Author: Harold

DOJ May Investigate Telco Market Power: The Dawn of a New Paradigm For Antitrust?

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Although the Department of Justice Antitrust Division (DOJ) has not confirmed it, the Wall St. Journal reported that DOJ is internally considering whether or not companies “such as AT&T and Verizon” have abused their market power. Most traditional antitrust lawyers I’ve seen quoted don’t think it likely the telcos have market power — especially given the hostility that courts have recently shown to antitrust. Indeed, in a world where even potential competition is supposed to be part of the market analysis, how can a modest 60% of the wireless market shared by the two companies, with no evidence of price fixing or coordinated behavior, support any sort of antitrust action?

Welcome to the more grown up and sophisticated view of market power in the more complex real world. After more than 25 years, U.S. antitrust authorities may be ready to reexamine the underlying limitations of antitrust in light of a new generation of economic scholarship on the subject of market power and the exercise thereof.

So are we at the dawn of a new age of antitrust, one that recognizes such modern economic phenomena as network effects, the power to constrain choice through non-disclosure agreements that create information asymetry, and the power of vertical integration to eliminate traditional geographic and product market distinctions? Will Christine Varney and John Lebowitz do to the the U of C worshipers of the gods of the marketplace as Copernicus and Galileo did to Ptolmey and his fanatics who preferred to reject the evidence of their eyes in favor of ever more complex theories of deferents and epicycles? Or will the judicial activists of the D.C. Circuit and the political might of the incumbents once again force regulatory agencies to abjure, curse and detest such heresies?

E pur si muove below . . . .

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It's time for the NOFA Awards!

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No, not the actual giving out of money, silly. My snarky commentary on yesterday’s unveiling of Broadband.gov.

I’ll preface by saying I absolutely still love and respect the folks I know on the inside who struggled with this stuff for months. I know how hard it is to actually implement this stuff, especially with this kind of ridiculous schedule and no one appreciating what it takes to coordinate among this many agencies and how utterly devestated the federal workforce was following 8 years of the Bushies refusing to invest in information technology, outsourcing everything to contractor cronies, and elevating political loyalty over actual talent.

Nor do I have much patience with those who are all “they sold us out blah blah blah . . .” Engineers don’t whine about how unfair it is that trees bloom in the spring and screw up line of sight with their leaves. You deal with it. Same in politics. You want good policy? Then you roll up your sleeves and get ready to fight for it rather than whining like little babies about how Obama the Deliverer failed to smite our enemies for us or persuade incumbents to put the public interest over their corporate interests and magically made all the problems of getting human beings to cooperate with each other go away. Because unless you’re willing to make some actual phone calls to members of Congress like Dittoheads do when Rush gives them the word, then I don’t want to hear it.

And the fact that there are some real issues does not negate all the good this NOFA will do. Anyone who claims that getting a less than perfect result means we pissed this away and it’s just as bad as Bush and blah blah does not know what they are talking about. I’d rather have this than more hymn singing from the worshipers of the gods of the marketplace. The fact that this turns out to be incremental rather transformative, a stepping stone rather than the whole edifice, doesn’t make it crap.

And finally, I promise to do real deep policy analysis soon.

But my selfish indulgence in unfair snarkiness below . . . .

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An Appreciation For Commissioner Adelstein

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Like everyone else in the telecom world, I’m pleased and relieved the Senate finally confirmed Julius Genachowski and reconfirmed Robert McDowell. But I need to echo Commissioner Copps’ sentiments that seeing Commissioner Adelstein go makes this particular bit of good news hard to take.

Long time readers know I’ve been a huge fan of Adelstein. I should add that I have equally been a huge fan of his staff, particularly Rudy Brioche and Renee Crittendon, with whom I’ve done a lot of work over the years.

What I have always admired about Adelstein is that he has been a Populist in the best sense of the word, and in the finest tradition of rural America. i.e., someone who actually cares about people and takes the time to listen to them and fight for their issues. Over the years, Adelstein has always tried to make the time to come to events where he can hear directly from people — whether at industry trade shows or a modest gathering of community wireless activists. He has always tried to make sure that everyone has the opportunity for meaningful access to both new media and old. He has spoken passionately about the need to make sure that the benefits of broadband are accessible to everyone. He has been a friend to PEG and leased access as means for independent programmers to bring independent viewpoints to cable and because of his appreciation for the importance of local programming. Side by side with Commissioner Copps, he toured the country and rallied opposition against any relaxation of media ownership rules. He pushed harder than anyone for the Commission to take on the problem of Payolla, and repeatedly called for more ways to get independent musicians and local talent on the air.

I will miss Adelstein’s energy and friendly spirit at the Commission. On the positive side, he is certainly the right man to run the broadband program at RUS. Adelstein has always been at his most enthusiastic when looking to see how new technologies can improve people’s lives, particularly in rural America. I look forward to seeing what he can do with $2.5 Bn to revolutionize broadband access in rural communities. Hopefully, the Senate Agriculture Committee will move quickly to hold a hearing and speed him through the confirmation process.

Stay tuned . . . .

Fragmentation Games: Playstation Gets “Boxeed,” TV Anywhere Gets More Content.

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In the latest twist in the broadband fragmentation games driven the overlap of MVPDs and broadband access providers, users of PlayStation 3 can no longer access Hulu. As some may recall, Hulu tried a similar trick with Boxee.tv, resulting in a good old fashioned tech arms race wherein Boxee camouflaged itself as browser and Hulu responded by encrypting html.

Now Hulu has shut off the spigot to Playstation 3. Why? As I noted when Hulu pulled this on Boxee in the spring, the people who make money off the existing video subscription model (both the cable operators like Comcast and the content holders like NBC Universal) really dislike the thought of streaming media actually competing with them. As long as video stayed on the laptop and occasionally stopped to buffer, it didn’t really threaten the established business models. But make it possible to watch streaming media on your regular TV, with a quality practically equal to what you get on cable, and it becomes a very disruptive technology.

Playstation 3 and other game consoles are obvious candidates to disrupt the existing business model. They already plug into your television set, you are very familiar with the controls, and the manufacturers are always expanding the capabilities of the units to make them more “media centers” and less “game centers.” Like Boxee, they represent a real threat by making it possible for me to stream online content effortlessly on my TV and watch in exactly the same way I watch anything else.

Meanwhile, Time Warner and Comcast have found lots of other content networks eager to join the “Entitlement Program.” This initiative appears to be gathering critical mass very rapidly, which is not too surprising. While some of the bigger folks like Disney may hold out to see how they can maximize their return, the midsized players anxious about possible changes to the business model are likely to want to get in while the getting is good.

To conclude, what we have here is not anything obvious or dramatic. It is a few more ripples in the pond, indicating where the big fish swim. Any one of the “fragmentation games” incidents I’ve discussed, for example the ESPN360.com business which has been slowly ratcheting up to include more ISPs, is not necessarily significant on its own. Taken together, however, I see a pattern emerging that tells me where the fun and games will happen over the next few years. Heck, at this point, I’m not even sure what policy prescription I would offer. I just know that I’m seeing a bunch of ripples that might be nothing. Or it might be bunch of salmon and a great place to cast a line. Or it might be a school of piranha and I need to be very careful before wading in.

Stay tuned . . . .

The Last Day of (Full Power) Analog TV And Our Post Transition To Do List.

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Well, here it is at last. Finally, more than 13 years after the 1996 Act created a scheme to transfer us to digital television by giving all existing broadcasters $70 billion (at the time) in new spectrum rights, the great day of reckoning is here.

Give the FCC and NTIA, especially mid-season replacements Acting FCC Chairman Michael Copps and Acting NTIA Administrator Anna Gomez, massive applause for seeing this through to the end. You guys rock! As one of your 300 Million taxpayer bosses, I’m telling you to sleep in tomorrow. Oh yeah, it’s Saturday.

Once you’re back on Monday, however, and assuming the world as we know it did not end, we have a few items left on the clean up list: Wireless Microphones, LPTV, the UHF Discount for Ownership, and Public Interest Obligations.

This post is dedicated to the memory of Libby Beaty, Executive Director of NATOA. A tireless advocate for the importance of local government and its power to protect consumer interests. Today, Libby tragically lost her battle with lung cancer. She will be sorely missed.

More below . . . .

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My Weekly Five Minutes of Fame — I Explain the National Broadband Plan In Five Minutes.

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We are starting a new feature at Public Knowledge called “Five Minutes With Harold Feld,” wherein I will take insanely boring complicated wonkery and make it mildly less boring. This week, I explain the National Broadband Plan and the comments PK filed last night.

Stay tuned . . . .

D.C. Circuit Affirms Inside Wiring In Fairly Broad Opinion. Terrestrial Loophole Next? And What About Time Warner's TV Anywhere?

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While folks in the suburbs sometimes forget this, a lot of people live in what we call “multiple dwelling units” (MDUs) — which is a fancy way to say things like apartment buildings and condos. One of the problems for people trying to switch from one provider to another for cable (for example, from Comcast to RCN) is that a cable operator may already have an exclusive deal with the landlord to provide cable services to everyone in the building. Competitors asked the FCC to ban such practices. In 2003, under Michael Powell, the FCC refused to ban such exclusive deals because “regulation is always bad, mmmmkayyy.” In 2007, as part of Kevin Martin’s attack on cable market power evil vendetta against the helpless cable industry, the FCC reversed this determination and found that under Section 628(b) of the Communications Act (47 U.S.C. 548) it needed to prohibit cable operators from entering into or enforcing such exclusive deals because Verizon can’t sell FIOS w/out being able to offer triple play. Predictably, this was widely denounced by the cable companies and their cheerleaders as not merely unwarranted, but a violation of law and certain to be overturned on appeal.

Turns out, not so much. In fact, in a rather broadly worded opinion, the D.C. Circuit affirmed the 2007 Order. Indeed, the language affirming the decision opens the door to the FCC tackling other cable issues, such as the terrestrial loophole (which Verizon wasted no time in pointing out to the FCC). Mind you, it remains unclear at this point whether the new FCC will have any interest in cable market power or not.

Still, there are a number of important aspects about this case, especially its implications for the FCC to regulate Time Warner’s TV Anywhere strategy, aka “how cable operators plan to preserve their existing business model and fight off Netflix.” I discuss this in more detail below . . . .

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Big Low Power FM Win!

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Back in 2007, the FCC issued an Order to try to address some of the problems impacting the low-power FM (LPFM) service. You can find out more about how amazing LPFM is, and why Congress needs to pass legislation to remove the artificial restrictions on how many LPFM stations we can have, here on the Prometheus Radio website.

Briefly, LPFMs are very small, very local non-commercial stations that operate at 100-watts or less. The FCC authorized the service in 2000, relaxing the “third adjacent channel” (A radio station must be 3 jumps away from the next radio station) rule to permit several thousand LPFM’s to operate without interfering with full power station. The NAB persuaded Congress to reverse this determination with the ironically named Radio Broadcaster Preservation Act of 2000. That act prohibited the FCC from relaxing or waiving the 3rd adjacent channel spacing requirement.

A few years ago, it became clear that the several hundred LPFMs permitted under the act were in danger of being crowded out by full power stations. Because of what appeared to be an unrelated decision to streamline the process by which full power FM stations can change their market designation. As a result, an LPFM could suddenly find itself impermissibly close to a full power station and need to shut down. Or it might start experiencing interference and get drowned out. The Commission therefore issued an Order and Further Notice of Proposed Rulemaking which provided some relief by making it easier for LPFMs to relocate on the 2nd adjacent channel, thus avoiding Congress’ mandate that the FCC not reduce or waive the separation distance required on the 3rd adjacent channel. This is not nearly as silly as it sounds, as the process involves a fact-based determination on whether there is actually any interference to any full power as a result of the move. Given how interference works, it is very possible to fit a LPFM into space on the 2nd adjacent without causing interference. Spacing is based on averages to make processing applications easier. Actual engineering can determine how to place a low-power tower to avoid interference. Mind, this would be easier to do if Congress hadn’t absolutely prohibited any waiver of 3rd adjacent spacing. But they did. Happily, however, Congress did not prohibit any waiver of 2nd channel adjacent.

The NAB promptly appealed, arguing that the FCC had no authority to alter first,second or third adjacent as a result of the 2000 Act. This, in turn, stalled the conclusion of the Rulemaking, since why finish a rulemaking if you don’t even know whether or not you have authority?

Today, the D.C. Circuit affirmed the FCC’s decision. It rejected the NAB’s argument based on the plain language of the statute and found that the FCC had rationally justified its decision.

This is extremely good news for LPFM, and for those communities lucky enough to have them. As acting Chairman Copps noted in a statement issued today after the ruling, the FCC is now free to move quickly to finish the pending rulemaking. And, of course, Congress should move just as quickly to pass the Local Community Radio Act of 2009, so that hundreds of new communities can enjoy the diverse voices of low-power FM.

My former colleagues at MAP — especially Parul Desai who did the lion’s share of work on this issue — deserve a huge shout out for this win. I should also mention that it was not a Democratic FCC, but Kevin Martin who brought the 2007 Order to a vote — and then voted with the Democrats against both his fellow Republicans to get the needed 3 votes to clear the Commission.

Stay tuned . . . .

Oh, those witty JP Morgan Guys, Pissing on Little Timmy Geithner

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JP Morgan Exec mocks Treasury Sec for bailout money.

To which I cannot help but respond:

I am glad Mr. Dimon is so pleasant with us;
His words and his sneer, I thank him for:
When we are next met in Congress assembled,
We will, by God’s grace, pass such a bill as
Shall send his wits into the hazard.
And we understand him well,
How he comes now with memory of wilder days,
When he did reign as Prince untouchable
And those set to guard against his excesses
Catered to his whims and kept him safe against all
Accountability that had once been law.
What wonder when, having supped so freely and so long
at public feast, that he should task us so
for daring to restrain his monstrous appetites?

So tell the pleasant prince this mock of his
Hath turn’d his balls to gun-stones; and his soul
Shall stand sore charged for the wasteful vengeance
That shall fly with them. For I swear
His jest will savour but of shallow wit,
When his colleagues weep more than ever they did laugh at it.

(With apologies to Henry V)

I do hope the folks at Treasury who fought so hard to restrain the “radical” demands that public money have some conditions attached take note of how grateful their financial sector “clients” are for their services.

Stay tuned . . . .