly complicated spectrum map managed by the agency since 1934. Advances in technology makes it possible to successfully use many different bands for many different purposes.
But the legacy of the FCC’s command-and-control model for allocations to favor “new” services (new, that is, until they are made obsolete in later years or decades) and shape competition to its changing whims is a confusing and unnecessary pile-up of limitations and conditions that severely and artificially limit the ways in which spectrum can be redeployed as technology and consumer demands change. Today, the FCC sits squarely in the middle of each of over 50,000 licenses, a huge bottleneck that is making the imminent spectrum crisis in mobile broadband even worse. Continue reading →
I’m puzzled by Harold Feld’s latest post. Last month, Harold laid out his argument that society faces a tradeoff between allocating the wireless spectrum to the highest bidder and maintaining competition in wireless services. I responded by showing geometrically that in most cases, efficient production is much more important than maximal competition; in economics, trapezoids are bigger than triangles.
Harold seemed to get it. My argument was only an intuitive one, but he admitted that he needed to be more rigorous to show that competition in the wireless industry is more important than lowering the cost of producing wireless services.
Today, Harold reprised nearly the same post, without additional economic rigor, and at greater length. So maybe you can see why I’m puzzled.
I continue to believe that trapezoids are bigger than triangles. But for this post, let’s put that issue to the side to focus on duopoly, of which Harold seems to have a visceral fear. He’s probably not alone.
Duopoly sounds really bad, because it’s 1 away from monopoly. But modern economists tend not to place too much emphasis on the number of competitors in an industry, at least not in isolation from other factors. For instance, it is well understood that under what is known as a Bertrand duopoly, economic profits to the firms are zero, and the price to consumers is as low as it is when there are many firms. That does not sound too scary, does it?
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The DOJ’s recent press release on the Google/Motorola, Rockstar Bidco, and Apple/ Novell transactions struck me as a bit odd when I read it. As I’ve now had a bit of time to digest it, I’ve grown to really dislike it. For those who have not followed Jorge Contreras had an excellent summary of events at Patently-O.
For those of us who have been following the telecom patent battles, something remarkable happened a couple of weeks ago. On February 7, the Wall St. Journal reported that, back in November, Apple sent a letter[1] to the European Telecommunications Standards Institute (ETSI) setting forth Apple’s position regarding its commitment to license patents essential to ETSI standards. In particular, Apple’s letter clarified its interpretation of the so-called “FRAND” (fair, reasonable and non-discriminatory) licensing terms that ETSI participants are required to use when licensing standards-essential patents. As one might imagine, the actual scope and contours of FRAND licenses have puzzled lawyers, regulators and courts for years, and past efforts at clarification have never been very successful. The next day, on February 8, Google released a letter[2] that it sent to the Institute for Electrical and Electronics Engineers (IEEE), ETSI and several other standards organizations. Like Apple, Google sought to clarify its position on FRAND licensing. And just hours after Google’s announcement, Microsoft posted a statement of “Support for Industry Standards”[3] on its web site, laying out its own gloss on FRAND licensing. For those who were left wondering what instigated this flurry of corporate “clarification”, the answer arrived a few days later when, on February 13, the Antitrust Division of the U.S. Department of Justice (DOJ) released its decision[4] to close the investigation of three significant patent-based transactions: the acquisition of Motorola Mobility by Google, the acquisition of a large patent portfolio formerly held by Nortel Networks by “Rockstar Bidco” (a group including Microsoft, Apple, RIM and others), and the acquisition by Apple of certain Linux-related patents formerly held by Novell. In its decision, the DOJ noted with approval the public statements by Apple and Microsoft, while expressing some concern with Google’s FRAND approach. The European Commission approved Google’s acquisition of Motorola Mobility on the same day.
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Congress freed up much-needed electromagnetic spectrum for mobile communications services Friday (H.R. 3630), but it set the stage for years of wasteful lobbying and litigating over whether regulators should be allowed to pick winners and losers among mobile service providers.
The wireless industry has thrived in the near absence of any regulation since 1993. But lately the Federal Communications Commission has been hard at work attempting to change that.
A leaked staff report in December helped sink AT&T’s attempted acquisition of T-Mobile. And the commission has taken the extraordinary step of requesting public comments on an agreement between Comcast and Verizon Wireless to jointly market their respective cable TV, voice and Internet services, beginning in Portland and Seattle. Nothing in the Communications Act prohibits cable operators and mobile phone service providers from jointly marketing their products.
FCC Chairman Julius Genachowski objected to a previous version of the spectrum bill which, among other things, would have prohibited the commission from manipulating spectrum auctions for the benefit of preferred entities. The limitation was removed, and Sec. 6404 provides that nothing in the legislation “affects any authority the Commission has to adopt and enforce rules of general applicability, including rules concerning spectrum aggregation that promote competition.
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The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.