Life In The Sausage Factory

The mechanics of how Washington works

First Step Reforming FCC’s Universal Service Fund? An Honest Evaluation of the Goals and Trade offs.

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The problem of reforming the Universal Service Fund (USF) without Congressional direction means working without clear guidance on what the FCC should, institutionally, hope to achieve. “Broadband!” Is the usual answer from reform proponents. “Basic broadband for everyone! And eliminate waste. And spur investment. And promote innovation. And create jobs. And education. And –“ Well, you get the idea.

Listening to the FCC Commissioners at the open meeting, and reading through the released materials, my sense is the FCC has decided that we ought to maximize the number of people who have access to a threshold level of broadband. That’s not necessarily a bad goal. At the same time, the general impact of the proposed reforms favor larger carriers providing minimal service over smaller, local providers that may provide significantly better service.  That may still end up being the best way to maximize “bang for the buck” and may ultimately benefit the largest number of Americans. But if we are going to make that choice, we ought to do it explicitly, and in a way that minimizes the harm to those who did a good job under the old rules. Even better, we ought to consider whether we will really get the broadband bang for the USF buck the FCC appears to expect by reverting to what is, in essence, a return to the universal service model we had under the AT&T monopoly and the Communications Act of 1934 rather than the more locally-oriented model adopted by Congress in the Telecommunications Act of 1996.

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Why Did The White House Support Reallocating D Block? It’s Smart Politics.

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The announcement that the White House that it would support reallocating the D Block – the 10 MHz of spectrum left over from big broadcast band auction of 2008 (the 700 MHz Auction) – to public safety use rather than auction it for commercial use defies conventional wisdom on two fronts. First, the National Broadband Plan called for an auction of D block to commercial providers as a means of providing critical spectrum for broadband, using the revenue to fund the construction of the public safety network, and giving public safety access to the rest of the 700 MHz band. Given that the Administration generally supported the FCC’s assessment that we have a looming “spectrum crisis” (although they took no position, until now, on D Block), why pull 10 MHz of prime spectrum ready for auction out of contention? Second, conventional wisdom holds that because of deficit concerns, lust for auction revenue will drive spectrum policy. But the White House not only endorses taking prime spectrum off the market, it wants to spend additionally billions on public safety infrastructure (under the FCC’s original plan, the auction of D Block would fund the build out of an interoperable national public safety network). So what happened?

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What’s A POTUS SOTU Shout Out On Wireless Worth?

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Last night, the wonkiest corner of telecom policy experienced its 15 picoseconds of fame when President Obama invoked spectrum policy in his State of the Union (SOTU) Address. In nerdness terms, this would be like James Franco and Anne Hathaway pausing before the Best Picture Oscar to announce this year’s Nebula Award for Best Dramatic Presentation.

Needless to say, I am uber-pleased to have the geekiest of Presidents acknowledge the wonkiest of my issues. But does it do any actual good? I explore this below . . . .

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What the DoJ Documents Tell Us About the Comcast/NBCU Merger

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In all the hoo ha about the Comcast/NBCU Merger, few folks troubled to read the Department of Justice Competitive Impact Statement, Complaint, andConsent Decree. That’s rather unfortunate, as these documents sets forth a straightforward case under the antitrust laws for program access conditions for online competitors and for network neutrality. Here’s the short version:  Comcast pre-merger makes almost 30 times more money from providing cable service than from programming revenues. Even adding all of NBCU’s revenue, Comcast will still make more than twice as much from selling cable service ($34 billion) as from programming ($16.9 billion). Anyone who can do basic arithmetic would therefore conclude that yes, Comcast’s incentive to protect its cable business from erosion by online distributors (or even from traditional rivals) outweighs the potential gain from increasing programming distribution. As an added bonus, for those ideologically committed to believing otherwise, turns out Comcast’s own documents agree with the simple arithmetic and not the fun theoretical models their experts submitted. Which is why (among other reasons) DoJ continued oversight is not merely something extra. It really matters.

Lets break this out some below …

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Three Potential Black Swans for Telecom 2011

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So with 2010 finished and 2011 now thoroughly under way, it’s time to play Prognosticate Me! Mind you, anyone can predict “spectrum will remain a focus” and “USF reform will loom large.” The fun lies in trying to pick the surprises. So I have selected 3 potential “black swans” for 2011. The term comes from Nassim Nicholas Taleb’s book about the high impact of low probability events.

I’ve selected three highly unlikely events that could have huge impact in 2011. First, the FCC could get serious about making online video accessible to virtual MVPDs (“MVPD”=multichannel video programming distributor, which is the fancy way to say any pay TV provider like cable or satellite) and new technologies. Normally betting on the FCC to play anything other than King Log while the incumbents play King Stork is a long-shot, unless the FCC actually has to act. Here, the need to renew the program access rules means the FCC will need to look at the state of the video market, and creates a forum for these issues.

Second, I’m betting that the FCC will continue to look at the underlying issues in the Comcast/L3 interconnection dispute long after the Comcast merger gets done, possibly rolling the issues raised here with the never ending proceeding on special access reform. Why would the FCC look into these issues when the FCC hates this sort of controversial stuff and has never wanted to look at, let alone regulate, internet backbone traffic? Because the there is (literally) too much riding on this. Comcast/L3 is much more a symptom of fundamental change in the economics of internet transport than about any two actors, and the pressure for the FCC to at least know what’s going on and figure out how it impacts the economics of Internet backbone transport — and therefore by extension the economics of all things Internet — is going to be very difficult for the agency to ignore.

Finally, I list my favorite potential black swan, LightSquared. Odds are against them for a variety of reasons, from possible financial problems to resistance from incumbent giants AT&T and Verizon. But the system, now that it has cleared a possible show-stopping satellite malfunction, has the potential to totally revolutionize the underlying economics of wireless backhaul and wireless services by providing really cheap purely wholesale LTE service. On the downside, it may also destructively interfere with GPS systems, which could be kind of a problem according to this Motorola filing with the FCC. Either way, it looks potentially pretty disruptive.

More below . . .

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After 10 Years of Struggle, Low-Power FM Will Give Thousands of New Communities A Chance To Get Their Voices On The Air.

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Ten years ago, the FCC did a startling thing. It recognized that much of the rise in “pirate radio” came from frustrated demand for small, local licenses of the sort the FCC had simply stopped distributing many years before. So the FCC offered a deal to the “pirate” community: stop transmitting illegally and the FCC would create a low-power radio service. Despite fierce resistance by commercial broadcasters at the National Association of Broadcasters (NAB) (and, to their eternal shame, National Public Radio, which can be just as much of a bad incumbent as its commercial sisters), the FCC adopted rules to allow 100-watt radio stations to operate on a non-commercial basis. These stations would operate on a “secondary” basis to full power stations, required to protect these stations from any interference. To create space for these new community Low Power FM (LPFM) stations, the FCC would relax the “third adjacent” spacing requirement, a mechanical rule for spacing radio station transmitters far enough apart adopted in the early days radio to ensure no interference. The FCC studied the matter and concluded that relaxing this rule would not cause harmful interference to existing full-power stations.

Needless to say, the full-power broadcasters did not give up so easily. But neither did the supporters of LPFM. It’s a story worth celebrating not merely for the result, but for what it teaches us about staying in the struggle for the long-haul.

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Why Network Neutrality Will Not Die (But It Doesn’t Mean We’ll Win, Either).

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Was it only last month when network neutrality was supposedly dead, deceased, passed on, expired, gone to meet its maker, run down the curtain, and joined the bleedin’ choir invisible? Yet here we are, with a network neutrality rule teed up for a vote at the FCC’s December 21 meeting. Even more surprising, it appears that a number of long-time opponents may actually be willing to come to the table on a compromise rule, with AT&T’s Jim Cicconi practically living in the Chairman’s office for the past few weeks presumably negotiating over the details of a proposal. Mind you, if the proposed rule is too much of a compromise, network neutrality supporters will oppose it. And, even if major carriers support it, Republicans at the FCC and in Congress are dead set against it.  But for the moment, network neutrality appears to have once again gone from “totally dead” to “certain to become law.”

Truth is, network neutrality has been declared dead so many times it ought to have its own movie or television franchise. I picture Jim Cicconi as Dr. Evil staring at a garishly dressed Josh Silver as Austin Powers and saying: “But you died in that landslide election, when my Tea Party sharks with laser-beams grafted to their skulls had you trapped in their lair!” Josh flips back his hair and replies: “Network neutrality will never die, baby. It’s too shaggidelic!” Or perhaps I, in my secret identity as Perry the Platypus, will once again foil Scott Cleland as Dr. Heinz Doofenshmirtz as he attempts to destroy the open internet with his Close-Internet-Inator (besides, I think FCC Chair Julius Genachowski and Chief of Staff Eddie Lazarus would look cute dressed as Major Monogram and Carl). Or perhaps a looming Voldemort-eque composite of the cable industry will turn its high power lobbying wand on a Network Neutrality Harry Potter (played by Sascha Meinrath, since Ben Scott is no longer available) and asking “Why do you live?” and a defiant Meinrath answers: “Because I have something to live for!”

But while network neutrality appears almost comically unkillable, that does not mean those pushing for strong network neutrality rules  will actually prevail.  As The Mikado once observed: “it’s an unjust world, and virtue is triumphant only in theatrical performances.” Hence the concern over the actual substance of the rule and the endless last minute wrangling.

Why Network Neutrality keeps coming back from the dead but why supporters still need to pull out the stops to get a strong rule below . . . .

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Did You Know This Election Turned On Network Neutrality? Why Washington Has Its Head Up Its Rear End.

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Apparently, the election results last Tuesday were a “national referendum” on network neutrality. I’m not sure how I missed this, but the constant repetition of this idea in the blogosphere and on Twitter has now utterly convinced me and everyone else in the Washington Echo Chamber that is totally true. In fact, I am assured that the only reason I refuse to acknowledge this fundamental truth is that I am in deep denial.
For those readers outside Policyland, you may wonder how government officials entrusted with making decisions that actually impact your lives could come to believe something so plainly ridiculous. In all of the various “lessons learned” pieces out of the election, no one outside the Telecom neighborhood of Policyland has even suggested this is the case. But, through the amazing combination of narcissism that puts us at the center of everybody else’s universe, the utter certainty with which people around here make ridiculous statements, and the sheeplike willingness of people on both sides of the debate to retweet this at each other, I now have people asking me about this and whether I think it’s true.

This is why Washington is broken and out of touch with America. There is a difference between stuff that is incredibly important because it has real impact on people’s lives, which applies to a lot of the policy work here in DC, and stuff that people care about, which is not a heck of a lot that goes on in DC. I wish it weren’t so. I would love it if we lived in a nation of policy wonks where the difficult details of national policy are the stuff of kitchen table conversations and earnest discussions at social gatherings.
However, I can assure you from personal experience that trying to engage people in detailed conversations about telecom policy is about as popular with normal people as the intimate details of your last root canal.

Still, as a case study in how conventional wisdom evolves in Policyland, this may amuse some of you non-DC folks. More below . . .

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The Fox/Cablevision Retrans Mess And FCC Learned Helplessness — The Insanely Long Version

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[This is a much longer, wonkier version of a post I did on the Public Knowledge blog, for those who can’t get enough explanation of Section 325.]

I feel a good deal of sympathy for FCC Chairman Julius Genachowski over the ongoing fight between Fox and Cablevision. My brother the educator likes to say that “responsibility without authority is trauma.” Or, in other words, if you are responsible for something, but don’t actually have the authority to do anything about it, then the only thing you can do is suffer when things go wrong. So it is for Genachowski and Fox/Cablevision — under the FCC’s current rules. But here’s the funny thing. The FCC actually has fairly strong statutory authority to take action. So while Genachowski is in a bind, he can actually fix the problem. He even has a vehicle all teed up and waiting in the form of Public Knowledge’s Petition to change the “retransmission consent” rules (I’ll explain what those are below).

So how on Earth did the FCC get reduced from the “cop on the beat” to pathetically tweeting the playoffs? The answer lies with over 15 years of deliberately learned helplessness and rulemaking that I can only charitably describe as auto-castration. Twice, in 1992 and 1999, Congress explicitly directed the FCC to make sure that broadcasters don’t abuse the retransmission consent negotiation process (or as we telecom policy wonks like to call it, “retrans”). Each time, the FCC went out of its way to develop rules that systemically divested itself of all capability to act. So although Congress gave the FCC the job of consumer protection cop, the FCC kept angling for the job of “palace eunuch” to the Media Barons. For 15 years, the FCC has loooooovvvved its job as Palace Eunuch for the Media Barons, wearing a very impressive Palace Eunuch uniform with those great big baggy pants and the cute little fez and toy sword it waves impressively when it tells members of the public to move along and stop trying to hold big media companies accountable for their public interest obligations.

Happily for Genachowski, he can trade in the silly, baggy Eunuch pants for bold, powerful “man pants” the Republican women keep talking about as the fashion accessory for the season. Or Genachowski could do nothing, which will give him time to go shopping for a nice pair of those little pointy shoes with the bells on the toes to go with the baggy Eunuch pants.

Wonky legal details below . . . .

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Genachowski Enters FCC In 12-Step Program To Stop Consumer Abuse

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“The first step in recovery is admitting you have a problem.” So goes the self-help cliché. For regulatory agencies, the first step is admitting that industry has a problem and that the wonderful happy world of the unregulated market – no matter how wildly competitive it might or might not be – doesn’t always protect consumers and that in fact, sometimes, free market dogma to the contrary, you actually reach the best result for everyone by having government set basic rules of disclosure and enforcement (the classic paper on this being George Akerlof’s oft-cited “The Market For Lemons”). The recent experience with the meltdown of the financial services sector and its ongoing tribulations provide rather vivid proof that “trusting the market” and waiting for “proof of a problem.”

Which brings me to FCC Chairman Julius Genachowski’s latest app release for Genachowski 2.0 – the Relaunch. With network neutrality on the backburner until after the election, Genachowski has taken the opportunity to get the agency on track with its substantive agenda. In addition to moving forward for the second month in a row on significant National Broadband Plan Items (White Spaces last month, CableCARD and Mobility Fund this month), Genachowski has started taking the FCC in the welcome direction of consumer protection.
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