Commissioner Pai: A ‘Consensus’ Of Incumbents Without Consumers Is No Consensus And means Disaster For 600 MHz.

Last week, the Federal Communications Commission (FCC) Wireless Bureau issued what should have been a fairly routine and highly technical Public Notice about possible alternative band plans for the 600 MHz Auction aka the Incentive Auction aka “that incredibly crazy, complicated deal Congress came up with last year where broadcasters sell back licenses to the FCC so the FCC can sell them to wireless companies.” Since public comment makes it clear that the various proposals present a lot of challenges (see my incredibly long and wonky explanation here), it shouldn’t surprise anyone that the Wireless Bureau asked for further comment after holding a band plan workshop a few weeks ago.

 

But Commissioner Pai issued a separate statement blasting the Wireless Bureau. In particular, Pai berated the Bureau for departing from what he called the “consensus framework” for one particular band plan – the band plan favored by AT&T, Verizon, the National Association of Broadcasters (NAB) and the largest equipment manufacturers. Pai ignored objections to the AT&/VZ/NAB plan and support from consumer groups (including Public Knowledge), competitors such as Sprint, or tech companies such as Microsoft. Over and over in his statement, Pai cited to the comments of AT&T, Verizon and NAB as proof of a “broad consensus” as if none of these objections existed.

As someone fairly active in this proceeding, who actually participated in the Band Plan Workshop, I am more than a little peeved. Yoo hoo! Commissioner Paaaaiiiiii!!! What am I, chopped liver? I am also more than a little irked at the allegations that the Bureau somehow behaved improperly in issuing the Public Notice. Pai’s accusation that the PN violates the Bureau’s delegated authority by soliciting comment on alternatives to the AT&T/VZ/NAB “consensus plan” appears designed to bully the Bureau into submission.

Setting my personal pique aside, as I keep trying to explain, letting the broadcasters and the largest wireless incumbents write the rules for the auction spells absolute disaster. If Pai genuinely wants to see a successful Incentive Auction, that means looking past industry “consensus” and getting into the very nasty and complicated details to figure out the right set of tradeoffs that will (a) get the broadcasters and wireless guys to the auction, but (b) not let them short the U.S. Treasury out of the cash it expects to collect in the process.

I vent and take one more shot at explaining this below . . . .

 

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First Reactions To The FCC’s 600 MHz Band Plan Workshop.

I was pleased to participate in the FCC’s 600 MHz auction (aka the Incentive Auction) band plan workshop last Friday. This was a pretty intense nerd-fest, with discussion limited as much as possible to real honest-to-God technical issues that arise with the band plan. While I knew some of this, the full scope of the problems associated with developing a band plan for this auction had not truly become clear to me until I sat through about 6 hours of technical discussion on the subject.

My biggest take away from this is that about the only way to get a rational bandplan on this is to go back in time to 1996 and tell Congress not to stop at Channel 51, but to clear all the way to Channel 37. Then, we go ahead to 2002, and tell Congress not to require the FCC to hold the first 700 MHz auction so we can actually com up with a rational band plan ion 2007. Given that I am unlikely to find either a souped-up DeLorean or a blue police box anytime soon, we are probably stuck with the existing constraints.

Most importantly, all the people yapping about how the FCC needs to focus on getting the maximum amount of spectrum to maximize revenue, please review this workshop before you open your yaps again. Srsly.

I explain why people who seriously care about the auction outcomes — even if it is only from a revenue maximization perspective — need to actually care about the technical issues before blathering on about recovering the most spectrum below . . . .

 

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Is Fear of Wireless Foreclosure “Speculative?” Depends. Is this About Intent Or Effect?

Recently, the Antitrust Division of the Department of Justice  (DOJ) filed these comments with the Federal Communications Commission (FCC) in the proceeding on spectrum aggregation limits (aka spectrum screen v. spectrum cap). The DOJ comments have some good stuff about the economics of the wireless industry and competition (in a theoretical way), and about why it is important to make sure potential competitors have spectrum, particularly low-band spectrum. Mostly, DOJ’s argument rests on the idea of “foreclosure,” that a wireless firm will bid on licenses at auction just to keep them out of the hands of competitors.

Asked about this on a recent earnings call, VZ CFO Fran Shammo basically said that there is no evidence that Verizon is bidding on licenses just to keep them out of the hands of rivals, so DOJ’s argument is “theoretical” and the FCC should not adopt any limits.

VZ basically argues that we should not worry about possible foreclosure unless there is evidence of an actual intent to foreclose. This treats a spectrum screen (and concern about foreclosure) as a precaution against bad actors. As long as bidding on licenses at auction makes sense for reasons other than foreclosure, and there is no evidence of any intent to foreclose, then everything should be just fine even if the outcome has the same effect as a foreclosure strategy (e.g., competitors don’t have enough spectrum to offer viable competing services.)

But the Communications Act does not work this way. Specifically, Section 309(j)(3)(B). Whether Verizon (or any other carrier’s) intent is as pure as the driven snow, or black as any comic opera villain, does not matter one iota. What matters is whether we avoid a “concentration of licenses” and “disseminate licenses among a wide variety of applicants” so that we “promot[e] economic opportunity and competition and ensur[e] that new and innovative technologies are readily accessible to the American people.”

As I will discuss below, the evidence from the 700 MHz auction and subsequent transactions demonstrates that we are feeling the effects of foreclosure, regardless of whether there was an actual intent to foreclose. As a result, the DOJ concern is not “theoretical,” but very real.

 

More below . . .

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The Right Cell Phone Policy In Boston.

The Associated Press reported that cell phone service had been shut down in Boston in the aftermath of today’s tragic Boston Marathon bombing. Happily, this report — sourced to an anonymous official — appears to be mistaken. Verizon and Sprint report that their networks are overwhelmed by the sudden spike in volume (common after a sudden disaster) but they have not been asked to suspend service and are in fact looking to increase capacity.

It is times like this when we remember exactly how dependent we are on cell phones, and why suspending cell service in an emergency like this (as happened with the BART nearly 2 years ago) is such a phenomenally bad idea. As a legal matter, the legality of law enforcement asking for a shut down of local cell service is much stronger than in the BART case. This is, arguably, the “ticking bomb” scenario that arguably justifies a brief shut down to protect lives. But the odds against a terrorist using a cell phone to detonate a follow up device after a shut off order are fairly low (terrorists try to coordinate, the explosions fairly closely, as we saw in Boston, and generally don’t like to rely on cell phones because they are not sufficiently reliable for this purpose).

As we are seeing in action, cell phones become the best anti-panic technology deployable at times like these. Everyone is calmer when they can stay in touch with family and loved ones, or receive updates from the authorities. Every “I’m fine” texted to a frantic relative is one less person tying up the information hotline or — even worse — going out to search. Indeed, with about 35% of people now without any landline service, cutting cell service would isolate about a third of people at just the moment they need to stay in contact. And while I have no information on how people are contacting the tip line, I would imagine that many are doing so with the most convenient phone available — their mobile phone.

The event also highlights the vital contribution of open WiFi hotspots as a furthering communication. At a time like this, every single means of communication comes into play. This is what I mean when I talk about the reliability that comes from redundancy. The ability to shift among networks can cut down on congestion and facilitate communication by public safety authorities. If we deployed mobile hot spots as well as cells on wheels (COWs), we could have substantial impact on the congestion situation. Something to think about as part of overall emergency preparedness. Because, sadly, there will be a next time. And when it comes, we will need to remember that we want to enhance communication and the flow of information and avoid congestion wherever possible.

Last summer, my colleagues at Public Knowledge and a number of other public interest organizations wrote these comments to the Federal Communications Commission (FCC) on why shutting down cell phone service for any extended period would be a very bad idea and probably a violation of law. (See also my colleague Sherwin Siy’s blog post here. The tragic events in Boston demonstrate once again how critical mobile phone service have become to all of us in a disaster, and what a terrible mistake it would be if local officials actually did shut down cell service at a time like this.

(I used to watch the Marathon go by on Heartbreak Hill (Commonwealth Ave, well back from the finish line). I was one of those frantically texting and posting status updates asking if family and friends were safe. I’ve been grateful for every response.)

 

Stay tuned . . . .

The Best 10 Ironies About The “Obama Phone”

There is so much about the “Obama Phone” nonsense that tickles my funny bone in odd places. It’s not just that everything conservatives say about it is factually wrong. It also proves that the cherished progressive belief that every policy ever adopted under Reagan and under W were universally unmitigated disasters for the poor and people of color is also wrong. (No, I’m not saying one good policy makes up for a load of bad policies – but honesty demands acknowledging that the Universal Service Fund (USF), of which Lifeline/Linkup is part, started under Reagan and got expanded to wireless by former Federal Communications Commission (FCC) Chair Kevin Martin under Bush).

 

As if this were not ironic enough, the “Obama phone” was approved by the FCC in part to address the massive sudden need for subsidized mobile phones for Katrina victims. In 2005-06, Tracfone distributed 30,000 phones to Katrina victims under the expanded Lifeline program, and raised awareness of the new program through the devastated Gulf Coast region, i.e, the same red state regions now bellyaching about the program. For Progressives, consider that the “Obama phone” was invented in part as a response to Katrina by the President who “didn’t care about black people.”

 

Even better, it’s an example of how Republicans once upon a time took action to create programs to address the needs of poor people, even when it meant raising rates on the wealthy – a thing neither conservatives or progressives appear willing to acknowledge ever happened. Then, of course, there is the irony that the people most upset about the “Obama Phone,” rural conservatives, are subsidized out of the same program at a much higher rate. For us law geeks, it’s fun to remember that USF started with the FCC exercising its “ancillary authority,” that the D.C. Circuit affirmed this massive expansion of FCC authority, and the Republican Congress would later approve, endorse, and expand this as part of the 1996 Act.

 

Another irony on the Republican side is that USF is exactly the kind of “teach a man to fish” program for the poor that at least some Republicans say holds the key to winning back the working class vote. Rather than just being a hand out, it puts an important tool for participating in the national economy in the hands of the poor so that they can find and keep jobs and become self-sufficient. Anyone who has applied for a job, or just about anything else these days, recognizes that having a mobile phone so your work can find you (especially if you are a day laborer or some other form of self-employed) is critical to success. Republicans should be arguing that this is exactly the kind of program that gives people tools to improve their lives rather than “creating dependencies,” etc.

 

Finally, as with so many of these things, legislation to end the “Obama phone” (as proposed by a number of Senators recently) would probably drive a serious spike into provision of rural wireless – and ultimately rural broadband and telephony generally.

 

So here are my Top Ten Ironies about the “Obama Phone.” Not that I expect actual history to matter much. But for my own amusement, and for the handful of telecom geeks like me that find this stuff entertaining, I elaborate below . . .

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The Progeny Waiver: Will the FCC Wipe Out Smart Grid? Save Thousands of Lives? Both? This Season on Spectrum Wars!

Depending on whom you ask, the Progeny Waiver will either (a) totally wipe out the smart grid industry, annihilate wireless ISP service in urban areas, do untold millions of dollars of damage to the oil and gas industry, and wipe out hundreds of millions (possibly billions) of dollars in wireless products from baby monitors to garage door openers; (b) save thousands of lives annually by providing enhanced 9-1-1 geolocation so that EMTs and other first responders can find people inside apartment buildings and office complexes; (c) screw up EZ-Pass and other automatic toll readers, which use neighboring licensed spectrum; or (d) some combination of all of the above.

 

That’s not bad for a proceeding you probably never heard about.

 

For me, the Progeny Waiver is a microcosm of why it has become so damn hard to repurpose spectrum for new uses. The added twist here is that this time it is largely the unlicensed spectrum users acting like incumbents and saying that it will be the end of the universe if Progeny lights up its system (although the licensed neighbors say the same thing, pretty much), and Progeny, the licensee, arguing that everything will be JUST FINE, really, and if it isn’t too damn bad because we are licensed and they are unlicensed so there!

 

You might ask, “if this Progeny thingie is so gosh darn important, why have I never heard of it?” Well that’s why you read this blog, you clever reader you. This amazing little proceeding is still so deep in the bowels of the FCC that only the true spectrum wonks have noticed. But action now appears imminent, so consider this a sneak preview of this season’s favorite telecom reality show, Spectrum Wars.

What raises the stakes on this too damn high, however, is the implications for the future of unlicensed generally and the implications for the credibility of the FCC as an agency able to actually do the technical job of managing an increasingly complex spectrum world. Fairly or unfairly, everyone is going to compare this to Lightsquared (waiver, followed by worries about interference, arguments that the FCC failed to follow its own rules and procedures, blah blah). Let us add to this House Republicans who would love to call the FCC on the carpet for mismanaging spectrum – especially around unlicensed. Add to that the car manufacturers in the 5 GHz band and the federal users generally wanting to show that the FCC can’t adequately manage the stuff it has and you have a pack of circling sharks just waiting for the FCC to screw this one up and commence the feeding frenzy. So no pressure.

 

Happily, I have, if not a solution, at least a better way for the FCC to cover it’s rear-end and contain the damage, below . . . .

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Cecilia Kang Is Right: There Really Could Be A Free National WiFi Network (of Networks)

This past week, we’ve had quite the discussion around Cecilia Kang’s WashPo piece describing a plan by the FCC to create a national WiFi network by making the right decisions about how to allocate spectrum between licenses for auction and what to leave available for the unlicensed TV white spaces (“TVWS” aka “Super WiFi” aka “Wifi on steroids”). As Kang describes, the FCC’s opening of sufficient spectrum for TVWS could lead to “super WiFi networks (emphasis added) around the nation so powerful and broad in reach that consumers could use them to make calls  or surf the Internet without paying a cellphone bill every month.”

Needless to say, the article faced much pushback, despite a subsequent Washpo clarification to indicate the FCC was not, actually, planing to build a network. Amidst the various critics, there were some general defenders of the concept. My colleagues at EFF noted that increasing the availability of open spectrum for WiFi-type uses , and my friends at Free Press argued that such a free public wifi network (or, more accurately, series of networks) is in fact possible if the FCC makes enough good quality spectrum, suitable for broadband and usable out doors, available on an unlicensed basis.

I will now go a step further than any of my colleagues. I will boldly state that, if the FCC produces a solid 20 MHz of contiguous empty space for TV White spaces in the Incentive Auction proceeding, or even two 10 MHz guard channels that could nationally produce two decent sized LTE-for unlicensed channels, then we will have exactly the kind of free publicly available wifi Kang describes in her article. Or, “Yes Cecilia, there really is free national public wifi. Don’t let the haters and know-it-alls tell you otherwise.”

 

More below . . .

 

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

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

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.

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.

More below . . . .

 

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