Tales of the Sausage Factory

An insider’s view of the media hegemony

Why California Will Sit Out The National Debate On Shutting Off the Phone System — Heckuva Job Governor Brownie!

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In the last two months, AT&T’s announcement that it will convert its existing traditional phone system to an Internet Protocol (IP) based network and the aftermath of Hurricane Sandy have galvanized the telecom policy world. One would think the state of California would figure prominently in this discussion, and that people in California would have a huge vested interest in the outcome of these discussion. For example, given our newfound interest in disaster preparedness for IP networks in the wake of Hurricane Sandy, California (which, I’m told, has the occasional wildfire, deluge, mudslide or earthquake which causes power and telecom outages) might want to hold their own hearings and develop their own state plan and state standards. Similarly, with both AT&T and Verizon (both service providers in California) announcing they are replacing rural copper with wireless and converting their old-style phone networks to IP, you would think California would want to have some say in how these companies (and other IP network providers) serve the customers of their state.

Sadly for the people of California, you will not have that opportunity. All decisions on these matters relative to you will be left entirely to the private sector, or will take place in Washington D.C. Why? Because on September 28, Governor Jerry Brown signed into law S.B. 1161. This law, drafted by the fine people at the American Legislative Exchange Council (ALEC) and introduced by Senator Alex Padilla, prohibits any agency of the state of California from regulating “voice over IP” or “Internet enabled service” (text of law here) (More on ALEC and its role in drafting the law here, here, and here). While this primarily focuses on the California Public Utility Commission (CPUC), the law prohibits “any department, agency or political subdivision of the state” from doing anything to regulate VOIP or IP-based services.

How does this relate to Hurricane Sandy, emergency preparedness, and the conversion to all IP networks? I explain below . . .

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In case you wondered just how much the EU hates ACTA . . .

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As we get ready for the World Conference on Information Technology (WCIT) of the International Telecommunications Union (ITU), a number of governments and governmental bodies are passing resolutions and doing other stuff to get their positions out there as part of the pre-game show. Last week, the Parliament of the European Union passed a resolution directed at the WCIT which, among  other things, “Supports any proposals to maintain the current scope of the ITRs and the current mandate of the ITU; opposes any proposals that would extend the scope to areas such as the internet, including domain name space, IP address allocation, the routing of internet-based traffic and content-related issues.”

Obviously, given my previously expressed concerns about the potential impact of expanding the ITU’s jurisdiction to the Internet, I think this is excellent news. It also clearly demonstrates that concern about expanding the ITU’s jurisdiction in this area is by no means limited to the United States or motivated from a hostility to the United Nations or global coordination. But that is not actually what I wanted to talk about.

I just wanted to briefly note how the debate around the ITU and WCIT illustrates just how much the EU (and others in the world) have come to hate ACTA. No, ACTA has nothing whatsoever to do with WCIT, although I understand that the folks at the ITU — in what can only be taken as a fine irony — apparently invited the media folks who developed ACTA and SOPA/PIPA to coach them on public relations. Nevertheless, for folks in Europe, ACTA has become the archetypical awfulness that could befall the Internet without constant vigilance. Thus, the President of the European Socialist Party denounced the WCIT for its “secretive processes” similar to the negotiation of ACTA and warned that the ITU would use the WCIT to “allow ACTA by the back door.”

Leaving aside that “ACTA by the back door” sounds like something available at a certain clubs in Berlin or Amsterdam for 10 euros (15 for a side of SOPA/PIPA), I just want to emphasize how very, very much the entire process and substance of ACTA is now despised in Europe. ACTA has essentially become code for “special interests in private trying to destroy Internet freedom.” Despite brief signs that USTR might actually be getting a clue on this last summer, more recent USTR activity shows they are still utterly intent on replicating every mistake they made with ACTA in negotiating the TPP.

I am not sure how many times USTR has to screw up international trade negotiations before they stop taking orders from Hollywood. But if USTR and Hollywood think the hostility to ACTA and SOPA/PIPA are just gonna blow over and they can go back to business as usual, they really need to think again. The fact that opponents of WCIT are scoring points in Europe by comparing it to ACTA is only the latest anvil to drop on USTR’s clueless noggin as a warning to stop trying to use agreements to promote trade to policy launder Hollywood’s copyright maximist agenda.

Stay tuned . . . .

This Is Why Policyland Is Complicated

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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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Shutting Down The Phone System Gets Serious: The Implications of AT&T Upgrading to An All IP Network

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(This is a reprint of a piece I wrote for the Public Knowledge blog)

I believe AT&T’s announcement last week about its plans to upgrade its network and replace its rural copper lines with wireless is the single most important development in telecom since passage of the Telecommunications Act of 1996. It impacts just about every aspect of wireline and wireless policy.

For those who missed it in the morning-after blur of the election results, AT&T announced that it will invest an additional $14 billion to upgrade its wireline and wireless networks, so that it projects investing $22 billion a year for the next several years in capital expenditures (“CAPEX” as they say on “The Street”). At the end of the three year time frame, AT&T expects to have converted its existing “time division multiplexing” (TDM) phone network entirely to an IP-based network which will seamlessly mix its wireless, remaining souped-up copper, and fiber (but not fiber-to-the-home). Since all existing phone regulation governing universal service, consumer protection, and competition rest entirely on the existing TDM/copper network, AT&T simultaneously filed a petition with the FCC to “begin a dialog” on how to address the regulatory issues raised by this shift and proposing some entirely deregulated “pilot programs” to determine what regulations are “really” necessary.

Setting aside my skepticism that these pilot programs offer anything of value, I thank AT&T for beginning with an offer to talk. At the same time, I’m mindful we need to get the key elements of the new framework down over the next year or two – which is practically nothing given the complexity of the issues and the number of stakeholders involved. It puts a premium on communities working quickly to come to internal consensus and on trying to bring as many allies to the table as possible. Ideally, we would set universal rules for all IP networks, but this would meet fierce resistance from existing IP-providers. Nevertheless, AT&T raises a valid point of concern if the rules for the TDM to IP apply only to it and other Local Exchange Carriers (LECs) upgrading their networks. The FCC must balance these concerns about competition and fairness with the broader questions of what happens when our 100-year-old copper safety net gets replaced by an essentially unregulated IP-based networks.

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Open Letter To Congress: Please Do Not Try For A Grand Bargain When “Competence” Still Eludes You.

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Dear Congress:

Please solve the Fiscal Cliff, but please don’t try for any “Grand Bargain.” Frankly, the fact that you can even suggest with a straight face that this is the time for a total rewrite of not just the tax code, but just about every major social program on which Americans rely, is a good indicator that you have absolutely no business trying to make decisions like this at the moment.  Like texting while drunk or Tweeting while in a rage, I know this seems like a really good idea. Worse, all your buddies in the media keep egging you on, telling you to “think big” and “show leadership.” Do not listen to them. Remember when your former best friend told you that drunk text to you coworkers was “outrageous man, do it!” or when your Tweeps kept saying “yeah, you totally tell it like it is!” And then when you came back later you realized you had totally embarrassed yourself? The media is not your friend here.

Just solve the fiscal cliff problem then go home for Xmas break. Get rested, maybe even laugh a little at yourself for all the ridiculous and crazy insults you shouted about the people you need to negotiate with, then come back in January ready to do the real work.

Still don’t believe me? Meet me below . . .

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Why Our Politics Are So Poisonous — It’s OK To Say “Thank You” and Romney Doesn’t Have a “Christie” Problem.

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We spend so much time lamenting the poisonous nature of today’s politics. “Why can’t the other side even acknowledge when our side agrees with them?” We ask. “Why can’t we show simple human courtesy? Why can’t politicians set aside their partisan squabbles and do what is right for the country?” You want to know why? Look no further than the media frenzy and cynical sneering in response to Governor Chris Christie’s effort to set aside politics and do the right thing in the face of disaster.

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If your cell tower loses power, be sure to thank CTIA and the D.C. Circuit.

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As we hunker down to wait out Hurricane Sandy, some folks have noticed that if we lose power our cell phones might not provide the back up we expect. Cell towers require power, and if the back up battery is drained and local power is not yet restored then the network goes dead. We had this problem in the Katrina aftermath. The report of the FCC’s Katrina Panel recommended a requirement that carriers have power back up for towers. The FCC subsequently issued an order implementing several of the Katrina Panel recommendations, including the back up power recommendation.  Under the announced rule, carriers would need to ensure that towers had 24 hours worth of back up power. The FCC relied on its Title I ancillary authority to justify the rule — arguing that ensuring sufficient back up power to maintain communications was “reasonably ancillary” to its authority to ensure emergency communications.

Needless to say, the carriers were not thrilled with this expensive new requirement. They challenged in the D.C. Circuit. Ever happy to spank the FCC on behalf of industry, the court first issued a preliminary injunction against the rule taking effect. At oral argument, Chief Judge Sentelle and Judge Randolph, two of the more notorious FCC-bashers, ripped counsel a new one for relying on all the dopey old precedent about Title I ancillary authority. Judge Rogers noted that the FCC’s actions were justified under the court’s precedents, but Sentelle and Randolph were having none of it. Bad FCC! Extending regulatory power over carriers just because lives might depend on it and past precedent before we got here said you had authority to issue the regs!

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I Propose A Commercial For Sprint’s Unlimited Data Plan

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I recently switched from Verizon Wireless to Sprint. While Verizon definitely has the best network (sorry guys), I upgraded from a Crapberry Curve to a Samsung Galaxy S3 and wanted Actually Really Unlimited Data. Yes, I could have bought the phone at full price and kept my grandfathered “unlimited data” with Verizon Wireless. But, as readers of my very first Wetmachine post know, I try to vote with my wallet for good policy. Back in the day, I subscribed to a CLEC and DIRECTV, then switched to FIOS because FIBER IS BETTER and good policy. Besides, my wife has been a Sprint customer since forever and we save a bundle by combining into a single family plan.

Anyhoo, to get back to the point of this blog post. I am sure many of you out there have seen this heartwarming ad from Verizon Wireless called “Always There.” In it, a young lad preparing for his tuba recital looks out with disappointment to see only Mom and sisters in attendance. As young lad takes his seat, Mom launches a Verizon hot spot and young lad is thrilled to see father and grandparents attending virtually. Hurray! Shared data and Verizon’s 4G network save young lad from future abandonment issues from his workaholic father.

Unfortunately for young lad and his family, it better be a fairly short piece because Verizon’s data plans limit you to 4GB shared data per month for a Smartphone plan and up to 10 GB per month shared for a tablet/iPad. What if Mom had already used up bandwidth streaming big sister’s black belt test, for example? As this Sprint ad shows, fights over sharing scarce bandwidth are rapidly becoming America’s #1 source of family friction.

I recently encountered this actual problem in real life. My brother and his wife were delivered of a healthy baby boy last week. According to ancient Jewish tradition, we scheduled a brit milah (circumcision ceremony) for the 8th day after the boy was born. i.e., yesterday. Unfortunately, my Mom recently had back surgery, and could not make it down for the occasion. What’s a Jewish family to do? My Mom not able to attend her grandson’s brit milah? Oy! Such a shandah! And let me tell you, between the actual ceremony and all the speeches, we are not looking at some 2 minute recital here. Happily, my Sprint unlimited data contract and my Galaxy S3 provided a modern solution.

In the interest of promoting genuinely unlimited data plans (and thus biringing harmony once again to America’s families), I propose this new commercial for Sprint’s unlimited plan entitled: Data Caps Suck Foreskin.

Roll it . . . .

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Will AT&T Try To Crash the Sprint/SoftBank Party?

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Yesterday, Sprint moved to acquire a majority stake in Clearwire (CLWR) in advance of SoftBank acquiring a majority stake in Sprint. Despite some earlier speculation that SoftBank might have strategies that don’t include CLWR,  and despite disappointment from investors that Sprint won’t spend the extra bucks to acquire CLWR in its entirety, the move was pretty much expected. One of the main obstacles to Sprint in recent years has been its occasionally testy relationship with CLWR, and difficulties the two companies have had negotiating terms for Sprint’s use of CLWR’s spectrum and network.

What was odd, however, was the reaction from AT&T. Whereas the wireless world has generally been quiet, AT&T went out of its way to suggest the deal might night not be good for America. Brad Burns, an AT&T V.P., said in a statement:

“Softbank’s acquisition of Sprint and the control it gains over Clearwire will give one of Japan’s largest wireless companies control of significantly more U.S. wireless spectrum than any other company. We expect that fact and others will be fully explored in the regulatory review process. This is one more example of a very dynamic and competitive U.S. wireless marketplace, which is an important fact for U.S. regulators to recognize.”

So what’s up with that? Is AT&T simply sore because Sprint was the leading industry opponent to AT&T/T-Mo? Or, (as suggested by the last sentence), does AT&T have something more strategic in mind. And, given that Sprint is already “credited” with CLWR spectrum for spectrum screen purposes under the 2008 Order approving the current Sprint/CLWR deal, it is not clear what trouble AT&T (either directly or via proxy) could make.

I don’t think AT&T could get the deal blocked. But (as AT&T indicates) there are issues of foreign ownership that give a determined opponent with money and resources (and a grudge) a chance to make trouble. And there are some things AT&T could hope to extract that potentially make such a play worthwhile. Notably, if AT&T pushes regulators to view Sprint/CLWR’s combined 2.5 GHz spectrum as equal to AT&T’s much better spectrum,  AT&T could hold off any hard spectrum cap limit in the pending FCC spectrum aggregation proceeding or in the upcoming incentive auctions. Perhaps more significantly, AT&T could sideline Sprint — the largest industry advocate of spectrum aggregation limits  – from taking an aggressive position in these proceedings.

I explore this a bit below . . . .

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How Antitrust Enforcement And Pro-Competitive Regulation Encourage Investment, Encourage Innovation, Enhance Spectrum Efficiency And All That Other Good Stuff Despite CW To Contrary.

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In the past month, to the complete surprise of just about every analyst and industry watcher, foreign investors spent the equivalent of $25 billion to invest in competing carriers T-Mobile and to acquire control of  Sprint and ClearWire. AT&T has announced a whole bunch of network upgrades such as repurposing its 2G spectrum, clearing up the interference in the WCS band, and a seemingly endless stream of license acquisitions. While the last is perhaps not so unusual, U.S. Cellular has likewise been spending money to coble together a broader footprint using the less—than—stellar—but—better—than–nothing 700 MHz A block.

Quite a turnaround from the start of 2011, when the industry appeared on a glide-path for a duopoly. Last year, T-Mo parent Deutsche Telekom (DT) was looking for a U.S. exit, AT&T and Verizon seemed more focused on buying out competitors than on developing the spectrum they already held, cable operators were giving up whatever plans they had to enter the market, and competing carriers couldn’t find financing to build out networks or pick up licenses in the secondary market. So what happened?

The Department of Justice (DOJ) and the Federal Communications Commission (FCC) have made clear over the last two years that (a) we will have 4 national carriers, and (b) the FCC cares about ensuring enough spectrum access to keep Sprint and T-Mobile (and hopefully other competitors) viable. Contrary to all conventional wisdom, two years of FCC regulation like data roaming and special access reform, combined with antitrust enforcement around AT&T/T-Mo and Verizon/SpectrumCo, stimulates investment in the wireless industry and forces companies like AT&T and Verizon to get serious about developing the spectrum they need and ditching the spectrum they don’t need on the secondary market.

Does that blow your mind? Is that just all freaky and too much for you to handle in a neo-con policy world that worships The Gods of the Marketplace and can’t tell the difference between a “competitive market” and a “deregulated market?” If you think you can handle the wisdom, pilgrim, then see my explanation below. . . .

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