My Insanely Long Field Guide To Understanding FCC Chairman Tom Wheeler Statement On Peering.

At the press conference following the Federal Communication Commission (FCC) March 31 Open Meeting, Chairman Tom Wheeler made the following observation:

 

“Interconnection is part of the Network Compact.” Peering “is just a $3.50 word for interconnection.”

 

Wheeler followed up this statement by explaining that there was a difference between “network neutrality” and the “open internet” on one hand and “interconnection” as the ‘path to the Internet’ on the other hand. While government has a critical role in monitoring peering/interconnection to protect the values of the Network Compact, it isn’t a network neutrality issue. You can see Wheeler’s full statement here (Start at 144:45 – 147:23 has unrelated stuff in middle) (transcript here).

 

After the meeting, the FCC released a separate statement that they really mean it when they say that they aren’t going to do peering as part of the Net Neutrality rules. While Brendan Sasso at National Journal gets points for noticing that ”the FCC could decide to enact separate regulations on the issue or force Comcast to accept new rules in order to receive permission to buy Time Warner Cable,” most folks I’ve read in the press have broadly interpreted this as indicating the FCC will not look into the Comcast/Netflix dispute or complaints by Cogent and Level 3 about large edge-providers squeezing them for higher interconnection fees.

 

Personally, I think most people are totally misreading this. Wheeler’s statements make it look more likely to me that the FCC will start looking closely at the Internet peering market, not less likely, especially as part of the Comcast/TWC deal. Indeed, Comcast’s Chief Lobbyist David Cohen, who ranks in my book as one of the absolutely smartest and most effective telecom lobbyists ever, has already started backing away from earlier statements that regulators would ignore peering issues and that he expects them to look at the Comcast/Netflix deal. (Unsurprisingly, Cohen also said he expects regulators to find no problems with the deal and called Netflix CEO Reed Hasting’s arguments that this eviscerated net neutrality “hogwash.”)

 

Below, I will rant at considerable length that (a) Wheeler is right, this is not a “network neutrality” issue, but the same goddam interconnection issue that we have struggled with for more than a hundred years in every networked industry from railroads to electricity to broadband; (b) The FCC needs to actually look at this and study it and understand how the market works before it makes any decisions on what to do; and, (c) While Wheeler is not saying in any way, shape or form he actually plans to do anything before he has real information on which to base a decision, he is signaling — for anyone actually paying attention — that he is, in fact, going to actually look at this as part of his overall transition of the agency around his “Fourth Network Revolution” and “Network Compact” ideas.

 

 

While this last would seem pretty basic and obvious, it represents a significant change in policy from the previous insistence that IP magic pixie dust obscures all things Internet and makes them invisible to the FCC. Whether I agree with what Wheeler ultimately does or not — and I have no idea what he might ultimately do here, he could decide the market is competitive and working just fine — I don’t believe Wheeler is going to go around with his eyes and ears covered blathering about the magic nature of the Internet. I think Wheeler is actually going to check under the hood and see what actually makes the damn thing tick — and Comcast is just the company to help him do it.

 

Much ranting below . . .

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A Guide To The Mechanics of the Comcast/TWC Deal. Part IV: Congress, The White House And The Public.

If you read most of the reporting on the Comcast/TWC deal, you would think that Congress and the White House play a huge role. In reality, as I alluded to in the Part I intro, not so much. The political stuff tends to get over-reported in part because it’s easier (it took me about 3000 words just to explain how the antitrust and the FCC review work never mind any actual reporting), and in part because everyone assumes that Washington is a corrupt cesspit where politics invariably determine outcomes.

 

As always, while the political matters, it plays a much more complicated role in the mix. Below, I will unpack how the political pieces (including public input) play into the actual legal and merits analysis. Again, keep in mind that I’m not talking about merits here. I’m just trying to explain how the process works so people can keep track over the course of the merger review (which will last a minimum of 6 months and may well run for more than a year).

 

Political details below . . . .

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A Guide To The Mechanics of the Comcast/TWC Deal. Part III: The Federal Communications Commission.

In Part II, I described how the Department of Justice will conduct its antitrust review of the Comcast/TWC. Here, I describe how the Federal Communications Commission will conduct its review under the Communications Act. While the FCC and the DoJ will coordinate their reviews and work together, the two agencies have very different procedures and operate under very different legal standards. (For those wondering why, you can see this article I wrote on the subject about 15 years ago.)

 

Details on FCC process below . . .

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A Guide to The Mechanics of the Comcast/TWC Deal. Part II: Antitrust Review

In Part I, I gave a general overview of the regulatory review process for the Comcast/TWC Deal. In Part II, I describe how the antitrust review works (which, in this case, will be conducted by the Department of Justice Antitrust Division). Keep in mind I am not discussing any of the arguments on the merits. I’m just trying to give people a sense of how the process will work and where they can weigh in if they feel so inclined.

Part III will address the review by the Federal Communications Commission (FCC) under the Communications Act.  Part IV will talk about Congress, the White House and the public.

 

Antitrust process described below . . .

 

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A Guide To The Mechanics of the Comcast/TWC Deal. Part I: Introduction

Those unfamiliar with how the merger review process works will want to know what happens next in the Comcast purchase of Time Warner Cable (TWC). In this 4 part series, I sketch out how the application will proceed and what role Congress plays in all this. I’m going to save for another time the arguments on the merits and what the likelihood is of blocking the deal (or getting stronger conditions than Comcast/TWC have already put on the table). I intend this simply as mechanical guide so that folks playing at home can follow the action, and weigh in as they see fit.

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Comcast/TWC Merger Explained By Taiwanese News Animation

I will, eventually, have more to say about the Comcast’s proposed acquisition of Time Warner Cable (TWC). My first reaction, I will admit, was pretty visceral. “My God! Aren’t you already freakin’ BIG ENOUGH Comcast?” But then, I realized that I needed to actually calm myself, and recall that bigness is not necessarily —

OH MY GOD!! YOU COMCAST PEOPLE HAVE NO LIMITS! YOU’RE LIKE SOME GIANT, COAX-TENTACLED CTHULHU-BEAST THAT KEEPS PROMISING TO DEVOUR US ALL BETWEEN 8 A.M. AND NOON BUT DOESN’T ACTUALLY GET AROUND TO DEVOURING US UNTIL AFTER 3 P.M. BECAUSE YOU GOT ‘STUCK IN TRAFFIC’ AND A PREVIOUS DEVOURING RAN LONGER THAN EXPECTED . . . .

Breathe, Harold, breathe. Think policy. [pause for calm] Several folks have posted excellent policy analysis, starting with my Public Knowledge colleague Jodie Griffin in this blog post here to this excellent piece by David Karr to this more general expression of antitrust concern by Paul Krugman

COMCAST IS ALREADY BUYING A POWER COMPANY! A FREAKING POWER COMPANY!!! YOU ALREADY ARE DOMINATING VIDEO, DATA AND VOICE AND YOU ARE BUYING A POWER COMPANY AND RUN ALARM SYSTEMS AND ARE PROBABLY GOING TO IMPLANT CHIPS IN OUR BRAINS SO WE CAN STREAM XFINITY DIRECT TO OUR EYEBALLS AND —

As you can see, I’m still having a bit of trouble getting over my visceral reaction to the shear size and scope of this deal. So while I am calming down and getting ready to write my Insanely Long Field Guide To the Comcast/TWC Merger, I will simply let the good people at Taiwan’s fine Tomo News capture the moment. Because nothing really says “Comcast/TWC” better than giant robots and tasers.

Stay tuned . . . .

CNET, CBS and the Newspaper/Broadcast Cross-Ownership Rules

I don’t do much by way of media ownership these days, but the recent mess of CBS meddling with CNET’s decision to award a ‘Best In Show’ to DISH’s new Hopper DVR constitutes another little reminder as to why we care about media cross-ownership in a consolidated world. Given that the FCC appeared at one point poised to significantly relax the rule, this reminder bears highlighting.

More below . . .

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This Is Why Policyland Is Complicated

Yesterday, FCC Chairman Julius Genachowski circulated a Notice of Proposed Rulemaking to address the problem of high phone rates charged to inmates and their families.  For those unfamiliar with this issue, many state prisons team with telecom providers to charge outrageous phone rates, sometimes exceeding a dollar a minute, for inmates to call family. Since these calls are collect, the burden falls on the inmates family, who are often poor. For too many, the weekly or monthly choice is whether to pay to talk to a son or daughter (or spouse, or father or mother) behind bars or whether to have enough to eat or pay for needed medication. This phone gouging is not only cruel, it is also bad policy. Just about all research on preventing recidivism shows that the more contact and support someone in jail receives from their family and community, the less likely they are to return to crime. So from a societal standpoint, we would want to do everything to encourage prison inmates to stay in tough with family.

As you might imagine from the above, I regard the current practices as cruel and abusive of the most helpless. This is literally a case where, as the Bible commands us, “suffer not the oppression of the widow, the orphan, the stranger or the poor.” (Zach 7:10). If ever there was an “unjust and unreasonable rate or practice” this surely qualifies. I cannot praise Genachowski enough for acting on this.

Also yesterday, Genachowski circulated a draft order to conclude the pending review of media ownership. He proposes to entirely lift the television/radio cross-ownership limits and to permit newspaper-broadcast cross-ownership in the top 20 markets.

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Could Verizon/SpectrumCo Create Gaping New Loophole In Media Ownership Rules?

Few people would imagine that the Verizon/SpectrumCo deal, now heading rapidly for conclusion, could potentially have huge impact on traditional broadcast ownership rules. Unfortunately, unless the FCC takes action, the deal is likely to create a new and powerful loophole in traditional media ownership rules involving something called the “attribution rules.”  While I do not think the participants themselves are aware of this problem, or intend this outcome, allowing the major cable companies and Verizon to participate in a Joint Operating Entity (JOE) without certain precautions creates a means by which these parties, if they wished, could coordinate their video offerings in a way that Congress and the FCC have traditionally found antithetical to our media policy of viewpoint diversity.

 

As the attribution rules apply to broadcast media, the mechanism for circumventing the attribution rules set in this case would extend to radio and television broadcast ownership as well. In other words, it’s not just about Comcast and VZ, or even Comcast and TWC, sharing programming info such as what they are paying for ESPN or what tier they plan to place Tennis Channel or EPIX. Approval of the deal in its current form also creates a mechanism whereby broadcasters such as News Corp and CBS could get together to coordinate news coverage on things of mutual interest, such as whether Congress should adopt SOPA.

 

Fortunately, the DOJ proposed final judgment lays the groundwork for addressing these concerns. But the FCC has to actually focus on this and act. It doesn’t make a difference for the current deal, but it makes a huge difference for the future of media ownership.

 

I explain below . . .

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VZ/SpectrumCo Update: Actually Pretty Good, Except For That ‘Cartel’ Thing.

I have been doing some analysis of Verizon’s latest move in the VZ/SpectrumCo transaction, the announcement VZ will engage in a series of AWS spectrum swaps with T-Mobile. Between this and Verizon’s commitment to sell off its Lower 700 MHz A&B block licenses, I am almost happy — except for that whole cartel thing with the major cable companies. But if we ignored the cartel thing, this deal now becomes the rare bird that actually enhances both Verizon’s position in the market and that of a prospective competitor. This is not quite a triumph for Coasian market efficiency, since it took the threat of agency action to nudge Verizon in the ‘right’ direction. I also need to point out that when we start out with a fairly dismal market structure, it does not take much to improve things. Giving spectrum to T-Mo is good, but it does not address all the competition problems created by our unfortunate means of distributing spectrum, which still ends up concentrating it in the hands of a very small number (i.e. 2) of companies. So ‘happy’ is a relative term.

As a result, the transaction needs a few minor conditions to make it complete: a data roaming condition to keep competition afloat (and in case the data roaming rule does not hold up in court) and accelerated build out/use or share to ensure rural communities see a 4G network before the end of the decade, but otherwise this looks pretty good (even with AT&T likely to snarf all the Lower 700 MHz B block licenses). Mind you, it reenforces the need to get interoperability and special access reform done if we want to see real competition — but we have rulemaking proceedings on those.

Unfortunately, there is that whole “cartel” thing with the major cable operators. And despite all the positive aspects of this transaction as now configured, they cannot outweigh the negative of creating an anti-competitive cartel at the center of our communications infrastructure.  But let me set that aside for the moment to focus on the spectrum side of things.

 

More below . . . .

 

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