Tales of the Sausage Factory

An insider’s view of the media hegemony

Richard Bennett Invites Me To A Panel On Tuesday March 2

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Back in October, Richard Bennett wrote a paper on why he thought network neutrality was particularly inappropriate — indeed, dangerous to the future evolution of — mobile internet access. On Tuesday March 2, his employer, The Information Technology & Innovation Foundation will be hosting an event to discuss the paper, mobile internet access and policy. He’s asked me to join Barbara Esbin from Progress and Freedom Foundation and Morgan Reed from the Association for Competitive Technology on a panel to discuss the issues. Should be fun.

Click here for the event announcement, which contains an RSVP link.

Stay tuned . . . .

Incumbents Bring Tea Party Tactics To Title II Reclasification Fight.

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I have never accused the incumbents of being overly subtle, especially when they feel threatened. But this new 14-page letter from the major cable and telco trade associations — as well as from the three biggest ILECs and Time Warner Cable (Comast shows unusual, perhaps merger inspired, diplomacy by sitting this one out) — hits a new low on the “Lack ‘O Subtlety Meter.” Given that the only one actively pushing reclassification these days has been yr hmbl obdn’t blogger, I should take this as a tribute to my personal skill. But it seems more likely an extension of the “shock and awe” tactics used by the incumbents to try to derail NN from the beginning.

Of course, this goes well beyond network neutrality. As AT&T’s previous lengthy exercises trying to justify Universal Service Fund reform under Title I (as well as AT&T’s less-than-direct acknowledgment that eliminating the phone network in favor of an IP-based network would eliminate interconnection requirements and complicate public safety access) attest, the question of FCC authority over broadband and what it can or can’t do under Title I impacts every area of the National Broadband Plan agenda.

Most of the argument in the letter is pretty standard, boiling down to “the universe is great under Title I dereg, don’t mess it up,” “Title II will impose horrible regulation, kill investment, destroy jobs, strangle puppies, etc.” with an additional “the FCC has no basis to change classification because nothing important has changed since the FCC reclassified last time.” Two things, however, require attention. Sadly, they mark the introduction by major players into the realm of “Tea Party” tactics similar to the Death Panels and mud slinging that have infected the health care debate and the financial reform debate.

More below . . .

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Google Is NOT Getting Into The Network Business, The Further Adventures of T. Googlii

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Unsurprisingly, the telecom world is all abuzz over the news that Google will build a bunch of Gigabit test-beds. I am perfectly happy to see Google want to drop big bucks into fiber test beds. I expect this will have impact on the broadband market in lots of ways, and Google will learn a lot of cool things that will help it make lots of money at its core business — organizing information and selling that service in lots of different ways to people who value it for different reasons. But Google no more wants to be a wireline network operator than it wanted to be a wireless network operator back when it was willing to bid on C Block in the 700 MHz Auction.

So what does Google want? As I noted then: “Google does not want to be a network operator, but it wants to be a network architect.” Oh, it may end up running networks. Google has a history of stepping up to do things that further its core business when no one else wants to step up, as witnessed most recently by their submitting a bid to serve as the database manager for the broadcast white spaces devices. But what it actually wants to do is modify the behavior of the platforms on which it rides to better suit its needs. Happily, since those needs coincide with my needs, I don’t mind a bit.

How does that play out here, and why do I compare Google to a protozoa? See below . . . .

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Please Tell Idiots In Industry Wireless Broadband Is ALREADY Metered, So Stop Spreading FUD To Support Price Gouging.

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If I had a dime for every article I have seen since AOL went to flat rate back in 1996 that foretold the coming end of flat rate internet access plans and the inevitability of metered pricing, I’d have so much money I could actually afford what wireline providers dream of providing as a monthly fee. Despite the “inevitability” of metered pricing for nearly 15 years, it hasn’t happened and I don’t expect it any time soon. Why? Because not only is it wildly unpopular with the customers (it is one of the few things powerful enough to overcome the switching cost for anyone with a choice), but the economics of it do not make a heck of a lot of sense. Heck, Comcast (the largest residential broadband provider) announced in its earnings call on 4Q 09 that it is reducing its capital expenditure on network capacity for 2010 because it has nearly completed necessary upgrades for DOCSIS 3.0, which gives it all the capacity it needs for the foreseeable future. “We don’t need to invest anymore in our network because we have all the capacity we need” is a might inconsistent with “we need to switch to metered pricing so we can afford to expand our network capacity and create incentives against ‘bandwidth hogs’ and other mythical beasts.”

I can forgive wireline providers for indulging in metered pricing fantasies, while admiting them for perpetuating the useful myth og limited capacity to ward off regulation. But when this article on the purported inevitability of metering wireless plans. This strikes me as “Keep The Government Out of My Medicare” lunacy.

As the article itself concedes without saying directly, wireless broadband plans are already metered. Blow past your monthly usage cap and you will pay per-minute charges. For those not old enough to remember, this was the old AOL metered pricing model. You got ten hours for free, then got charged on a per-minute basis. They abandoned it because customers hated it and moved to flat rate price plans. So what wireless providers apparently mean by “metered” is “find a away to reduce the usage cap further by pretending to call it something else.” I expect this will not catch on any better than the efforts to change pricing structure on the wireline side, and for the same reason. The economics don’t make sense.

Which brings us to the next lesson on network economics. The cost structure of building and maintaining the network is marked by high fixed cost and low marginal cost. That is to say, the vast majority of cost comes from building the network itself, regardless of how many customers use it. Once the network is built, the actual marginal cost of each customer is fairly low. Even an intense user does not “consume” very much of the network resources (the supposed “bandwidth hog” is a problem only because network capacity is ridiculously oversold). The argument that the majority of subscribers subsidizes the few “bandwidth hogs” is simply rubbish. The question is simply how obscenely high a rate of return can the network operator squeeze out of each customer.

Back in the old days, we used to require providers to prove cost. Sure we had metered pricing, but that was so that the very profitable areas could subsidize the high cost areas. Nowadays, we rely on “the market” to regulate cost, with the result that profit per customer for the major providers continues to rise. I’m cynical enough to wonder if that’s why we see this endless parade of speeches by network operators and articles by their sycophants about the “inevitability” of metered pricing — so we will thank our lucky stars that when we are outrageously ripped off that it is at the “bargain” of overpriced flat rates.

Stay tuned . . .

Wireless Bureau Wisely Decides To Not Play Referee In 3.65 GHz Band

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I have a fondness for the 3.65 GHz band for a number of reasons. In the first place, I was heavily involved in the the fight over the rules. For another, it seems to be filing an important niche in the wireless broadband ecosystem. So I was pleased when the FCC’s Wireless Bureau resisted the invitation to get involved in interference disputes in the band. OTOH, it also highlights the value of having a referee with jurisdiction in case something does go wrong.

I know I’m getting to this late, as the decision came out at the end of December, but it’s been a busy time. More below . . .

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Genachowski's Remarks At Auschwitz

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I cannot claim to know Chairman Genachowski very well. But the remarks below, given as head of the U.S. delegation in commemoration of the 65th Anniversary of the Liberation of Auschwitz, mark him as my brother on a level that goes beyond all levels of politics and policy.

Ezchor! Lo tishcach I will remember; do not you forget.

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Doing Kojo Nnamdi Show This Tuesday — and other opportunities to see me.

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For those interested, I’ll be appearing on the Kojo Nnamdi Show on Tuesday, January 26 (tomorrow). I’ll be on for a discussion of the future of cable with Greg Sandoval and Derek Thompson. Should be fun and interesting, as I hope to talk about things like our set-top box petition, the SOC Waiver, and how all this ties in with TV Everywhere, overt-the-top video, Comcast/NBCU, and the general “cable digital transition” as more systems convert to all-digital. Should be fun — if you are the sort of person who reads this blog.

UPDATE: You can listen to the Kojo show here.

As long as I’m doing the self-promotion thing, I’ll mention three other events where I’ll be speaking.

February 16: The Administrative Law Review event on Regulatory Change Under The Obama Administration at the Washington College of Law at American University.

March 15: Law Seminars International Telecom Conference in Seattle.

June 10: Pike & Fisher’s Broadband Policy Summit VI, where I shall square off against the ever popular Scott Cleland on everyone’s favorite topic “Who are the Internet Gatekeepers and Should They Be Regulated?” [I know, big suspense on which of us will say “Google” an which of us will go on about ISPs, switching costs, and all that other stuff.]

Stay tuned . . . .

MA Elects Public Access Programmer To U.S. Senate

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Never underestimate the power of local media, although I can’t really say if this made a difference. But Senator-elect Scott Brown (R-MA) has his own public access cable show he uses to keep in touch with his constituents.

It shall be interesting to see if this has any impact on his approach to cable issues, although I suspect he is unlikely to get on a committee where this would matter.

Somewhat more seriously, it underscores the importance of staying in touch with your constituents, and the importance of PEG regardless of political allegiance. Brown won, among other reasons, because he actually went out and campaigned. This also wasn’t some clever act of pretending to stay in touch with constituents. Looking at his record here, he has been doing local cable show for years, and doing local events.

If one truth is emerging from the spate of special elections from NY-29 to last night’s MA race, it is that politicians cannot phone in their campaigns and expect the party affiliation (either their own or their opponent’s) to carry the day. Ya gotta work it. So the next time local cable access programmer asks for an interview, don’t snort “Wayne’s World, right” and blow them off. Take a lesson from Scott Brown — commitment to local media matters.

Stay tuned . . . .

FCC Issues Excellent Wireless Microphone Order — Perhaps NAB Will Rely Less on Scare Tactics and Celebrity Letters Now.

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Time to clear up a little piece of unfinished business for which I and this humble blog can claim some modest responsibility. The FCC finally issued it’s long awaited Order on wireless microphones stemming from this blog post and the subsequent complaint/Petition for Rulemaking by the Public Interest Spectrum Coalition (to which a special shout out to the folks at New America Wireless Future is due, given the fantastic amount of work they did on assembling evidence and helping draft the document).

As one can tell from this FCC press release describing the details, we pretty much got what we wanted — although not entirely and not in the way we expected. But, as I noted in this press statement in my role as Legal Director of Public Knowledge, we’re very happy with how things turned out. Briefly:
(a) all wireless mic users are now granted legal status, this is done pursuant to the FCC’s Part 15 rules for unlicensed rather than the “license by rule” that we suggested, but my only regret about that is I didn’t think of it when we filed.
(b) Everyone using wireless microphones needs to clear out of the 700 MHz band by Jun 12, 2010 — one year after the DTV transition and 15 months after the original date proposed by the FCC. Given how the Broadway people have been telling the FCC for months how they are off the 700 MHz band, this should not be too much of a hardship — especially for those who had no right to be there in the first place.
(c) The FCC will invest a boatload of its own resources, and gin up the FCC 2.0 machinery, to get the word out to folks and help consumers, churches, etc. handle the transition.
(d) The FCC will require that wireless microphones have signs and labels going forward to make sure that people understand the difference between licensed users and unlicensed users.

In addition, the FCC is having a further notice of proposed rulemaking that will:
1) Set the rules for the new Part 15 unlicensed wireless microphones.
2) Will examine whether to expand the class of Part 74 Subpart H eligible licensees to see if they should expand the class to give interference protection to some set of users — which would include who gets to be in the database of licensed services protected from operation of TV white spaces devices.

Yeah, that kicks the can down the road rather than saying flat out “anyone who was using a wireless microphone illegally is not entitled to protection against the TV white spaces devices, which went through the legal process and got approved.” But I can most definitely live with that. For one thing, I am confident that in an evidence-driven FCC which places consumer interests first, as demonstrated by this Order with its unprecedented investment of FCC resources for outreach (which we had not even dreamed of requesting except in the most general way of offering to help), will focus on the real question of whether or not there is interference and if so how to strike the appropriate balance between allowing new technologies and protecting existing users. Hopefully, this will inspire white spaces opponents to focus on engineering rather than trying to use scare tactics and celebrity “star power”.

More below . . .

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Does Comcast Fear To Win Too Much?

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I grant I wasn’t there, but pretty much everyone who was seems to think the D.C. Circuit oral argument in the Comcast/BitTorrent case was an utter disaster for the FCC/pro-NN forces and a total triumph for Comcast. Given my previously voiced opinion about the judicial activists on the D.C. Circuit, I can’t say this surprises me even in light of the previous precedent. Indeed, from what I have heard, the D.C. Circuit appeared breathtakingly eager to rush past the procedural issues and declare that the FCC has absolutely no jurisdiction to regulate anything an ISP ever does, ever.

So why has Comcast, which (along with its trade association) has argued that it would violate its First Amendment rights for the FCC to regulate its conduct as an ISP, posted this blog entry to explain that of course they totally support FCC regulation of broadband ISPs, under the right circumstances, etc.?

Answer: Comcast fears to win too much. For Comcast (and other broadband providers), the ideal world consists of an FCC with jurisdiction but no authority. That is to say, they want an FCC that appears to have authority to do something, but when push comes to shove is prevented from actually doing anything Comcast doesn’t like. Which is why Comcast wanted to win on procedure and, perhaps, get the court to threaten the FCC that it had no authority. In that universe (which could still come to pass), Comcast could keep Congress from giving the FCC explicit authority by saying it has jurisdiction but keep the FCC from doing anything by claiming that it lacked authority for any specific action.

But there is every indication that the D.C. Circuit will go much further, and find that the FCC has no jurisdiction to even consider regulation of ISP behavior no matter what the circumstances, because it doesn’t believe that ancillary authority exists. While that sounds like exactly what Comcast would want, it scares them silly. Because even the fear of this sort of huge loss creates a panic that could lead Congress explicitly delegating the FCC extremely clear and unambiguous authority.

More, including a shout out to all my fellow Buffy the Vampire Slayer fans, below . . . .

UPDATE: According to this blog post by Washpo Reporter Cecilia Kang, I’m not the only one thinking this way. A few more choice remarks from NCTA’s Kyle McSlarrow about how the FCC’s role is to be a big ATM for his members may get even this Congress off it’s rear end.

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