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How do we get more spectrum to underserved entrepreneurs

Earlier this week the Minority Media and Telecommunications Council released a white paper describing a number of policy actions recommended for the Federal Communications Commission to use when addressing distribution of spectrum to minority or women-owned business enterprises.  The MMTC has extensively documented the problem minority or women-owned enterprises face when attempting to enter the media markets as owners of radio or television stations.  This problem of ownership also extends to ownership of wireless facilities and the licenses necessary for accessing spectrum; the electromagnetic waves that connect cell towers, broadcast stations, televisions, and smartphones.

Going up against well capitalized firms such as AT&T and Verizon is like David going up against a Goliath that has the added advantage of having sucked down some steroids.  Raising capital in order to successfully bid on licenses that grant access to spectrum is difficult and that financial barrier works to keep many minority entrepreneurs out of the market to own wireless facilities.  And the FCC has not been very passionate about re-igniting old policies like tax certificates or designated entity-specific auctions that could help lower barriers to media market entry.

Financial capital today is pretty cheap thanks to current monetary policy combined with absent at best or dysfunctional at worst fiscal policy.  That won’t last for long as 2014 may be the year that our friends at the Federal Reserve may start considering when to stop buying assets and letting interest rates rise.  That increasingly probable scenario could be problematic for minority owned business already pushing up on constraints, whether financial or societal, to capital access.

One alternative to broadcast spectrum may be unlicensed spectrum.  Not only would access to and use of unlicensed spectrum get minority or women-owned firms into, say online media, much faster, successful use of unlicensed spectrum could be used as leverage for future licensed spectrum acquisitions.

Minority or women-owned firms could use or build Wi-Fi networks that consumers could use to access content, hopefully content owned or produced by the aforementioned minority or women-owned firms.  Minority firms can build out networks providing health monitoring and other data services.  We could see more minority and women-owned firms entering the market to provide devices and networks that offer broadband on the go.  The NCTA has provided an informative graphic that you can see here.

The downside to unlicensed spectrum is that, if you are strictly pursuing a wireless communications business model, there may be issues of reliability primarily due to signal interference.  Reliability issues may give financiers reason for pause.

While minority or women-owned businesses should not take their eyes off of the prize of wireless communications market entry, giving some priority to building and owning networks and devices for use in the unlicensed spectrum space may provide a successful pathway that can be leveraged in the future for market entry.

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Netflix, Comcast agreement exposes a house of cards flaw in net neutrality

Posted February 24th, 2014 in Comcast, FCC, Government, Government Regulation, net neutrality and tagged , , by Alton Drew

On 23 February 2014, Netflix (Nasdaq: NFLX) announced that the over-the-top video distributor has entered an interconnection agreement with Comcast (Nasdaq: CMCSA).  According to Netflix:

“Working collaboratively over many months, the companies have established a more direct connection between Netflix and Comcast, similar to other networks, that’s already delivering an even better user experience to consumers, while also allowing for future growth in Netflix traffic. Netflix receives no preferential network treatment under the multi-year agreement, terms of which are not being disclosed.”

The Federal Communications Commission has not, at the time of this writing, issued a statement yet on the interconnection agreement.  Interconnection agreements between backbone providers and internet access providers are unregulated, although the FCC has authority to regulate the internet eco-system as affirmed by a recent appellate court ruling last month.

How does this agreement impact net neutrality in general?  First, it exposes a flaw in the approach that net neutrality advocates pursued on the issue of non-discrimination among various providers of traffic.  As The Washington Post‘s Timothy Lee pointed out in an article this morning, advocates have looked at traffic flow from websites, big and small, as coming through one pipe with the fear that an internet access provider could determine which content provider’s packetized data could flow through at one level of speed versus other providers.

Yesterday’s announcement presents what could be a trend where larger providers of content, such as Netflix, a company that accounts for 30% of video traffic over the internet, could go the backbone provider arbitrage route, choosing to go directly deliver traffic to residential ISPs versus going through a backbone provider.

Mr. Lee raises concern that there may be some negative impact on competition in the backbone provider sector especially where content providers can connect directly to ISPs and ISPs themselves are backbone providers.  The way I see it, backbone providers would have to reduce their interconnection rates to stay competitive with ISPs like Verizon or Comcast who have the resources to provide their own backbone services.  As content providers pay lower charges to interconnect and as more over-the-top providers enter the market, consumer welfare may increase because the rates they pay for over-the-top services may remain flat or even decrease.

Going back to the appellate court’s ruling in January, the agreement forces the FCC to apply extra caution in interpreting and using section 706 of the Communications Act to reboot net neutrality rules.  Here it is that a content provider has entered into an agreement to increase the quality of services to its clients without any prodding from regulators.  Should regulators now subject content providers and ISPs to case-by-case reviews of interconnection agreements?  That policy approach would run counter to enhancing consumer welfare in that subscribers to video services such as Netflix would have to see delays in the implementation of increased quality of customer service.

If the FCC wants to promote the deployment of a high-speed universal broadband network, allowing content providers and ISPs the autonomy to enter and enforce their interconnection agreements is the best approach.

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Marsha Blackburn ready to cut off net neutrality rules at the pass

Posted February 21st, 2014 in Congress, Federal Communications Commission, net neutrality and tagged , , by Alton Drew

U.S. Representative Marsha Blackburn, Republican of Tennessee, today filed a bill that would invalidate the Federal Communications Commission’s current net neutrality rules.  The bill would also prohibit the FCC from reissuing rules that are substantially or effectively the same as current net neutrality rules.  The only exception would be rules that have authority in law enacted after HB 4070 is enacted.

Enacted is the key word here.  Given the makeup of the U.S. Senate, even if HB 4070 passed the Republican-controlled House of Representatives, the Democratic-controlled Senate would kill the bill.  It would take an unusual alignment of celestial bodies to get this anti-net neutrality rule law past the Congress and even if that happened, President Obama’s veto would apply the gravity to bring it back to Earth and into the grave.

In the next net neutrality go-round, will the FCC promote municipal broadband

Federal Communication Commission chairman Tom Wheeler announced this morning that the agency will take a second crack at net neutrality rules. In his statement, Mr. Wheeler said that:

“In its Verizon v. FCC decision, the United States Court of Appeals for the District of Columbia Circuit
invited the Commission to act to preserve a free and open Internet. I intend to accept that invitation by
proposing rules that will meet the court’s test for preventing improper blocking of and discrimination
among Internet traffic, ensuring genuine transparency in how Internet Service Providers manage traffic,
and enhancing competition. Preserving the Internet as an open platform for innovation and expression
while providing certainty and predictability in the marketplace is an important responsibility of this

Mr. Wheeler went on further to clarify that the FCC will not appeal last month’s federal court of appeals order that vacated the anti-blocking and ant-discrimination portions of the FCC’s rules.  The rules left in place transparency rules and cemented the FCC’s authority to regulate the internet pursuant to section 706 of the Communications Act of 1934.  That section grants the FCC authority to pursue policy that promotes the deployment of advanced services including broadband and can be read broadly to include over-the-top or edge services such as those provide by Netflix or Hulu.

The FCC is also reserving its authority to reclassify broadband service as a telecommunications service under Title II of the Act, according to the article.

Also of interest was Mr. Wheeler’s statement on competition in the area of broadband access, seeming to indicate promoting municipal broadband as a policy to address internet service provider choice:

“The Commission will look for opportunities to enhance Internet access competition. One obvious candidate for close examination was raised in Judge Silberman’s separate opinion, namely legal restrictions on the ability of cities and towns to offer broadband services to consumers in their communities.”

Yesterday, President Obama reiterated his support for an “open internet” but reminded the public that he could not order the FCC to apply Title II treatment to the internet.

AT&T issued a statement on the FCC’s latest effort to codify open internet rules, indicating a willing to work with the FCC while reminding the agency that it has sufficient authority to maintain openness without firing another regulatory shot:

“AT&T has built its broadband business, both wired and wireless, on the principal of Internet openness.  That is what our customers rightly expect, and it is what our company will continue to deliver.  That is also why we endorsed the FCC’s original rule on net neutrality, and is why we pledged to adhere to openness principles even after the recent court decision.

“As the FCC embarks on a new proceeding to clarify its authority under section 706, we will, of course, participate constructively and in the same spirit with which we worked with the Commission on its original rule.  We believe the FCC possesses sufficient authority under section 706 to preserve Internet freedom and openness, and that it can do so without over-regulation.  Indeed, and as the court recognized, section 706 was clearly intended by Congress as a tool to enhance broadband investment and deployment.  Thus, it is vital that, as the FCC defines its authority, it do so in a way that does not inhibit the very investment section 706 was intended to assist.”–Jim Ciccone, AT&T Senior Executive Vice-President for Legislative and External Affairs

Verizon also issued a brief statement reminding the public and regulators of its commitment to an open internet:

“Verizon remains committed to an open Internet that provides consumers with competitive choices and unblocked access to lawful websites and content when, where, and how they want.  We have always focused on providing our customers with the services and experience they want, and this focus has not changed.”–Libby Jacobson, Verizon, Director of Digital Policy Communications



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Maryland taking second shot at anti-IP Transition bill

Posted February 18th, 2014 in IP transition, Maryland and tagged , by Alton Drew

I learned today that Maryland House Bill 48 was withdrawn from consideration by its sponsor, but a new bill, HB 447 now takes its place.  The bill, according to Delegate Jeannie Haddaway-Riccio, is very similar to HB 48.  HB 447 can be found here.

HB 447 prohibits certain telephone companies from replacing landline service to customers with wireless service.  The Maryland Public Service Commission is also prohibited from authorizing certain telephone companies to replace wire line with with wireless services.

A hearing was held on HB 447 but so far no committee vote has been taken.