But Why Time Warner Cable’s Bandwidth Cap May Be A Good Thing. See How Complicated This Is?

So no sooner do I cast a very suspicious eye over AT&T Wireless’ new scheme to allow ap developers to pay the overage charges for users who exceed their 2 GB monthly cap when I see that Time Warner Cable (TWC) is now offering an “Internet Essentials” plan in some test markets in Texas. Customers who opt into the new 5GB/month metered plan will receive a discount. TWC also includes a meter so customers can monitor their use. Finally, customers in the metered plan can easily pay more to get more access.

While this is just a first reaction based on the TWC description, I have to say this is the kind of “metered usage” program I really like. In fact, this looks like an excellent product offering (albeit not for an ‘power user’ like myself.). I salute TWC for listening to its customers and offering something different and innovative.

So what’s so good about this metered program but I remain suspicious of other “usage based billing plans? I answer below . . .

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AT&T Poised To Fulfill Ed Whitacre’s Vision? Charging Aps For Customers and The Future of Wireless.

It has been just over 6 years since Ed Whitacre, then CEO of AT&T, kicked off the Network Neutrality movement by famously declaring that rival services would not “use my pipes for free,” neatly side stepping the fact that customers were actually paying to “use [his] pipes” already. Because why just collect money from one side of a platform when you can collect the same money again from the other side? Well, it appears that AT&T may finally be on the verge of realizing Whitacre’s vision — at least for the wireless world. While details remain sparse, the Wall St. Journal broke a story yesterday that AT&T may “allow” application providers to pay the overage charges for customers who exceed AT&T’s arbitrary “bandwidth cap.” As my colleague John Bergmeyer pointed out over at Public Knowledge there is not much functional difference between simply charging both sides of the platform directly and  giving you the first 2 GB/month and then charging you for access.

I first wrote about the problem of “Whitacre Tiering” (having a “slow lane” for the “public internet” and a “fast lane/Quality of Service (QoS)” for favored content) in the wireline context almost 6 years ago today, back when AT&T (and other supporters of such schemes) used “the exaflood” as the reason why we absolutely positively must charge service providers to reach broadband subscribers. Remember the “exaflood,” the prediction that our broadband systems would crash under the ever-rising flood of data as users, unconstrained by metered pricing, outstripped the capacity of broadband systems? Except, of course, it didn’t happen. Cable operators developed DOCSIS 3.0, DSL providers figured out how to do better, and those stuck with ruinous backhaul charges figured out other ways to manage their networks (generally in cooperation with users).

Moving to the wireless universe, we find ourselves with similar arguments that we faced six years ago — including the wireless version of the “exaflood.” Below, I consider whether the arguments for wireless make any better sense than they did when Whitacre proposed it for wireline back in October 2005.

More below . . . .

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Why Genachowski’s Cybersecurity Initiative Is So Radical (In A Good Way)

When people think of “cybersecurity,” they usually think about the big stuff like Iranian hackers bringing down the power grid or master criminals hacking Bank of America. We associate it with the Department of Homeland Security (DHS) and institutions generally clustered around the military. When its gets down to the individual consumer level, we usually think of it as something entirely different, like “identity theft.” To the extent we think of any federal agency involved with protecting consumers from such “cyberfraud,” we usually think of the Federal Trade Commission (FTC) going after businesses for failing to disclose that the free game you just downloaded to your smart phone will also track your location so that the folks at Target can text you when you get within 500 yards.

This has two unfortunate results. The first is that the “cybersecurity establishment” generally does not trouble itself about things like privacy or ease of use or general consumer habits. If anything, they think of users as part of the problem. Cybersecurity in this regard works like airport security. Just accept the loss of privacy and overall inconvenience as the price of security – even if it makes you much less likely to fly. After all, the mandate of the cybersecurity experts is security and protection, not promoting broadband.

The second unfortunate result is to treat consumers either as helpless victims or part of the problem. But in either case, no one thinks they have anything useful to contribute on the subject.

Which is what makes the Federal Communications Commission’s (FCC) new cybersecurity initiative so important, and Chairman Julius Genachowski’s speech last Wednesday such a radical and welcome addition to the cybersecurity discussion.  The approach outlined by Genachowski, if followed, promises to address three key security weaknesses in the Internet in a way that actually works with the underlying principles that have made the Internet such a widespread success for everyone from the most unsophisticated end user to the most sophisticated tech giant: voluntary consensus, openness, and ease of use. By leveraging the strengths of the network to help overcome the vulnerabilities of the network, the FCC can do a lot to improve cybersecurity while simultaneously fulfilling its statutory mandates to protect consumers and promote broadband adoption and use.

More below . . .

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Spectrum Auction Theory v. Competition Theory

As I’ve previously reported, Congress is weighing spectrum legislation as part of the Payroll Tax Holiday and Everything Else extension. One critical change pushed by House Republicans (with the enthusiastic support of AT&T, surprise surprise . . .) involves whether the FCC should be able to keep companies that have a lot of spectrum (AT&T and Verizon) from bidding on some licenses in the future. This is called “eligibility restrictions” (i.e., are you eligible to bid in the auction or not). The FCC has authority to impose eligibility restrictions now, but generally doesn’t. As the spectrum gap between AT&T and Verizon and everyone else in the wireless world gets bigger, however, there is some talk of possibly bringing them back.

Needless to say, AT&T and its supporters think this is both unfair and bad policy. Others, such as the folks at T-Mobile (now no longer being absorbed into the Bell Borg) have responded to the fairness argument.  For myself, I am always deeply suspicious whenever incumbents start arguing about “fairness,” as it usually means “please consider this particular detail in a total vacuum without ever thinking about all the unfair advantages I have, and use my framing because I appeal to basic values and use sports metaphors like ‘level playing field.'”  But lets set that aside and do the cold-hearted  policy wonk think. As Paul Krugman occasionally likes to say “economics is not a morality tale.” And in any event, even if we decided this on “fairness,” we’d still want to know the right answers and outcomes, right?

Two usual policy arguments are advanced for no eligibility restrictions. The first is that “auctions put spectrum in the hands of those who will use it most efficiently.” The second is that auctions with open participation increase total revenue. Lets pretend for a moment the first statement is true. Based on this, I shall prove below that not only does open participation decrease revenue, but it creates a serious conflict with competition policy. If we maximize auction efficiency, it is inevitable that the largest players will win the majority of the licenses and that this problem will grow worse over time.

So meet below the line for a video blog explaining this and some serious policy trade off discussions . . . .

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The Keystone XL Pipeline — A project IG-Farben would be proud of

You’ve heard of the Keystone tar-sands pipeline by now. You may not have heard that the Reactionary Right in the U.S. Senate is attempting to revive it yet again, after their last gambit failed.

We must not let this happen.

The Keystone XL Pipeline is planetary arson and intergenerational crime on an unprecedented scale.(PDF)

The arguments in its favor are all specious. At best, they are ignorant. At worst, they are dishonest and immoral.

Let me just address one of these arguments: jobs. Proponents of the pipeline say it will create jobs for Americans. And surely it will. Construction jobs that will disappear once the pipeline has been built. The permanent jobs created by this project will be in Canada. More importantly, since the pipeline itself is immoral, all jobs associated it will be morally tainted. The Holocaust created jobs too, remember. There were good jobs for chemical engineers and plant managers at IG Farben, where Zyklon-B gas was manufactured for shipment to Auschwitz and other well-engineered murder factories and crematoria.

If you find this rhetoric over-the-top, I respectfully suggest that you read up on the climate-change impact of this one project and ponder its implications. And then consider the risks of permanent damage to the Ogallala aquifer.

Please sign this petition now, and then pick up the phone and call your Senators. It won’t take long, and stopping Keystone is at least as important as stopping SOPA, PIPA and ACTA.


“A false sense of precision”

“Whenever you hear the term ‘Darwinian’ from anyone other than historians of science, assume the crash position; it’s going to get real ugly.”

The quote is from a blogger known as Mike the Mad Biologist. The title of the post is When Economists Misunderstand Biology, an entry he wrote in response to economist Russ Roberts’ piece called What is economics good for?. In Roberts’ opening paragraph, he refers to his previous argument that macroeconomics is “deeply flawed and not a science”. He goes on to describe that economist Friedrich Hayek (the original anti-Keynesian) felt that to label economics a science gave “a false sense of precision and understanding.”
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RIAA — Take Us Back To The Days of Illegal Price Fixing.

One final point about Recording Industry Association of America (RIAA) CEO Cary Sherman’s NYT Op Ed on “how the Internets did us wrong.” Mr. Sherman notes that:

They [Congress] knew that music sales in the United States are less than half of what they were in 1999, when the file-sharing site Napster emerged, and that direct employment in the industry had fallen by more than half since then, to less than 10,000.

There are two caveats here worth noting. The first is that when Mr. Sherman talks about sales and the “music industry” generally he means his organization’s members — specifically the four (soon to be three) “major labels” and all of their various sub-labels and subsidiaries.

This is important because in 1999, according to the Federal Trade Commission (FTC), the major labels were engaged in an illegal price fixing scheme. The major labels agreed to discontinue their price-fixing practices as part of settlement decree in May 2000. Not surprisingly, once the major labels stopped violating antitrust law, their artificially inflated profits declined and independent competitors saw a significant rise in profits.

Needless to say, as part of the general magical thinking problem of the industry, Mr. Sherman and his fellows don’t believe the loss of their stranglehold on industry distribution and the rise of competitors (online and offline) has anything to do with their fading fortune. No, it is all that evil Napster and its wicked legacy of Internet piracy. But any legislators and policymakers who expect to be taken seriously ought to seriously consider using a benchmark other than the period from 1995-2000. It would be embarrassing for those not explicitly in the pay of the music industry to believe that it is the responsibility of government to return the industry to glory days of price fixing and monopoly profits.

Stay tuned . . . .

Mr. Sherman’s Magical Thinking

I am always impressed with the utter unwillingness of the Entertainment industry to acknowledge the world as it actually is, rather than the world as they want it to be. Perhaps it is a side effect of being in the business of ‘selling dreams.’ In any event, I could not help but marvel at Carey Sherman’s recent New York Times Op Ed “What Wikipedia Won’t Tell You.” Even for the Entertainment Industry, it is astounding. It actually crosses the boundary from an industry-centric bias to outright magical thinking.

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AT&T, Anger Management and Spectrum Legislation

Based on recent statements, it’s hard to tell whose angrier at the Federal Communications Commission (FCC) and its Chair, Julius Genachowski: AT&T’s Upper Management or the House Commerce Committee Republicans. Mere mention of Genachowski’s name converts House Commerce Committee Republicans, such as Telecom Subcommittee Chair Greg Walden (R-OR), from urbane sophisticated legislators into sputtering mad parodies of Elmer Fudd.  “Oooh that wascally Chaiwman! Always wegulating the fwee market! I’ll fix his wagon!” Meanwhile, AT&T CEO Randal Stephenson devoted the main part of his recent earnings call to repeating variations on “Juliuth, you’re desthpicable.”

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