Tales of the Sausage Factory

An insider’s view of the media hegemony

Dave Sez: “It's raining, and I can't watch Charlie Brown in HD.”

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Some of you may remember my friend “Dave” who tried to get the $10 DSL deal from AT&T in ’07 when he moved to Sacremento. As I noted at the time, Dave does not get cable TV “on the grounds that 99% of the programming ‘sucks.’” Being a smart and technologically savvy fellow, as well as keeping up on all things media and telecom by reading this blog, Dave went and got his NTIA coupon and bought a converter box and did everything like a technologically savvy consumer should.

Did this bring Dave the wonders of digital television? Sadly, no. But let him tell you in his own words below . . . .

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Update: Apology to Craig Settles

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I owe Craig Settles an apology for my snarky aside in my piece on what the broadband stimulus does. Craig has written his own rebuttal to the NY Times piece, in which he explains that the reporter lifted a single quote from a 30 minute interview out of context. In private correspondence (as well as in a comment on the original post), he has shown himself an advocate for rural broadband and certainly not a tool of industry. He also gets high ratings from Jim Baller, one of the real heroes of munibroadband and broadband policy generally.

I’ve amended the original post to take out any reference to Craig and the out-of-context quote.

Stay tuned . . .

Public Service Announcement for Public Knowledge

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The great public interest advocacy group Public Knowledge (about which Harold might tell us more, if he feels like it), has issued an alert about efforts by lobbyists of the Hollywood and corporate-state varieties to insert nasty, scary language about “copyright filtering” into the stimulus bill.

I used the Public Knowledge website to register my objection. Here’s the version of the letter I sent to Senator Reid and Congressman Waxman:

Dear Representative/Senator,

It is my understanding that during the conference committee on the stimulus bill, your office may be asked to change the provision that deals with public grants to spur broadband deployment to allow for copyright filtering. This may be proposed as a “noncontroversial” change that would allow Internet Service Providers to inspect its subscribers’ Internet connections to filter out copyright infringement, under the guise of “network management.” Copyright filtering is outside of the capabilities of network management, would be a massive invasion of privacy and would prohibit my lawful use of copyrighted works — for purposes of education, criticism, and commentary.

Copyright filtering is very controversial and I urge you to oppose such changes to the stimulus.

As someone who depends on free downloads of my own copyrighted works for marketing and publicity, I consider copyright filtering not only unconstitutional, unAmerican, but also a threat to my livelihood. Please resist the temptation to go down this corporate-statist road. Nothing good will come of it.

Sincerely,

John Sundman

Please click on the link above and do the right thing.

Understanding What The Broadband Stimulus Does, and What It Doesn't Try To do.

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Not unsurprisingly, we have considerable debate on the merits of the broadband stimulus package, even leaving aside the network neutrality provisions. They range from this NYT article suggesting that building out in rural is a waste and won’t create jobs to Yochai Benkler’s more optimistic piece to my own previous enthusiastic support (here and here). Along the way, we find plenty of folks with a “yes, but –” because it does not address urban builds or competition or network neutrality or other issues in a way they consider satisfactory, and this weakness, from their perspective, makes the whole bill a worthless boondoggle and a multi-billion gift to the incumbents to boot.

I find the claims of those pushing tax credits or opposing the network neutrality conditions that grants will not create any jobs or result in any new broadband uptake, and that conditions on grants will prevent anyone from building these systems, simply not credible. I can only conclude those pushing this line either don’t get outside Washington DC and New York City much or have their own agendas. Otherwise, they should check out my friend Wally Bowen at MAIN and how he and projects like him are creating jobs for network operators and bringing economic opportunity for their communities. But even setting aside such extremes, it should come as no surprise that we see a variety of opinions on what the broadband stimulus does or should do because:

1) We have a set of complex problems;

2) Everyone has a different perspective on the nature of the problem(s).

This makes assessing the cost/benefit difficult, and makes getting the prospect of any consensus of opinion phenomenally unlikely. What constitutes proof for me that this bill (even after the Senate changes) looks to do a lot of good and is therefore worth the cost won’t persuade others who disagree with me on the fundamental nature of what we need to fix.

In the hope of persuading folks, however, I lay out my arguments below on why I think the broadband stimulus is well designed to handle one piece of the very difficult puzzle of deploying a ubiquitous nationwide broadband system that all citizens will use so they can partake of the rich opportunity for civic engagement, economic development, educational opportunities, and new services such as telemedicine (even if they don’t realize they need this yet). Along the way, the stimulus bill gives another nudge (but hardly solves) the question of how to keep the internet open to innovation and “as diverse as human thought.”

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Sermon — Will Progressives Be The Generation of the Desert or The Generation of Joshua?

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I must interrupt my usual analysis for a sermon.

It is appaling to me that we stand on the verge of seeing the stimulus bill go from a reasonable piece of legislation designed to fundamentally alter the economy to enhance sustainability to a return to the usual failed policies and boondoggles. This is not happening because the Obama people are “stupid” or “failing” or because the “special interests” are too powerful. It does not happen because Rush Limbaugh is “too strong.” If it happensm, it will be because the people who listen to Rush Limbaugh are willing to get off their rear ends and pick up phones and make calls to their Senators and to their local newspapers and browbeat them into cowed compliance — and we Progressives will not.

Voting on election day is not nearly as important as being willing to spend five minutes when it counts. We have the tools, we have the moment, we have a good first step before us. But will we trouble ourselves to save it?

The time has come for Progressives to decide. Shall we be the helpless Generation of the Desert, the generation that time and again quailed before the challenge and demanded Moses return them to the land of Egypt and died in the desolate waste without coming to the Promised Land? Or will we be the Generation of Joshua — willing to make war to take the Land flowing with milk and honey the Lord has promised us? This fight for the stimulus bill marks our first test.

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House Republicans Continue to Stand Up For Principle Despite Self Interest or Common Sense. Go GOP!

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I am not entirely sure that a delay of the DTV transition is a good thing, but I know a political reality when I see it. With too many viewers likely to experience serious television viewing disruption, the smart politician takes some prudent steps to avoid blame. Hence the unanimous Senate vote to delay the transition until June. But the House Leadership, eager to give Obama and the Ds their first “defeat,” felt otherwise. They managed to muster a cadre of the faithful to vote against the passage of the Senate bill in the House “on suspension,” meaning without debate and requiring a 2/3rds majority.

It’s largely a symbolic gesture, since the Ds can always bring the bill up through the usual processes. And, for the majority of the country who are not hardcore GOP “we hate Obama and want him to fail no matter what this does to the country or even us personally,” it reenforces the perception that the Rs would much rather play games than get stuff done. Still, Republicans and various news outlets are all about how this marks Obama’s first “defeat.”

I look forward, therefore, to future news stories such as this:

Washington — House Minority Leader John Boehner (R-OH) and senior Republican members of the House of Representatives suffered serious head injuries today after slamming their heads repeatedly into a wall until they fell unconscious. The strange behavior began when Obama suggested he would introduce legislation that would have made it illegal to slam your head into a wall until you fall unconscious.

Conservative pundits praised Boehner and his colleagues for “sticking to their principles” and “refusing to cave.” “If Obama and his socialist comrades in Congress outlaw giving yourself a concussion, they’ll take our guns away next!” Warned Rush Limbaugh. Other media analysts questioned whether this “head banger rebellion” marked a turn around in the Republican’s fading fortunes. “If Obama can’t get bipartisan support for not injuring yourself, you have to ask what sort of influence he really has,” said Brit Hume.

House Speaker Nancy Pelosi (D-CA) expressed sympathy for her Republican colleagues and wished them a speedy recovery. However, a source close to the Speaker reported that — when conferring with President Obama and Senate Majority Leader Harry Reid (D-NV) — Pelosi giggled and said: “Next week, let’s get them to eat dung beetles.”

Stay tuned . . . .

Why Do Competitive Markets Keep Misbehaving? The Curious Case Of Cellular Txt Msging.

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Been meaning to get to this for awhile now, which is why the links are so old.

It has long been an article of faith among the worshipers of the Gods of the Marketplace that once you achieve “competition” (generally described as at least one more possible new entrant, but certainly where multiple providers exist) you eliminate regulation, because a competitive marketplace gives consumers what they want — like high fuel efficiency standards and a secure financial system. Thus, for the 30 or so years, we have more and more framed the debate in telecom and media policy around whether or not we have “enough” competition rather than about the benefits or drawbacks of any actual policy. Unsurprisingly, you can always argue that we have “enough” competition (or that competition is about to emerge) and thus side step the whole question of the actual state of reality and what reality we might prefer.

Enter the curious case of cellular telephony. I’ll take the case of text messaging, although the same argument applies in varying degrees to other aspects of the wireless market like network attachments and ring tones. As Randall Stross wrote in the NY Times at the end of December, the cost charged to consumers for txt messaging has absolutely nothing whatsoever to do with the actual cost of the service. Yet — as we are constantly reminded — the cell phone market has four national players and numerous regional players. This makes it squindoodles more competitive than, say, the broadband market in most places in the country where you can generally get two somewhat comparable services (cable and DSL) and a whole bunch of also rans that folks like to claim are competition.

Text messaging is so overpriced compared to cost that last year Senator Herb Kohl, Chair of the Senate Antitrust Subcommittee, has sent a letter to AT&T, VZ, T-Mobile, and Sprint (more details here)asking ‘Ello, ‘ello, ‘ello and what’s all this ‘ere, then? — you’re nicked!’ (no, I have no idea why Kohl sounds like a British Bobby from 50 years ago — ask him). As Kohl noted in his letter, the consistent ridiculously high prices for SMS txt messaging “is hardly consistent with the vigorous price competition we hope to see in a competitive marketplace.”

Short answer: it is utterly consistent with the nature of the wireless market. But — and here’s the shocker — real world markets are often much, much more complicated than the followers of the Gods of the Marketplace like to believe. Cell phone companies charge outrageous prices for text messaging (and other services like ring tones) not because they conspire with one another, or even because they engage in conscious parallelism. Nor do they do so because they must as a result of actual costs. They do so because — to use that classic phrase — it is what the market will bear, and the structure of the market ensures there is no benefit to any cellular carrier to offer text msging plans at anything approaching cost plus reasonable profit.

In economic terms, this is an oligopoly. Washington regulators treat oligopolies as if they were the same as competitive markets, unless one can show evidence of actual collusion — in which case it becomes a question of price fixing. But in reality, it doesn’t always work out that way. Even absent collusion, the ability of players to engage in strategic planing can negate the anticipated benefits of competition. Applying this framework to the CMRS market, and the question of the price of text messaging goes from suspicious riddle to entirely predictable. Whether you regard this as a reasonable outcome or not has nothing to do with “competition” or “market failure” and everything to do with whether we make a policy choice to care about it or not.

(Much) longer answer below . . . .

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Why The Stimulus Speed Upgrades Are Right, Or Public Utility Meets Zeno's Paradox.

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Many folks talk about broadband build out as if it were rural electrification. I do agree with this in one sense — it is a critical part of our infrastructure and links to our tradition of ensuring that we remain one country with access to vital services for all. In this respect, broadband is similar to telephone/voice, electric power, sewage, roads, and other other public utility/natural monopoly type investments. But it is fundamentally different from all of these in a fundamental way. Other public utilities have high initial construction cost, but then have very predictable maintenance and upgrade costs. This makes it possible to solve some problems with a huge one-time grant or, for the private sector to make a serious cap ex investment, but then budget for regular upgrades based on projected need and maintenance based on standard depreciation.

Not so broadband. As our technological capacity increases, we increase both the potential capacity for the network and our capacity to use the network in unpredictable ways. But we have neither public policy nor private sector models that acknowledge this — with the possible exception of Verizon, which solved the problem from their perspective by aggressively pulling fiber/overbuilding capacity as to current demand where profitable and aggressively selling off high cost rural regions. And, while that works for Verizon and its shareholders, it rather sucks from a public policy perspective.

I call this the Zeno’s Broadband Buildout Problem. No matter how much Achilles invests in build out, he will never catch up to the limit of possible upgrades. As I explain below, my tentative conclusion is that the right public policy result is a recognition that we don’t get to do a one time investment and go away, but need to continue to experiment to find sustainable models that factor in growth rather than simply look at build out followed by steady state. I’m not sure beyond that, other than my conviction that anyone who shrugs and says “that’s why the government shouldn’t do this at all” is definitely wrong.

OTOH, it also means I find the speed upgrade in the stimulus package — 45/15 for wireline and 3/1 for wireless — pretty good despite the fact that many of us want to reach the 100 mbps or even 1 gigabit/second capacity for future network needs. Broadband Achillies may not be able to catch up to Bandwidth Demand Tortois, but that doesn’t mean he gets to slack off either. A good swift stimulus in the patootie is actually a pretty good idea, given the open ended nature of the problem.

More below . . . .

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Big Congratulations To Copps on Being Named Acting

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No surprise, but good to see it finally happen officially. According to this article, Commissioner Copps has been named as acting Chair, pending appointment of the official chair (presumed to be Julius Genachowski).

I expect Acting-Chairman Copps will be heavily focused on the DTV transition for the next few weeks. Indeed, I think that if they do not push off the analog switch off date, the smartest thing would be to keep Copps in as Acting until after the transition. We have only a few weeks to go, and the idea of piling on the inevitable confusion of a new Chairman — even one as familiar with the agency as Genachowski — on top of the mad scramble of the DTV transition is probably not a good idea.

In any event, I’m extremely pleased with the FCC in Copps’ extremely capable hands however long it lasts.

Stay tuned . . . .