Series of Tubes

Net Neutrality, ICANN, and other issued related to internet infrastructure

What the DoJ Documents Tell Us About the Comcast/NBCU Merger

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In all the hoo ha about the Comcast/NBCU Merger, few folks troubled to read the Department of Justice Competitive Impact Statement, Complaint, andConsent Decree. That’s rather unfortunate, as these documents sets forth a straightforward case under the antitrust laws for program access conditions for online competitors and for network neutrality. Here’s the short version:  Comcast pre-merger makes almost 30 times more money from providing cable service than from programming revenues. Even adding all of NBCU’s revenue, Comcast will still make more than twice as much from selling cable service ($34 billion) as from programming ($16.9 billion). Anyone who can do basic arithmetic would therefore conclude that yes, Comcast’s incentive to protect its cable business from erosion by online distributors (or even from traditional rivals) outweighs the potential gain from increasing programming distribution. As an added bonus, for those ideologically committed to believing otherwise, turns out Comcast’s own documents agree with the simple arithmetic and not the fun theoretical models their experts submitted. Which is why (among other reasons) DoJ continued oversight is not merely something extra. It really matters.

Lets break this out some below …

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Three Potential Black Swans for Telecom 2011

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So with 2010 finished and 2011 now thoroughly under way, it’s time to play Prognosticate Me! Mind you, anyone can predict “spectrum will remain a focus” and “USF reform will loom large.” The fun lies in trying to pick the surprises. So I have selected 3 potential “black swans” for 2011. The term comes from Nassim Nicholas Taleb’s book about the high impact of low probability events.

I’ve selected three highly unlikely events that could have huge impact in 2011. First, the FCC could get serious about making online video accessible to virtual MVPDs (“MVPD”=multichannel video programming distributor, which is the fancy way to say any pay TV provider like cable or satellite) and new technologies. Normally betting on the FCC to play anything other than King Log while the incumbents play King Stork is a long-shot, unless the FCC actually has to act. Here, the need to renew the program access rules means the FCC will need to look at the state of the video market, and creates a forum for these issues.

Second, I’m betting that the FCC will continue to look at the underlying issues in the Comcast/L3 interconnection dispute long after the Comcast merger gets done, possibly rolling the issues raised here with the never ending proceeding on special access reform. Why would the FCC look into these issues when the FCC hates this sort of controversial stuff and has never wanted to look at, let alone regulate, internet backbone traffic? Because the there is (literally) too much riding on this. Comcast/L3 is much more a symptom of fundamental change in the economics of internet transport than about any two actors, and the pressure for the FCC to at least know what’s going on and figure out how it impacts the economics of Internet backbone transport — and therefore by extension the economics of all things Internet — is going to be very difficult for the agency to ignore.

Finally, I list my favorite potential black swan, LightSquared. Odds are against them for a variety of reasons, from possible financial problems to resistance from incumbent giants AT&T and Verizon. But the system, now that it has cleared a possible show-stopping satellite malfunction, has the potential to totally revolutionize the underlying economics of wireless backhaul and wireless services by providing really cheap purely wholesale LTE service. On the downside, it may also destructively interfere with GPS systems, which could be kind of a problem according to this Motorola filing with the FCC. Either way, it looks potentially pretty disruptive.

More below . . .

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Why Network Neutrality Will Not Die (But It Doesn’t Mean We’ll Win, Either).

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Was it only last month when network neutrality was supposedly dead, deceased, passed on, expired, gone to meet its maker, run down the curtain, and joined the bleedin’ choir invisible? Yet here we are, with a network neutrality rule teed up for a vote at the FCC’s December 21 meeting. Even more surprising, it appears that a number of long-time opponents may actually be willing to come to the table on a compromise rule, with AT&T’s Jim Cicconi practically living in the Chairman’s office for the past few weeks presumably negotiating over the details of a proposal. Mind you, if the proposed rule is too much of a compromise, network neutrality supporters will oppose it. And, even if major carriers support it, Republicans at the FCC and in Congress are dead set against it.  But for the moment, network neutrality appears to have once again gone from “totally dead” to “certain to become law.”

Truth is, network neutrality has been declared dead so many times it ought to have its own movie or television franchise. I picture Jim Cicconi as Dr. Evil staring at a garishly dressed Josh Silver as Austin Powers and saying: “But you died in that landslide election, when my Tea Party sharks with laser-beams grafted to their skulls had you trapped in their lair!” Josh flips back his hair and replies: “Network neutrality will never die, baby. It’s too shaggidelic!” Or perhaps I, in my secret identity as Perry the Platypus, will once again foil Scott Cleland as Dr. Heinz Doofenshmirtz as he attempts to destroy the open internet with his Close-Internet-Inator (besides, I think FCC Chair Julius Genachowski and Chief of Staff Eddie Lazarus would look cute dressed as Major Monogram and Carl). Or perhaps a looming Voldemort-eque composite of the cable industry will turn its high power lobbying wand on a Network Neutrality Harry Potter (played by Sascha Meinrath, since Ben Scott is no longer available) and asking “Why do you live?” and a defiant Meinrath answers: “Because I have something to live for!”

But while network neutrality appears almost comically unkillable, that does not mean those pushing for strong network neutrality rules  will actually prevail.  As The Mikado once observed: “it’s an unjust world, and virtue is triumphant only in theatrical performances.” Hence the concern over the actual substance of the rule and the endless last minute wrangling.

Why Network Neutrality keeps coming back from the dead but why supporters still need to pull out the stops to get a strong rule below . . . .

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FCC Google “Spy-Fi” Investigation To Establish Network Neutrality Authority? Thanks Scott!

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Scott Cleland is mad at Google. This is not much of a surprise. Scott Cleland spends much of his time mad at Google and wishing terrible things would happen to them. This time, Cleland wants the FCC to investigate and punish Google for their collecting user data while sending their truck fleet to find open hot spots as part of their “street view” project. The FCC has confirmed it is investigating Google’s conduct. Cleland hopes the FCC will throw the book at Google.

I’m also hoping the FCC will act. But having pondered this for awhile, I’m not sure Cleland understands precisely what an FCC action against Google would mean for issues like network neutrality and regulation of wireless broadband access. Briefly, it would require the FCC to either assert authority over all unlicensed spectrum and passive reception under some combination of Section 301 (47 USC 301) and Section 302 (47 USC 302a) of the Act, or authority over wireless broadband pursuant to Section 705 (47 USC 605). While this does not trouble me, evil pro-regulatory big-government free-market hating Socialist that I am, I am rather surprised to see those (like Cleland) who usually want the FCC kept at arms length begging the FCC to charge into the fray and extend its authority over Google, especially when such an expansion of authority would extend to network neutrality regulation as well.

More below . . . .

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Sorry AT&T, Title II Would Not Require The FCC To Allow Paid Prioritization.

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AT&T has raised a bit of buzz recently with claims from their policy folks that under Title II, AT&T could still do paid prioritization (aka “fast lanes,” “toll lanes,” or, as I like to call it in honor of the man who so clearly laid out the concept “Whitacre Tiering” — but that one sadly never caught on). The implication of these recent statements apparently being that (a) Title II is therefore sooooooo not worth it; and, (b) the demand by whacky-crazy-socialist-radicals to prohibit paid prioritization is just more whacky-crazy-radical-socialist stuff, so pay it no mind. One might ask, if so, why AT&T has invested so much money in demonizing Title II when it supposedly would require the FCC to allow paid prioritization, but I digress.

Instead, let’s play stupid fun lawyer games and try some legal analysis. Ooooooohhhh!!! I love that game! It makes me all nostalgic for a time when we actually filed pleading at the FCC and debated these issues before agencies in a public record rather then in blogs (which tells you how pathetically old I am). Besides, all kidding aside, debating actual law and precedent with with some of the other lawyer types willing to play law games is one of the few intellectual pleasures remaining to me in Policyland these days, given the way this usually degrades to blah blah Socialist blah blah. Heck, I may even see some substantive reply.

My short answer is that while Title II would allow the FCC to permit paid prioritization, in a non-discriminatory manner, it does not compel the FCC to permit paid prioritization. Further, while Title II would not require the FCC to prohibit paid prioritization, it would give the FCC authority to prohibit paid prioritization. Indeed, I first addressed this back when Genachowski announced his “3rd Way” proposal. At this point, the more results oriented can skip directly to the comments to tell me how socialist stupid I am, or describe how evil AT&T is (depending on your preference). Those interested in a little law and policy, see below . . .
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Web dead? Some Reactions To Chris Anderson’s Wired Piece

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A lot of folks have reacted to Chris Anderson’s deliberately provocative piece in Wired: “The Web Is Dead, Long Live the Internet.” I have two chief reactions. One is a methodological one — Anderson gives no justification for reliance on percentage of total Internet traffic as being a measure of anything in particular from which we might draw conclusions. I am hardly the first to note, for example, that according to Anderson’s chart, DNS traffic ceased to matter by the mid-1990s, a conclusion dramatically contradicted by actual reality.

But my chief criticism is substantive. Anderson — perhaps unintentionally — does an excellent job recapitulating Karl Marx’s original Socialist critique of capitalism, i.e., that it will invariably reduce to a monopoly or cartel structure exacting monopoly rents (although he leaves off the part about it eventually collapsing under its own inefficiency, the workers seizing the means of production, yadda yadda yadda). But his conclusion is that such is human nature and we ought to just suck it up as long as we keep getting cool stuff. (Aps are the opiates of the technorati masses, apparently).

But there is a reason I am not a socialist (despite claims of some critics to the contrary) and instead brand myself as a member of the Congregation of the Progressive Capitalists.  Anderson notes that “Monopolies are actually even more likely in highly networked markets like the online world. The dark side of network effects is that rich nodes get richer.” But he overlooks the ability of public policy to prevent that from happening. Anderson appears ignorant of the role of such things as the FCC’s Carterfone decision and subsequent rulemaking, or the role of the Computer Inquiries in creating the conditions for the growth and development of the Internet and the applications that ride on it, including the Web.

Accordingly, if we ignore the methodological problems and accept the underlying economic argument, the solution is not to develop ill-suited analogies based on the happenstance that we can somehow define “the Internet” as “post-adolescent” to somehow rationalize our loss of freedom. To the contrary, if we are really seeing the decline of the Web and the rise of the App, we have a policy choice to make. We can do nothing, and follow Anderson’s inevitable slide from the open world of the Web to the closed world of the Ap. Or we can do what we did to the wireline world 40 years ago in the FCC’s Carterfone and Computer proceedings and wedge the system open.

Put another way, we can still save the vibrant free market on the web through a little proactive regulation, rather than accept Anderson’s “inevitable” collapse.

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What Dems Have To Lose If Genachowski Embraces The Latest “Net Neutrality Consensus.”

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I occasionally suspect my colleagues in the Public Interest community lack a sense of humor — although perhaps it is simply that I am in a more relaxed frame of mind after my annual vacation from the 21st Century. I am neither surprised nor outraged at the recent news that members of the Information Technology Industry Council (ITIC) are picking up where the FCC “secret meetings” left off and trying to come up with a net neutrality consensus framework. To me, it seems rather sad and funny. My only surprise is that even in Washington, the notion of an industry trade association working with its members is anything unusual or significant. I mean, that’s what industry trade associations do after all.

The sad thing is that, given the utter genius the Obama Administration has shown for pissing off the Democratic base through constant waivering, there is every reason to believe that the FCC might be tempted to view what comes out of this “industry consensus process” as something it can embrace to its bosom. This would be a disaster not merely for Genachowski and what remains of his reputation, but for Congressional Democrats as well. If there is one unequivocal lesson that came out of the Goog-VZ debacle last week, it is that the Netroots care deeply about this issue. While I get that the DC establishment considers the Netroots something of an embarrassment (or, as Rahm Emmanuel famously opined, “bleeping retarded”), Congressional Democrats understand that unless the Netroots (a) keep giving money, and (b) turn out and vote, they are toast — as evidenced by Alan Grayson’s abrupt about face from his previous “let Congress handle it in our own sweet time” to “Congress and the FCC must step up now.”

More below . . . .
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Why We Care About Broadband Policy, Not Competititon.

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I’m back from my week of travels, where lousy broadband connectivity prevented me from blogging my trip to the NARUC Summer Conference and trip to Netroots Nation. Hopefully, I will get to fill in some of the blanks. NARUC (the National Association of Regulatory Utility Commissioners) passed some good Telecom resolutions supporting the FCC’s reclassification of broadband back into the Title II telecom box (although reminding the FCC that states have an important role to play and therefore to use preemption sparingly), and urging the FCC to address early termination fees for cell phone services.

So to get the ball rolling, here is a reprint of my opening remarks in the “framing debate” between myself and Ray Gifford from our Wed. morning NARUC Telecom session. As regular readers know, I’ve argued that things like Network Neutrality are right as a matter of economics (that is, they promote a better economic outcome for everyone: see economists make this argument here and here), that it is critical as a matter of First Amendment freedom and to prevent “virtual redlining.” Below I add an additional argument, what Ray characterized (and I agree) is a “progressive era” argument for why we care about broadband policy.

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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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