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Question is, why does government have to regulate cable black outs

The Federal Communications Commission is seeking comment on whether it has the authority to eliminate its sports black out rules.  These rules prevent cable companies, satellite companies, and open video network companies (typically local exchange companies) from importing a signal carrying a live sport event from a broadcaster located outside a local viewing area where the very same live sporting event is taking place not being carried by the local station.  The rule was first applied to cable companies forty years ago and has been extended to satellite companies and open video networks over the subsequent three decades.

The NFL initiated black outs of local games to protect the gate receipts of the local team.  In order to not have a local game see a fall off in gate receipts due to another game being broadcast in its local area, local television stations and later cable companies were prohibited from carrying those games.  The FCC decided to supplement the NFL’s policy by instituting the black out rules basing its rationale on a consumer welfare theory that “to ensure to the greatest extent possible the continued availability of sports telecasts to the public.”

That rationale is pretty suspect, in my opinion.  The FCC was concerned that the NFL and other professional sports associations would extend their black outs to all distant broadcasters just to protect the revenues at the gates.  Question is, why should the state, in the form of the FCC, care about viewer access to a sporting event where the viewer is more than 35 miles away from venue where the live game is being played?  If they want to see the game that bad, then pay a premium on the ticket and drive or fly to the city where the game is being played. The FCC will vehemently deny that it ws subsidizing ticket sales at the gate with this supplemental policy but that appears to be the result.

In 2017, a fan of Atlanta Braves baseball living in Douglas County, Georgia will be able to watch a game on her tablet, iPad, lap top, desk top (if she is brave enough to admit she still has one), or smart phone.  She may not want to or be able to afford to drive to Cobb County to watch them play or even be able to afford a ticket, but at a fraction of the cost, can afford to watch via a broadband connection.  Should the Braves and the MLB prevent a transmission of the game to her if the Braves fail to sell out their new stadium?  Yes, they should.  Would it make good business sense?  No, it wouldn’t.  Should the state in the form of the FCC care either way?  No, it shouldn’t.

If anything, given its social policy of encouraging the use of broadband by all Americans, the FCC might be expected to prohibit black outs where viewing a game via a broadband connection would be discouraged, but even in promoting broadband adoption, the FCC would encroach on the business judgment of the Braves and the MLB, robbing them of their economic liberty to make a choice to sell or not to sell viewing time.

In addition, Public Knowledge and the Media Access Project do make a solid point that the FCC’s rules on black outs are anti-consumer.  They do not expand consumer welfare.  They work to diminish the value the consumer has in using alternative means to view content.  This rationale, however, should not be extended to reach to the business judgment of the content provider, in this case professional sports.  Any fall off in viewership should be punishment enough.

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Somewhere along the information highway, we forgot about entrepreneurial freedom and value

About fifteen years ago I started writing for a publication that was transmitted to its subscribers via e-mail.  We published twice a day on regulatory events on the federal and state level.  The content we provided had great value and our clients paid us for it.  Not only did the staff get paid for the production work, but I’m sure the company had to pay an internet service vendor to transmit our content to the end user.  It’s called business.

I define business in the following way.  Business is the activity that you partake in to create, develop, market, and sell a product for income.  Business is dynamic and along your production line you are going to pay employees and contractors in order to get your product to market.  Business also requires you to look for opportunities to reduce your costs for getting your product to market and in so doing may require you to strategically partner with another entity to meet the objective of being better and faster.  That strategic partner may develop a method for helping you be better and faster and would rightfully expect to be compensated for the value their innovation bestowed on you.

The end user or consumer may observe three alternative developments resulting from the value provided by the strategic partner and all resulting in an increase in consumer welfare.  One, the consumer may see improvement in speed or quality of service with no change in the price she pays.  Two, the consumer may see an increase in price but faster service and better quality.  Although her costs have gone up, they are offset by the increase in value that she identifies in the increased quality of service.  Third, she might see her prices fall as the innovations brought by the strategic partner increase efficiencies in the way the product is delivered.

The business provider has to pay for the innovation but given the increase in consumer welfare realizes that his welfare also increases because the consumer is satisfied.

Notice in my example that the “F” word, “free”, is missing.  It’s that word that has confused content providers and consumers.  Over the past two decades, content providers and consumers have been misled by the notion that access to and delivery of information on the internet was supposed to be free.  This thought was spawned by the misinterpretation of the phrase, “open internet”, which referred not to consumption of and access to information but to the ability of application entrepreneurs to develop services that made the movement and placement of content online easier.

The edge providers, such as Google, Facebook, and Twitter, benefiting from the ability to interconnect their servers and applications with the world wide web were able to turn around and ironically compound the myth of free access by offering certain services to end users for free.  ”Free” had a network effect all on its own and open internet provocateurs such as Free Press and Public Knowledge have been milking it for years.  From free consumer access to ignoring intellectual property rights by promoting the Aaron Schwartz paradigm that all data online should be freely accessed by everyone, they have fanned the flames of contagion, creating such nausea that consumers overlook or ignore the market nature of the internet: the production and delivery of a product called information and knowledge, and like all products moving through a free market its value should be recognized and monetized and the creators of the information and knowledge should expect not only to be compensated but to pay the cost of its delivery.

Yesterday’s opinion in Verizon v. FCC failed to acknowledge the true, core market characteristic of the net neutrality debate.  Net neutrality, which has nothing to do with the open internet, denigrates the market signaling between content providers and internet service providers such as AT&T, Comcast, and Verizon.  Google, Facebook, and other edge providers have signaled the need for greater capacity and speed and internet service providers wanted to address this demand.  Rather than recognizing this demand, the Federal Communications Commission, egged on by the open internet provocateurs, preferred to disrupt the basic law of supply and demand and risk upsetting the flow of commerce.

The opinion is a mixed bag when it comes to freedom of the entrepreneurial spirit of the internet service provider.  It still leaves open the door to regulating broadband providers and, in my opinion, by leaving in place transparency rules, violates the freedom of speech of internet service providers by forcing them to communicate information for a reason that no longer exist, namely compliance with anti-blocking and anti-discrimination rules correctly vacated by the court.

Freedom got a boost yesterday, but the boost was not high enough.  Policy and the law need a change in mindset to recognize that it’s okay to allow markets to work.

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Suppose Stephen King and Rob Zombie were developing this idea online?

Posted February 26th, 2013 in Broadband, crime, free speech, indecency, privacy and tagged , , , , , by Alton Drew

The New York Times posted a story about a police office who participated in online chats about raping and cannibalizing women, including his wife. The story is horrific because it reminds you what depraved thoughts we as humans may have toward one another and that these thoughts are being expressed online everyday.

Fortunately the women discussed in these chat rooms were not harmed so the prosecution may have a hard time showing that thinking and talking about it was a crime. There was plenty of malice but no bodily injury or harm.

My question is, what would be the difference between a horror movie writer like Stephen King or Rob Zombie sitting in on an online chat discussing different more macabre ways to scare their audiences? Would the notion that the discussion is being held merely for artistic purposes be enough to distinguish the two conversations?

If not, then this police officer might get off. If so, then the Internet might be subjected to a different level of scrutiny.

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FCC to address interruption of wireless services

Posted March 2nd, 2012 in FCC, free speech, Government Regulation, wireless communications and tagged , , by Alton Drew

Federal Communications Commission Chairman Julius Genachowski shared the following yesterday:

Today, the FCC issued a Public Notice seeking comment on concerns and issues related to intentional
interruptions of wireless service by government authorities for the purpose of ensuring public safety.

FCC Chairman Julius Genachowski said:

“Our democracy, our society, and our safety all require communications networks that are available and
open. Any interruption of wireless services raises serious legal and policy issues, and must meet a very
high bar. The FCC, as the agency with oversight of our communications networks, is committed to
preserving their availability and openness, and to harnessing communications technologies to protect the public.”

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Megaupload and willful blindness?

Honestly never heard of Megaupload before this news broke. Their services remind me of those lockers you see at airports and bus stations. You rent a box and the box owner probably warns you up front not to put anything in there that you wouldn’t want seen on the evening news.

Megaupload could probably claim that it did not know that copyright material was being uploaded and downloaded, but that would be a bit naïve on their part, especially since their technology was replacing an older, less efficient file sharing technology. The “I didn’t know” argument may not hold up against the prosecution’s argument of willful blindness, however. Time for their attorneys to take a look at the Pentalpha and Grokster cases for further guidance on litigation strategy or better yet, guidance on a settlement. Not only won’t willful blindness hold, but their file sharing business model may have induced more consumers to infringe on copyrights.

Fortunately these guys aren’t a public company or else investors would be seeing shares tank.