wireless — Page 9

Posts tagged as:

Regulatory Whack-a-Mole

by Jerry Ellig on November 11, 2009 · 0 comments

If you have any credit cards, you’ve probably received notices recently that your credit card company is going to do you some wonderful favors, like apply payments to the balances carrying the highest interest rate first. These same notices also contain changes in other contract terms that might make you worse off. One of mine, for example, tells me that henceforth my annual percentage rate on purchases will be the prime rate plue 11.99 percent, with a minimum of 17.99 percent. The company tells me this is higher than my old fixed rate. (I don’t know what it was, since I never use credit cards to borrow.)

These changes are the result of new federal regulations that were supposed to make credit card companies give us a break on certain terms and conditions. But since all of the terms and conditions of the credit card contract are not comprehensively regulated, the companies can adjust other terms to make up for the money they lose as a result of the mandated regulatory changes. Some scholars call this “term substitution.” I call it “regulatory whack-a-mole,” after that carnival game in which you whack a mole that pops up out of a hole only to have another mole pop up out of another hole.

What does this have to do with technology policy? Term substitution is a pervasive feature of reality whenever regulators regulate some, but not all, aspects of a transaction. Since technology markets are not comprehensively regulated like public utilities, we can expect to see term substitution all over the place in technology markets in response to regulatory mandates.

If you want to find term substitution in technology markets, think of transactions that are only partially regulated:

If wireless companies couldn’t charge early termination fees, we’d pay more for phones.
The last time the federal government tried to regulate “basic” cable rates (for your local broadcast and public affairs channels), rates for “expanded basic” and premium channels went up.
Casket sales have also experienced term substitution. Responding to low-priced Internet competition and federal regulations that allow consumers to BYOB (bring your own box), funeral directors simply reduce casket prices and increase the price they charge for their services.
Net neutrality regulation might have this kind of effect, if it prevents network operators from charging high-bandwidth users different prices from low-bandwidth users. Forcing them to charge everyone the same, unregulated price could mean the low-bandwidth users pay more than they otherwise would.

I’m curious to hear more actual examples from readers of term substitution in technology markets. What’s the most interesting thing you’ve seen?

0 comments

Let’s Make a Deal: Broadcasters, Mobile Broadband, and a Market in Spectrum

by Adam Thierer on November 10, 2009 · 6 comments

Along with my colleague Barbara Esbin, the Director of PFF’s Center for Communications and Competition Policy, I have just released a new paper on discussing the possibility of reallocating a portion of broadcast television spectrum for alternative purposes, namely, mobile broadband. As I discussed here before, Blair Levin, the Executive Director of the FCC’s Omnibus Broadband Initiative, has been suggesting that it might be possible to craft a grand bargain whereby broadcasters get cash for some (or all) of their current spectrum allocations if they return spectrum to the FCC for reallocation and re-auction, likely to mobile broadband services.

In our paper, “An Offer They Can’t Refuse: Spectrum Reallocation That Can Benefit Consumers, Broadcasters & the Mobile Broadband Sector,” [PDF] Barbara and I argue that:

the benefits of such a deal could be enormous for wireless broadband providers, developers of digital technologies, and consumers. Expanding the pool of spectrum available for next-generation wireless broadband offerings will ensure that innovative new networks, devices, and services are made available to the public on a timely basis. Ultimately, that will mean more high-speed choices for consumers, especially those in rural areas harder to reach with high-speed wireline networks. Finally, more generally, anything that moves us in the direction of a freer market in spectrum is a good thing. But fairness to broadcasters lies at the heart of this spectrum reallocation plan. If a deal can’t be structured that broadcasters would find acceptable, they should not be forced to come to the table. When we speak of an offer they can’t refuse, we mean one so attractive that no rational businessperson or investor would pass it up. It is essential broadcasters be willing partners in the deal, and be full participants in the process of shaping its contours.

Read the entire thing here, or below the fold as a Scribd document. Continue reading →

6 comments

A positive agenda to promote sustainable net neutrality

by Jerry Ellig on October 21, 2009 · 0 comments

I like the idea of having a neutral Internet that allows me to go where I want to go and read what I want to read, all for the price of my monthly subscription. Sure, it took me awhile to figure out why anyone would want to access skype on an iphone (after all, an iphone is already a phone!), but now I can see why some people might enjoy making free international calls without having to plop down in front of the ol’ PC wedged into the guest bedroom.

At the same time, I don’t see a pressing need for regulation to ensure that we get whatever degree of neutrality is practical. Even in his speech announcing that he would propose net neutrality rules, FCC Chairman Genachowski could cite only the same three old anecdotes that have been tirelessly trotted out by others as proof that new regulation is required. Sure, by Washington standards, that’s two more anecdotes than are usually required to justify issuing a regulation. But it’s hardly proof of a broad, systemic problem that requires new rules (as Jerry Brito and I argued here.)

Nevertheless, as the saying goes, “You can’t beat something with nothing.” So I suggest a positive agenda to promote sustainable net neutrality.

Many of the arguments for a non-neutral net are based on the assumption that last-mile bandwidth is, at least sometimes, congested — or may soon become that way as people use more bandwidth-intensive applications. One solution is for the network operator to prioritize some packets over others, so if I have a heart attack, my wife’s VOIP call for an ambulance doesn’t get crowded out by the neighbor’s kid playing video games with his buddies in Australia. Another solution, though, is to make sure the network operators have adequate ability and incentive to build plenty of bandwidth. As an economist, I understand that some network management or usage-based pricing might be less expensive for consumers than building massive bandwidth. But that’s no reason to persist with policies that artificially constrain bandwidth.

For wired broadband, a positive agenda to promote sustainable net neutrality means avoiding regulations that impair incentives for investment that increases the capacity of the last-mile network. For wireless broadband, that means freeing up more spectrum to be auctioned for commercial wireless services.

And while you’re at it, FCC, maybe you can do something about the NIMBY problem that prevents me from receiving a decent 3G broadband signal in my house. Now that would expand last-mile bandwidth and promote competition to boot!

0 comments

Intel “Holiday Mobile Etiquette” Poll

by Adam Thierer on October 20, 2009 · 3 comments

I’ve ranted on here before about technological etiquette, or that lack thereof by many people. (See my tedious screed from 3 years ago: “A Few Snooty Words about Technological Etiquette.” Man, I was really angry when I wrote that piece!) As much as I love technology and defend its unrestricted use, I think it’s important to encourage social norms about proper technology use to make it less likely people will call government in to act as a nanny.

That’s why I found this new “Intel Holiday Mobile Etiquette” poll so intriguing. According to the poll, which was conducted by Harris Interactive and sponsored by Intel:

most online U.S. adults (80 percent) feel there are unspoken rules about mobile technology usage, and approximately 7 in 10 (69 percent) agreed that violations of these unspoken mobile etiquette guidelines, such as checking e-mails, sending text messages and making phone calls while in the company of others, are unacceptable.

Hmmm… While I’m glad that such a large majority still have a sense of propriety about such things, this sounds like a case of people saying one thing when they likely do quite another. Then again, my perspective might be biased by life in a big city where people have PDAs practically glued to their hands full-time. I’ve even grown accustomed to people staring at their digital devices more than me during conversations and meetings. Of course, that could just be because I am so damn boring. [My colleague Jim Harper will, no doubt, suggest the latter.] Regardless, I just remain shocked by how people feel they simply must take every call, answer every email, or do whatever else on their devices in the presence of crowds or others. In my rant from 3 years ago, I offered “Two Simple Rules of Techno-Etiquette” that I will reiterate here as the first steps down the path to techno-etiquette recovery:

(1) If you absolutely MUST take that cell phone call or answer that e-mail right away, try saying this: “Excuse me, do you mind if I do this real quick?”

(2) Do not EVER, under any circumstances, answer a cell phone call while you are in a restaurant, movie theater or other public establishment where relative quiet is expected. If you have to take the call, go outside.

Seriously, would that be so hard?

3 comments

Wireless Innovation is Alive & Well: Two New Reports Set the Record Straight

by Adam Thierer on October 11, 2009 · 20 comments

The smell of high-tech regulation is increasingly in the air these days and many lawmakers and some activist groups now have the mobile marketplace in their regulatory cross-hairs. Critics make a variety of claims about the wireless market supposedly lacking competition, choice, innovation, or reasonable pricing. Consequently, they want to wrap America’s wireless sector in a sea of red tape. Two important new studies thoroughly debunk these assertions and set the record straight regarding the state of wireless competition and innovation in the U.S. today. These reports are must-reading for Washington policymakers and FCC officials who are currently contemplating regulatory action.

First, Gerald Faulhaber and Dave Farber have a new report out entitled “Innovation in the Wireless Ecosystem: A Customer-Centric Framework.” Here’s what Faulhaber and Farber find:

the three segments of the wireless marketplace (applications, devices, and core network) have exhibited very substantial innovation and investment since its inception. Perhaps more interesting, innovation in each segment is highly dependent upon innovation in the other segments. For example, new applications depend upon both advances in device hardware capabilities and advances in spectral efficiency of the core network to provide the network capacity to serve those applications. Further, we find that the three segments of the industry are also highly competitive. There are many players in each segment, each of which aggressively seeks out customers through new technology and new business methods. The results of this competition are manifest: (i) firms are driven to innovate and invest in order to win in the competitive marketplace; (ii) new business models have emerged that give customers more choice; and (iii) firms have opened new areas such as wireless broadband and laptop wireless in order to expand their strategic options.

They continue on to address the policy issues in play here and discuss the “consumer-centric” approach they recommend that the FCC adopt: Continue reading →

20 comments

Why Congestion Pricing for the iPhone & Broadband Makes Sense

by Adam Thierer on October 7, 2009 · 17 comments

Interesting piece here from Slate’s Farhad Manjoo on why AT&T should dump unlimited data plans and end what he calls the “iPhone all-you-can-eat buffet.” He notes that: “The typical smartphone customer consumes about 40 to 80 megabytes of wireless capacity a month. The typical iPhone customer uses 400 MB a month. AT&T’s network is getting crushed by that demand.” Because “some iPhone owners are hogging the network” and causing “a slowed-down wireless network,” Manjoo recommends a congestion pricing model as a method of balancing supply and demand:

How would my plan work? I propose charging $10 a month for each 100 MB you upload or download on your phone, with a maximum of $40 per month. In other words, people who use 400 MB or more per month will pay $40 for their plan, or $10 more than they pay now. Everybody else will pay their current rate—or less, as little as $10 a month. To summarize: If you don’t use your iPhone very much, your current monthly rates will go down; if you use it a lot, your rates will increase. (Of course, only your usage of AT&T’s cellular network would count toward your plan; what you do on Wi-Fi wouldn’t matter.) To understand the advantages of tiered pricing, let’s look at AT&T’s current strategy of spending billions to build more network space. Why won’t this work? For the same reason building more roads doesn’t reduce traffic—more capacity increases the attractiveness of driving, which brings a lot more cars to the road, which leads to more gridlock.

Congestion pricing and metering is something I’ve written quite a bit about here in the context of wireline broadband (1, 2, 3), but Manjoo is equally correct that it could be applied for wireless data plans. It has the added value of taking pressure off lawmakers to impose Net neutrality regulation since pricing of the pipe becomes an effective substitute for most other forms of network management. In other words, price, don’t block bandwidth-hogging customers and applications. The problem, Manjoo explains: Continue reading →

17 comments

Will the FCC regulate wireless phone rates?

by Jerry Ellig on September 30, 2009 · 4 comments

Today is the filing deadline in a somewhat unusual Federal Communications Notice of Inquiry that asks how the commission should revise its framework for evaluating competition in mobile wireless communications. Among other things, the FCC asks how it should measure wireless companies’ profits. It’s clear from an earlier public notice issued by the FCC’s Wireless Bureau that regulators are looking for a way to identify “abnormal” profits that might justify new regulation.

For 13 years, Congress has required the FCC to issue annual reports on wireless competition. These reports have usually found that wireless is pretty competitive by most conventional measures. There are now four national competitors, numerous regional ones that are growing larger, and a bunch of resellers. The FCC’s most recent report provides numerous examples of innovation in technology, pricing, and services.

About the only fly in the ointment is federal policies that severely limit the amount of spectrum allocated for “flexible use.” Limits on the amount of flexible use spectrum are like taxi medallions: they hinder entry and limit the amount of service the wireless firms can offer.

Nevertheless, the wireless industry’s performance has been impressive. Adjusted for inflation, average revenue per minute fell by 87 percent between 1997 and 2007, and average voice revenue per minute fell by 90 percent. Just during the last five years, inflation-adjusted average revenue per minute fell by 53 percent, and average voice revenue per minute fell by 61 percent.

Could regulation improve on these outcomes? In our comments to the FCC, Jerry Brito and I offer a little thought experiment. Suppose the wireless industry were subject to enlightened, highly efficient, and perfectly operating price regulation. Specifically, suppose the FCC had mandated a version of “incentive” regulation that allowed the wireless companies to increase their prices by no more than the rate of increase in the consumer price index minus an annual 7 percent offset to reflect increased productivity. (Seven percent is the highest productivity offset we’ve seen any telecommuncations regulator in the U.S. use in any context.) Would this be better or worse than what the market actually produced?

This graph shows the answer. If wireless had been subject to incentive regulation, even a 7 percent productivity offset would have reduced wireless revenue per minute by only 36 percent since 1997 and by 19 percent since 2002. In other words, the lightly regulated wireless market produced price reductions nearly 2.5 times as large as those that could have been expected under severe, highly efficient, perfectly operating regulation. And these results measure only the price effects, not the explosion of innovation that accompanied the price reductions.

Would the results have been even better if more spectrum were available for wireless services? Probably. But beyond that step, it’s doubtful that regulators could have done much else to improve on the 90 percent price reduction we’ve seen in the past decade.

4 comments

Google Voice & the Slippery Slope of Net Neutrality Regulation

by Adam Thierer on September 26, 2009 · 12 comments

Whatever you think about this messy dispute between AT&T and Google about how to classify web-based telephony apps for regulatory purposes — in this case, Google Voice — the key issue not to lose site of here is that we are inching ever closer to FCC regulation of web-based apps! Again, this is the point we have stressed here again and again and again and again when opposing Net neutrality mandates: If you open the door to regulation of one layer of the Net, you open up the door to the eventual regulation of all layers of the Net.

You might not buy that story initially but if you doubt it then I invite you to read just about any history of American broadcast media regulation over the course of the past seven decades. (You might want to start with Krattenmaker & Powe’s Regulating Broadcast Programming or Jonathan Emord’s Freedom, Technology, and the First Amendment). In such histories you will find a common theme: Once regulation of media and communications platforms gets underway, the natural progression of things is uni-directional — Up! That is, when new questions arise about how to “deal with” a new service, network, platform, or technology, the general tendency is the “regulate up” instead of “deregulating down.” When regulators are given a greater say about the contours of markets as technologies evolve and/or converge, we shouldn’t be surprised that their first instinct is to “bring them into the fold.”

And, sadly, that is exactly what is likely to occur eventually with Google Voice. The only really interesting question is what else regulators start mucking with in the search and applications layer once they get their hands on it. And if you still insist that I am being overly paranoid about “regulatory creep” and the prospect of the FCC gradually transforming into the Federal Information Commission, then consider what the agency had to say about cloud computing in paragraph 60 (pg. 21) of the FCC’s recent Wireless Innovation and Investment Notice of Inquiry, which was launched on August 27th: Continue reading →

12 comments

Escaping cell phone early termination fees

by Jerry Ellig on September 11, 2009 · 3 comments

Did you know you can escape the early termination fee in your wireless contract simply by getting someone else to take over the contract? I discovered this little gem recently while reading the Federal Communications Commission’s 2008 report on competition in the wireless industry , released earlier this year (mentioned in paragraph 186, if you’re curious).

Cell phone companies charge early termination fees of up to $200. They charge these fees because they usually sell phones at subsidized prices and then get reimbursed over the life of the contract via the monthly fee. If someone else takes over my contract, the company still gets its money, so they’re OK with the practice of transferring the contract to someone else.

Consumer writers such as David Wood and Patrick at cashmoneylife.com explain how to transfer your contract to someone else. Web sites match up people who want to get out of their contracts with people who want to take over these contracts. Some web sites offer to put parties in touch with each other for free. Others charge $20 — far below the typical early termination fee.

Score another victory for wily entrepreneurs who invented a win-win solution that benefits consumers and wireless phone companies as well. The Federal Communications Commission report cites 2006 and 2007 Wall Street Journal articles on this, so it’s not exactly a secret. (I was unaware of it until now only because my wife and I use 5 year old cell phones, so we’ve been on a month-to-month wireless contract for years and have never had to look for a way around the early termination fee.)

But for the past several years, federal legislators have been pushing wireless companies to prorate their early termination fees, supposedly because consumers have no choice but to pay the fee if they want to get out of a contract before it concludes. In October 2007, I testified before the Senate Committee on Commerce, Science, and Transportion on a piece of legislation called the “Cell Phone Consumer Empowerment Act.” The bill included a requirement that wireless companies prorate their early termination fees. Apparently to head off the legislation or FCC regulation, the day before the hearing, AT&T announced it would follow Verizon’s lead and prorate its early termination fees; other major carriers followed suit. Sen. Amy Klobuchar (D-MN), sponsor of the legislation, took credit for the change, thanking AT&T for beginning the fee prorationing on her birthday.

When wireless companies prorate fees, they usually reduce them by $5 per month. Trading my contract, on the other hand, lets me escape the fee altogether. So who got me a better deal — the federal government, or a pack of entrepreneurs I’ve never met?

3 comments

“Parental Controls & Online Child Protection” PFF special report (Version 4.0 Release)

by Adam Thierer on July 27, 2009 · 18 comments

The latest edition (Version 4.0) of my PFF special report on “Parental Controls and Online Child Protection: A Survey of Tools & Methods” is now up. For those not familiar with the report, it explores the market for parental control tools, rating schemes, education and media literacy efforts, and various other tools, methods, and initiatives aimed at promoting online child safety. After evaluating that state of this market, I conclude: “There has never been a time in our nation’s history when parents have had more tools and methods at their disposal to help them decide what constitutes acceptable media content in their homes and in the lives of their children.” Moreover, I believe that the parental controls and content management tools cataloged in the report represent a better, less restrictive alternative to government regulation.

Version 4.0 of the report is now over 250 pages long (up from 200 pages in Version 3.0) and it contains almost 70 exhibits (up from 50), 725 references (up from roughly 500), and numerous updates in all five sections of the book. Major updates have been made to the Internet, social networking, and mobile media sections, reflecting the growing importance of those sectors and issues. Other new sections or appendices have also been added to the report, including:

a new section examining how many households really need parental control tools;
a new appendix on the downsides of mandatory parental controls and restrictive default settings;
a new section on the dangers of “deputizing the online middleman” solution as an approach to solving child safety concerns;
a new appendix reviewing the findings of 5 past online safety task forces;
… and much more.

I issue major updates once a year and 1 or 2 minor tweaks during the course of the year to reflect the evolution of the parental control and online child safety marketplace and debate. The report is available free-of-charge on the PFF website, and the previous editions of the report are housed there too in case you want to see how it has evolved over the past couple of years. For those interested in taking a quick look at the report, I have embedded it down below the fold as a Scribd file. Finally, as is always the case, I encourage readers to send me updates and suggestions for how to improve the report and I will incorporate them into future versions. Continue reading →

18 comments

← Previous Entries

Next Entries →