Comments Off

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.


Comments Off

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.

Comments Off

Investors should support the current section 706 framework for spurring broadband investment

Investors, private equity firms, and venture capital firms concerned about the impact of public policy on broadband investment should support advocacy for the Telecommunications Act of 1996′s current Section 706 regime versus the imposition of additional net neutrality rules that run the risk of needlessly expanding the Federal Communications Commission’s jurisdiction and its penchant for ex-ante regulation into the edge provider space.

John Mayo raises a couple good arguments for why I believe that investors should stay off of the net neutrality bad wagon.  Regulation should be output centric.  According to Professor Mayo, Section 706 places policy emphasis on output and policies that emphasize output ensures competitive behavior.

How so?  look at the opposite of competitive behavior; monopolistic or collusive behavior.  Increased pricing on the part of monopolies and oligopolies are the result of reduction in output.  This is counter to our social policy of increased deployment of broadband access to all American households.  According to Professor Mayo, Section 706 aligns an economic policy rationale for Internet governance with traditional, policy proven anti-trust tools that focus on the output altering effects of firm behavior.

On the other hand, argues, Professor Mayo, Title II public utility style regulation takes an ex-ante approach that risks squelching novel, output enhancing innovation.  And where would this innovation and increased output occur?  On the edge.

I recently argued that the FCC should take into consideration the impact regulation has on an edge provider’s ability to enter markets.  Professor Mayo argues that an example of increasing output is the ability of edge provider’s to expand investment.  If an ISP’s behavior discourages edge provider investment, then yes, the FCC could make a call that Section 706 was violated because output has been restricted resulting in less content distribution choice and probably higher prices for subscribers to such services.

Investors should not let what appears as equivocation on the part of edge providers like Netflix confuse them.  A net neutrality regime further enhanced by additional rules does nothing for increase in output or entry by more viable edge providers.  Further regulations amount to additional barriers to entry manifested in greater costs of compliance, costs that impact that bottom line.


Comments Off

Apple would be a better acquirer for Yahoo! Than Google, Microsoft

Posted October 23rd, 2011 in antitrust, Google, Microsoft, private equity, Yahoo and tagged , , , by Alton Drew

Hard to miss a post in The Wall Street Journal reporting on Microsoft and Google’s play for Yahoo!, the troubled Internet portal. Microsoft, according to the report, wants to help finance part of a bid by a private equity firm to buy Yahoo! Google has allegedly spoken to two private equity firms to help them finance the purchase of Yahoo! As well.

As if the U.S. Department of Justice doesn’t have its hands full with its lawsuit to stop AT&T from purchasing T-Mobile USA. Any whiff of a horizontal merger between Google and Yahoo would have advertisers crying foul, with allegations of any joining creating a rise in online advertising rates. The relevant market (galactic) and the relevant product (online advertising and Internet search) are obvious.

A better player for Yahoo! would be a company that has a less horizontal relationship and an appreciation for building a social community around its product. A company like Apple. An Apple combination would be more vertical in nature. Apple could argue that it is merely acquiring another platform through which it can sell some content and definitely its hardware. Yahoo would just be an expansion of its stores.

Apple can also argue that it’s not in the search engine business. It’s at the mercy of a Google algorithm just like any other product provider.

Granted, there will be a couple snickers at the suggestion that Apple is at the mercy of a Google algorithm.

An Apple-Yahoo! combination will benefit Yahoo! by propping up Yahoo!’s value and keeping the regulators away.