Tales of the Sausage Factory:
FCC Special Access Reboot — And AT&T’s Somewhat Disingenuous Response

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Good news, the FCC has decides to one again reboot its seven year old proceeding on “special access.” Given that I have been flogging the FCC since 2006 to do something about this, with occasional reminders since then, I am obviously pleased. AT&T, one of the chief beneficiaries of the current deregulated monopoly regime, is less pleased.  AT&T’s chief argument against the FCC denying it yet another rate hike and demanding AT&T and the other telcos fork over data critical to determining if they are charging monopoly rents is: “Why you bringing up old stuff?”

This is not exactly the pinnacle of legal reasoning or persuasive policy. But in AT&T’s defense, when it’s all you got you make the best of it. Bob Quinn does a masterful job of portraying this as being about legacy copper phone bits that don’t matter anymore and that somehow the FCC taking action here is distracting us all collectively from building the super cool uber fast Gigabit networks we need and would build if only the FCC would let us buy T-Mobile. Or something.

As I explain, however, this isn’t some musty old copper no one gives a crap about, but a rather critical bit of infrastructure generating between $18-20 billion annually and impacting pretty much every aspect of mobile communications and broadband access. And with the cable operators about to become total BFFs with Verizon, what little competition that exists in the special access market appears ready to disappear altogether.

I explain below . . . .

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Tales of the Sausage Factory:
Turning Off The Phone System? What Do You Mean We’re Turning Off The Phone System?

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A few weeks ago I went to a fascinating gathering of a few dozen academics, policy wonks, and others from the U.S.  and elsewhere to talk about the end of the phone system. While by no means a unanimous consensus, a very solid majority considered the phone system obsolete and ready for the scrap heap. This will come as a surprise to those of you who called home on Mother’s Day or who thanked God for a call center number when your broadband connection went down. But in fact, most of you are probably not using a phone service but a “phone service,” so we are half-way to shutting down the actual phone system anyway.

 

For about a year now, folks in the nerdiest, geekiest, obscurest reaches of Policyland and Wonkdom have been talking about how to turn off the phone service and replace it with “phone service.” For those of you enjoying “phone service” from the likes of cable companies or cell phone providers, you may wonder why this matters. Sure, Grandma may finally need to replace that princess phone, but other than that, who cares? As is so often the case, however, these technical issues matter quite a bit in the real world – but you won’t notice until waaaay too late to make a difference. (Unless you keep abreast of these things by reading this blog.)

 

In the best case scenario, we shift over to an all digital network free from antiquated laws and policies that stifle innovation and needlessly increase cost to consumers. In the worst case scenario, your phone becomes an utterly unreliable overpriced service that doesn’t guarantee that you can communicate with someone on another phone network because the two networks are having a “peering dispute” and won’t exchange traffic. What actually happens is anyone’s guess at this point, but the recent effort to totally deregulate “phone service” in California gives us something of a preview.

 

More below . . . .

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Inventing the Future:
API Copyrightability in Oracle America [sic] v Google

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Judge Alsup announced his findings on copyright as an order in the Oracle vs Google case. I’m surprised that I haven’s seen any discussion in my usual social channels. I can’t imagine why not.

The narrow conclusion is that the Java API is not protectable by copyright.

I found the judge’s order to be extraordinarily clear and free of legal jargon. I felt that he very much intended it to be read and understood by people in my field. You can read it yourself at Grocklaw

The principle seems to be that useful activity comes under the domain of patent law rather than copyright law.

  • Copyright asserts a monopoly for 95 years without any decision or action or finding by the government, but only applies to non-essential creative activity, and only to a single fixed expression of that creativity. It never covers the ideas behind that expression, methods of operation, or names.
  • Patent grants a monopoly for only 20 years, and only after an examination by a government agent, but it can cover useful methods of operation, beyond the specific embodiment being commercially protected.

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Tales of the Sausage Factory:
CISPA Passes House, But I See Reasons For Optimism — Lessons From 2006 And How to COPE With A House Defeat.

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In the face of a remarkably successful public outcry, the House Republican leadership moved up the vote on the Cyber Intelligence Sharing and Protection Act (CISPA) by a full day and amended it to make it even more awful. While obviously not a good thing, I see a lot of positive signs for the future fight.

Why? Because CISPA backers faced serious signs of opposition — enough so that they moved up the vote to avoid further R defections. By the end of yesterday, the number of Rs committed to opposition had grown from 2 (Barton and Paul) to 28. That sounds small, but the trend was rapidly accelerating in the wake of the Tea Party uprising on this. Meanwhile, the White House veto threat combined with the civil liberties outcry from the left help shore up Democratic resistance. While it did not prove sufficient to prevail in this round, it will prove extremely important as we roll on to the Senate.

In many ways, the situation here reminds me of when Congress considered the Communications Opportunity Enhancement Act of 2006 (COPE). Among other things, COPE would have prohibited the FCC from adopting significant Net Neutrality rules (which everyone at the time actually assumed the FCC had the authority to do, so opponents wanted legislation to limit that authority). Almost exactly six years ago, we suffered a similar defeat in the House. Then, as now, I saw good reasons for optimism that we will ultimately prevail. In fact, our situation then was much weaker than the situation now.

I explore some of the reasons to believe that we can continue to ramp up the fight against CISPA in the Senate and ultimately prevent passage of either CISPA or its equally- nasty-but-for-different-reasons Senate version, the Cybersecurity Act of 2012. (While I appreciate the White House veto threat, I prefer not to rely on it.). But before I dig into any detail, let me repeat what I said 6 years ago when COPE passed out of Committee despite the effort of grassroots activists on the left and right to stop it:

There’s a lesson here . . . . YOU CAN’T OUTSOURCE CITIZENSHIP. You can’t let “the tech companies” or even “the consumer advocates” or anyone speak for you. Citizenship carries responsibilities that go beyond the ritual of voting every two years. But when citizens wake up and speak up, and speak to each other, they find — to their surprise — they are strong. They find they have power. And they find that being a citizen may take hard work, but it is so, so, SO much better and more satisfying than being a couch potato. As the great Jewish sage Hillel said: “If I am not for myself, who will be for me? If I am only for myself, who am I? If not me then who? If not now, when?”

More on the current situation below . . . .

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Tales of the Sausage Factory:
Verizon/SpectrumCo: Spectrum Gap v. Spectrum Crunch, Why Competition Is Actually Worse Off If Verizon Swaps AWS For 700 MHz (Part III)

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For those just joining, Part I recounted how Verizon suddenly encountered unusually strong headwinds in its effort to acquire AWS-1 spectrum from the cable consortium known as SpectrumCo (Comcast, Time Warner Cable, and Bright House) along with the AWS-1 spectrum that Cox Cable took when it broke up with SpectrumCo back in ’08 (you can get all the details on the deal and I why don’t like it from my Insanely Long Field Guide to the Verizon/SpectrumCo deal ). In Part II, I explained how Verizon’s proposed private auction of its Lower 700 MHz A&B block licenses would not resolve the problems with the proposed deal because (a) it wouldn’t address the three side agreements that make this look too much like the foundation of a cartel among the major broadband, video and voice providers; and, (b) AT&T would most likely end up acquiring the licenses.

Now let us assume for the sake of argument that AT&T would not bid for the Verizon Lower 700 MHz licenses. Would that make everything OK?

Sadly, no. Even without AT&T winning the licenses, letting Verizon acquire the SpectrumCo/Cox AWS licenses will massively aggravate the spectrum gap between Verizon and its competitors, while doing little to alleviate the spectrum crunch for competitors. Marguerite Reardon does an excellent job explaining why here, but I cannot help but add a few more wonky details below . . . .

 

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Tales of the Sausage Factory:
Verizon/SpectrumCo Spectrum Gap v. Spectrum Crunch — Verizon’s Brilliant Aikido Move (Part II)

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When last we left our story, the good folks at Verizon had recognized that the FCC’s concerns around spectrum concentration, the “spectrum gap” between AT&T and Verizon and everyone else, had grown exponentially in the last few months as it looked like the “spectrum crunch” (the general lack of new spectrum for all wireless providers in the face of increasing mobile data use) would continue for the foreseeable future. Yes, the “spectrum crunch” increases the desire to get spectrum into productive use (for example, by moving it from cable companies who can’t figure out what to do with it to Verizon). But it also makes spectrum a zero-sum game, where any gain to Verizon or AT&T translates directly to a loss by all other competitors. At this point, the spectrum gap has become so large that conferring any further advantage to Verizon (or AT&T) threatens the ability of any rival to offer competing services.

Faced with this change in the environment, Verizon announced last week that it would auction off its Lower 700 MHz A&B block licenses to competitors (including AT&T, natch) if it got the AWS spectrum from Spectrumco and Cox. Verizon explained on its Q1 results call for analysts that no one had forced it to offer these divestitures, but that if it got the AWS spectrum, Verizon would no longer need the capacity from these licenses. To translate: “we’re not spectrum hoarding, but if we get what we want from SpectrumCo we won’t need the super-duper wonderful 700 MHz spectrum we picked up at auction in 2008, so we will sell them off and make more spectrum available for our competitors.”

As I explain below, this is an utterly brilliant Aikido move by Verizon. Unfortunately, it doesn’t address the key problem with the transaction — the three side agreements between Verizon and its cable competitors to team up in a variety of ways — that make this look an awful lot like a would-be cartel. Even if we set that aside, as other folks have also noticed, the most likely winner of any private auction Verizon would hold for its Lower 700 MHz A&B blocks would be AT&T. Letting AT&T bug Verizon’s Lower 700 MHz A&B licenses would make the spectrum gap much, much worse.

More below . . . .

 

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Tales of the Sausage Factory:
Verizon/SpectrumCo: The Spectrum Concentration Gap v. The Spectrum Crunch (Why VZ’s 700 MHz Divestiture Offer Doesn’t Help) Part I

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Verizon has clearly studied everything AT&T did wrong last year when it tried to acquire T-Mobile. That includes staying alert for early signs of trouble and taking preemptive moves to keep the course of approval running smoothly. It also includes showing grace under fire rather than trying to browbeat the FCC into submission. To head off concerns about the growing “spectrum gap” between Verizon (and AT&T) and its competitors, Verizon has offered to sell its Lower 700 MHz A&B block licenses in a private auction if the FCC grants the application to transfer the AWS-1 spectrum to it from Spectrumco.

At the same time, Verizon also insists that it is doing this of its own free will and not because the FCC is making it do so or because it has run into any trouble. As I will explain, I believe Verizon is telling the truth. The 700 MHz A&B block licenses Verizon promises to auction to competitors is not nearly as useful to it as the AWS-1 spectrum it will get from Spectrumco and Cox. Given that everyone has extolled the virtues of the 700 MHz spectrum as the most important, game changing super-duper useful for mobile broadband spectrum in the entire universe, and since the licenses in question do cover some major markets, that no doubt comes as a surprise to many. Indeed, rather like the stereotypical used car salesman offering to swap your beat up lemon for his hardly ever driven luxury cream puff, this offer looks too good to be true. Why would Verizon want to swap Magic Elixir 700 MHz spectrum for Totally Awesome But Not Magic AWS-1 spectrum?

Below, I give a run-down of my guesses as to why Verizon decided to make a preemptive offer to divest when so many experts opined this would sail through without serious problems. I also explain why, despite the real virtues of the 700 MHz spectrum, Verizon has good reason to want to ditch these licenses (and was already starting to sell them off before the Spectrumco deal). Finally, I’ll explain why, IMO, this doesn’t address the fundamental problems of the VZ/Spectrumco deal because (a) it doesn’t address the side agreements that make this look like the formation of a cartel; (b) for reasons I have explained at length before, AT&T is the most likely winner of any “private auction” Verizon will hold; and, (c) even if AT&T were excluded from getting the licenses, the Spectrum Gap will actually be worse, not better, as a result of the transaction.

In chess terms, Verizon is offering to sacrifice two pawns to gain a queen. Hopefully, the FCC will resist the invitation and avoid a Fool’s Mate for competition.

Because this ended up being rather long, I’ve divided it into three parts. Part I explains how the spectrum situation changed dramatically in just a few months, so that concern about the Spectrum Gap, the difference in spectrum between the two largest providers and all other wireless providers, came to have such increased significance in the FCC’s thinking. This prompted Verizon to make public what it already planned to do, ditch the 700 MHz A&B blocks, despite the fact that this leaves them open to accusations of spectrum warehousing during the pendency of the Spectrumco/Cox deal.

In Part II, I explain why AT&T will likely win the licenses (a conclusion others have reached as well), absent some condition by the FCC to keep AT&T out of the private auction (which I consider politically unlikely). Part III explains why, even if AT&T were excluded from the private auction for Verizon’s Lower 700 MHz A&B licenses, it still would aggravate the spectrum gap. Since the transaction would make competition worse off post-transaction (and fail to address the whole ‘cartel’ thing), the FCC should still deny the application for transfer.

More below . . . .

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Neutrino:
Behind the Bobo

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Following in the tradition of behind-the-scenes posts like The Making of Idiot’s Mask, I invite you now to take a look at the genesis of my most recent serialization effort, Bobo, in which I will share my originating ideas, my thoughts on the themes in the story, and even some “deleted scenes” that didn’t end up in the final novella.

Also: Bobo is available right now in every e-book flavour under the sun, including but not limited to Kindle and Nook or Kobo or iOS or Sony and Palm, and even as a good old fashioned PDF. ($3)

Bobo for President

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