Replace “telecommunications carrier” with “broadband access provider and voila, privacy rules

The Federal Communications Commission today issued some guidance on protection of consumer privacy.  Short of any specific privacy rules, the FCC will apply provisions of Section 222 of the Communications Act to providers of broadband access services.  In other words, substitute the term “telecommunications carrier” with the phrase, “broadband internet access service provider” and we will have a template for broadband access providers to follow when determining how to use consumer information that they collect either from consumers themselves or the other broadband access providers with which traffic, data, and private information are exchanged.

Which has me asking.  Just what type of consumer information do broadband providers collect and how do they use it? To provide an example of information collected and how it is used, I took a look at the privacy agreement provided by All Points Broadband, a broadband provider located in Loudon County, Virginia.  The company collects personal information including a subscriber’s name, billing address, credit card information, service address, and the nature of the devices used by the subscriber.

Personal information provided by the subscriber to the company may be combined with other personal data gleaned from the company’s Facebook page, the company’s affiliates, third party operators, market research firms, or credit reporting firms.  All Points also collects non-personal information such as the specific device identifier for a subscriber’s device, the browser being used by the subscriber, or the page requested during a subscriber search.

The company also collects information about the use of their network including the equipment used on the subscriber’s premises, time when the service is being used, the type of data being transmitted, the content received and transmitted by the subscriber, and the websites visited by the subscriber.

And just how is this data being used?  Network information is used by the company to monitor the performance of the company’s network.  The company, using network information, assesses how the subscriber uses the company’s services including the amount and type of data beineg received and transmitted.

Personal information may be used to send the subscriber marketing and advertising messages about the company’s servivces and website.  While disclosure of personal information to third parties is provided only with a subscriber’s consent, the company reserves the right to disclose non-personal information or any other information that the subscriber decides to make public.

In an era of big data, broadband companies are sitting on a treasure chest of information that can generate up to 10% economic value, depending on the quality of analytics, both from internal and external monetization points of view.

Could the FCC’s application of Section 222 to data collected by broadband providers threaten a provider’s revenues and profits?  My answer is yes.  For example, take Section 222(c)(1) of the Communications Act.  Under this section, broadband access providers receiving customer proprietary network information would only be able to use this network information in the provision of broadband services from which the information was derived or for service necessary for providing broadband servivces.

Broadband providers would have to make the argument that network information has a distinct meaning from personal  or run the risk of losing revenues from the acquisition and distribution of this data.  Should the FCC’s network neutrality rules survive court challenge, the agency should consider making a distinction in its rules between network information and personal information.

Why is FCC spectrum policy favoring weak business models?

Reading Jeff Mazella’s piece for the Center of Individual Freedom regarding T-Mobile’s two-sided arguments on spectrum has me wondering why the Federal Communications Commission even attempts to implement spectrum auction policies that favor carriers like T-Mobile and Sprint.  In my opinion, Sprint and T-Mobile’s business models are primitive and lack the vision of AT&T or Verizon’s business models, models that recognize the convergence of broadband platforms and media.

Mr. Mazella makes the argument that the FCC should not accept T-Mobile and Sprint’s request that portions of spectrum be set aside during the 2016 incentive auction.  T-Mobile and Sprint have portfolios filled with an ample amount of spectrum, are backed by large foreign corporations, and in the case of Sprint, have even exercised the option of sitting out a spectrum auction, in Sprint’s case an auction for advanced wireless services (AWS-3) spectrum.

I would add to Mr. Mazella’s argument that Sprint and T-Mobile simply haven’t shown that they are worthy of more favorable treatment simply because they are stuck in the early 2000s and have not shown me that they can or even want to take their business model to the next step.  As a platform, what are they prepared to do in a converging media and broadband environment?  Why should the FCC pick a loser if they are going to pick and choose which companies will succeed in the first place?

After reviewing company filings with the U.S. Securities and Exchange Commission as well as company press releases, I determined that neither Sprint or T-Mobile plan to innovate or make acquisitions in the media space.  In my opinion the next great moves that the duopoly has embarked on, namely acquiring content and the advertising space and technology they provide, is a business model that goes back to the future and works.  The content model puts a premium on the spectrum that wireless carriers compete for and should signal to regulators which carriers are willing to do more than just make rhetorical arguments about competition and innovation.

Verizon to FCC: We are a media company. Leave us alone

Verizon sent another clear signal this morning to regulators and the financial markets.  We are transitioning from a broadband company to a media company.  Suppose Verizon takes it another step and also declares that they, say five years from now, will get out of the broadband access to the internet business and settle for being a channel solely for their own branded content or content that they get a license to retransmit solely on their servers?  Such a move would get them from under the Federal Communications Commission’s Title II/net neutrality rules while opening the door to smaller internet service providers to fill the broadband access to the internet market vacuum.

First, the news.  Today, The Wall Street Journal reported that Verizon Communications Inc., agreed to buy AOL, Inc., for $4.4 billion.  The purchase will be made with cash on hand and the issuance of commercial paper and make Verizon a player in the digital media content market.  According to The Journal:

“The acquisition would give Verizon, which has set its sights on entering the crowded online video marketplace, access to advanced technology AOL has developed for selling ads and delivering high-quality Web video.”

Verizon goes on to say that its principal interest in the purchase is access to AOL’s ad tech platform probably for use with Verizon’s mobile video service scheduled to launch this summer.  The service will offer snippets of video content, live sports, concerts, and on-demand programming.

Verizon and AT&T believe video content will drive demand for their wireless services as consumers, particularly millenials, (who have passed Generation X-ers as America’s largest consumer group), prefer get their content anywhere on the go, unlike their more sendentary Baby Boomer elders.

Verizon can also leverage its relationships with content providers.  For example, according to the article:

“Verizon already has relationships with many media providers because of its FiOS TV service, which is available in 5.6 million U.S. households. And it has shown prowess in mobile video already, including through a partnership with the NFL that allows it to stream some games over phones.”

It sounds like Verizon is ready to step up to being what I consider all broadband providers to be: media companies.  Regulatory wise, I think Verizon and AT&T could circumvent the FCC’s net neutrality rules by making the declaration that not only are they media companies, but they are no longer in the business of providing access to the 67,000 interconnected networks known as the internet.  Verizon instead should declare that it provides IP-access solely to its website of original and licensed content.  If you want to see “Game of Thrones”, you’ll use a broadband access provider that connects you with HBO’s website.

A broadband internet access service, according to Section 8.2(A) of the FCC’s net neutrality rules is “a mass retail service by wire or radio that provides capability to transmit data to and receive data from all or substantially all Internet endpoints, including any capabilities that are incidental to and enable the operation of the communication service, but excluding dial-up Internet access service.  This term also encompasses any service that the Commission finds to be providing a functional equivalent of the service described in the previous sentence, or that is used to evade the protections set forth in this Part.”

If Verizon describes in its service agreement that access to its particular content found on its website does not include access to the other endpoints found on the remaining 67,000 networks, should that take them out of the FCC’s net neutrality stranglehold?  I would hope so.  Yes, the FCC and the grassroots groups will still utter in their last gasps that even if this new media model held that Verizon’s subscribers would still need consumer protections, but in my opinion those protections would come under contract law and a better equipped Federal Trade Commission since Verizon and any other broadband provider opting for a new media model would fall in the category of edge provider.

Let’s shake it up a little, Verizon.  This is the right step toward bringing well needed disruption into the media market.

 

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Taking “toll free” to the 21st century level

If you want to see the true colors of net neutrality rule proponents look no further on their stances on zero rating.  A zero rated site is a site that a wireless carrier has exempted from its fee structure or data cap.  The company behind the site may have decided that exempting access to its site via its app may be good for attracting additional eyeballs which means more people viewing the ads that may be appearing on the site.  For a wireless carrier wanting to heat up the competition with other carriers, offering their subscribers data cap exemption when accessing popular websites like Facebook may help garner subscribers.

So far it looks like when 12 June 2015 rolls around and the Federal Communications Commission’s net neutrality rules kick in that the strategic partnership between mobile carriers and app developers in the form of zero rating may remain unharmed.  Carriers, according to published reports, are turning to zero rating because of the additional revenues that can be generated by advertisers.  And as I allued to earlier, app developers or advertisers are taking advantage of the traffic they can create by making it easy for consumers to avoid additional data charges when viewing their sites.

The FCC, in some deference to the net neutrality advocacy groups, will apply additional scrutiny to these arrangements because at the core of the net neutrality debate is whether content providers that bring better value, better marketing, or both, should be able to dominate a market against those content providers who are not able to market their content as valuable.  The FCC will, on a case-by-case basis, determine whether a consumer’s lawful access to internet content is being hindered by broadband access providers.

The “case-by-case” review will cause snarls on the way to product deployment and those delays will increase an app developers cost of deployment combined with lost ad revenues as the FCC makes up its mind as to whether a strategic partnership between app developers, advertisers, and broadband access providers violates net neutrality.  I believe that such arrangements even under the FCC’s net neutrality rule shouldn’t be viewed as violations.

First, there is apparently no blocking on the part of a broadband access provider pursuant to Section 8.5 of the FCC’s net neutrality rules.  The app providers are, by definition, edge providers and they are offering sponsorship of subscriber data as such.  Nothing in a zero rating scheme appears to prohibit any broadband access provider from visiting sites that compete with a zero rated site.

Second, zero rating a site is not the same as throttling according to Section 8.7 of the FCC’s rules.  Throttling is defined as impairing or degrading lawful internet traffic; slowing it down and negatively impacting the quality of the traffic’s flow.  Nothing in the definition of zero rating implies that a broadband provider would have to slow down traffic to site B in order to meet its zero rating promise to site A.  There would be no incentive since the company behind the app is reimbursing the broadband provider for revenues lost when exempting subscribers from data caps.

Finally, I wouldn’t equate zero rating with paid prioritization, and apparently not even net neutrality proponents are doing so.  Under Section 8.9 of the FCC’s net neutrality rules, paid prioritization sees a broadband access provider managing its network in order to favor one content provider’s traffic over another provider’s traffic in exchange for compensation.  In the case of zero rating, a content provider’s traffic is not being given any higher priority treatment.  Nothing in the definition of zero rating says that one provider’s traffic moves through a faster lane.  Neither can an argument be made that consumers are being disadvantaged.  On the contrary, the consumer benefits because they are accessing more content at a lower cost.

Zero rating is a win for consumers and content providers. The FCC, while expected to scrutinize these relationships, should not go overboard with oversight in this area.

 

 

 

http://www.npr.org/blogs/alltechconsidered/2015/02/25/388948293/what-net-neutrality-rules-could-mean-for-your-wireless-carrier

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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.