Shouldn’t the Federal Communications Commission​ show that its regulation of commerce increases commerce?

I think it is safe to say that broadband access has an impact on commerce, specifically commerce that passes though the digital conduit we know as the internet. Individuals and businesses use broadband access to acquire online content, deliver services, and communicate.

It would be a difficult argument to make that Congress’ constitutonal power to regulate commerce did not include the electronic commerce. There is a rational basis for concluding that broadband substantially effects interstate commerce. While broadband access is a sub-division of the internet; it provides that last mile connection between end-user and the information cloud, As an impacting factor on commerce, its regulation would come under the reach of Congress.

I suspect that Congress’ regulation of commerce was a left over from the mercantilist period that started to wind down in the late 18th century. Mercantilist policies were designed to protect the government and commercial class. By restraining imports and expanding exports, governments and their commercial classes hoped to expand their nations’ wealth.

Contrast the mercantilist approach with the laissez-faire and free market approach that would replace it. The free market approached emphasized trade based on specialization in production benefited importer and exporter. Economic welfare would, because of free trade and freer markets, be spread across a population outside of government and commercial interests.

But whether in the context of a mercantilist system or today’s preferred free market system, no government would regulate commerce in order to reduce it’s output and vibrancy. The Federal Communications Commission, as a creature of Congress, should, as an economic regulator, demonstrate that its Title II rules for broadband access would do just that. Simply repeating the phrase, “virtuous cycle” doesn’t equate to evidence of growth in the knowledge economy spawned by new rules. In 300-plus pages of support for less than ten pages of actual rules, the FCC offerred no evidence of rigorous quantitative support for growth in commerce as a result of its new rules.

The courts like using deference to an expert agency as their out for not expanding the overreach of government. It may be time to turn the tables on that judicial philosophy by requiring agencies show how their actions improve our economy.

In space, one can do fast lanes

A great piece in The Economist discussing increasing the deployment of #broadband infrastructure in lesser developed countries.with the use of lower flying satellites, hot air balloons, and drones. These lower cost options relative to those provided by legacy satellite firms are hoped to provide the “backbone infrastructure that connects wireless telephone companies to each other and to the backbone provider making access to high-speed broadband increasingly feasible for consumers in poor countries.

The article discusses briefly the regulatory hurdles that companies like #Facebook may face when attempting to deploy drones. In addition the article notes that transmission speeds may be higher in space where traffic travels 40% faster via dark matter versus through a piece of cable.

I wonder if the FCC would try to extend net neutrality rules in space should Facebook decide that it’s hot air balloon program could work for underserved rural areas in the United States? Probably not. It’s #netneutrality rules apply primarily to the behavior of broadband internet access providers.

According to Section 8.9(a) of the FCC’s net neutrality rules, a person engaged in the provision of broadband internet access service … shall not engage in paid prioritization. This sentence right here would get Facebook or #Google off the hook for being subject to the rule.

What’s also interesting is the definition of “paid prioritization.” Let’s say that Google or Facebook is successful in launching their “where no man has gone before” initiative to connect the globe via low flying satellites or drones. Let’s also suppose that they decide to go head-to-head with Netflix and provide over-the-top streaming content. Given their size and capital, Facebook or Google could afford to enter a “bill and keep” arrangement with broadband access providers to move their traffic to the last-mile on a priority basis without paying for prioritization. The Facebook or Google brand would give them some traction with consumers given Google’s search prowess and Facebook’s growing bankbook of connections worldwide.

Since the Federal Communications Commission​ allegedly has no intention of regulating rates and would have less incentive to deny a traffic exchange agreement that involves no compensation or advantage for a third-party affiliate, The broadband access provider could increase rates to recover the costs of its clogging network.

Now this scenario assumes that Facebook and Google’s global initiatives are a success, but should their drone and hot air balloon programs work, their will be incentives to connect the dots here at home by making these initiatives available to rural America where demand is great.

I hope they try it….. .

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Why can’t broadband competition proponents focus on the real picture?

The Center for Public Integrity released a post yesterday that has me questioning their economics integrity.  In the post, the Center describes how broadband providers avoid competition by arguing that the “Internet service grew out of the old telephone and cable TV systems, where only two companies owned direct lines to U.S. households.”  Sorry, but that’s only half the story.  As I shared in my comments on the post:

“Advocates for competition in the broadband access platform market need look no further than the localities that ensure that only the provider with the deepest pockets are able to get entry into a market. Onerous financial, regulatory, and technical barriers keep ouyt smaller players. Richard Bennett makes a powerful point about legacy carriers having no incentives to go beyond service territories they negotiated for or acquired when initiating services.

In addition, there is too much emphasis on the “number of carriers” narrative. This is a capital intensive business and unless new players can muster up the cash, then you won’t see a third wireline carrier entering a market.

Finally, when will “competition proponents” come out and give a definitive number for the amount of carriers in a market necessary for a declaration of competition. Two, three, or four carriers still reflects an imperfect competitive market.”

Not only are Federal Communications Commission rules not promoting broadband deployment, but local government policies are adding to the hindrance.  No one complains about whether Interstate 4 connecting Tampa and Orlando should have a duplicate interstate running along it.  The concern is whether there is enough commerce running over the highway to spur economic growth and justify widening the existing lanes.

For example, according to comScore.com’s report , 2015 U.S. Digital Future in Focus”, in 2014, mobile app usage made up the majority of digital media activity.  Traditional television ratings fell as more Americans obtained content from emerging online platforms.    Seventy-five percent of all digital consumers over the age of 18 use desktop and mobile platforms to access Internet content.

Another sign of mobile’s encroachment on the desktop is growth in smartphone use.  According to comScore, smartphone use increased 16% in 2014.

I just started watching “House of Cards” (Okay, I’m a late bloomer) so now I’m counted as one of 7 of 8 Americans watching video content online, with half of these consumers watching content online on a daily basis.

And about that commerce moving along the roadway?  E-commerce grew 14% in 2014 with businesses raking in $268.5 billion.

All this content and e-commerce activity happening while consumers allegedly are “abused” by a lack of broadband access platform competition.  Policy makers shouldn’t waste their time on making an oligopoly a larger oligopoly.  The focus should be on clearing spectrum for greater use of the internet and ensuring that the provision of data, whether in the form of video or text, is not interfered with.

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No, Mr. Wheeler. Your net neutrality rules haven’t been kind to the communications sector

Posted March 18th, 2015 in Federal Communications Commission, net neutrality, Title II and tagged , , by Alton Drew

During testimony before the U.S. Senate Committee on Science, Commerce and Transportation, Federal Communications Commission chairman Tom Wheeler argued that the Commission’s net neutrality rules would have a positive impact on investment, citing an uptick in the market the day after the Commission issued its broadband reclassification order.  Mr. Wheeler is correct that the market enjoyed a sweet ride upwards on February 27.  CNN reported that the Nasdaq increased 7% while the Dow rose 5.6%.  The S&P 500 gained 5.5%.

But were these returns the result of the Commission’s decision to take us back to 1995?  No, they were not.  The jump in stock market values were likely due to signals from central bankers around the globe, including insights shared by Federal Reserve Board of Governors chairman Janet Yellen.  Dr. Yellen opined before Congress that the economic outlook for the United States in 2015 was good.  Also adding to the positive outlook on that day were actions taken on the part of a number of European central banks.  For example, the European Union approved another stimulus package for the Euro Zone with particular emphasis on Greece’s struggling economy.  That type of positive news out of Europe could only signal to investors that an important market for American business was thawing.

If we go back to the day of the Commission’s issue of its rules, February 26th, the news was gloomier for the markets overall.  According to Zacks.com the market took a downturn, with the Dow Jones Industrial Average falling .1% and the S&P 500 falling .2%.  The Nasdaq, which weighs heavily toward tech stocks, did see an increase of .4%.  This increase was led, however, by Google, Adobe Systems, and Facebook.  Ironically, Google and Facebook have been proponents to some degree of net neutrality so maybe Mr. Wheeler was doing the happy dance for these guys.

Overall the past four weeks have not been good for the media and telecommunications.  Over the last four weeks, the New York Times Technology Media and Telecommunications index has been down .62%.  For the past 52 weeks, a time period that for the very most part did not include any net neutrality rules, the New York Times TMT increased  9.37%.  With that type of growth the industry didn’t need any rules to spur innovation.

Bottomline, Mr. Wheeler hasn’t shown me any evidence that his latest version of net neutrality rules is having any positive impact on the markets.

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Does the Republican Party want to turn ‪#‎netneutrality‬ into ‪#‎Benghazi‬?

Right now Tom Wheeler, chairman of the Federal Communications Commission, is testifying before the House Committee on Oversight and Government Reform. The Republicans have making an issue of President Obama’s supposed influence in the FCC’s rulemaking in the net neutrality space, arguing that until a number of meetings either with the President or White House staff, Mr. Wheeler was pursuing net neutrality rules based on section 706 of the Telecommunications Act of 1996 versus the common carrier rules from Title II of ythe Communications Act of 1934.

Section 706 authorizes the FCC to promote the deployment of advanced communications services with different regulatory schemes including price regulation. Title II, a section of the 1934 Act, allows the FCC to regulate rates, services, classifications, and practices of telecommunications companies. The FCC wants to reclassify broadband operators as telecommunications companies thus sending public policy in the telecom space back to the late 20th century when we sported Kangols and rocked to Dougie Fresh and Slick Rick.

Unfortunately for the American public, the issue of how much influence the White House had over the decision making process at the FCC is turning into another #Benghazi hearing.

The GOP inquiry into how much Mr. Obama was able to twist Mr. Wheeler’s arm and deviate from a section 706-based order to an order dripping with Title II ooze won’t amount to much of anything unless Congress decides to overhaul the disclosure procedure for all government agencies.

Jason Chaffetz, chairman of the oversight committee, echoed my sentiments during the hearing and hopefully Congress can write a rule that provides a 30-day comment period for draft rules before a final vote is taken. This would add credibility to a decisionmaking process where unelected bureaucrats are making policy impacting the decisionmaking process of entreprenuers.