Here are some quick thoughts on the proposed AT&T – T-Mobile merger, mostly borrowed from my previous writing on the wireless marketplace. First, however, I highly recommend this excellent analysis of the issue by Larry Downes, which cuts through the hysteria we’re already hearing and offers a sober look at the issues at stake here. Anyway, here are a few of my random thoughts on the deal:
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The deal will likely be approved: First, to cut to the chase.. After much wrangling, the deal will probably be approved primarily because of two factors, both of which help political officials as much as AT&T: (1) The deal delivers upon the National Broadband Plan promise of getting the country blanketed with wireless broadband; and (2) it “brings home” T-Mobile by giving an American company control of a German-held interest. As Larry Dignan of ZNet says, it is tantamount to “playing the patriotism card.”
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One reason it might not be approved: Some Administration critics, especially from the more liberal part of the Democratic base, could make this a litmus test for Obama administration’s antitrust enforcement efforts. In the wake of the Comcast merger approval — albeit after several pounds of flesh were handed over “voluntarily” to get the deal approved — some of the Administration’s base will be looking for blood. I remember how the Powell FCC was under real heat to “get tough” on mergers back in 2001-02 and during that time blocked the proposed DirecTV-EchoStar deal, possibly as a result of the pressure. The same thing could happen to AT&T – T-Mobile here.
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It’s all about spectrum: From AT&T’s perspective, this deal is all about getting more high-quality spectrum, which is in increasingly short supply. Indeed, as Jerry Brito noted earlier, this merger should serve as another wake-up call regarding the need to get spectrum reform going again to ensure that existing players can reallocate their spectrum to those who demand it most. (Hint: Incentivize the TV broadcasters to sell... NOW!) But, in the short-term, this deal helps AT&T built out a more robust nationwide wireless network. Over the long-haul, that should help T-Mobile deliver better service to its customers. Continue reading →
The Washington Post editorializes this morning on the “Google-Verizon” proposal for government regulation of the Internet:
For more than a decade, “net neutrality” — a commitment not to discriminate in the transmission of Internet content — has been a rule tacitly understood by Internet users and providers alike.
But in April, a court ruled that the Federal Communications Commission has no regulatory authority over Internet service providers. For many, this put the status quo in jeopardy. Without the threat of enforcement, might service providers start shaping the flow of traffic in ways that threaten the online meritocracy, in which new and established Web sites are equally accessible and sites rise or fall on the basis of their ability to attract viewers?
What a Washington-centric view of the world, to think that net neutrality has been maintained all this time by the fear of an FCC clubbing. Deviations from net neutrality haven’t happened because neutrality is the best, most durable engineering principle for the Internet, and because neutral is the way consumers want their Internet service.
Should it be cast in stone by regulation, locking in the pro-Google-and-Verizon status quo? No. The way the Internet works should continue to evolve, experiments with non-neutrality failing one after another . . . until perhaps one comes along that serves consumers better! The FCC would be nothing but a drag on innovation and a bulwark protecting Google and Verizon’s currently happy competitive circumstances.
I’ll give the
Post one thing: It represents Washington, D.C. eminently well. The Internet should be regulated because it’s not regulated.
“If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”
A favorite PR maven pitched me (and probably many of you) Senator Al Franken’s (D-MN) email suggesting that WiFi is threatened by the Google-Verizon “deal.”
“The Google-Verizon ‘framework’ was written so as not to apply to wireless Internet services,” says Franken. “If you use wi-fi or access the Internet on your phone, this is a serious problem.”
Kindamaybenotsomuch. WiFi is wireless, yes, but it’s not what they’re talking about when they say “wireless.”
But what caught my eye is Senator Franken’s somewhat inverted take on power arrangements in the federal government: “This evening, I’ll be speaking at an FCC hearing in Minneapolis. I’ll urge the commissioners to reject the Google-Verizon framework, stop the Comcast/NBC merger, and take action to keep the Internet free and open.”
Folks, Article I, section 1 of the United States Constitution creates the United States Senate, with section 3 describing the Senate’s makeup and some procedures.
The Federal Communications Commission is not a constitutional body. The best view is that Congress has no authority to establish an FCC like we have today. The better view is that Congress should not maintain the sprawling FCC we have today. And the only correct view is that FCC is a creation of Congress, beneath it in every relevant respect.
Senator Franken is supposed to be the boss of the FCC, not a supplicant “urging” the FCC to do x, y, and z.
Does it matter a lot? No. Senator Franken is mostly making a symbolic appeal to gin up constituent support. But he’s also symbolizing the abasement of the legislative branch to an independent agency that has no constitutional pedigree.
As Steve Titch discusses below, Google and Verizon, two of the leading antagonists in the long-running drama over FCC net neutrality regulation, may be about to call a truce. According to numerous media reports, the two firms have or soon will agree to a compromise framework for regulation, which would provide for a limited degree of regulation by the FCC.
The exact provisions of the compromise are unclear. Reportedly, however, the plan would ban Internet access providers such as Verizon from blocking content outright, while allowing them to offer prioritized service for a fee. The provisions would not apply to wireless Internet access, which would be kept mostly free of regulation.
While Google and Verizon have long been adversaries on this issue, it’s been no secret that the two have been working together to craft out common ground. The two in fact, filed joint comments in the FCC’s rulemaking on the issue earlier this year, and the CEOs of the two firms even jointly authored a Wall Street Journal op-ed on broadband policy.
The incentives for both are clear. With federal courts earlier this year rebuffing the FCC’s attempts to impose regulation, it was no doubt clear to Google that nothing could happen without a compromise. Moreover, the “big is bad” tenor of the debate no doubt gave Google – one of the largest firms in our galaxy – reason to rethink. For Verizon, a deal would provide some policy certainty, much-needed given the vast investments in broadband it is making. And since the firm has always disavowed any desire to block wireline content, the new rules would come at little apparent cost.
Continue reading →
Today I appeared on CNBC’s “Power Lunch” to debate Net neutrality issues and the specific role of pricing in this debate. Specifically, the producers wanted to know whether websites should be allowed to pay a higher fee to allow consumers faster access to their sites or should it be equal for every website. The show was partially a response to the rumors that the may be some sort of deal pending between Verizon and Google about prioritized services. On the program, I was up against Craig Aaron of Free Press. During the discussion I made several points, many of which first appeared in my 2005 essay on “The Real Net Neutrality Debate: Pricing Flexibility Versus Pricing Regulation.” Here are the key points I tried to get across:
- In a free-market economy, companies should be able to freely set prices for goods and services without fear of government price controls.
- This isn’t about consumers paying more for basic Internet access or having their connections “slowed down”? This is about whether the government will allow some broadband services to be differentiated or specialized for unique needs, such as online gaming, live event telecasts, secure telepresence conferences, telemedicine, etc.
- Differentiated and prioritized services and pricing are part of almost every industrial sector in a capitalistic economy. (ex: airlines, package shipping, hotels, amusement parks, grades of gasoline, etc.) Why should it be any different for broadband?
- It’s always important to remember that there is no such thing as a free lunch. Something has to pay for Internet access. It doesn’t just fall like manna from heaven. Differentiated services may help in this regard by allowing carriers to price more intensive or specialized users and uses to ensure that carriers don’t have to hit everyone – including average household users – with the same bill for service. Why should the government make that illegal through Net neutrality regulation?
- Heavy-handing tech mandates – especially Internet price controls – could have a profoundly deleterious impact on investment, innovation, and competition. After all, there can be no innovation or investment without a company first turning a profit. We don’t want to return to the era of rotary-dial regulated monopoly, in which our choices were few and our services were standardized and rudimentary. We should let our current experiment with facilities-based, head-to-head competition continue.
http://plus.cnbc.com/rssvideosearch/action/player/id/1559985749/code/cnbcplayershare
PFF has just published the transcript for an event we hosted last month asking “What Should the Next Communications Act Look Like?” The event featured (in order of appearance) Link Hoewing of Verizon, Walter McCormick of US Telecom, Peter Pitsch of Intel, Barbara Esbin, Ray Gifford of Wilkinson, Barker, Knauer, and Michael Calabrese of the New America Foundation. It was a terrific discussion and it couldn’t have been more timely in light of recent regulatory developments at the FCC. The folks at NextGenWeb were kind enough to make a video of the event and post it online along with a writeup, so I’ve included that video along with the event transcript down below the fold. Continue reading →
Noting that the Telecom Act has become ” irrelevant to the ecosystem that has developed,” Verizon’s Executive Vice President Tom Tauke today called for Congress to overhaul the nation’s archaic communications laws and the regulatory regime that the Federal Communications Commission (FCC) is currently attempting to pigeonhole the Internet and entire Digital Economy into. It’s an excellent speech, and I encourage you to read the entire thing (which I have embedded down below the fold in a Scribd reader).
“[T]he test for government intervention in the marketplace is to prevent either harm to users or anti-competitive activity,” he said. He rightly noted that, in an age of technological convergence and vigorous cross-platform competition, the old silo-based approach of the Telecom Act — with its various Titles for outmoded market definitions — no longer makes any sense. He noted:
by the very nature of the Internet Ecosystem, many are working together or competing in other company’s turf. Computer companies sell phones, and quite successfully. Search engines sell open operating systems. Network providers create their own apps stores. That means that the value proposition to the consumer is really a package created by many companies acting together with little, if any, regard to their previous corporate histories. So no set of companies should be immune from scrutiny.
Of course, a regulatory regime already exists that accomplishes this goal: antitrust law. But Tauke’s proposal isn’t quite that sweeping. He doesn’t call for the FCC to be dynamited the ground and to just shift everything into the antitrust bucket, which some of us would prefer. Instead, he speaks generically about the need for a more sensible process — most likely still enforced by the FCC — that would work as follows:
Continue reading →
Progress Snapshot 6.6, The Progress & Freedom Foundation (PDF)
Mobile broadband speeds (at the “core” of wireless networks) are about to skyrocket—and revolutionize what we can do on-the-go online (at the “edge”). Consider four recent stories:
- Networks: MobileCrunch notes that Verizon will begin offering 4G mobile broadband service (using Long Term Evolution or LTE) “in up to 60 markets by mid-2012″—at an estimated 5-12 Mbps down and 2-5 Mbps up, LTE would be faster than most wired broadband service.
- Devices: Sprint plans to launch its first 4G phone (using WiMax, a competing standard to LTE) this summer.
- Applications: Google has finally released Google Earth for the Nexus One smartphone on T-Mobile, the first to run Google’s Android 2.1 operating system.
- Content: In November, Google announced that YouTube would begin offering high-definition 1080p video, including on mobile devices.
While the Nexus One may be the first Android phone with a processor powerful enough to crunch the visual awesomeness that is Google Earth, such applications will still chug along on even the best of today’s 3G wireless networks. But combine the ongoing increases in mobile device processing power made possible by Moore’s Law with similar innovation in broadband infrastructure, and everything changes: You can run hugely data-intensive apps that require real-time streaming, from driving directions with all the rich imagery of Google Earth to mobile videoconferencing to virtual world experiences that rival today’s desktop versions to streaming 1080p high-definition video (3.7+ Mbps) to… well, if I knew, I’d be in Silicon Valley launching a next-gen mobile start-up!
This interconnection of infrastructure, devices and applications should remind us that broadband isn’t just about “big dumb pipes”—especially in the mobile environment, where bandwidth is far more scarce (even in 4G) due to spectrum constraints. Network congestion can spoil even the best devices on the best networks. Just ask users in New York City, where AT&T has apparently just stopped selling the iPhone online in order to try to relieve AT&T’s over-taxed network under the staggering bandwidth demands of Williamsburg hipsters, Latter-Day Beatniks from the Village, Chelsea boys, and Upper West Side Charlotte Yorks all streaming an infinite plethora of YouTube videos and so on. Continue reading →
Worth It?
OK, time for a quick rant. What is all this confusion and consternation over early termination fees (ETFs) for high-end smartphones? I mean, seriously, how hard is this process to understand? The FCC has worked itself into a lather over this and is bombarding wireless operators and Google with hate mail letters of inquiry harassing asking them about their ETF policies. I just don’t get it. Let’s review some simple realities:
- Smartphones — especially high-end devices like the iPhone, the Droid, and the Nexus One — are basically mobile mini computers.
- Mini mobile computers do not grow on trees; someone has to make them and sell them at a profit or else no one would offer them to begin with.
- But the people who make and sell these devices (and wireless service for these devices) want to ensure rapid, widespread distribution to win over customers and recoup their costs.
- So, they offer a classic business inducement — an upfront subsidy for the product in exchange for monthly payments to amortize the upfront “loan” they have given the customer;
- AND THEN THEY FORM A CONTRACT WITH THE BUYER TO MAKE THE DEAL WORK. And that contract obligates both sides to live up to their end of the deal.
- Hey… did I mention they need to form a contract to make the deal worth it? OK, good, wanted to make sure I got that point across.
- Then they give you a nice shiny new mobile mini-computer that for some reason we Americans still insist on calling a cell phone.
- Then you start paying off the “loan” they’ve given you for that device over the span of the service contract. This is called “prorating.”
- But, if you default on that loan by breaking your contract, you’ll be hit with a penalty — an early termination fee — since it would leave the carrier without a way to recoup the cost of that shiny new mobile mini-computer that they handed you on the cheap when you just absolutely had to have the hot new toy in town.
Is this process really all that complicated? And why is it so controversial? It certainly shouldn’t be. Prorating happens every day in countless ways in a capitalist economy. And yet in the apparent techno-entitlement society we live in these days, some people seem to think there’s something scandalous about this process when it happens with our beloved mobile devices. In reality, the smartphone subsidy and prorated contract system is really one of the great pro-consumer accomplishments of our time. Continue reading →
Last week I commented on a severely one-sided FCC net neutrality hearing that featured a endless parade of horribles being prophesied by virtually every speaker. The litany of spooky stories became tedious and absurd. Everyone foretold of the impending doom that awaits unless government intervenes to save us from various corporate conspiracies to “silence” our voices. Unsurprisingly, evidence was in short supply. It was pure Chicken Little poppycock.
This got me thinking again about what I have referred to as the “problem of proportionality.” I have discussed the problem of proportionality in the context of public policy debates about online safety and privacy, but it seems equally applicable to debates about net neutrality. Here’s how I explained the “problem of proportionality” in an earlier essay:
let’s think about how some of our lawmakers and media personalities talk about the Internet. If we were to judge the Internet based upon the daily headlines in various media outlets or from the titles of various Congressional or regulatory agency hearings, then we’d be led to believe that the Internet is a scary, dangerous place. That ’s especially the case when it comes to concerns about online privacy and child safety. Everywhere you turn there’s a bogeyman story about the supposed dangers of cyberspace. But let’s go back to the numbers. While I certainly understand the concerns many folks have about their personal privacy or their child’s safety online, the fact is the vast majority of online transactions that take place online each and every second of the day are of an entirely harmless, even socially beneficial nature. I refer to this disconnect as the “problem of proportionality” in debates about online safety and privacy. People are not just making mountains out of molehills, in many cases they are just making the molehills up or blowing them massively out of proportion.
Again, much the same is true of net neutrality. Indeed, it is even
more true since actual net neutrality “incidents” are so hard to come by. Continue reading →
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