In space, one can do fast lanes

A great piece in The Economist discussing increasing the deployment of #broadband infrastructure in lesser developed countries.with the use of lower flying satellites, hot air balloons, and drones. These lower cost options relative to those provided by legacy satellite firms are hoped to provide the “backbone infrastructure that connects wireless telephone companies to each other and to the backbone provider making access to high-speed broadband increasingly feasible for consumers in poor countries.

The article discusses briefly the regulatory hurdles that companies like #Facebook may face when attempting to deploy drones. In addition the article notes that transmission speeds may be higher in space where traffic travels 40% faster via dark matter versus through a piece of cable.

I wonder if the FCC would try to extend net neutrality rules in space should Facebook decide that it’s hot air balloon program could work for underserved rural areas in the United States? Probably not. It’s #netneutrality rules apply primarily to the behavior of broadband internet access providers.

According to Section 8.9(a) of the FCC’s net neutrality rules, a person engaged in the provision of broadband internet access service … shall not engage in paid prioritization. This sentence right here would get Facebook or #Google off the hook for being subject to the rule.

What’s also interesting is the definition of “paid prioritization.” Let’s say that Google or Facebook is successful in launching their “where no man has gone before” initiative to connect the globe via low flying satellites or drones. Let’s also suppose that they decide to go head-to-head with Netflix and provide over-the-top streaming content. Given their size and capital, Facebook or Google could afford to enter a “bill and keep” arrangement with broadband access providers to move their traffic to the last-mile on a priority basis without paying for prioritization. The Facebook or Google brand would give them some traction with consumers given Google’s search prowess and Facebook’s growing bankbook of connections worldwide.

Since the Federal Communications Commission​ allegedly has no intention of regulating rates and would have less incentive to deny a traffic exchange agreement that involves no compensation or advantage for a third-party affiliate, The broadband access provider could increase rates to recover the costs of its clogging network.

Now this scenario assumes that Facebook and Google’s global initiatives are a success, but should their drone and hot air balloon programs work, their will be incentives to connect the dots here at home by making these initiatives available to rural America where demand is great.

I hope they try it….. .

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Why can’t broadband competition proponents focus on the real picture?

The Center for Public Integrity released a post yesterday that has me questioning their economics integrity.  In the post, the Center describes how broadband providers avoid competition by arguing that the “Internet service grew out of the old telephone and cable TV systems, where only two companies owned direct lines to U.S. households.”  Sorry, but that’s only half the story.  As I shared in my comments on the post:

“Advocates for competition in the broadband access platform market need look no further than the localities that ensure that only the provider with the deepest pockets are able to get entry into a market. Onerous financial, regulatory, and technical barriers keep ouyt smaller players. Richard Bennett makes a powerful point about legacy carriers having no incentives to go beyond service territories they negotiated for or acquired when initiating services.

In addition, there is too much emphasis on the “number of carriers” narrative. This is a capital intensive business and unless new players can muster up the cash, then you won’t see a third wireline carrier entering a market.

Finally, when will “competition proponents” come out and give a definitive number for the amount of carriers in a market necessary for a declaration of competition. Two, three, or four carriers still reflects an imperfect competitive market.”

Not only are Federal Communications Commission rules not promoting broadband deployment, but local government policies are adding to the hindrance.  No one complains about whether Interstate 4 connecting Tampa and Orlando should have a duplicate interstate running along it.  The concern is whether there is enough commerce running over the highway to spur economic growth and justify widening the existing lanes.

For example, according to comScore.com’s report , 2015 U.S. Digital Future in Focus”, in 2014, mobile app usage made up the majority of digital media activity.  Traditional television ratings fell as more Americans obtained content from emerging online platforms.    Seventy-five percent of all digital consumers over the age of 18 use desktop and mobile platforms to access Internet content.

Another sign of mobile’s encroachment on the desktop is growth in smartphone use.  According to comScore, smartphone use increased 16% in 2014.

I just started watching “House of Cards” (Okay, I’m a late bloomer) so now I’m counted as one of 7 of 8 Americans watching video content online, with half of these consumers watching content online on a daily basis.

And about that commerce moving along the roadway?  E-commerce grew 14% in 2014 with businesses raking in $268.5 billion.

All this content and e-commerce activity happening while consumers allegedly are “abused” by a lack of broadband access platform competition.  Policy makers shouldn’t waste their time on making an oligopoly a larger oligopoly.  The focus should be on clearing spectrum for greater use of the internet and ensuring that the provision of data, whether in the form of video or text, is not interfered with.

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Netflix, Tumblr wanted 1995 not 1934

Internet Innovation Alliance’s Bruce Mehlman wrote an insightful blog post last Friday about the second thoughts companies like Netflix are having about the Federal Communications Commission’s decision to reclassify broadband services as plain old telephone service.  Netflix’s befuddlement over the FCC’s decision to use Title II to drop the regulatory hammer on the internet ecosystem has me wondering how much on the same page were these net neutrality proponents?  The push for net neutrality may be an example of how dysfinctional the left can be when it sells a narrative to multiple classes within its big tent and has the manage the disappointment that ironically occurs when it gets what it wants.

Netflix’s insistence that heavy Ttle II regulation was not a part of its end game has me wondering if progressives had really settled down on a definition of a “fair and open” internet.  The left apparently has not.  To Netflix and other Silicon Valley giants, fair and open appears to mean an internet where they can interconnect in a pre-1996 manner; under some bill and keep methodology with any type of technology they deemed appropriate regardless of a broadband provider’s discomfort.

To the end-users, the four million confused members of the masses, “fair and open” was a rallying cry of the democratic wish; that a fair internet will respect their rights to communicate with whatever website of their choice and move data equally to the end-user no matter the source of the content.

Narrative managers like Public Knowledge and Free Press were successful in conflating the two narratives but were probably inept in educating their supporters, like Tumblr‘s David Karp, as to the downside of using Title II as a mechanism for reconciling the two narratives.  Title II, Mr. Karp and the rest of his Silicon Valley cohorts should have been told that their content operations, particularly the agreements that they enter into to connect to broadband networks, were not guaranteed to escape fees for the exchange of data nor was privacy from prying consumer or competitor eyes or noninterference from the government going to be avoidable.

The FCC may find itself a big loser resulting from its participation in a disingenuous conflation of varying narratives.  It must now deliver on a basket of promises to the consumer as it answers complaints from an an ill-informed electorate regarding every perceived slight in service practice and rate assessments.  It won’t be able to tell consumers or the markets that it never intended to regulate rates.  Consumers won’t stand for that because improving their consumer welfare calls for what they believe is a long awaited initiative to regulate rates.

You wanted 1995?  You may have to settle for 1934.

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Quick note on the Federal Communications Commission’s inconsistency on rate regulation

I just finished delivering a presentation before the National League of Cities infrormation technology committee.  Cities and towns are taking an interest in how the Federal Communication Commission’s reclassification of broadband may impact their decision to deploy commercial broadband facilities.  It’s one thing for the FCC to say that it will preempt state laws that prohibit a city from expanding broadband services from beyond its electric utility’s boundaries.  It is quite another to run the risk of having those services regulated by Tom Wheeler and Associates.

I pointed out to attendees that there is an inconsistency stemming from two sources.  First is the FCC’s proclamation that it will not apply public utility style rate regulation to broadband providers and that it will forbear from applying tariffing requirements to broadband carriers.  The problem is that the FCC is ready to apply “core requirements” of Title II.  Those core requirements, as found in sections 201 and 202 of the Communications Act, require that the rates charged by telecommunications firms be just and reasonable.  How will the FCC ensure just and reasonableness without a rate review?  In addition, “rate regulation” need not take the form of the traditional methodology where a regulatory body determines what the appropriate rate base is i.e. the assets needed for providing a service and, after applying a government-determined rate of return, calculating revenue and rates.

Rate regulation, as I shared with the committee, may take the form of determining rate bands, implementing price caps, or some other form of incentive regulation.  Also, while traditional tariff requirements might be foreborne, simple price schedules, as required for cable companies, may also be an option for making rates transparent and publicly on file with the FCC.  Simply sayng there will be no “public utility-style” rate regulation does not mean that broadband operator rates will not be regulated.

Second, the FCC and its net neutrality proponent allies sold consumers a level of expectation, a bill of goods, by arguing that need for regulating the internet was imperative to maintaining an open internet that would facilitate consumers’ abilities to freeluy express themselves on the printing press of the 21st century.  Notwithstanding a lack of any threat to the consumers’ ability to express themselves, the FCC, Free Press, Public Knowledge, and other groups insisted on Title II as a ready source of necessary consumer protections.  To the consumer, protection takes the form of rate and services regulation.  If the FCC is going to forbear from rate regulation, then what was the point of the net neutrality exercise?

As I relayed to the atendees, net neutrality was never about consumers and their rights to rant, vent, and watch videos.  Net neutrality is and always be a battle about content providers attempting to push their costs for transmitting content to a zero rate.  Uncertainty has been created by the FCC with its reclassification of broadband as a Title II, common carrier service.  That’s a quagmire that municipalities should stay out of.

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If the FCC is serious about regulating the internet like a utility, then this is what it should do

The argument that access to the internet via broadband networks should be regulated like a public utility sends society the wrong message about how information moves along the internet and that it is okay to devalue information, data, content along certain interconnection points when indeed the opposite should be happening; that for the value added at these interconnection points, added value should be reflected in the price mechanism.  Access should not be priced at near zero on false premises of openness and privacy.

On the contrary, if the data consumer wants to keep the prying eyes of access providers or other data providers away from her activities, there should be an exchange of compensation that guarantees such activity won’t take place.  Rather than regulate the internet as a “public utility”, let the parties in data transactions enter into contracts that spell out each party’s rights.

Unlike an electric utility where the product, electricity, flows for the most part one way (we’ll ignore distributed energy for now), data, content, information flows two ways.  Electricity flows from an energy producer to an entity that coordinates the transmission of electricity flows to the distribution utilities that have been searching for the best price from the generators. Data, content, information flows at least two ways; from content creator/generator/aggregator to an end-user in response to the locational or other personal data the end-user provides to either her internet service provider or content provider.

The data end-user or consumer pays her broadband provider for access to the internet and may also an online entity for access to their content which may be located behind a paywall.  In most cases the information the end-user seeks is offered by content providers free of charge.  But if a public utility model is followed for participants in the data markets then consumers have been underpaying for their search activities and their bills should be adjusted upward to capture the major costs a utility incurs when delivering service.

A consumer’s utility rate includes the cost of generating electricity; transmitting electricity; and distributing electricity to its final stop.  The utility consumer may also pay environmental compliance costs, nuclear construction costs recovery, a municipal franchise fee, and sales tax.

Broadband fees are another matter. What sticks out when you look at your broadband bill is that none of your fees and charges are related to the generation, transmission, or distribution of data, content, information.  For broadband access you may pay state and local taxes and that’s it.

So while a utility’s rate reflects activities impacting the movement of product that end-users want to purchase, electricity, broadband rates, while reflecting the cost of access, include nothing else, not even the cost of generating and transmitting data, content, information. If progressive advocates for public utility-style regulation of internet access want their argument to have validity they will have to accept that along with the additional regulatory burdens they propose via Title II, customers should expect bills that capture all the costs involved in generating and sending their data, content, information to them.  Broadband providers should pay every content provider that the broadband subscriber chooses as a source of data, content, information, and broadband providers should turn around and pass on these costs to the consumer so that her bills reflect these choices.

The benefits from such an approach is that it would give the markets a much more accurate view of which content providers are providing end-users with the most value.  The net neutrality debate would end because consumers would choose content they value the most as a result of rates that reflect the cost of getting a near infinitesimal amount of data to the end-user.

That is, off course, if the FCC is really serious about regulating the internet like a utility.