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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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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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Will Traditional OTA Broadcast Networks Go Cable-Exclusive?

by on November 23, 2008 · 19 comments

In her latest column, Media Post media market guru Diane Mermigas wonders how long it will be before we see a traditional over-the-air (OTA) broadcast TV network (like ABC, NBC, CBS, or Fox) dump their old broadcast business altogether and just move all their properties to cable and satellite TV. And, in response to Mermigas, Cory Bergman of Lost Remote argues, as I did last week, “the real future of TV is not linear cable, but non-linear video delivered seamlessly via IP to multiple devices, including your TV set. But mass adoption of this approach is still several years away.”

Bergman is right. It would be foolish to think any traditional network is going to rely exclusively on IP-based distribution any time soon; they see it as more of a compliment (or another product window). But Mermigas may be on to something in predicting that broadcast networks may soon be looking to get out of the OTA television business altogether and essentially become “a glorified general entertainment cable network.”

The strain on their dysfunctional paradigm is emanating from a devastating recession and the ongoing digital revolution. Both are permanently altering the rules of play for the networks. A case can be made for at least one of the Big 4 broadcast networks emerging as a glorified general entertainment cable network within the next several years. The economic advantages: more steady ad revenues and consistent subscriber fees as content is distributed cross-platform. It would be a bold move that a free-spirited company such as News Corp. might already be contemplating for its Fox Broadcast TV Network, or NBC Universal for its peacock network. Industry analysts increasingly wonder how an independent CBS can prattle on under the crumbling old rules. In a world of exploding access and choices, the prime-time ratings (even with Live plus 3 configurations) spell diminishing returns. For Disney, ABC’s general entertainment status is on par with ESPN in sports; the new multi-platform model is in place except for formally moving the ABC TV Network to the cable side of the ledger.

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Leading U.K. Telecom Official to Deliver Major Lecture at George Mason University

by on October 23, 2008 · 5 comments

William Webb, Head of Research and Development at OFCOM, to speak about ‘The Theory, Practice, Politics and Problems of Spectrum Reform’ on November 12

ARLINGTON, VA., October 23 – With the transition to digital television in the United States less than four months away, disputes about the airwaves used by broadcasters are raging here and around the globe.  A world-class expert will soon weigh in on how one country, the United Kingdom, views the challenges of bringing radio spectrum allocation into the 21st Century.

On Wednesday, November 12, 2008, the Information Economy Project at the George Mason University School of Law will host its next Big Ideas About Information Lecture, featuring an address by Dr. William Webb, a top policy maker at OFCOM, the U.K. telecommunications regulator.

OFCOM’s ambitious liberalization strategy, announced in 2004, permits the large majority of valuable frequencies to be used freely by competitive licensees, offering an exciting and informative experiment in public policy.  Dr. Webb’s lecture, “The Theory, Practice, Politics and Problems of Spectrum Reform,” will offer a timely progress report for the American audience.

Webb’s lecture will be the sixth in a prestigious series that has included Nobel Laureate Vernon Smith and noted economist David Porter on how FCC license auctions have worked; Martin Cooper, the “father of the cellphone,” on spectrum allocation; Brian Lamb, founder and CEO of C-SPAN, on the policies that enabled the cable network to launch;  former Federal Communications Commission Chairman Dennis Patrick, on the decision to abolish the “Fairness Doctrine” in 1987; and University of Minnesota Professor Andrew Odlyzko, on financial bubbles in high-technology industries.

Dr. Webb’s Lecture will review the century-long history of radio spectrum regulation. For almost all of that century, the policy-maker has micro-managed spectrum use, defining services, technologies and business models deployed by wireless operators. The inefficiencies embedded in this approach have triggered calls for liberalization since the pioneering work of economist Ronald Coase in the 1950s.

While efforts to relax administrative control have generally met great political resistance, some substantial progress has been made with the emergence of mobile telephone networks over the past two decades.  Policy makers in some nations are now seeking to achieve bolder changes. The regulator in the United Kingdom, OFCOM, has emerged as a leader in this campaign.

After the Labour Government commissioned a landmark 2002 study authored by economist Martin Cave, OFCOM moved aggressively to assist the emergence of property rights in frequencies, the institutional switch enabling market allocation of radio spectrum.

This lecture, delivered by a key OFCOM policy official and a noted spectrum technology expert in his own right, dissects the liberalization process in Great Britain and offers lessons learned. This experience promises great insight for the U.S. and other countries struggling to enact pro-consumer policy reforms.

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History of DRM; IIPI Event Reviewed

by on October 2, 2008 · 2 comments

http://penny-arcade.com/comic/2008/9/26/

Speaking of snakes, I am just returned from a camping trip along the Appalachian trail in the Michaux Forest, quite out of wireless reception range. Several days’ heavy rain had washed the forest clean, left the moss glowing green and the mushrooms, salamanders, crayfish, and frogs quite content. There one combats the same problems confronted by earlier settlers–mice (and the snakes they attract), staying dry and tolerably warm, the production of decent meals, and keeping small children from wandering off into the woods. Why do some people enjoy briefly returning to this world? Despite being one of those people, I can’t say. Now I am back and my day is easy and comfortable (comparatively), with time to spare contemplating the meta-structures of finance, property, and capital. Let’s all hope these structures are not nearly as fragile as our confidence in them, which, judging from the tone of remarks at last week’s ITIF conference on innovation, has fallen quite low. Continue reading →

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More on M2Z / AWS spectrum fight

by on August 16, 2008 · 3 comments

Several of us here have outlined our reservations about the proposal to allocate a block of the Advanced Wireless Services (AWS) spectrum for a free, nationwide wireless service. (Here’s a filing I signed on to that critiques the portion of the plan that requires censorship of the entire band once allocated).

But, strictly from an economic perspective, this is the best overview and critique of the plan I have seen so far: “The Static and Dynamic Inefficiency of Abandoning Unrestricted Auctions for Spectrum,” by Bob Hahn, Allan Ingraham, Greg Sidak, and Hal Singer. It’s a response to a paper favoring the M2Z plan that was penned by Simon Wilkie of USC, who also formerly served as the Chief Economist of the FCC. (Wilkie’s work on behalf of M2Z can be found on the M2Z site here). It’s a good debate and I encourage you to look at both papers if you are interested in this issue.

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What’s Worse Than Rigged Auctions & Internet Censorship? How About Both in One Package!

by on June 6, 2008 · 7 comments

Berin Szoka and I just released a short article on the FCC’s proposed follow-up to the failed 700 mhz D Block auction:  a free, nationwide wireless service that would serve public safety users as well as consumers.  It’s attached down below or the PDF can be found here.

What’s Worse Than Rigged Auctions & Internet Censorship? How About Both in One Package!

a PFF Progress Snapshot Release 4.12 June 2008

by Adam Thierer and Berin Szoka

The big spectrum policy debate in town these days continues to be the fight about how to redo the botched D block auction. As we all know, FCC Chairman Kevin Martin’s previous effort to micro-manage that auction failed miserably. Sadly, the follow-up plan isn’t much better, as the Wall Street Journal notes in an editorial today:

You’d think Chairman Martin would have learned from this experience. It’s not the role of regulators to pick winners and losers to achieve their preferred social outcomes. Private competition and the price mechanism can most fairly and efficiently find the best use for scarce spectrum. The FCC’s clumsy attempt at social engineering resulted in a failed auction that has prevented otherwise desirable spectrum from being put to commercial use. Alas, Mr. Martin has now proposed another wireless auction for a separate piece of spectrum. And this time he wants to require the winner to offer free Internet access that filters out pornography–conditions that obviously would decrease the value of the license and turn off potential bidders. It just so happens that Mr. Martin’s proposed auction seems tailor-made for the business plan put forward by M2Z, another politically connected Silicon Valley start-up looking to enter the wireless broadband telecom market.

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Should White Spaces be Unlicensed?

by on April 2, 2008 · 16 comments

The white space debate has been the subject of much attention lately, with Microsoft, Dell, and Google pitted against the CTIA on the question of how to allocate white spaces between UHF channels. The two competing proposals are 1) auction off white spaces, similar to the 700mhz auction, or 2) leave them unlicensed and managed (like 2.4Ghz) but allow devices which don’t cause interference.

This controversy again raises the issue of the desirability of unlicensed spectrum. I’ve been reading about the merits of unlicensed spectrum, inspired by a 2006 exchange between Jerry Brito and Mike Masnick on TLF and TechDirt. Jerry makes a compelling argument that command-and-control commons rules might hinder the emergence of superior networks operating with devices emitting greater than 4w EIRP.

The public interest is to allocate the spectrum in the most economically efficient manner, so if unlicensed spectrum uses do not make the best use of scarce airwaves, unlicensed bands should be auctioned off. Tim envisions privately managed commons that would provide for much the same openness now offered by unlicensed spectrum, but without a monolithic regulator imposing centralized rules.

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Public safety spectrum, here we go again

by on March 31, 2008 · 12 comments

Better late than never, here are my thoughts on the FCC’s auction for the D Block public safety band. There was only one bid for the block, Frontline Wireless to shut down, and some are even suggesting improprieties. Sadly, we’ve got a long way to go before we have an operating public safety network. Why did the D Block auction fail? I think at root the problem is that the FCC simply placed too many restrictions on the would-be licensee, and that’s something the FCC should keep in mind as it considers what to do next.

Under the D Block’s service rules the commercial licensee must come to an agreement with the Public Safety Spectrum Trust (which is the licensee for the adjacent public safety spectrum) about the details of the network to be built. If it doesn’t come to an agreement, the FCC can impose whatever requirements it sees fit on the licensee, and if the licensee surrenders its license or has it taken away, they must pay a forfeiture penalty that can run into the millions. Because there are no similar penalties for the non-profit PSST to come to agreement, this allows the PSST to basically dictate the terms of the network. Why would anyone bid for the privilege to be a part of that deal?

Sadly, Chairman Martin doesn’t seem to get this. He recently lamented the fate of the D Block:

“Did we get everything perfect in it? Obviously not because no one was willing to end up taking on that burden,” Martin conceded. “So, do I wish that someone was willing to take on that burden? Yes. And do we need to restructure it in such a way that someone is willing to take on that burden? Absolutely. But absent somebody else coming up with some idea to solve this, this is the only way to solve what’s really a public-safety crisis.”

Instead of expecting some selfless corporation to “take on the burden” of such a thankless deal, why not try instead to create a license aligned with the interests of both the private sector (profit) and public safety (cheap and interoperable communications solutions)? Here’s my recipe:

  1. Get rid of the PSST, a bureaucracy more than prone to capture that will do nothing but hold a commercial licensee hostage.
  2. Take the spectrum now held by the PSST and combine it with the D Block. Create two national licenses on the combined spectrum so as to inject competition and avoid a monopoly provider.
  3. Place public safety obligations on each of those licenses but allow the licensees to lease excess capacity. What sort of obligations? Obviously public safety should have priority, and leased access would only be secondary. Beyond that, the FCC could include minimum performance standards in the licenses to ensure that the networks are built to public safety standards without having to prescribe specific technologies or methods.
  4. Auction the licenses without reserve prices.

There are no doubt more than a few hurdles for such a plan to overcome, but I think it makes sense to allow market forces develop public safety networks. I’d love to hear any critiques of this idea. No doubt I’ll be submitting a comment to the inevitable rulemaking on this issue and it would help me to figure out the weaknesses of this scheme.

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Gutierrez: Strong demand for free money

by on January 7, 2008 · 8 comments

Commerce Secretary Carlos Gutierrez issued this statement on Friday:

The TV Converter Coupon Program opened as scheduled on January 1, and is off to a great start. Americans have begun requesting coupons that will help them get the converter boxes needed for when our television signals change on February 17, 2009. With these coupons, the federal government will defray $40 of the cost of an eligible converter, which is expected to cost between $50 and $70. The demand for coupons is strong. We’ve taken requests from every state for nearly 1.9 million coupons from more than one million households.

The demand is strong? Really? For something that’s free? You’re kidding.

Let’s see, 1.9 million coupons requested at $40 a pop is $76 million of taxpayer money out the door in just four days. As Secretary Gutierrez says, “off to a great start” indeed. At this “great” pace it’s good to know the coupon fund totals $1 billion.

What are you waiting for? Get your piece of the American dream here.

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