Tales of the Sausage Factory

An insider’s view of the media hegemony

Shutting Down the Phone System: “IP” Does Not Equal “Fiber,” “Fiber Does Not Equal IP.”

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As regular readers know, I regard the upgrade of the phone system (aka the “public switched telephone network” or “PSTN”) to an all-IP based network as a majorly huge deal. As I’ve explained at length before, this is a huge deal because of a bunch of decisions the Federal Communications Commission (FCC) has made over the years that have fragmented our various policies and regulations about phones into a crazy-quilt of different rules tied sometimes to the technology (IP v. traditional phone (TDM)) and sometimes to the actual medium of transmission (copper v. fiber v. cable v. wireless). This whacky set of FCC decisions has produced a great deal of confusion about what we are talking about when we talk about the upgrade of the phone network.

 

As a result, people keep pointing out the same two things to me over and over and over. “AT&T is not switching to fiber to the home! Their upgrade is still copper!” The other is: “Verizon is pulling up all their copper in New York City (and everywhere else in the Sandy zone) and shifting customers from copper to FIOS without getting any permission from anyone!” These observations are usually made with the same fervor as Charlton Heston giving out his recipe for Soylent Green.

 

Allow me to debunk the Cult of the Copper Snake (with bonus points for recognizing the Biblical reference. And no, it isn’t the Golden Calf. It’s the Copper Snake.) You can have an all IP network that runs on copper, and you can run a traditional TDM-based network over fiber that is treated like a phone service. Both of these are different from a TDM-system that runs on copper.  All three are treated differently from each other from a regulatory perspective. I also must point out, in AT&T’s defense, that AT&T never claimed it was upgrading to fiber, and in fact has been quite specific that they are not going FttH (to Wall St.’s great relief and the disappointment of many others paying attention).

 

If you want to stop here, you can. If you want to find out why this is true, and why people keep confusing them, then you must continue on, delving into the minutiae of the last ten years of regulatory history. While a pain in the patootie to sort through (and I will do what I can to make it less boring where possible), it’s worth it if you want to understand what’s going on and how AT&T can be going on about how this is going to improve broadband and blah blah blah without ever promising to move to fiber to the home.

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Shutting Down the Phone System: Five Fundamentals Framework For Managing the PSTN Transition.

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As I wrote back in November, AT&T’s decision to upgrade its network from tradition phone technology (called “TDM”) to an all Internet protocol (IP) system has enormous implications for every aspect of our voice communication system in the country. To provide the right framework for the transition, Public Knowledge submitted to the Federal Communications Commission (FCC) our proposed “Five Fundamentals” Framework: Service to All Americans, Interconnection and Competition, Consumer Protection, Network Reliability, and Public Safety.

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AT&T to FCC: “I double dare you to show you’re serious about wireless competition.”

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Rarely do you see companies double-dare the FCC to back up their brave talk about promoting competition. That is, however, what AT&T has just decided to do – with a little help from Verizon. After gobbling a ton of spectrum last year in a series of small transactions, AT&T announced earlier this week it would buy up ATNI, which holds the last shreds of the old Alltel Spectrum. To top this off, Verizon just announced it has selected the purchaser for the 700 MHz spectrum it promised to sell off to get permission to buy the SpectrumCo spectrum. And guess what? The purchaser of the bulk of Verizon’s 700 MHz licenses, which Verizon promised to divest to promote competition – is AT&T!

 

In the last few months, we have seen billions of dollars in new investment as a result of the FCC’s decision to deny AT&T/T-Mo, force Verizon to divest in VZ/SpectrumCo, and otherwise draw some lines in the sand against further consolidation and to promote competition. For reasons I explain below, this transaction crosses just about every single red line the FCC (and Department of Justice (DoJ)) have ever indicated they had about wireless spectrum concentration. The question is — will the FCC (or DoJ) actually do anything about it?

 

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SOPA Blackout, One Year Later

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A number of folks are celebrating the one year anniversary of the Great Sopa Blackout as Internet Freedom Day. I’m glad, because it deserves celebrating and remembering.

In the first place we ought to remember how the broader Internet community came together and shifted SOPA from “unstoppable” to “dead” in a week. As I noted at the time, the cynical “will have all manner of sensible explanations for what ‘really’ happened and why what we did didn’t ‘really’ make a difference.” As time goes on, and it turns out that corruption continues to corrode our political system, the siren call of the cynics likewise corrodes the will to resist despite the evidence of our own experience. It’s important, therefore, to remember what we achieved and to realize that we can therefore achieve it again.

Nor was SOPA the one-time event some seem to believe. True culture change takes time and persistence. SOPA/PIPA was not an aberration, it resulted from the normal way of doing business in Washington, where legislators and policymakers treated copyright and Internet issues as industry food fights, brokering backroom compromises between lobbyists without concern for the public or the public interest. So yes, CISPA passed the House — after Republican House leaders rushed the vote to outrun public protest. But as I observed at the time, this was a sign of weakness, not strength. Despite industry buy in, public resistance from the “Internet constituency” killed the bill in the Senate.

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

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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.

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Lessons From The Derecho 9-1-1 Failure: When Industry Self-Regulation Is Not Enough.

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The FCC released a fairly thorough report on the widespread 9-1-1 failure that followed the June 2012 “derecho” windstorm. For those who don’t remember, the derecho differs from most weather events by coming up almost without warning. According to the report, carriers had approximately two hours of warning from the time the derecho started in the Ohio Valley to when it hit the D.C. Metro region.

 

As a consequence of the damage done by the derecho, Northern Virginia experienced a massive failure of its 9-1-1 network, leaving over 1 million people with working phones (at least in some places) but no access to 9-1-1.  West Virginia experienced systemic problems as well, as a did a scattering of locations in other states impacted by the derecho. Verizon maintains the network in Northern Virginia, while West Virginia is managed by Frontier.

 

In both cases, the report concluded that both Verizon and Frontier failed to follow industry best practices or their own internal procedures. To be clear, this was not a massive dereliction of duty. But the accumulation of some corner cutting over here, some poor practice over there, meant that when the unpredicted crisis hit the system suffered critical failures precisely when most needed. Unlike just about every other part of the network, where providers balance the cost of hardening a network against potential events with a number of other factors, the core 9-1-1 system is explicitly supposed to remain operational in even the most extraordinary circumstances.  It is the foundation of public access to emergency services. As long as I can contact the phone network, I should be able to get 9-1-1 service. Public safety responders rely on the public reporting emergencies so that they can efficiently deploy resources as much as the public depends on its ability to contact emergency services through 9-1-1.

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Ergen Makes Bid For CLWR After All, What’s Up With That?

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Last Sunday, I noted that while Ergen was a potential bidder on Clearwire’s (CLWR) 2.5 GHz spectrum, it seemed unlikely given the fact that Sprint would still own a majority stake in CLWR and that governance issues would make this a very messy fight that would potentially tie up DISH assets when they are needed for its own network deployment and for a potential H Block Auction bid. I also noted a lot of other issues that make a purchase by anyone other than Sprint less attractive — such as the cost of network buildout — that cast serious doubt on Crest’s valuation of CLWR’s spectrum at $30 billion.

48 hours later, Ergen makes a bid for CLWR valuing CLWR at at $3.30 a share (a reasonable enough premium over Sprint’s offer to require serious consideration). Mind you, nothing in the bid (what details there are can be found here) contradicts anything I said previously. As noted by CLWR in it’s press release, the proposed deal comes with a bunch of conditions and caveats that reflect Sprint’s ownership and the cost of building out a network that would integrate with Ergen’s AWS-4 spectrum. Which naturally raises the question of why Ergen decided it was worth it to make the bid anyway. Making a serious tender offer — even if you think it will ultimately be rejected — is a non-trivial process that incurs expense. Before dismissing this as mere payback for Sprint’s (successful) push to amend the AWS-4 rules to protect H Block (creating delay in the approval and potential issues for deployment), it is worth considering what the potential upsides are to DISH that justify the cost.

Oh yeah, I should also talk about some consumer stuff and broader stuff as well. Horse race is all well and good, but there are a lot of industry folks that do that better than I do.

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Crest’s Moronic Petition To Deny In Sprint/CLWR Symptom of Broader Idiocy That Actually Matters.

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OK, I suppose I should really wait until they file, but this story detailing Crest Financial’s planned Petition to Deny in Sprint/Softbank/CLWR appears to be, in my humble opinion, the single dumbest grounds for a Petition to Deny. EVAR. For those just tuning in, Sprint, backed by Softbank, has offered approximately $3/share for the outstanding shares of Clearwire (CLWR). Because some analysts with no understanding of the actual spectrum market think CLWR is sitting on a spectrum pot ‘o gold, Crest is pissed and wants more money. It has already filed a shareholder derivative suit claiming that Sprint leveraged its insider position to buy out Clearwire below fair market value. Given how corporate law has crapped all over minority shareholder rights in recent decades, I am not giving this much hope. Apparently, Crest feels the same way, because they are now taking the fight to the FCC.

According to the story: “In going to the FCC, Crest will argue that the Clearwire deal artificially undervalues the company’s spectrum holdings, Schumacher said. That in turn potentially devalues future revenue for the U.S. government when it auctions off spectrum licenses.” Crest apparently thinks CLWR’s spectrum holdings are worth $30 billion, prompting me to wonder what planet they live on and whether they share it with House Republicans who keep thinking spectrum auctions are automatic pots of gold.

What makes this utterly dumb is the combination of a false factual premise combined with an utter lack of legal grounds, on top of a near zero chance of holding things up politically (unless AT&T or possibly DISH file, which might introduce greater political uncertainty). I would normally confine myself to simply snickering but there is a rather important point to be made here — especially for all those listening to analysts telling broadcasters they can make gajillions in the upcoming incentive auction –about spectrum valuations.

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A Pocket Guide For The WCIT-12

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So here I am in Dubai, attending the World Conference on International Telecommunications (#WCIT or #WCIT12) of the International Telecommunications Union (#ITU). The good folks at the ITU are webcasting the Plenary Sessions (the official part where the countries vote). You can tune in here (archives of live caption transcripts here). As you might expect, the WCIT has its own specialized vocabulary which can make following all this rather difficult. I have therefore prepared an impromptu and very incomplete glossary of the acronyms and peculiar phrases of the WCIT for the benefit of folks trying to follow along.

Disclaimer: I am an advisory member of the U.S. delegation, but nothing in here is an official statement of U.S. Del. I’m offering this for information purposes only.

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