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Precedence and Clarity Require FCC Subject Its Rulings to Public Hearing

I have some preliminary thoughts on additional transparency at the Federal Communications Commission. During my heyday at the Florida Public Service Commission, no major rule or other policy change was implemented without an evidentiary hearing. This type of openness provided both investors and consumers the ability to weigh in on an issue and helped ensure that the PSC met its duty to balance the interests of consumers and investors alike.

Not only did the PSC balance these interests by being open and transparent in their deliberations, but they also established a clearer record of precedent. This is the approach that the FCC needs to apply on a going forward basis in its decisions. Recent findings in the Commission’s special access ruling and the decision on the spectrum transaction between Verizon and SpectrumCo LLC provide examples on how a lack of an evidentiary hearing can send mixed signals about promotion of competition and free markets.

For example, the FCC concluded that it should suspend its special access rules that granted pricing flexibility to carriers facing competition. The FCC believes now that there is evidence the rules are not reflecting competition for special access.

However, in its review of the Verizon-SpectrumCo LLC license acquisition, the FCC concluded that the cable companies do not have the ability, at least in the near term, to cause anti-competitive harm in broadband services. In addition, a significant increase in backhaul rates is unlikely to impact subscribers.

So in special access, an important component of backhaul, the FCC doesn’t know whether there is competition, but in a spectrum docket, the FCC concludes in effect that there will be no anti competitive or anti consumer impact resulting from an increase in backhaul rates.

There has to be some reconciliation of the special access market with pricing impacts in the backhaul market and only a precedent setting evidentiary hearing can do this.

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I Don’t See How DOJ-FCC Pressure to Modify Verizon-SpectrumCo Agreement Furthered Commerce

Posted August 17th, 2012 in FCC, Government Regulation, spectrum, SpectrumCo, Verizon, wireless communications and tagged , , , , by Alton Drew

Country X is about to enter a peace agreement with a group of other countries who find it more appropriate to sell some of their weapons to Country X. Country X promises to sell to Country C a portion of the weapons once the deal with the group of countries goes through. Country X realizes that sooner or later Country C is going to turn those weapons on it, but figures since it is much bigger than Country C, it won’t be a problem.

The United Nations doesn’t like either deal. Wars have a purpose. A good war can promote some higher good like ridding the world of weapons of mass destruction, so the U.N. threatens to bring its full weight against Country X and the smaller group of nations. They must give up their treaty of cooperation and instead enter The Hunger Games and duke it out because war builds character and weeds out the weak, leaving behind a vibrant, robust ecosystem.

Country X can still sell weapons to Country C, of course, because a competition between nations is good for all nations.

That’s basically what the Federal Communications Commission and the U.S. Department of Justice did yesterday when both agencies reported that Verizon and SpectrumCo had agreed to amend their agreement where Verizon would purchase unused spectrum from SpectrumCo. The FCC and DOJ were concerned that an accompanying agreement requiring Verizon resell the cable services of SpectrumCo’s companies would not incentivize Verizon to offer and sell its own video distribution and broadband services in areas where SpectrumCo was located.

The FCC and DOJ want to see Verizon duke it out with the cable company owners of SpectrumCo. The problem I have with the settlement is that the FCC and the DOJ are forcing these companies to go up against each other. If Verizon and the cable companies believed a more effective business plan is for them to collaborate on technology research, who is the government to interject, especially where all the parties are prepared to commit? How can the FCC and DOJ argue that there will be efficiency in the broadband market by forcing parties to compete? Is it the government’s job to make markets and create artificial competition?

Verizon and the cable companies must have determined that the benefits of settlement outweighed the costs of fighting a DOJ lawsuit. Heck. After seeing AT&T forced to stand down from its proposed acquisition of spectrum licenses from T-Mobile, Verizon probably thought it wasn’t worth it. Also, T-Mobile wasn’t about to lose out on more spectrum, even if it has to get it via another DOJ shakedown.

At least the FCC can say that opponents of its decision to block AT&T-T- Mobile were wrong because T-Mobile is still standing.

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MetroPCS: Supports Verizon Selling Spectrum to T-Mobile, But …

MetroPCS reiterated its opposition to Verizon obtaining more Advanced Wireless Services (AWS-4) spectrum from SpectrumCo, LLC. MetroPCS expressed its continued dissatisfaction with the proposed transaction in an ex-parte meeting with Federal Communications Commissioners and staff.

MetroPCS has no problem with Verizon selling spectrum to T-Mobile. MetroPCS said in its ex-parte meeting that the sale proves that Verizon has more than enough spectrum. Before the FCC even thinks about approving the transfer of spectrum from SpectrumCo to Verizon, MetroPCS would like to see Verizon divest spectrum in certain markets including …gasp …Atlanta. MetroPCS would like to see divestiture of spectrum in Boston, Miami, and New York.

Personally, as a Verizon customer in Atlanta who has connections in Miami and New York, this is a no-no.

Seriously, though, the FCC should consider consumer welfare concerns before even contemplating such a request.

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Democrats Need to Focus on Commerce

Posted July 9th, 2012 in antitrust, AT&T, spectrum, SpectrumCo, Verizon and tagged , , by Alton Drew

So let me get this straight. The Democratic Party wants telecommunications companies to build out infrastructure where there is no business case to do so. This appears to be the position of a bunch of congressional Democrats as I read it in an article posted today in The Hillicon Valley. The Democrats are arguing that Verizon’s deal to buy spectrum from SpectrumCo and cross sell cable services provided by SpectrumCo’s partners (Comcast, Time Warner, & Bright House Networks) somehow constitutes anticompetitive behavior.

I’m all for broadband adoption, but it should be driven primarily by the market. Verizon’s deal is driven by its need to get spectrum quickly, both for short term and long term reasons. With left leaning advocacy groups trying to make a bogus antitrust case against Verizon, there may be no free market alternatives left for wireless carriers to acquire spectrum.

In addition, there has been no demonstration how this deal would curtail competition. Cross selling occurs in the communications and other industries. How does Verizon selling Comcast services stop AT&T from selling DirecTV or long distance telephone services? Is Verizon going to stop deploying facilities where consumers need them because they are selling The Vampire Diaries on Time Warner? Give us a break.

Before any congressman considers any action against any industry, they should first ask themselves, how does my reaction promote commerce? If it doesn’t, then they should back off.

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Is Free Press Implying a Tying Arrangement in the SpectrumCo/Verizon Deal?

Posted July 4th, 2012 in Comcast, FCC, Government Regulation, spectrum, SpectrumCo, Verizon and tagged , , , by Alton Drew

Free Press filed an ex-parte notice late last week documenting discussions it had with Federal Communications Commission staff regarding the spectrum license transfer proposal between Verizon, SpectrumCo, and Cox. Near the end of the letter, Free Press expressed concern about the joint agreement between the parties to cross-sell each others’ services. Specifically, this is what Free Press had to say:

“We also noted that the transaction between Verizon and T-Mobile does nothing to address our and other petitioners concerns about the harmful joint marketing and operating entity arrangements that are directly tied to the underlying spectrum transaction between Verizon and SpectrumCo/Cox. We noted that these joint arrangements would frustrate the Commission’s goals of fostering a more competitive broadband market, both in wireless and wireline, and urged the agency to focus on these aspects of the transaction as it brings its review to a close.”

Interesting. Is Free Press implying a tying arrangement between Verizon’s wireless services and its proposal to cross sell HBO?

A tying arrangement is a contractual arrangement which conditions the sale or lease of one product on the purchase or lease of another product from the same seller. Verizon hasn’t indicated that it would be branding video distribution services as Verizon cable. Comcast’s cable services are going to remain Comcast’s cable services.

Verizon has been doing fine selling its wireless services without the cross selling, so there would be no need to require Mr. Jones buy cable service in order for him to get wireless services. If Verizon can cross sell cable services, it would amount to a little extra gravy that Verizon’s investors should have no problem with.

Free Press, as usual, is barking up the wrong tree.