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One end game for broadband adoption: digital currency

The message for broadband adoption is incomplete because there is nary any mention of how adopting broadband aids capital accumulation or deployment for the consumer. I talked last week about how the only thing that slowed down capital expenditure by broadband providers is an economic slowdown. But what inroads on the consumer side should we see at the intersection of capital and broadband?

One intersection I find appealing is digital currency.  Digital currency allows users to exchange online credits for goods and services. Digital currency exchange may involve the use of a mobile app or can be conducted from a computer. With the use of a digital wallet, digital currency can be sent to or received by a consumer.

Transactions are made with no middlemen. International transactions are cheap and are currently not subject to regulation although governments are concerned about taxation and the lack of control over the currency. These concerns conflict directly with the philosophy underlying the development of digital currency; to take power out of the hands of the government and central bankers, a philosophy I believe that is much in keeping with the freedom and openness of the internet. With talk of central banks considering the issuance of digital currency, I’m concerned that the speed and freedom of transactions stemming from the use of digital currency like Bitcoin would be lost.

Digital or more accurately cryptocurrencies offer an alternative medium of exchange especially for communities underserved by traditional mediums of capital exchange. With a computer a consumer could “mine” her own currency, enter into markets where it is accepted and purchase goods and services in those markets. As more goods and services are purchased in digital exchanges with digital currency, not only will the value of the digital currency increase but so to will the value of the broadband networks that sustain these exchanges. More consumers would have incentive to get on board with broadband as broadband and digital currencies combine to give consumers increased access to local, regional, national, and global markets.

 

 

 

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Any regulation of zero rating is unnecessary market interference

Members of the wireless industry got together yesterday in Washington, D.C. to debate what the Federal Communications Commission’s next move on zero rating ought not to be. Inside Sources reported that the wireless confab included T-Mobile, Verizon, Facebook, and other parties. Zero rating allows wireless services subscribers to access certain content providers without that access being charged against the consumer’s data plan. T-Mobile’s “Binge-On” service is a recently deployed example of this type of service.

Pro-net neutrality groups like Free Press, Public Knowledge, and the Electronic Frontier Foundation believe that zero rating violates the Commission’s open internet order by throttling data streams while favoring certain content providers over other providers.  For example, under 47 CFR 8.7, a person engaged in the provision of broadband internet access service shall not impair or degrade lawful internet traffic on the basis of internet content, application or service, or use of a non-harmful device, subject to reasonable network management.

One issue will be whether a service like “Binge-On” actually throttles traffic pursuant to this rule. The Commission so far has opted to a light touch approach to zero rating-type services, which wireless carriers have likened to 800-number services where the 800-number customer or its telephone service provider ate the cost of a long distance call from a customer. The Commission should find that there is no throttling because treatment of data traffic will be the same for all content providers, whether access to their content is done via “Binge-On” or not. The Commission’s political constraints go beyond the letter of their rules.

The Commission has been fervent about its clear and fair “rules of the road”; that all traffic be treated equally, that it may not want to rock the boat with the pro-net neutrality posse or their alleged four million post-card writing supporters. There is a chance that the Commission may opt for the safety of saying no to “Binge-On” with the claim that its best to err on the side of caution and avoid having its net neutrality rules go sliding down a slippery slope.

A call against “Binge-On” and other zero rating services is a strike against investor interests especially for investors in smaller carriers like T-Mobile. If T-Mobile is to acquire more market share it will do so with bolder offerings like “Binge-On.” The service appears to be an effective way for promoting the company’s other offerings, so much so that T-Mobile is finding that some customers, having had free access to participating websites are opting for additional and more expensive service. If there is an opportunity for government to show how anti-investor some policies can be, treating zero rating as anti-net neutrality would be one of them.

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Taking “toll free” to the 21st century level

If you want to see the true colors of net neutrality rule proponents look no further on their stances on zero rating.  A zero rated site is a site that a wireless carrier has exempted from its fee structure or data cap.  The company behind the site may have decided that exempting access to its site via its app may be good for attracting additional eyeballs which means more people viewing the ads that may be appearing on the site.  For a wireless carrier wanting to heat up the competition with other carriers, offering their subscribers data cap exemption when accessing popular websites like Facebook may help garner subscribers.

So far it looks like when 12 June 2015 rolls around and the Federal Communications Commission’s net neutrality rules kick in that the strategic partnership between mobile carriers and app developers in the form of zero rating may remain unharmed.  Carriers, according to published reports, are turning to zero rating because of the additional revenues that can be generated by advertisers.  And as I allued to earlier, app developers or advertisers are taking advantage of the traffic they can create by making it easy for consumers to avoid additional data charges when viewing their sites.

The FCC, in some deference to the net neutrality advocacy groups, will apply additional scrutiny to these arrangements because at the core of the net neutrality debate is whether content providers that bring better value, better marketing, or both, should be able to dominate a market against those content providers who are not able to market their content as valuable.  The FCC will, on a case-by-case basis, determine whether a consumer’s lawful access to internet content is being hindered by broadband access providers.

The “case-by-case” review will cause snarls on the way to product deployment and those delays will increase an app developers cost of deployment combined with lost ad revenues as the FCC makes up its mind as to whether a strategic partnership between app developers, advertisers, and broadband access providers violates net neutrality.  I believe that such arrangements even under the FCC’s net neutrality rule shouldn’t be viewed as violations.

First, there is apparently no blocking on the part of a broadband access provider pursuant to Section 8.5 of the FCC’s net neutrality rules.  The app providers are, by definition, edge providers and they are offering sponsorship of subscriber data as such.  Nothing in a zero rating scheme appears to prohibit any broadband access provider from visiting sites that compete with a zero rated site.

Second, zero rating a site is not the same as throttling according to Section 8.7 of the FCC’s rules.  Throttling is defined as impairing or degrading lawful internet traffic; slowing it down and negatively impacting the quality of the traffic’s flow.  Nothing in the definition of zero rating implies that a broadband provider would have to slow down traffic to site B in order to meet its zero rating promise to site A.  There would be no incentive since the company behind the app is reimbursing the broadband provider for revenues lost when exempting subscribers from data caps.

Finally, I wouldn’t equate zero rating with paid prioritization, and apparently not even net neutrality proponents are doing so.  Under Section 8.9 of the FCC’s net neutrality rules, paid prioritization sees a broadband access provider managing its network in order to favor one content provider’s traffic over another provider’s traffic in exchange for compensation.  In the case of zero rating, a content provider’s traffic is not being given any higher priority treatment.  Nothing in the definition of zero rating says that one provider’s traffic moves through a faster lane.  Neither can an argument be made that consumers are being disadvantaged.  On the contrary, the consumer benefits because they are accessing more content at a lower cost.

Zero rating is a win for consumers and content providers. The FCC, while expected to scrutinize these relationships, should not go overboard with oversight in this area.

 

 

 

http://www.npr.org/blogs/alltechconsidered/2015/02/25/388948293/what-net-neutrality-rules-could-mean-for-your-wireless-carrier

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An emerging Africa means America must deploy broadband quickly

Last week, President Barack Obama hosted fifty leaders from the African continent.  The United States is recognizing Africa as an emerging market.  According to an article in The Economist, Africa’s population will double by 2050 and it will be a young population.

This young population is also taking advantage of mobile technology where, for example, farmers are applying mobile telephone technology to connect them to weather and crop information that can hopefully lead to increased profits.

President Obama is correct in his assessment that the American economy is based on ideas and innovation and that ideas and innovation depend on development of human capital.  The African economy is going to need ideas and information in order to create knowledge that can be applied to problem solving, product creation, and service delivery.

Part of the reason why I was excited by Time Warner’s Howie Hodges’ presentation at the Congressional Black Caucus Leadership Institute conference a couple weeks ago was the result of him mentioning virtual data rooms.  Virtual data rooms or VDRs are replacing the physical data rooms that law firms and investment banks use to share and access information involving merger and acquisitions or bankruptcy proceedings.

According to Inc.com,  the virtual data room industry market, which was valued at $628 million in 2012, is expected to balloon to $1.2 trillion in 2017.   VDRs operate on the edge of the Internet and as repositories of digitized information, I see them playing an increasing role in global markets especially as trade between America and African countries increase.

An edge provider industry expected to grow this quickly should not be at risk of becoming collateral damage from Title II or common carrier regulation.  As these providers receive increasing requests to provide more services, they will have to respond not only to demand but to increasing competition.  They will have to be nimble.  They can’t run the risk of being forced to buy access services out of tariffs or wait for the FCC or a state regulator to approve new services or facilities because an advocacy group believes that strategic partnerships are taboo.

Africa’s emerging markets and their adoption of mobile broadband technologies for their agricultural and financial transaction markets signal the need for America to service the Continent’s needs for innovation and knowledge that only the American knowledge economy can provide.

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Broadband: Why would an edge provider let FCC see its business model

Technocrat’s Anne L. Kim blogged on comments Consumer Electronics Association CEO and president Gary Shapiro made at a recent Brookings Institution event.  Here is an excerpt from her post:

On net neutrality, Shapiro wants more of a hands-off approach from the government. He wants to see government allow industry and nongovernmental organizations establish principals. “And if the principals are violated, then act,” he said.

“I personally am fearful of all of a sudden sending those companies into a new area of regulation like utilities,” referring to the FCC considering using Title II of the 1996 Communications Act to rewrite net neutrality rules.

He said he likes things the “way they are” and that he’s rather not see them changed, adding that “good intentions scare me.”

Take a look at Title II, something more edge providers need to do, and you can appreciate some of Mr. Shapiro’s fear.  For example, section 211 of the Communications Act requires that common carriers (a classification that net neutrality advocates want applied to broadband providers) file copies of all contracts that they have with other common carriers.  So, if Google, a broadband wannabe, has peering or transit contracts with Comcast, Google will have to file its contracts with the Federal Communications Commission, and probably with state public utility commissions as well.  If these contracts contain information regarding traffic from certain edge providers a la Netflix, Netflix wouldn’t be happy that some aspect of its business model may be on public display with the FCC.

This type of transparency may bring joy to net neutrality proponents but not to the edge providers they purportedly are so concerned about.  In my opinion, letting the government have a copy of a contract entered into autonomously is the same as the government regulating your free speech.  Unless there is a dispute to be resolved between two parties to a contract, I see no reason to let the government have access to its contents.  If edge providers want to see a slippery slope created that takes regulation right to their doorsteps, Title II will lay the bricks for that driveway.

My walk down the Yellow Brick Road of regulation gets scarier when I take a look at section 215.  Section 215 allows the FCC to examine transactions involving the furnishing of services, supplies, equipment, personnel, etc., to a carrier.  Also, the FCC, pursuant to this section, may examine transactions that impact charges a common carrier assesses for provision of wire or wireless services.  Section 215 also allows the FCC to determine how reasonable these charges are.  Also, the FCC may report its recommendations to Congress as to whether charges are invalid and should be modified and prohibited.

Now, not to knock on Google, but since they are the Internet flavor of the week given the disclosure of their perceived wretched diversity in hiring practices, disclosing matters regarding personnel much less on their services should make the company and its investors think twice about supporting net neutrality brought to you via Title II classification.

All of Title II should be scary to venture capitalists, private equity, and their investor clients, but section 218 should bring great pause. This section allows the FCC to inquire into the management of all common carriers.  The FCC may obtain management information not just from the carriers, but from entities that directly or indirectly control them.  That, in my mind, includes private equity firms or venture capitalists that may have a controlling interest in some little regional or rural broadband provider.  With the SEC stepping up its scrutiny of private equity via the Dodd Frank Act, does private equity want another alphabet soup agency knocking on its door?

Here is one more, especially for the app developers.  Section 231 speaks to app developers, or more definitively access software providers.  This section prohibits the use of the World Wide Web to transmit material harmful to minors.  I wonder how many apps fall under this category.

When you look behind the curtain of good open network intentions, you can find some scary stuff.