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Motley Fool thinks AT&T is bullish when it comes to spectrum

A post in the Motley Fool describes AT&T management as “bullish” when it comes to spectrum. The post uses AT&T’s attempts at acquiring T-Mobile last year (Wow, has it been a year?) as an example. Another example includes buying smaller companies in order to obtain more spectrum. AT&T’s two-year data plan package for 3G and 4G tablets is expected to eat into Sprint’s reputation as the cheapest provider of data, according to Motley Fool.

The bullishness appears like the appropriate strategy in my opinion. Sprint has made 70% of itself available for purchase by Japan’s Softbank and is also considering buying out the remaining investors in Clearwire. While Sprint’s pending moves won’t be enough to knock AT&T or Sprint from their industry leading positions, Sprint can become a stiffer competitor in the wireless market.

Hopefully the Federal Communications Commission continues to play observer this time around. A facilitating regulator the FCC was not as it signaled to the industry and the U.S. Department of Justice its lack of support for last year’s proposed takeover of T-Mobile by AT&T. By rule, the FCC must approve the transfer of licenses from Clearwire to Sprint assuming Clearwire no longer operates as a separate entity if Sprint goes ahead with a buy. I would not be surprised if Sprint goes ahead with a complete acquisition that sends Clearwire into spectrum heaven. It would probably make the company more valuable to Softbank if Sprint actually has its name on those licenses.

Either way, the FCC should, to use a sports term, let them play. If any regulatory approvals are needed, they should be granted with haste. A minimalist regulatory approach is what’s needed right now.

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Pai gives his thoughts on where FCC may go on net neutrality

Posted December 6th, 2012 in Broadband, FCC, Government Regulation, net neutrality and tagged , , , , , by Alton Drew

Federal Communications Commission member Ajit Pai today gave his assessment on where the FCC may go on broadband regulation should the United States Court of Appeals-DC Circuit decide to uphold the FCC’s net neutrality rules issued back in December 2010. Here is an excerpt from his opening remarks before the Phoenix Center :

“On a more serious note, I would like to spend a few minutes this morning previewing the
year ahead in broadband policy. I believe that 2013 will be a watershed year. And the most
important action probably will not occur either at the FCC or on Capitol Hill. Instead, it will
take place in the federal courthouse about a mile away on Constitution Avenue. At some point
next year, the D.C. Circuit likely will decide the fate of the Commission’s 2010 net neutrality
order. Whatever the court’s decision, the consequences are likely to be profound.

Should the D.C. Circuit uphold the FCC’s order, I would expect to see revitalized efforts
to expand the Commission’s regulation of the Internet. In particular, I would not be surprised if
the FCC looked into whether we should stiffen our oversight of the network management
practices of wireless broadband providers and whether we should begin to regulate usage-based
pricing. With a court victory under the Commission’s belt, I believe that the net neutrality order
would be the first step, not the last, on our regulatory path.

I expect that a court victory also would result in more calls to enforce the FCC’s net
neutrality rules. To date, we’ve received few complaints that these rules have been violated, and
we’ve done little with any that have been filed. But if the regulations are upheld, the agency
could well receive more complaints alleging violations and it could spring into action
adjudicating them. Uncertainty over how the FCC would resolve these complaints could persist
for some time.

Now let’s look at the opposite (and perhaps more likely) scenario. What would happen if
the D.C. Circuit decides that the FCC lacked the authority to adopt the net neutrality order? The
big question confronting the Commission would be this: whether to abandon the drive to regulate
network management practices or instead to sidestep the court’s decision by reclassifying
broadband as a Title II service.

For what it’s worth, I have already made my view on this matter clear. Under no
circumstance will I support Title II reclassification. I am convinced that grafting creaky,
burdensome common carrier regulations onto the Internet would dramatically slow broadband
deployment, reduce infrastructure investment, frustrate innovation, hamper job creation, and
diminish economic growth.”

Investors, naturally, should keep their fingers crossed that the court does not uphold net neutrality rules thus giving the FCC authority to apply common carrier treatment to broadband providers. The just and reasonable standard when it comes to pricing and to whom service can be provided a priori would see carrier costs of service increase with pressure from the FCC on pricing. Not only would grass roots advocates scream about justifiable price increases implemented to cover compliance the costs, advocates would press for additional hearings on network management practices.

Based on the court’s rejection in Comcast to treat broadband as a Title II service, I do believe that Verizon should be successful with its opposition before the DC Circuit to the FCC’s net neutrality rules. I would have to conduct a more thorough analysis to draw a definitive conclusion.

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FCC: Another example of the need for transparency

Posted December 5th, 2012 in FCC, Government Regulation, media ownership and tagged , , , by Alton Drew

According to a report in The Washington Post today, commenters are up in arms about a proposal circulating out of Federal Communications Commission Chairman Julius Genachowski’s office that allegedly relaxes the ban on a television station owning a newspaper in the same town or city. Advocates, such as Free Press and Public Knowledge, don’t like the proposal, fearing that media consolidation would put a damper on speech and expression.

I believe the lack of transparency in the FCC’s decision making process is at the root of the confusion over media ownership rules. Given the impact the rules could have on increasing diversity in media ownership particularly, as well as the flow of capital to struggling newspapers, the FCC should provide an opportunity for scrutiny of the Chairman’s proposal during a hearing process. The comment system does not ensure that different and relevant perspectives are being reflected in any record on the matter.

The FCC risks being seen as a play pen where only a few vocal advocacy groups can be allowed in to play. This approach negatively impacts consumers and investors alike.

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Why the data roaming ruling may be bad for small carriers

Yesterday the U.S. Court of Appeals for the District of Columbia Circuit held that the Federal Communications Commission was empowered under Title III of the Communications Act to promulgate its data roaming rule. The rule, however, does not impose any common carrier obligations on mobile Internet providers.

In 2007, the FCC mandated that mobile voice carriers offer roaming agreements to other carriers on a just, reasonable, and non-discriminatory basis. The FCC invoked Title II of the Communications Act reasoning that mobile voice providers have a common carrier obligation to provide roaming.

The 2007 mandate did not extend to mobile Internet or mobile data carriers that entered voluntarily into roaming agreements with other carriers for mobile data.

The FCC’s rationale for its rule was:

1. The mandate would promote access to seamless mobile data coverage nationwide;
2. The mandate balances incentives for new entrants and incumbents to deploy advanced networks across the country; and
3. The mandate would foster competition among multiple wireless providers

Verizon and AT&T opposed the rule, arguing that the rule was unnecessary given that carriers were already entering voluntary agreements for data roaming and that smaller carriers would have reduced incentive to build their own networks.

On the surface, investors in large carriers such as AT&T and Sprint should not see any additional losses from the ruling. The data roaming rule has been in place from 2007 and given that no new rules or divestitures resulted from the ruling, I see no additional costs of compliance to AT&T or Verizon due to this legal proceeding.

I don’t see how in the long run the ruling would benefit smaller carriers. If anything they may see increases in whatever charges they are assessed by the larger carriers as a result of negotiations in for future agreements, and they can thank the FCC’s competition posture for this.

As spectrum becomes harder to come by, larger carriers may feel compelled to pass on higher costs of handling additional traffic from smaller carriers. Delays by the FCC in releasing spectrum compounded by burdensome and lengthy scrutiny of license transfers will make a scarce resource more expensive. Smaller carriers will not be able to have their cake and eat it too.

For example, smaller carriers will argue that they do not have the capital to expand their networks on the one hand while on the other criticize any attempts by the FCC to ensure that spectrum goes to the carriers with the greatest economies of scale and the larger client base that would be negative impacted by a lack of sufficient spectrum. Either way, smaller carriers are going to have to absorb the costs of expanding traffic on the network either through sucking it up and deploying their own networks or paying increasing costs for roaming.

Smaller carriers may find themselves being more of a price taker in negotiations for roaming because all a larger carrier has to show is that the roaming charge being negotiated is commercially reasonable, a lower standard than the classic just and reasonable standard.

In the immediate term, the ruling may be deemed by Verizon and AT&T as a loss, but in the longer term, smaller carriers may have simply delayed the inevitable.

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U.S Cellular Corp. urges action on interoperability

Posted December 4th, 2012 in FCC, Government Regulation, wireless communications and tagged , , by Alton Drew

The Federal Communications Commission yesterday posted a letter from U.S. Cellular Corp. documenting a recent ex-parte meeting between the wireless carrier and staff members from the FCC’s wireless telecommunications bureau. In the letter, U.S. Cellular Corp. says that its meeting with FCC staff was geared toward urging action on interoperability rules.

Specifically, U.S. Cellular Corp. told the FCC that it believes that all its commercial band 12 devices would pass band 17 interference testing consistent with 3GPP specifications. U.S. Cellular also told the FCC that it would be moving forward with VoLTE equipment deployment in 2013 and 2014.

U.S. Cellular Corp. expects VoLTE will reduce disparities between CDMA and GSM devices and that VoLTE would bolster the argument that CDMA carriers should have AT&T devices that are interoperable with Band 12.