Life In The Sausage Factory

The mechanics of how Washington works

My Insanely Long Field Guide To Cisco’s War On The TV White Spaces

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Will Cisco’s war against the TV white spaces tank incentive auctions? No doubt this question comes as a surprise to the vast majority of people unaware Cisco was running a war against TV white spaces (TVWS). True, Cisco has mostly tried to stay behind the scenes. But as we get closer to the Super Committee deadline, which include negotiations for incentive auction rules that would let TVWS survive, Cisco has become increasingly willing to go public with its anti-TVWS lobbying efforts.

This blog post on the Cisco blog, followed by this letter from the High Tech Spectrum Coalition (HTSC), finally say publicly what Cisco and its allies have been saying privately since debate over spectrum legislation began last January: “Death to the TV White Spaces.” Instead, argues Cisco, open up a new block of 5 GHz spectrum to “replace” the white spaces. But with spectrum legislation in trouble – as evidenced by CTIA’s non-stop radio advertising here in D.C. and it’s recent ‘we love unlicensed, can’t we all get along?’ letter to the Super Committee – Cisco’s continued opposition to white spaces threatens to tank any hope of getting incentive auctions passed either in the Super Committee or elsewhere.

Incentive auctions, while popular as a revenue generator, were always a tough sell because of broadcaster passive/aggressive opposition. Adding D Block reallocation made it even more difficult. Cisco’s war on the TVWS threatens to be the final straw that makes this lift just too heavy. It splits a tech community that would otherwise wholly support incentive auctions, while simultaneously pissing off key members of Congress who helped get TVWS done in the first place.

So the time has come for Cisco, CTIA, and others who really want incentive auctions, to ask themselves whether it’s worth it to risk incentive auctions just so that Cisco can keep Microsoft, Google/Motorola, Dell, and others from bringing a competing product to market. The Hutchison/Rockefeller Bill, S.911, was a compromise that kept spectrum for TVWS, gave Cisco the 5 GHz block it wants, and made sure that a minimum threshold of 84 MHz would be auctioned before allocating any recovered spectrum to replace white spaces lost by auction or repacking. While not great from my perspective as a white spaces supporter (and I’d still like to see it tweaked some), it was at least a livable compromise. Cisco’s anti-TVWS campaign already backfired once, with the Republican discussion draft to require auction for all unlicensed spectrum. Will Cisco and CTIA fail to learn just how easy it would be for them to blow this for everyone? Or will they settle for the compromise that got a bipartisan bill out of the Commerce Committee?

Why Cisco has been gunning for the TVWS, the quiet little war of the last ten months, and how to get out of this quagmire before it’s too late, below. . . .

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Can People Please Stop Pretending That DoJ is Going To Settle in AT&T/T-Mo?

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It’s been a rough day for those who continue to hold the belief that DoJ and is really planning to settle with AT&T, or that AT&T’s mighty lobbying machine can bring the Antitrust Division to heel. First, White House Chief of Staff Bill Daley, appears to be losing influence. That’s important because cynics and true believers in the unbeatable awesomeness of AT&T’s lobbying have often pointed to Daley’s ties with the business community (and AT&T specifically) and cast him in the role of white knight for AT&T.  With Daley apparently in fade out mode, that seems rather unlikely.

But more importantly, at an unrelated hearing, Senator Herb Kohl (D-WI), Chair of the Judiciary Committee, asked Holder whether DoJ was “in it for the long haul.” Holder was about as aggressive as he could possibly be without challenging AT&T CEO Randal Stephenson to ‘meet him outside in the parking lot after the hearing and settle this one-on-one,’ and committing to “do to AT&T and Deutsche Telekom what Joe Frazier did to Muhammad Ali in Madison Square Garden – win a unanimous decision!” According to Reuters, Holder told Kohl that “people in the antitrust division are committed to seeing this through. There is a trial team in place and they are ready and eager to go to court.”

No doubt DT will continue to tell European analysts that Eric Holder is “such a flirt” and this is how we negotiate settlements here in the United States.  I also expect that a hardcore contingent will just never believe that AT&T can’t get what it wants in DC by spreading enough PAC money around and rounding up a few more endorsements. But anyone looking at this ought to realize that AT&T is wasting its money on all those commercials promoting the benefits of the merger to try to force a settlement.

AT&T can still prevail in court (although as I noted here and here, events of last week do not inspire much confidence on that front). But anyone thinking AT&T can avoid a trial really needs to wake up and smell the coffee. At this point, either AT&T and DT figure out how to unwind the deal, or bet the long odds that they can prevail. If I were an AT&T or DT stockholder I would definitely prefer Option 1. But as long as AT&T and DT management can spend money that’s not theirs, they will continue to hold out for a miracle.

Stay tuned . . .

 

The Sprint/C. Spire Skirmish: AT&T Loses Ground While DoJ Gets A Roadmap

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Any tactician knows that battles can be won or lost by defining the battlefield. Skirmishes like the fight over whether Sprint and C. Spire (formerly Cell South) can go ahead with their private lawsuits against AT&T’s acquisition of T-Mobile help define the terrain for the bigger fights to come (order here). By ruling on what constitutes a recognizable injury under the antitrust rules and making preliminary determinations about the nature of the market, the Order sets the boundaries of what arguments DoJ can make and what it will need to do to prove its case. Where AT&T manages to have certain market definitions locked in and certain potential injuries excluded as not cognizable under antitrust in these early rounds, it gains an advantage. By contrast, where the court rejects AT&T’s efforts to limit the scope of the review by adopting different market definitions or recognizing certain injuries as addressed by the antitrust law, DoJ gains an advantage.

Both Sprint/C. Spire and AT&T claimed victory after Judge Huvelle issued her decision Wed. evening – Sprint/C. Spire for staying in on some claims when AT&T had said they would get thrown out, AT&T on the basis that “most” of Sprint and C. Spire’s claims got dismissed and what remains doesn’t matter. But everyone knows this is just a skirmish in the big battle between AT&T and DoJ. So, setting aside who won or lost this particular round, how does this position AT&T for the real fight?

More below . . . .

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Obama finally Nominates Rosenworcel and Pai: Can They Get Confirmed Before The FCC Drops to 3?

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The White House finally confirmed what everyone in the D.C. telecom world has expected for months. Obama officially nominated Jessica Rosenworcel to replace outgoing FCC Democratic Commissioner Michael Copps, whose term expires when Congress adjourns, and Ajit Pai to replace Republican Commissioner Meredith Baker, who stepped down last March. Both have considerable experience at the FCC, giving them understanding of how the agency functions in a very nuts and bolts kind of way. Both have broad experience with a range of communications issues, and no particular ties for/against any particular industry sector or company.

In short, both are “workhorse wonks,” with a proven track record of digging in on the complex issues that make this sector such a joy for those of us who like wonkiness and tough questions and such an eye-glazing, mind-numbing experience for those who don’t. While no one can say with any certainty what happens in this crazy and poisonous partisan environment, which every day comes more closely to resemble the delightful fable of the turtle and the scorpion crossing the river, their nominations should raise little controversy. Hopefully, the Senate will confirm both before the end of the year, when the FCC will otherwise drop down to 3 Commissioners.

For those unfamiliar with how this works, or with the candidates themselves, I provide a primer below.

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A Personal Reflection on the FCC’s USF/ICC Reform Order

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A Personal Reflection On The FCC’s USF/ICC Reform

Yesterday, the FCC approved an Order addressing about 10 years of accumulated undone work in the telecom world and at least starting work on the more serious issues – such as interconnection for IP-based services – that will govern the next ten years. I have, no surprise, plenty of personal opinion about the substance and I expect that when the Order is published I will have my share of things to say and that some of them will be quite scathing, skeptical and snarky. Nevertheless, it is important to pause first and reflect on why yesterday’s vote represents a real accomplishment for Genachowski and the Commission. Similarly, it is important to appreciate the context of the Order and the limitations on the agency imposed by law.

None of this negates the very real and substantive criticisms that I and others will have – particularly with regard to the self-inflicted wound over the FCC’s legal authority. I have no delusion that hard work and good will somehow transform poor policies into better ones. My appreciation for what the agency did right and its limitations under law do not blind me to the part that political influence plays, nor does it somehow make it more palatable to those who feel that the outcome will make jeopardize their livelihoods or that we missed significant opportunities to do better.

But it is just as poisonous to public policy when we focus only on its flaws and failures as when we excuse them. It is not simply a matter of basic fairness, or that decisionmakers are human beings who do better when praised for what deserves praise. I believe failure to recognize the achievements and limitations of the policy process makes one a less effective advocate and prevents one from seizing opportunities when they arise. This is neither bogus pragmatism that counsels surrender and diminished expectations, nor delusional Pollyannaism that insists we live in the best of all possible worlds. The world is messy and complicated, and policy reflects that.

So, all that said, the accomplishments and context of the Order below . . .

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Comcast Unhappy With Free Market Title I Nirvana. Demands “Access Charges Bailout” But No Reg Oversight.

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It says something about the messed up world of telecom today that the “Connect America Fund” the FCC will vote on tomorrow has become the “what the heck are we going to do about IP-based interconnection” proceeding. In particular, the rather high-profile spat between AT&T and Comcast (andother cable companies) over access charges illustrates exactly the kind of cosmic cluster#@$! we predicted would happen if the FCC failed to classify broadband as a Title II telecom service. AT&T is100% right on the key argument: Comcast has the access charge regime it fought for and deserves. Letting Comcast collect access charges as if it were a traditional telecom provider subject to Title II, while shielding it from any actual oversight or obligations as a Title I information service, is nothing more than an undeserved windfall to the company that tore up the social contract in the first place.  If they don’t like the outcome, then perhaps they should have thought about it before they declared Jihad on Title II.

More below . . . .

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A Pocket Guide To What Happens Now That Network Neutrality Rules Are Officially Published.

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Hey everyone, remember back at the end of last year when the Federal Communications Commission (FCC) adopted the better-than-nothing-but-still-painfully-disappointing Network Neutrality rules? Well, after a long and winding road, which included bouncing back and forth between the FCC and the Office of Management and Budget a few times and a premature challenge by Verizon, the rules were finally published in the Federal Register today. So without getting into the merits, here is what to expect procedurally.

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Quick Thoughts on Today’s Status Hearing in United States v. AT&T

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By all accounts, the main event on the status hearing was — as expected by lawyers — fairly boring. I am not sure why some folks think that splitting the difference between AT&T and the DoJ on timing was a win for AT&T (AT&T wanted January 16, DoJ wanted March 19, Judge picked Feb. 13).  It is, I suppose, consistent with those who thought picking the later date would be a sign the judge wanted a settlement. i.e., there are those who just can’t believe AT&T is going to win this and therefore everything is somehow an advantage to AT&T no matter how it turns out.

The more interesting note was the decision not to join Sprint and Cell South’s complaints to the DoJ case and setting a date for AT&T to file a motion to dismiss. That was a modest victory for AT&T, but not terribly indicative of where the DoJ case is going. It is rare for private litigants to file to enjoin a merger, and antitrust commentators have noted the trend in the last 10 years to make private antitrust cases more difficult to bring as a matter of standing. I suspect if Sprint and Cell South survive the motion to dismiss on standing grounds the cases get joined, as they are related cases. But it also would not surprise me if Sprint and Cell South get dismissed on standing. As will no doubt be lost on everyone if that happens, it won’t really tell us one way or another about the merits.

All in all, pretty much what one expects in such a case — although I feel bad for the DoJ lawyers who just lost their Christmas and New Year holidays. Be interesting from a legal perspective to see how the motion to dismiss goes. Meanwhile, we await the FCC.

Stay tuned . . .

Why AT&T Can’t Just Cut A Deal With Leap or MetroPCS and Call It A Day

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The latest AT&T ploy to convince the gullible that it’s planned acquisition of T-Mobile remains TOTALLY AND COMPLETELY ON TRACK and that everyone should just ignore the minor little tiff it has with the Department of Justice (and 7 State Attorneys General) involves pretending to pick potential rivals as recipients of any divestiture agreement. I say “pretending” because AT&T has either conveniently forgotten that such transfers need FCC approval or has reassured everyone involved that the FCC will rubberrstamp any settment AT&T negotiates. My personal theory is that AT&T’s “outreach” to supposed potential buyers is solely for theatrical effect so it can claim to be in “negotiations” with “interested parties” at the upcoming status conference.

In any case, AT&T’s claims to be negotiating such settlements should be greeted with a healthy dose of skepticism, and not merely because the sources for this story are “two people with direct knowledge of the situation” who refuse to be identified. The sheer regulatory mechanics of such a settlement make it highly improbable, if not outright impossible for AT&T to negotiate and get approval for such a settlement before T-Mobile can claim its break up fee.

I explain in greater detail below . . . .

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DoJ Says “No” To Ma Cell; Here’s What Happens Next (and Why It’s All Over But The AT&T Screaming)

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In what is undoubtedly the best Labor Day present the Department of Justice ever gave America, DOJ has filed to block the AT&T/T-Mobile Merger in court. One should not, however, expect AT&T to give up easily. AT&T can, and almost certainly will, decide to fight rather than simply abandon the deal. If nothing else, it has $6 billion in break up fees to pay if the merger does not go through. On the plus side, the odds definitely favor the DoJ, which is why so many companies simply abandon the merger once DoJ has filed.

Meanwhile, the FCC, an independent agency, still needs to make its decision on what it will do. Unlike DoJ, where the head of the Anti-Trust division makes the call (subject to the usual political checks, of course), the FCC must have a vote on an Order, which must get a majority of the Commission (3 votes). Since Congress repealed the FCC’s ability to immunize phone mergers from antitrust back in 1996, the FCC cannot approve if DoJ wins in court. OTOH, the FCC is under no time pressure, and can wait to see how the court case turns out. At the same time, however, the court may decide to stay consideration until the FCC decides, since the merger cannot proceed without FCC approval.

All of this has huge implications for AT&T and its current bluster that it will fight DoJ for the right to eat T-Mo. Normally, AT&T could hope to get this wrapped up in a few months, and continue to try to use its political muscle to force a settlement. But the interaction between DoJ’s challenge and the FCC lawsuit make it incredibly difficult for AT&T to get this done before Deutsche Telekom decides it wants it $6 billion cash ‘n spectrum break up fee. As I explain below, AT&T must simultaneously persuade the FCC not to act while convincing the court to move at super speed, despite the fact that the usual way things work is for courts to wait for agencies to finish review (because the agency may remove the need for the court to act).

I explain AT&T’s legal problems below . . .

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