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Dig deeper into this order and uncertainty abounds

Upon receiving an invite from an associate to spend the evening in the Bedouin’s tent with a lady of his choice, James Bond quipped, “When in Egypt, one must dig deeply into her treasures.” Next to Goldfinger telling Bond he expected the British agent to die, I don’t remember to many lines from the movie series, but the Egypt line stood out when I read this latest Federal Communications Commission order released earlier today.

The FCC clarified that price capped local exchange companies (phone companies not subject to rate-based regulation) must use a portion of their frozen high-cost support either to recover the cost of past network upgrades to extend broadband-capable networks in areas substantially unserved by an unsubsidized competitor or to maintain and operate existing networks in such areas, or a combination of the two.

I’ve always thought of price capped carriers as the big brothers that went off to college or the Army while the little brother rate-based carriers were left at home to sulk. Price capped carriers received their designations during that period where competition was thought to be right over the horizon. Given shrinking market shares and the argument that an alternative regulatory scheme was needed to unleash completion in the local markets, price capped regulation was given a try.

It seems this time that big brother prefers keep the gloves on and the FCC is willing to acquiesce. The FCC is willing to let these price cap companies maintain two networks; a broadband network and whatever legacy network existed before that was being used to serve rural customers.

For example, FairPoint, one of the original petitioners that spawned the issue addressed in the order, serves mostly rural customers. The company did not want to allocate one-third of frozen universal support to broadband deployment. That position flew smack in the face of the FCC’s plan to connect rural households to the high-speed broadband. But with this order, FairPoint gets to have it both ways.

Either market intervention via universal service doesn’t appear to bring about the broadband social policy goals the FCC wants or the FCC may have to be firmly restate that it promotes an IP transition. The FCC acknowledges the costs of maintaining two networks in this order. It should move to have all carriers pursue that goal. The treasures of an IP transition demand it.

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Tier-2 carriers are 21st century re-sellers on steroids

Today the Federal Communications Commission released an order on interoperability in the lower 700mMHz band where smaller competitive wireless carriers can roam on AT&T’s wireless network. I look at the order as a quasi private-public partnership where the FCC met the industry half-way by reworking its power emission rules in the 700 MHz block while AT&T voluntarily agreed to let smaller carriers roam on its network.

The most apparent winner here is the consumer. The ability to enjoy a seamless call experience increases consumer welfare by providing the consumer with additional choice in carriers. Why leave Sprint if that carrier can provide true nationwide calling by leverage its ability to roam on another network.

That to me is the downside of the FCC’s push to increase the roaming capabilities of the smaller carriers. To me all we have here is a reseller agreement on 21st century steroids. Today’s order says that rather than pursue go old fashioned capital formation and leverage it into your own facilities-based networks, just do a B-52’s impersonation and “roam if you want to.”

AT&T’s cost-benefit analysis probably led the company to the conclusion that we’ll pick up a little roaming revenue, but with the tweak in the emissions rules, we’ll be okay. I think in the long run it sends the wrong message that rather than go into the markets and buy cheap money, just make some noise with the regulators.

Steve Berry, president and chief executive officer of The Competitive Carriers Association, recently opined on CSPAN-2’s The Communicators that consolidation was decimating the Tier-2 wireless carriers. Well expect the decimation to continue not primarily because of mergers and acquisitions, but because all these smaller carriers end up being are sources of customer lists because without the expanded facilities-based networks that’s the only value that they will be able to boast about.

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Do I sense anti-trust promotion from smaller wireless carriers?

I just finished tuning into The Communicators on CSPAN-2. The guest was Steven Berry, president and chief executive officer of the Competitive Carriers Association. They represent a bunch of wireless carriers from T-Mobile and Sprint on down. Mr. Berry managed to give interim Federal Communications Commission chairman Mignon Clyburn some love this evening for her ability to move AT&T towards voluntarily allowing smaller carrier devices to inter-operate on the larger carrier’s network.

Mr. Berry addressed what he saw as the disadvantages of smaller carriers not being able to transmit a national footprint without the ability of their devices operating on a larger carrier’s network and touted Ms. Clyburn pro-consumer proclivities as helping bringing AT&T around in the 700 MHz band and hoped that the FCC would be able to help bring about the same results in 600 MHz band.

If you are a Run-DMC fan, think of the line from the “King of Rock” where the rap duo boasts that they and their music can knock down ceilings and walls. That’s why the 600 MHz and 700 MHz portions of the airwaves are preferably where cell phone companies would like to transmit their phone signals. Phone signals can travel long distances on these frequencies, which is ideal for rural wireless communications. Signals traveling on these airwaves can penetrate walls which is advantageous to urban communications where someone may be making a phone call from the basement.

What got my ears up was Mr. Berry’s discussion on consolidation in the wireless market. Mr. Berry expressed his concern that Tier 2 carriers were riding off into the sunset, pointing out that at least five Tier-2 carriers had gone the way of the Dodo bird over the last twelve months. Mr. Berry asked how far consolidation should go. His question sounded like an invitation for more anti-trust action on the part of the federal government, especially given his belief that Ms. Clyburn and perceived new chairman Tom Wheeler have consumer interests at heart. That’s a red flag for government action that promotes competition. We heard those words before two years ago when the U.S. Department of Justice sued to stop the acquisition of T-Mobile by AT&T.

Is anti-trust law designed to promote competition while protecting consumers or is it designed to keep a couple competitors at bay while leveling the technology playing field for everyone else? Again, Mr. Berry appeared to be hinting so considering the question may be premature.

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Cities should really start thinking about being broadband ports-of-call

Posted October 25th, 2013 in Broadband and tagged , , , by Alton Drew

I know it’s late, but this The New York Times article got me thinking (again) about how important cities need to consider being broadband ports-of-call. The article challenges the expectation that there will be plenty of job growth in the areas of health care and education. The article tempers these expectations by pointing out that small and mid-sized cities may not experience growth in these areas because they are not considered world leaders in education and health care.

Although Walmart may plan to send employees with specialized health needs to larger hospitals in larger metro areas, not every employer will be able to do that. That means that in order to compete with larger hospitals, small and mid-sized hospitals will need to get their hands on the best technology that can be used to monitor the progress of patients. In addition, broadband, other last mile, edge , over-the-top, and middle-mile providers will have to be able to interconnect their networks with minimal delay to ensure a high-performance network is available to support these hospitals.

That’s why it concerns me when I hear state regulators hearken the old days of Section 251 interconnection requirements under Title II of the Communications Act. Back in 1996, the talk was about cable companies entering the local voice markets, and incumbent local exchange companies rubbing their hands together in anticipation of providing long distance voice services.

Long distance? Really?

The nature of the internet will always see carriers entering interconnection agreements for the purpose of intercommunicating. That’s what the internet is about, but do we want to see delays in the deployment of innovative services by broadband providers because the States want a piece of the interconnection agreement/arbitration action?

We accept for now that the Federal Communications Commission and state public utility commissions all want to play harbor master in the broadband space, but given the competition for job growth small and medium-sized cities are facing, we need public policy that will create the least delay in providing innovative last-mile services.

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Could Obamacare scare broadband adoption?

Posted October 22nd, 2013 in Broadband, digital divide, Federal Communications Commission, Obama by Alton Drew

The Federal Communications Commission and the Obama Administration have as a social policy goal access to high-speed broadband services by every American household. Although a finely-tuned website for accessing health insurance companies may not have been a part the FCC’s or the Administration’s broadband adoption plans, you can see where there could be an indirect impact on adoption.

First, the Administration is miffed that the website’s glitches may be a turn off to a tech-savvy younger generation. According to Bloomberg Business Week, “The failures may discourage the young, healthy, web-savvy consumers whose participation is critical to offset the risk of insuring older, sicker people and to keep the program sustainable.”

And what of older people and their use of the Internet? Overall 15% of adults do not use the Internet according to Pew Research. In addition, 32% of non-Internet users site difficulty of usage of the Internet and computers as reasons for not adopt9ing broadband.

Approximately 43% of adults 65 and over have broadband at home compared to 80% of adults age 18-29. A website that doesn’t reach the young sure won’t reach the old.

Policy wise, while won’t derail the national broadband plan, it’s not helping it either.