Tales of the Sausage Factory:
700 MHz PreGame Show: Reading the Tea Leaves on Verizon and AT&T's Last Moves

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Well the short forms are in, and a surprising number of companies are keeping mum about whether they even filed or not. But a few more interesting tidbits have turned up — notably that Echostar will come to the ball without its dance partner from the AWS auction, fellow satellite TV provider DIRECTV. And Clearwire, an anticipated participant, will sit this one out.

But of course, all eyes turn to the expected big boys of the auction, the largest incumbents, the returning champions, those winners of wireless, the masters of mobility, AT&T and Verizon! These are the guys to beat, the multi-billion wireless guerrillas that should be unstoppable and able to dictate to the market whatever they want. With the cable guys eliminated, they should be on easy street. But with Google making its play, and Frontline getting a 25% “designated entity” discount if it bids on D Block, even the mighty incumbents need to tread warily and brace for battle, lest they end up playing the French to Google’s Henry V at the spectrum equivalent of Agincourt.

With the necessary paperwork in to the FCC on December 3 triggering the anti-collusion rules and ending the last chance to say or do anything related to the auction, every last minute twitch and adjustment of the incumbent will be under intense scrutiny. Professional prognosticators, armchair analysts, and even random bloggers like yr hmbl obdn’t will try to read the tea leaves and predict the outcome of the upcomming spectrum steel cage smackdown.

So with this in mind, it is interesting to note the unusual a last minute wireless asset swap between AT&T and Verizon. Traditionally, wireless carriers have avoided these sort of mutually beneficial deals, preferring to duke it out directly with rivals. But AT&T Wireless and Verizon Wireless are now fully assimilated into the ILEC Borg Collective. Is this last minute swap a sign that the major wireless players will act more like wireline incumbents and work to defend their common interests — such as resisting the intrusion of newcomers Google and Frontline? Or is it merely that there are so few players to whom the companies can divest these assets (in both cases, the swaps are for licenses the FCC ordered divested as conditions on acquisitions) profitably before the Dec 3 short form deadline that this trade was inevitable?

And what should we make of Verizon’s announcement it will embrace Google’s “android” open platform for wireless? Is it just another move by Verizon to adjust to the T. Googlii lifestyle needs and turn a challenge to its business model into an opportunity to make huge profits? Or is this a final effort by Verizon to ward off my Apocalyptic Google Prophecy by persuading Google it doesn’t need to win licenses to get what it wants?

Finally, there is Verizon’s Petition for Reconsideration asking the FCC to reverse its decision to allow Frontline to keep its “Designated Entity” bidding credit while still doing 100% wholesale, but only for D Block. Is this just yet-another-round of the non-stop sniping between Frontline and Verizon? A signal that Verizon is interested in D Block? Or even a possible feint to disguise it’s intention to go for C Block and leave D Block to others?

More below . . . .

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My Thoughts Exactly:
Howard the Duck, KISS, Sudd the original scrubbing bubble, and me

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Harold’s been wonkifying up Wetmachine lately, almost to the point of upsetting the delicate bullshit/wonkosity ratio that I, as Wetmachine circusmaster, have so studiously sought to maintain down the cascade of years. Time for some drastic action to keep our ph right.

Over on another group blog (which shall remain nameless) on which I hang out from time time time, a recent confessional thread has prompted people to fess up to embarrassing things from their adolescence, such as the fact that the first album they ever purchased was Michael Jackson’s “Thriller” or the Bee Gee’s “Saturday Night Fever”. That discussion inspired me to relate the tale of a post-adolescent piccadillo of my own which appears below the fold. To borrow a sentiment, if not the precise line, from Charles Dickens’ alter ego David Copperfield, whether this tale will make me an Internet hero worthy of your esteem and cross-linking, or whether it will make me more deserving of your open scorn or silent pity, these paragraphs must show.

One night, nearly thirty years ago, while drunk, I wrote a letter to the writers of Howard the Duck, a quasi-popular, quasi-cult Marvel comic book about a cynical, wise-cracking, cigar-smoking guy from a universe where everybody is a duck, who was stranded here in our universe one day when “the cosmic axis shifted”. The writers’ response, two months later, has immortalized me in bathrooms all over North America (and for all I know, all over the world).

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Tales of the Sausage Factory:
Is Nancy Pelosi Possessed By A Demon Trying To Sabotage The Democratic Party? Or Is The “SAFE Act” A Big Yawn?

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That’s the question I’m trying to figure out today.

It all has do with the passage last night of yet another bill written by luddites who see Internet access as the work of Satan and don’t care if they are screwing up the lives of actual women and children who depend on cheap access for their education, health care and livelihoods. While such things were a routine election year stunt under the Republicans, it is somewhat shocking to see Democratic House Speaker Nancy Pelosi (D-CA) pull something like this. As the Dems used a special parlimentary manuever reserved for “noncontroversial” bills to bring a fresh bill to the floor without any consideration by relevant committees or debates, (let us savor the irony of this happening the same day as the House Commerce Committee hearing labeling Martin’s FCC processes as “broken” for pushing items through in the dead of night without allowing debate or time for consideration) it is clear Pelosi and the House Democratic Leadership view this as something positive and important.

As I discuss below, however, according to the report by Declan McCaluagh, the bill is a potential disaster of epic proportions for poor women and children, minority inner city neighborhoods, and rural areas — all of whom benefit from the growing availability of community-based wifi and municipal wifi projects. And, as a political matter, it will create serious headaches for the Democrats among tech voters, younger voters who actually understand and rely on these servcies, and civil libertarians. Because just as these voters were finally starting to shake the long-standing stereotype of the Dems as the “Nanny State” party and regard the Republicans as the party that is generally anti-tech, anti-civil liberties, and far too obsessed about sex for its own good, in steps Ms. Pelosi and the rest of the Democratic leadership to alienate these guys in time for the ’08 election.

So is Pelosi possessed by a demon out to destroy the Democratic Party’s chances in ’08? Or — as equally Libertarian but usually more careful George Ou suggests — has famed Libertarian and generally anti-Democratic Party reporter (of “Al Gore Claims He Invented the Internet” fame, and, more recently, “Net Neutrality Is Dead and Buried — Thank God”) once again let his prejudices run away with him ad get in the way of accurate reporting? Although frankly, even if Ou is right, I think Pelosi and the Democratic leadership that rushed this through last night have done themselves no favors and — as is so often in the case with bills writen by a cobination of sincere ignoramaces with deep feelings and no sense with cynical political grandstanders — the proposed SAFE Act doesn’t actually do much to solve the real problem of trafficking in child pornography.

More below . . . .

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Tales of the Sausage Factory:
700 MHz PreGame Show: Ergen’s Echostar Dances Alone; Brave Little Toaster Or Stubborn Idiot?

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Echostar has decided to bid in the 700 MHz auction, despite DIRECTV sitting this one out. This raises the obvious question. Is Echostar founder and CEO Charlie Ergen a “brave little toaster,” boldly defying the odds and the nay sayers to reap a well-deserved reward in the end? Or is this another example of the stubborn idiocy that earned the proposed Echostar-DIRECTV merger the distinction of being the first merger in living memory actually rejected by the FCC because he refused to pull it when it became obvious it was doomed?

Actually, I’m betting on the “brave little entrepreneur” scenario, but the jury is still out.

More below . . . .

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Tales of the Sausage Factory:
Jenny Toomey Takes Over At Ford to Replace Becky Lentz — Excellent!

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A brief bit of noteworthy good news. The Ford Foundation has hired Future of Music Coalition founder and Executive Director Jenny Toomey to take the place of Becky Lentz as the Program Officer for Ford’s Media and Culture Policy program.

This is absolutely unqualifiedly fantastic news. As you can see from Wikipedia entry, Jenny has had tons of experience as an indie rocker, indie prodcer, movement organizer, and “big vision” umm… visionizer. I’ve worked with Jenny for the last 6-7 years and cannot think of anyone I’d rather have in this spot. Because of her experience, Jenny has the rare combination of understanding what makes effective organizing in the field and what makes things happen in DC. She has put together major presentations that tour the country and break down these complicated issues into something people can understand — and see why it impacts their lives. At the same time, she has testified before Congress some ungodly number of times, talking the policy wonk talk with the best of them. She is unfazed by the industry tactics of obfuscation and intimidation, and knows damn well when they are trying to buy off the public interest for pennies.

So while I am sorry I will no longer bump into Jenny regularly here in Washington policy land, I expect real good things to happen from her going to Ford. Good luck Jenny, and keep rocking the world.

Stay tuned . . . .

Tales of the Sausage Factory:
Nothing Like Biting Industry On The Ass To Get Republicans Hot For Process

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OK, color me cynical, but I find this recent bipartisan interest in the fairness of FCC processes a source of some considerable eye rolling on my part. Not because the issue isn’t timely, important, etc., etc. But because it wasn’t until the cable industry started bleating their little heads off that this amazing bipartisan consensus suddenly emerged.

For some background here, I wrote my first major paper on how badly the FCC processes suck rocks back in 2003. I and my employer, Media Access Project, have complained about the crappy way the FCC behaves going back to when the Democrats ran the show and the Media Bureau routinely issued “letter opinions” and developed “street law” that eventually became binding agency precedent. The whole business of how stations could circumvent the ownership limits by engaging in local marketing agreements (LMAs) and joint sales agreements (JSAs) which sold everything but the actual license was bitterly fought by MAP and goes back to the Bush I administration. And yes, I fully agree with the recent GAO Report about how FCC processes favor industry over the public because the long-standing relationships between FCC staff (including career staff well below the Commissioner level) and industry become back channels for critical information and influence.

But it sticks in my craw no end to see Republicans come alive to this issue for the first time because it bit the cable industry on the rear end instead of sticking it to the public interest community.

Nor am I overly thrilled with my friends and colleagues in the movement who seem to believe that Martin invented this mess. Certainly Martin has used every procedural device and negotiating tactic available to him. He is, as I have observed on more than one occasion, a hard-ball player. And his hrdball negotiating tactics — a huge list of agenda items, last minute negotiations, everything Adelstein complained about in his concurrence at te last meeting — have clearly generated ill-will and suspicion among his fellow Commissioners.

But when I think about all the crap that Powell pulled as Chairman with nary an eyebrow raised and compare it to the conduct of this FCC, I could just weep. Martin met with us in the Public Interest Spectrum Coalition (PISC) on multiple occasions when Senate Democrats wouldn’t even invite us to testify. And I still remember back in 2003 during the Comcast acquisition of AT&T Broadband that it was Martin who insisted that Powell issue a written denial of our motion to get access to certain agreements so that we would have a basis for appeal.

So while I normally am in full agreement with my friends at Free Press, I must vehemently dissent from their apparent insistence that Martin has debased the FCC’s processes to new depths. Martin’s FCC is such an improvement over the pro-industry/anti-public interest/don’t bother us because we pre-decided it cesspit that was the Powell FCC that these allegations can arise only because Free Press did not exist when Powell was running the first dereg show. As George Will noted, Michael Powell met a total of twice with public interest groups (once with my boss, Andy Schwartzman, and once with Consumers Union’s Gene Kimmelman) and conducted exactly one public hearing outside of DC before issuing his ownership order — in far off Richmond Virginia.

And as for the recent Tribune merger — please! I certainly disagreed with the result, but Martin has nothing on Powell’s former Media Bureau Chief Ken Ferree. Ferree twisted FCC law and process like a pretzel to give Tribune a waiver extension it didn’t deserve. This is the same Ken Ferree, btw, who informed the public interest community that the FCC would hold no public hearings on media ownership because the FCC didn’t need “foot stomping” to make a decision. Indeed, the list of the sins of Ken Ferree — whose arrogant disregard for process remains unsurpassed in the annals of the FCC — could fill several more pages of blog postings.

And while all this crap was going on, we had nary a peep from the Republicans in Congress. But as soon as Martin made it clear he intended to actually enforce the existing law against the cable industry, SUDDENLY Congressional Republicans woke up to due process issues and beagn to fret about “abuses of power” and Martin being “out of control.”

I can forgive my colleagues in the movement who weren’t around the first time. And I understand the Congressional Democrats, who were either out of power when Powell was running the show or simply not yet arrived on the scene. Certainly Markey and other Congressional Democrats were equally loud in their complaints about process when Powell sprang a spanking new “diversity index” on the public with no warning as they have been n recent weeks against Martin — but being in the minority their protests amounted to little. But when I hear Republicans like Barton and Upton, who positively applauded sticking it to the public time and again, rush to the defense of the poor beleaguered cable industry on process grounds, I have to say something. Even for the self-serving cynicism and hypocrisy that passes for principles in the Republican party these days, this is just too much.

I certainly hope the concerns of Mr. Boehner, Mr. Sunnunnu, and the other Republicans that have suddenly become obsessed with process persist after their master in the cable industry get what they want.

Stay tuned . . . .

Tales of the Sausage Factory:
700 MHz PreGame Show: Cable Cos Largely Pass — No Surprise And A Win for Public

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Yesterday was the day for companies interested in bidding in the 700 MHz auction to file their “Short Form” applications with the FCC. While it will still take a few days for the FCC to process the forms and for companies that made errors to correct the forms and give companies a chance to correct possible errors, we are seeing a few interesting developments already — notably in cable land. It is also interesting to see that MetroPCS and Leap never did get together before the auction.

On the cable side, no real surprise that most cable cos are sitting this one out. (Back in August, I already doubtful they’d want to play.) Actually, the mild surprise is that Cox is going it alone. I have not expected Spectrum Co. (the Comcast/Time Warner/other cable co joint venture) to bid, despite winning big in the 2006 and AWS auction and participating in the rulemaking for the 700 MHz auction. For one thing, thanks to the introduction of anonymous bidding, the cable cos cannot effectively target their industry rivals (like the telcos or the DBS guys) to drive up prices or block them altogether, as they did in the 2006 AWS auction. So a big motivator for the cable companies to participate, i.e. strategic blocking outside the value of the spectrum itself, is gone.

In addition, Sprint divorced itself from the partnership and shacked up with Google, leaving the cable cos with an ugly alimony settlement for the AWS auction and no wireless partner to help them build the network. And, finally, the cable guys haven’t figured out what the heck to do with the AWS spectrum they acquired last summer. While that went relatively cheap (45 cents/mhz pop), it still cost $2.5 Billion with nothing to show and a danger that if the cable cos don’t start building out a network they will lose the licenses at the end of the license term for failure to meet the mandatory performance metrics. (Licensees are required to meet build out and service requirements. The aren’t terribly onerous for the AWS band, but they do require you to build something and push a signal through it.) Given that the 700 MHz licenses have the most rigorous build out requirements ever (in no small part to ensure that folks like Spectrum Co. don’t win the spectrum and then “warehouse” it), the cable cos are very unlikely to buy spectrum on the off chance they’ll figure out something to do with it.

Finally, there is the big reason every is pointing to — the cable stock valuations. Cable stocks have declined significantly this year, both as a function of the general decline in the market and because it looks like Verizon bet right on fiber to the home. Competing against FIOS means that cable operators (particularly Comcast, Cablevision, and Time Warner) are in for another round of expensive capital investment to maintain their competitive footing or risk losing customers to FIOS. In this sort of situation, the last thing investors want to see is cable companies spending billions for licenses they can’t use unless they spend billions more to build networks from scratch.

This last is probably why Cablevision is sitting it out, despite vigorously playing in the AWS auction in ’06, and why Cox, which recently went private, has decided to toss its hat in the ring and play. Cox also has the advantage that licenses that overlap its territories (assuming it does not go for C Block or D Block) also have significant overlap with the area covered by AT&T with its purchase of Aloha. This potentially removes a major competitor for the A and B Block licenses, giving Cox a chance to get coverage of it’s network and offer a package of wireless and wireline services down the road. So Cox can ante up for a chance to catch a bargain without taking a stock hit. By contrast, Cablevision directly overlaps with Verizon for the licenses that cover its region and the adjacent markets into which Cablevision would want to expand. Verizon will fight like a tiger because it wants the spectrum, so the inability to block due to anonymous bidding does not help Cablevision. And, because Cablevision is publicly traded, even anteing for a chance to play will cost it big time.

UPDATE Apparently, Cablevision did file a short form. A Cablevision spokescritter said that Cablevision was reserving the right to bid, but declined to say if Cablevision would bid. Earlier stories I had seen said they wouldn’t bid. Well, I give them credit for trying. Good luck trying to break out of NYC.

All in all, I consider the elimination of Comcast and Time Warner as potential bidders to be a real win for the public interest. As I have written before, allowing cable companies to bid for this spectrum raises extremely serious competition problems and would make it virtually impossible to see a new, independent broadband provider emerge. Given that the 700 MHz auction creates a potential “transformative moment” for wireless broadband, and therefore potentially for broadband generally (especially the much hoped for “third pipe”), I breathe a huge sigh of relief to see the cable boys out of it.

Stay tuned . . . .

Tales of the Sausage Factory:
I Go Delphic, Snort Oak Leaves, And Give Four Reasons Why Google Will Bid To Win in the 700 MHz Auction (despite what the smart money says)

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Analysts who watch Google and watch the wireless world really, really, really don’t want to think of Google as getting into the wireless biz. This spring, I heard an awful lot of “Google won’t bid” or “Google can’t win” or, my personal favorite, “you think Google is going to bid? Are you on crack?”

As regular readers know, while I have occasionally been a shade grumpy about how Google worshipers have attributed all things in the auction to our Great Google Overlords, I have been surprised at the reluctance of most analysts to accept that Google really does want to win licenses. For example, when Verizon announced it would open its network to third party devices, analysts suggested this would take the pressure off Google to win licenses itself. When Google announced it definitely would participate in the auction, a number of analysts again questioned whether Google was really serious about winning or whether it just wanted to insure the $4.6 billion C Block reserve got met. Although as shown in this article here, some analysts expect Google to press hard to win, the conventional wisdom among analysts has jelled into “Google is only bidding to make sure the C Block conditions stay in place.”

These analysts have sound reasons for thinking Google would be mad to bid. Google never wanted to be a network provider. Sure, they’ve dabbled a bit by investing in broadband over power line (BPL) and dipping a toe in muniwireless (neither of which has amounted to very much). But Google never took the potentially ruinous plunge from being an applications provider (its realm of dominance) to becoming a network provider. Worse, the estimated $5-$6 billion price tag for the C Block licenses is only the beginning of the cost to actually build a network. According to one widely reported estimate by Google itself, it would cost another $12 billion to build the network once Google has the licenses.

Nor is the wireless industry considered ripe for expansion. If anything, analysts expect further consolidation as smaller carriers find it tough sledding against the vertically integrated giants AT&T and Verizon (which jointly control the bulk of residential subscribers, can offer a nice set of wireless and wireline bundles, and enjoy other advantages that make them tough to beat). Even with Google’s genius for creating new capital opportunities, the conventional wisdom goes, how on Earth can Google ever recoup this mammoth investment as yet-another-wireless carrier in the highly-commoditized world of wireless telephony. And the one thing that might have worked, creating its own compelling “walled garden” that encourages users to go with Google wireless to enjoy access to features they routinely access in the wireline world, is the one thing Google has sworn up and down it won’t do. To put icing on the cake, the formation of Android and the inclusion of national carriers T-Mobile and Sprint make it impossible for Google to create its own walled garden if it changes its mind after winning.

With all this to consider, small wonder analysts by and large don’t see much chance of Google making a serious run to win. They believe that Google wants someone else to win, but offer an open network Google can ride on. So while bidding to make sure the spectrum gets bought makes sense, actually wanting to win the licenses doesn’t. Hence the convergence of the conventional wisdom that Google will leave it to Verizon or someone else rather than tie a multi-billion dollar albatros around its neck and potentially crash its stock valuation (especially if you hold Google stock).

For the reasons given below, I will play the contrarian. I think Google will bid and fight hard to win licenses. Indeed, while I expect Google to target C Block, it may well go after D Block or some of the other licenses as well, if that’s what it takes to build a national footprint. Google might still get outb id by Verizon and other carriers, but I don’t think that’s Google’s plan. I think they are in to win.

Why? See below . . . . .

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My Thoughts Exactly:
Jabberwocking the Fundies

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Here at Wetmachine we have a tradition of posting what the New Critics called “close readings” of arcane texts. Usually these close readings are done by Harold Feld in Tales of the Sausage Factory or by Greg Rose in Econoklastic, and most often the closely-read documents are obscure legal decrees, rulings, opinions, pronouncements, etc, originating from the Oracle at Federal Communications Commission, or they’re drafts of some lobbyist-written telecommunications bill lurking in the shadows of some state legislature or congressional committee, hoping to become law while nobody’s looking –although occasionally Harold treats us to a scholarly exegesis of a biblical or Talmudic text.

Over at Enter the Jabberwock, my erstwhile OpenLaszlo colleague Josh Crowley has a long-running series of close readings of illustrated tracts by the crackpot so-called “Christian” fundamentalist Jack Chick. Crowley calls these analyses “Chick Dissections”. In them he mercilessly skewers the artwork, logic and theology of individual Chick tracts. He does this in a direct, unironic voice, taking each frame of the comic book under review at face value. In other words, he does not come at them with a knowing, jaded air of sophistication and superiority. He engages them on their own terms.

When I first saw these Chick Dissections I wondered what the point was, since the comics themselves are so ineptly drawn and poorly reasoned that they basically are self-refuting; they are their own parody.

But, you know, Jack Chick is not some lone nut promulgating his paranoid ravings in photocopied pamphlets on a streetcorner to an indifferent audience of dozens. He’s a lone nut promulgating his paranoid ravings to an audience of millions, some of them quite credulous, through his website and publishing empire. The fundamentalist meme, in Christian, Islamic, Hindu, or whatever form, is a present danger to civilization. Therefore Jabberwock/Crowley is right to resist it. The Chick Dissections are not to everybody’s taste, but Jabberwock is providing a valuable service. And he’s often quite funny.

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