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Verizon challenges FCC failure to recognize a competitive wireless market

The Federal Communications Commission is seeking reply comments as it prepares its 17th state of wireless competition report. In past reports, the FCC has not provided any definitive conclusions as to whether effective competition exists in the wireless market.

Verizon, on the other hand, is not mincing words on effective competition, requesting that the FCC declare the wireless market as effectively competitive. In their comments to the FCC, Verizon reminds us that there are a number of markets to consider when addressing the issue of wireless competition. We have a market for applications; backbone network services; and wireless handsets.

Verizon also addresses another indication of a competitive market: ease of market entry. Citing investments being made by SoftBank into its acquisition of Sprint-Nextel and Deutsche Telekom’s investment into T-Mobile, Verizon sees investment as proof that foreign firms see the U.S. market as a viable one.

Verizon even gives the FCC a little love by noting that the removal of restrictions in the BRS/EBS, 2 GHz MSS, and WCS bands provide carriers with the opportunity to enhance their capacity and enter markets.

And the myth about how poorly the U.S. is doing as opposed to other nations? Here is Verizon’s take on that:

“The U.S market also compares favorably to wireless markets in other areas of the world.
Not only does the U.S. invest more per subscriber ($94 compared to the non-U.S. average of
$16), U.S. consumers pay less (one-third of the EU average for voice service), experience faster
connection speeds (nearly twice as fast as the EU average), and enjoy broader LTE coverage.”

I will be presently surprised if the FCC takes the report to another level and makes an effective competition finding. Verizon has provided plenty of evidence for the agency to make such a declaration.

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You have to admire Anna Eshoo

The House sub-committee on communications and technology met today to discuss the relocation of federal spectrum and the challenges to spectrum sharing. My takeaway from the discussion was a low expectation that federal agencies will be able to get it together on finding ways to relocate and money to upgrade their facilities should they have to inhabit new real estate along the spectrum beach head.

Honestly, the representative from the Department of Defense, Teri Takai, made a good argument about concerns DOD had about interference with its air combat preparedness. Being a member of the U.S. Air Force Auxiliary myself, her argument honestly hit a cord with me. I’d rather the military keep their spectrum or at least be given a sufficient amount of time to carefully assess what frequencies they can live without.

I didn’t hear any of the congressmen suggest (threaten) any new legislation that would (in your dreams) expedite the vacate of spectrum bands by the federal government. Anna Eshoo, Democrat of California, minced no words when she expressed her displeasure at how long it was taken federal agencies to come up with a plan to relocate their frequencies. She’s expended a little political capital on the issue based on recent comments she made in support of President Obama’s creation of a spectrum task force team:

“I welcome the administration’s creation of a spectrum policy team, operating as a joint venture between federal agencies uniquely positioned to maximize the efficiency and value of our nation’s airwaves. Relinquishing or sharing underutilized spectrum can yield more efficient use of this limited resource and help to propel our communications economy even further into the digital age.”

The sub-committee is exhibiting bi-partisan energy on the matter. You really can’t get to partisan about spectrum.

The sub-committee chairman, Greg Walden, Republican of Oregon, seemed pretty upbeat about today’s meeting as well:

“I’m convinced we can upgrade federal systems while freeing spectrum, thereby promoting both our nation’s safety and economic well-being. Last year, Congress passed the Middle Class Tax Relief and Job Creation Act, including the commercial incentive auction provisions that were the fruits of this subcommittee’s labor. Such auctions can help make spectrum available to meet the growing demand from mobile broadband services, provided the FCC gets the auction and band plans right,” said Chairman Walden. “Building on the knowledge gained by the working group, today we look at the tools available to maintain and even improve federal agencies capabilities while freeing spectrum for commercial use.”

Congress is limited by how much fire it can put under the butts of federal agencies. Leadership will have to come from the executive branch and I don’t see President Obama being able to push the military any harder. It’s not worth his political capital.

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Are we too connected?

Posted June 22nd, 2013 in Broadband, Facebook, Government and tagged , , , by Alton Drew

I wonder if we are too interconnected. As a society we interconnect primarily for our self-interest in security. We accept the rules that result from our voluntary decision to be a part of society when those rules protect our property and resolve disputes when our liberties are interfered with.

Unfortunately our reliance on our current state of permanent interconnection via social networks is being leveraged by government and Internet companies not to the benefits I mentioned above, but to the benefit of government that benefits from extracting tax revenues and garnering votes; and to commercial enterprises chasing revenues resulting from sales of goods and services and advertising.

Today’s level of interconnection simply does not promote our security. It does not serve to help us create capital that we can leverage for food and shelter. Frankly it encourages more consumption and should not be confused with the natural communications flow that exists between members of society. By natural communications, I am referring to exchanges of information that enhances the ability of the communicators to purchase housing, food, and security. Connection should be for the mutual benefit of enhancing each communicator’s self-interest without any benefits flowing to third-parties, specifically the government or Internet companies.

Arguably society benefits from the cohesiveness that communications brings, but it shouldn’t profit from communications by collecting personal information, taxes, or advertising revenues.

We should be careful to exclude broadband providers from the requirement of non-extraction of rents. The Internet is still a tool of information exchange and broadband carriers provide consumers with the pipes necessary for accessing data. Broadband providers were relevant before the advent of Facebook and should not be tainted by FISA, PRISM, or the NSA.

The recent disclosures surrounding the government’s monitoring of e-mail and telecommunications has shed light on how much of our own liberty and individuality is being trampled on. We have bought into the lie, the Facebook mantra, of changing the world through digital connection so much so that we have forgotten the primary reason for connecting via membership in society; the promotion of our self-interests.

The growth and popularity of social networks should not be surprising. Forming groups is the result of basic human drive. Social networks tend to herd us like so much sheep, but although we may volunteer to run with the flock, it doesn’t mean we condone Internet companies and our government stalking us like prey.

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It’s time for broadband providers to raise their prices

Earlier today I sent out a tweet saying that it’s time for broadband providers to raise their prices. I know that is not a popular thing to say, but when you consider the increase in traffic driven by the demand for smartphones and tablets, and the emergence of social media, then it’s time to allow and not be afraid of the laws of supply and demand.

Take growth in the U.S. market for smartphones. TechSci Research forecasts that in terms of volume the compounded annual growth rate for the U.S. market to be 18% through the end of 2017. As the number of smartphones and tablets owned by consumers increases, there will be an increase in demand for data services which means greater constraints on networks as carriers attempt to meet the increased demand.

Specifically for carriers, they may not only face a spectrum crisis by 2015, but a revenue crisis sometime during 2013. As reported on CIOZone.com, the real cost of delivering a gigabyte of information may be surpassed by the revenue or real costs received by a carrier for delivering that data.

“The reason why is pretty clear. All mobile services rely on the infrastructure of wireless networks. These assets, in turn, rely on both man-made capital – items such as radios, base stations, high-capacity bit transport grids — and natural resources, namely the frequency spaces through which their signals hop. These infrastructure costs are variable based on usage of the network. As demand increases the cost to operate increases at a faster rate because of scaling data transmission costs tied to newer technologies to carry more data in the same frequencies. This gets capital intensive for the carriers and more expensive to deploy and maintain their networks”, wrote CIOZone.com’s Susan Kelley.

Social media is impacting network usage as well. As the demand for and usage of smartphones and tablets increase, so to is the demand for accessing social media platforms. These platforms are seeking out ways to keep their subscribers increasingly engaged. The Facebook “Home” initiative is a recent example of such attempts. As subscribers become increasingly engaged this means the demand for wireless network capacity continues to increase.

So where should wireless broadband carriers recover the costs for the increased traffic? This question was posed in a recent The Wall Street Journal post where it was discussed that Internet companies such as Facebook, Google, and NetFlix are paying backbone providers, such as Cogent, to prioritize their traffic over backbone or middlemen networks. Under net neutrality rules, such an arrangement would be a no-no for last-mile providers such as AT&T, Verizon, or Comcast, but the backbone market is unregulated.

But if congestion is being relieved along the highway due to payments received to open up a few fast lanes, shouldn’t that treatment also be afforded to the carriers bringing that traffic down the neighborhood street? If net neutrality is prohibiting prioritization thus denying carriers an additional revenue stream, shouldn’t broadband providers be allowed to increase rates on the consumers who in the end are driving demand for data?

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The FCC needs a Joshua Wright type to step up

Today Federal Trade Commission member Joshua Wright offered a definition of unfair method of competition during remarks made before the New York State Bar Association’s antitrust section. Mr. Wright argued that unfair method of competition as discussed in section 5 of the Federal Trade Commission Act left a lot of room for re-interpretation especially as commissions change due to members joining and moving on. A policy statement that set the definition more into regulatory stone would provide businesses with more certainty as they contemplate the appropriate business models necessary for entry into a market.

Unless Mr. Wright can sell his colleagues on the ideas he presented today, I wouldn’t worry about an in-depth analysis of what he offered, although what he offered was pretty substantive. The reason his proposed policy statement caught my eye, quite frankly, was because the statement was posted in a tweet by Federal Communications Commission member Ajit Pai which signaled to me that the statement was worth a look see.

My take away as it concerns the FCC is that the nation’s regulator of interstate telecommunications seems to skirt the issue of competition in the wireless telecommunications market. The FCC currently has a docket opened to address the state of competition in the wireless market. The FCC also avoids any declaration of competition in the wireless market which is peculiar given the existence of four major national players; AT&T, Verizon, Sprint, and T-Mobile, and a myriad of smaller carriers such as Virgin Mobile, Leap Wireless, ClearWire, and Boost Mobile.

A major part of the FCC’s problem, and I would suspect the FTC’s as well, is that they are too focused on the actual number and size of the players in the market. The very word, “market”, should be enough to set the FCC’s focus properly. Market is a relational term, and when we discuss markets, we are talking about the primary demand and supply relationship between consumer and producer. Given that the preamble of the Communications Act asks the FCC to concern itself with universal access by consumers to a communications network, the FCC has been focusing on just about everything else; from how much revenues T-Mobile generates to whether we, as consumers, actually give a damn about what management techniques Verizon uses to bring us broadband services.

Instead, the FCC’s focus should be on whether the consumers’ demand for services is being met; is the market providing the output necessary for meeting the communications needs of consumers. Given the increasing demand for smartphones and tablets with no reported problems with carriers opening up accounts, and again given the existence of four major carriers and quite a few regional carriers, the FCC should have been able to create a definition for competition that reflects what is happening in the market. It hasn’t done so. It hasn’t even tried.

What we need is a little boldness; for the FCC to step out and say, here is our policy statement on the meaning of competition. Here is what we mean by a competitive market. Until then, all I see is a 17th, 18th, and 19th state of wireless competition report that fails to definitively state that we are moving in the right direction.