In the next net neutrality go-round, will the FCC promote municipal broadband

Federal Communication Commission chairman Tom Wheeler announced this morning that the agency will take a second crack at net neutrality rules. In his statement, Mr. Wheeler said that:

“In its Verizon v. FCC decision, the United States Court of Appeals for the District of Columbia Circuit
invited the Commission to act to preserve a free and open Internet. I intend to accept that invitation by
proposing rules that will meet the court’s test for preventing improper blocking of and discrimination
among Internet traffic, ensuring genuine transparency in how Internet Service Providers manage traffic,
and enhancing competition. Preserving the Internet as an open platform for innovation and expression
while providing certainty and predictability in the marketplace is an important responsibility of this
agency.”

Mr. Wheeler went on further to clarify that the FCC will not appeal last month’s federal court of appeals order that vacated the anti-blocking and ant-discrimination portions of the FCC’s rules.  The rules left in place transparency rules and cemented the FCC’s authority to regulate the internet pursuant to section 706 of the Communications Act of 1934.  That section grants the FCC authority to pursue policy that promotes the deployment of advanced services including broadband and can be read broadly to include over-the-top or edge services such as those provide by Netflix or Hulu.

The FCC is also reserving its authority to reclassify broadband service as a telecommunications service under Title II of the Act, according to the article.

Also of interest was Mr. Wheeler’s statement on competition in the area of broadband access, seeming to indicate promoting municipal broadband as a policy to address internet service provider choice:

“The Commission will look for opportunities to enhance Internet access competition. One obvious candidate for close examination was raised in Judge Silberman’s separate opinion, namely legal restrictions on the ability of cities and towns to offer broadband services to consumers in their communities.”

Yesterday, President Obama reiterated his support for an “open internet” but reminded the public that he could not order the FCC to apply Title II treatment to the internet.

AT&T issued a statement on the FCC’s latest effort to codify open internet rules, indicating a willing to work with the FCC while reminding the agency that it has sufficient authority to maintain openness without firing another regulatory shot:

“AT&T has built its broadband business, both wired and wireless, on the principal of Internet openness.  That is what our customers rightly expect, and it is what our company will continue to deliver.  That is also why we endorsed the FCC’s original rule on net neutrality, and is why we pledged to adhere to openness principles even after the recent court decision.

“As the FCC embarks on a new proceeding to clarify its authority under section 706, we will, of course, participate constructively and in the same spirit with which we worked with the Commission on its original rule.  We believe the FCC possesses sufficient authority under section 706 to preserve Internet freedom and openness, and that it can do so without over-regulation.  Indeed, and as the court recognized, section 706 was clearly intended by Congress as a tool to enhance broadband investment and deployment.  Thus, it is vital that, as the FCC defines its authority, it do so in a way that does not inhibit the very investment section 706 was intended to assist.”–Jim Ciccone, AT&T Senior Executive Vice-President for Legislative and External Affairs

Verizon also issued a brief statement reminding the public and regulators of its commitment to an open internet:

“Verizon remains committed to an open Internet that provides consumers with competitive choices and unblocked access to lawful websites and content when, where, and how they want.  We have always focused on providing our customers with the services and experience they want, and this focus has not changed.”–Libby Jacobson, Verizon, Director of Digital Policy Communications

 

 

Comments Off

The IP transition should have a positive impact on capital inflows

Capital flows to where it  can find the highest returns and in the broadband world, that area is internet protocol networks.  As Rick Boucher, honorary chairman of the Internet Innovation Alliance shared in a recent op-ed in The Hill:

“The dramatic shift toward broadband-based networks forecasts nothing less than the end of the aging telephone network first used in the era of Alexander Graham Bell. By the end of this decade, through a carefully planned process, all consumers will have transitioned to modern high-speed broadband networks.

Most consumers — essentially anyone who has a cellphone or who gets telephone service from a cable provider — have already made this switch without government action. Drawn in significant part by 4G wireless technology offering speeds comparable to the fastest wired broadband, consumers are fleeing the old network in droves. Today, less than one-third of the country uses it at all, and only 5 percent use it exclusively. It’s rapidly wearing out. Manufacturers don’t make new equipment for it, and the costs of maintaining it are skyrocketing. It’s a network with limited service functionality. As the transition to date underscores, consumers realize how broadband-based networks offer them far more. Driven by new technological opportunities, that’s the marketplace at work.”

Consumers here in the United States are ahead of the Federal Communications Commission when it comes to the realities of the broadband and information markets.  Consumers want data and content delivered quickly.  They are used to the simultaneous flow of text, voice, and data over their smartphones and tablets and are not about to go back to costlier old legacy alternatives that provide way less capacity needed to provide the benefits of convergence.

Remember the days of clicking back and forth on the telephone between two people in the same conversation?  Do you prefer that type of communication of yesteryear or do you like the capacity broadband enables for Google hangouts or talking to multiple people on Skype?

One example of capital seeking opportunity for high return I found way south of here in Jamaica.  Maybe it’s my homesickness combined with Atlanta’s recent two-inches of snow blizzard that guided me to this Capital Networks article.  The takeaway here though is that Jamaica’s information, communications, and technology infrastructure is an increasingly important asset and by description it is increasingly digital.  The strategic partnership between Capital Networks, a content provider, and broadband provider Flow Jamaica resulted in innovative services for the country’s tourist industry, and all on digital networks.

Here at home, Verizon provides an example of how broadband networks, particularly wireless networks, are being leveraged to attract financing from the capital markets.  In a recently issued prospectus for securities being issued to finance its buyout of Vodafone’s share of Verizon Wireless, Verizon wrote the following:

“Our strategy is to build upon the foundation and strength of our network assets as the platforms for future growth and innovation. We have a unique asset portfolio to drive continued growth and value over our networks and create an integrated experience for our customers. We are extremely well-positioned in the center of the trends that are driving growth in our industry – mobility, broadband, video, cloud services and security. Our portfolio of assets will enable us to better leverage our capabilities across the entire business.

In wireless, we completed our 4G LTE coverage build and continue to invest in our network to take advantage of the significant opportunities enabled by this technology, as we innovate around our customer solutions. We have further strengthened our portfolio of enterprise strategic services with the development of a new cloud services product suite, the launch of a mobile healthcare platform, and several targeted acquisitions which will enhance our capabilities in mobile video delivery.

We are confident in our ability to take advantage of the growth opportunities in our key strategic markets. We will continue to invest in our networks as the platforms for future growth and innovation.”

Investment is flowing to high-speed networks.  If the FCC is concerned about continued innovation in the broadband markets and wants to help facilitate flows of capital to broadband providers, a thoughtfully planned by expedited IP transition trial is imperative.

Comments Off

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.

Comments Off

There is more to Idaho than potatoes and Debbie Austin

My son and I are apparently keeping up with some of the Joneses.  Yesterday his mother came into town to visit him and presented him with a smartphone.  Yes, a smartphone.  The old man is still in 3G la la land having upgraded from a 2G flip phone back in November 2011. (I’m still smartin’ from having my chops busted by Dr. Nicol Turner Lee for having the audacity to carry a 2G flip phone in public a couple years back).  Anyway, with two cell phones in the house and no wireline, the Chuckster and I are firmly a part of the unit of analysis evaluated by Pew Research and the National Centers for Disease Control (CDC) for determining the number of households that have snipped the cord at home and rely completely on wireless access to communications services.

According to a study by the CDC, 52.3% of adults in Idaho live in households that do not have  a wire line but have at least one wireless phone.  On the lower end, 19.4% of adults in New Jersey live in households that do not have a wire line but have gone the wireless-only way.  In my home state of Georgia, that percentage is 37% while Maryland comes in at 29.4%.

A closer look at the urban areas of Georgia and Maryland show that the percentage of adults that have opted for wireless only households is higher.  DeKalb County and Fulton County Georgia show 41.8% of adults living in households where there is a wireless phone only while the rest of the Peach State is at 36%.  In Maryland, Baltimore City comes in at 39.6% while the rest of the state registers at 27.6% of adults living in wireless only households.

If you have a penchant for old school, legacy land line usage then New Jersey is the state you want to be in, according to a Pew Research study, with 78.9% of households in Tony Soprano land have at least one land line.

Age and wealth have a bearing on whether a household cuts the cord, according to Pew.  Citing additional CDC research, Pew concluded that:

“The wireless-only lifestyle is especially predominant among the poor and the young. According to the CDC, nearly two-thirds (65.6%) of adults ages 25-29 lived in households with only wireless phones, as did three-in-five (59.9%) 30- to 34-year-olds and a majority (54.3%) of adults ages 18-24. A majority of adults living in poverty (54.7%) lived in a wireless-only household, versus 47.5% of what the CDC calls the “near-poor” and 35.3% of non-poor adults; wireless-only households also predominate among Hispanics, renters and adults living with roommates.”

Policy wise this tells me that regulators should not force broadband providers like AT&T and Verizon to continue putting resources toward maintaining old copper networks.  The country, whether for aesthetics, convenience, or financial reasons, showing its preference for mobility and regulations that go against this grain only encourages inefficiencies in resource allocation.

Comments Off

Broadband connectivity and productivity go hand in hand

The following excerpt from a U.S. Telecom research brief released in March 2013 provides substance to the argument that broadband plays an important role in the future expansion of the American economy.

“Broadband networks are critical enablers of productivity and growth enhancing innovation. As noted above, Marshall Poe describes the attributes of five historical communications media: speech, writing, print, audio-visual, and the Internet.

Among these, he identifies the Internet as especially powerful in generating economic activity, spillover effects, and novelty,another word for innovation. Steven Johnson, in “Where Good Ideas Come From,” offers an even
broader perspective on the role of what he calls “dense liquid networks” in the innovative process, from the formation of the first life forms in the so-called “primordial soup,” to the biodiversity of coral reefs, to the generation of novel ideas through neural networks, to the flourishing of civilization when humans settled in cities. Johnson argues—paraphrasing—that dense liquid networks enable increasingly large numbers of innovative agents to come into contact with one another, colliding and sharing ideas, rethinking and building on existing ideas, and exploring new combinations and possibilities. 

Broadband networks are the essential fluid medium through which today’s information-based
innovative processes occur. Extensive broadband networks connect and make possible
interactions among individuals, businesses, academics, governments, connected computers and
other things, and the information generated by all of these. Broadband networks are an essential
enabler of the creation and diffusion of new ideas across the modern information-based
economy.

In the specific context of data-based innovation, promising technologies such as cloud
computing, RFID-enhanced logistics, smart electrical grids, electronic health records, social
media applications, and big data analytics all thrive in this context. Through the broadband
medium, applications are able to gather, process, and analyze information, and distribute useful
insights, products, and services. Such applications require the transmission of large and growing
volumes of data, to and from widely distributed network nodes, and increasingly in real-time.

Thus, continuous innovation and investment in broadband networks themselves will be necessary
to accommodate ever growing demand and to realize the potential productivity benefits so
essential to economic growth. Competitive investment by the private sector has generated
widespread benefits, bringing broadband to the vast majority of the country and accommodating
usage that grew by a factor of approximately 4,000 from 1996 to 2010. Providers have invested over a trillion dollars in the last decade and a half to provide the essential capacity, quality of service, and application-based innovations needed to accommodate ever increasing network demand from users at the so-called “edge.” 
Policy must now aim to encourage the maximum levels of continuing investment by broadband
providers and the widespread adoption, by consumers and enterprises, of productivity-enhancing
applications. We can accomplish this in part by removing barriers to investment by broadband
providers, removing legacy burdens and encouraging the migration to Internet Protocol networks
for consumers and enterprises.”

US Telecom’s research tells me that as demand for the efficient and fast transfer of information increases, not only will more information consumers need to maintain their connections to the Internet, they will need networks that provide the capacity or bandwidth for maintaining high-speed connections.  That can’t happen if there is the persistent threat of net neutrality petitions constantly being filed and slowing down the deployment of these networks.

Facilitating the flow of data at high-speed won’t happen if AT&T, Verizon, and other owners of legacy telephone networks are forced to spend finite resources on legacy telephone networks that cannot provide the capacity demanded by the businesses, researchers, academics, and consumers mentioned in the report.

The Federal Communications Commission will have to go beyond thinking about tweaking regulations.  The FCC will have to start thinking about repealing regulations.  Just as importantly, the FCC will have to look itself in the mirror and reconsider its overall mindset when it comes to innovation and the knowledge markets.  The question should not be what regulations do we apply.  The question should be how do we get the knowledge market to fly.