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FreedomPop applies to FCC to resell services at all international points

On 29 July 2016, STS Media doing business as FreedomPop applied to the Federal Communications Commission to provide resold services from all international points. FreedomPop provides free mobile broadband plans, devices, digital services, and social sharing that allows its subscribers to share data across accounts.

The company was formed in 2011 and counts among its investors Mangrove Capital, DCM, and Atomico. According to its website, the company provides services in the United States and the United Kingdom and plans to roll out services to a dozen more countries this year.

FreedomPop uses Clearwire’s 4G WiMax data network and Sprint’s 4G LTE network.

The California-based start-up has avoided being acquired so far opting instead for raising private capital in a number of rounds. In June of 2015 it was reported that FreedomPop would invest $50 million in raised funds to invest in European and Latin American markets while expanding here in the United States.

STS Media’s application is filed under ITC-214-INTR2016-01757.


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The FCC to explore the Spectrum Frontiers

Yesterday Federal Communications Commission chairman Tom Wheeler channeled President John F. Kennedy in his announcement that the Commission will be issuing rules that release additional spectrum for use by 5 G devices and services. The release will also include 14 GHz of unlicensed spectrum. Mr. Wheeler wants to make 5 G a national priority given the role it plays as a platform for the internet of things. Mr. Wheeler did not come to this point overnight or by himself.

Working groups in the private sector have been making regulators aware of the spectrum requirements necessary for deploying effective 5 G networks. For example in August 2015, 4 G Americas, a wireless trade association, released a whitepaper identifying the best spectrum bands for 5 G. The paper makes the following key points:

  • “Mobile spectrum bands below 6 GHz will be valuable to allow the smooth integration of 4 G and 5 G systems.
  • Spectrum bands in the range above 6 GHz will offer technical challenges; however, capabilities for mobile services are possible in the higher band ranges with new radio solutions.
  • A variety of bands are needed to address both coverage and capacity needs of evolved 4G and 5G systems.
    • Lower frequencies have better propagation characteristics for better coverage and thus can support both macro and small cell deployments.
    • Frequencies beyond those traditionally used for cellular systems, especially those above 6 GHz are important to consider.
    • Higher frequencies can support wider bandwidth carriers due to large spectrum availability at millimeter-wave bands for providing very high peak data rates in specific areas where traffic demands are very high.
  • Action is needed by regulators to ensure that new spectrum needs are addressed for the evolution of 4 G and additionally to address the timely introduction of 5 G by identifying new spectrum ranges to be studied in the ITU- Radiocommunication Sector (ITU-R).” (Source: Yahoo! Finance)

The telecommunications services sector was in the positive this morning along with other sectors in the economy so saying that Mr. Wheeler’s announcement moved mountains much less the telecom sector would be a reach.Acting as a monopoly licensor of spectrum, I suspect that wireless companies will be seeking licenses at a premium given the scarcity of the resource. Mr. Wheeler admits that the emerging technology should be driving demand for spectrum. Fortunately in this case he appears willing not to hinder deployment but issuing new rules.

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Free State reminds us how market manipulation skews markets

So why should the Federal Communications Commission keep conduct a least restrictive spectrum auction for broadcast spectrum?  Because, according to the Free State Foundation, tying conditions to an auction negatively impacts the outcome in terms of pricing and the number of firms that leave the auction with any spectrum at all.

In a recent blog post, the Foundation shares a couple examples of how interference by the FCC, in the form of aiding what the agency deemed as financially weak competitors, resulted in less spectrum being released. In describing the PCS C Block and 700 MHz auctions, the Foundation stated that:

“In the PCS auction, the FCC extended long-term credit to financially weak bidders, with the apparent intention of encouraging small businesses and rural bidders. This manipulation of the auction resulted in a decade of bankruptcy litigation, delayed the availability of spectrum, and cost consumers over $65 billion according to some estimates. In the 700 MHz C block auction, the FCC required the winner of the 22 MHz C license to provide non-discriminatory network access for all devices and applications. This vague “open access” mandate lacked detail on the freedom of a new licensee to set prices or innovate and disincentivized bidding. This condition-encumbered C block sold for 29% of the price as comparable or even less valuable blocks. Additionally, in auctioning the D block in the same 700 MHz auction, the FCC imposed significant conditions on the use of the spectrum and imposed eligibility rules on bidding. The results of this auction were also unsuccessful, since the D license failed to sell even for a reserve price that was one-third of the average obtained for other comparable licenses. As Tom Hazlett, Professor of Law & Economics at George Mason School of Law stated, “this is evidence that regulatory rules and spectrum allocation procedures continue to distort markets.”

This time, the FCC is considering providing help to smaller wireless carriers by either keeping larger carriers out of the auction, or limiting the amount of spectrum larger carriers can walk away with.  Rules have yet to be promulgated for the reverse television spectrum auction so there is still time to consider this: if a carrier is financially weak, what is the likelihood that carrier is able to stay in the market long enough to acquire the customers necessary to be successful?

Whether credit is extended, larger carriers excluded from the auctions, or the amount of spectrum garnered is subjective to caps, why should the FCC spread the small carriers’ risks to taxpayers?  The FCC seems dead  set on getting into market scuffles between investors.  The FCC, like any regulator, manages to maintain too much focus on the companies (the investor facade) versus the investors themselves.  This is a result of the FCC not including in its mandate the balance between consumer and investor.  The FCC can easily pursue the hands off approach to regulation overall and the spectrum auctions in particular if it remembers that investors in these wireless carriers, whether publicly or privately held, accepted risk when they purchased their shares.  The risk investors in smaller companies took on was the chance that larger carriers would continue, through marketing and quality of service, to widen their lead by better serving their customers.

Should larger carriers be punished for leveraging their historical advantages? I hope not.


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There is no coherent rationale for common carriage regulations

The title of this post came from remarks made by Christopher Yoo, professor of law at the University of Pennsylvania. Professor Yoo sat on a panel hosted today by the Progressive Policy Institute where the topic of discussion focused on existing common carrier obligations under the Communications Act. A common carrier, according to Section 153(11) of the Communications Act, is any person or entity engaged for hire to provide interstate or foreign communications by wire or radio, or interstate or foreign radio transmission of energy. Common carriers have a duty to provide communications services where the request is reasonable and granting the request is in the public interest.

Along with the public interest criteria comes the usual just, reasonable requirement for rates and charges assessed by common carriers and the prohibition against discrimination against consumers of communications services in the form charges, practices, classifications, regulations, facilities, or services. The issue here is whether these common carrier obligations are relevant in today’s broadband market.

I chuckle at my use of the word, “today.” As an old head I remember when common carriage referred to monopoly providers of local telephone services. The mandate that the Federal Communications Commission ensure the availability of a nationwide network that could be accessed by all Americans required that Americans not be turned away by communications providers of last resort. Compounding the need for this requirement was the monopoly status of these carriers. Even in 1996 when the Communications Act was last updated, Baby Bells and AT&T along with their little cousins GTE and United Telephone, still dominated the local and long distance communications landscape. Few people knew what a modem was (you had to be a true geek to have one), and mobile phones were still carried around in brief cases or big enough where they could be used to knock you over the head.

When i read the common carrier rules today, I can’t help but ask, “Why are these rules still in the books?” Today, voice is merely another app (one of one million apps to date); 11-year old kids have cellphones (I still refuse to get my 6th grader a smartphone); and people are watching live television on laptops, desktops (did I say desktops?), iPhones, and iPads. Choice is no longer an issue. Budget allowing, I could access the Internet from my apartment using three broadband platforms at the same time: a Verizon 4G “hotspot”; a Comcast cable modem; and an AT&T digital subscriber line.

Given this amount of choice, why should Google have to subject itself to non-discrimination rules and price schedule requirements from a bygone era of communications monopolies? Why should the broadband market run the risk of an innovative broadband provider not entering the market because its regulatory compliance costs are unnecessarily high?

While some advocate for applying a public utility model to the broadband market, I argue why drive up the costs for broadband access by using a model that has been abandoned by communications companies and failed the electric utility market. Analyzing common carrier rules in the context of today’s technology and multiple communications platforms should leave consumers with no other conclusion that we have broadband choice and that the common carrier framework is no longer relevant.

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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.