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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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Let a private capital business model meet un-served, underserved broadband market

Federal Communications Commission member Ajit Pai yesterday sent a letter to the chief executive officer of the Universal Service Administrative Company, the not-for-profit entity designated by the Commission to administer the universal service program. In the letter, Mr. Pai questions apparent waste in the Lifeline program arising from certain households receiving more than one Lifeline subsidized service and the application of exceptions used to to allow additional members of household to qualify for a subsidy.

USAC administers four programs: high-cost and low-income; rural health care; Lifeline; and schools and libraries.  Universal service is premised on the principle that all Americans should have access to a baseline of telecommunications services. These principles were recently expanded by the Commission to include high-speed internet access.

To meet these goals, a federal universal service fund has been established where telecommunications providers and voice-over-the-internet service providers make contributions to the fund and telecommunications companies may apply to receive reimbursement of the expenses involved in meeting universal service goals. According to USAC, in 2014, $7.9 billion in funding were disbursed from the fund to telecommunications providers.

My bird’s eye view of the extension of Lifeline to mobile broadband here in Atlanta tells me that mobile carriers are focusing on lower income neighborhoods. Here in the West End sector of Atlanta there appears to be a table and tent pushing free phones on every other corner. Assurance Wireless, a subsidiary of Virgin Mobile  is pretty busy pushing its Lifeline wireless services here. Fraud and waste as discussed above has been a big issue with policymakers. Rather than a government program where a private company is being required to act as a social welfare agency determining whether a consumer is eligible for a government aid program and rather than telling households how many phones they should be limited to having, why not let entrepreneurs and private capital identify and sell to underserved markets for cell phones.

The technology is there where cell phones, capable of accessing the internet, can be provided to lower income consumers at prices a fraction of what it costs to get an iPhone. Technology continues to innovate where low cost phones can be provided. For example, Verizon offers smartphones at retail prices ranging from $94 to $120. Plop down the cash and for the monthly data plan fee a consumer can make calls or surf the internet.

If private capital sees returns from investing in a company that can provide handsets and data plans to low income households, private capital will make the investment. The problem is the premise that everyone should have access to the internet via mobile broadband. That premise is faulty because it assumes a value to the consumer and forces that value into Commission rule. Yes, commerce benefits from the deployment of a telecommunications infrastructure that facilitates the flow of data, knowledge, and information, but those providing and extracting this value should be ready to compensate the providers of services or invest in its deployment out of their own pockets or with funds raised in the capital or credit markets.

Yes, telecommunications networks may increase in value with an increase in end-users accessing it, but spreading the cost of facilitating access by one consumer who probably brings no value communications wise to other consumers is an externality that I view as negative. Not only will we see fraud in the current government-based universal service, but a taking of consumer property via the taxes paid by consumers to support universal service.

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Crude oil is a poor analogy for business data services

Tom Wheeler, chairman of the Federal Communications Commission, in a remarks delivered to INCOMPAS recently likened special access or business data services to crude oil given crude oil’s impact on energy prices. As a barrel of crude grudgingly inches higher (now up almost seven dollars from last week and hovering around $42.), prices at the pump have increased as well (although still $.34 a gallon less than last year).

Mr. Wheeler’s comparison struck me at first as a weak attempt to tie special access prices to the prices consumers pay for broadband. I can see that argument for being made for mobile broadband prices given that the costs for ordering special access services are built into the price consumers pay for accessing broadband services.  For other industries such as banking and large grocery chains, the cost for procuring special access is probably built into bank fees or the price per pound of potatoes.

But the reason crude oil is a poor analogy is because its price is not regulated by a government agency although some of its supply may be controlled by the output decisions of a cartel. The prices for special access services, especially those provided by so called dominant carriers, are regulated by the Commission. Rather than hint at letting regulation go if competition is identified, Mr. Wheeler should just go all out and deregulate the industry, period. Mr. Wheeler’s technology-neutral principle is on point and in line with that of INCOMPAS and Verizon, two entities that, by their own admission, don’t agree on much when it comes to special access. Mr Wheeler, INCOMPAS, and Verizon also see eye-to-eye on promoting the movement from legacy TDM services to IP services, arguing that enterprise clients want digital services versus legacy services.

But saying we’ll promote competition after we see competition doesn’t incentivize more private capital to enter the business data services markets to fund additional deployment. That’s the type of uncertainty that scares capital away. Demand for special access services and the price set when providers and business enterprises decide to enter an agreement for such services should be the framework for regulating the market. Private capital is always prepared for high risk with the flip side providing high reward, but not with a regulator ready to erode those rewards.

 

http://www.verizon.com/about/news/compromise-enables-networks-future