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FCC overlooks the word proprietary

The Federal Communications Commission refers to customer data as “proprietary” in its privacy order set for vote this coming Thursday. Webster’s New World Dictionary defines proprietary as something belonging to an owner like a patent, trademark, or copyright. By placing the qualifier “proprietary” on customer data, the Commission gives the impression that the data is compiled by the consumer for possible placement into the stream of commerce and by transferring this data can receive something in return. Is the consumer doing this; getting something in return for putting her data out there?

The relationship between a consumer and her broadband internet access service is one where she provides certain personal information along with a network access fee to her broadband provider and in exchange receives access to the internet. An informed consumer is aware that sharing some personal data is part of her total cost for receiving access to the internet via her broadband provider. The best way to ensure privacy of her data is to not buy access service to begin with but public and social policy currently promotes universal deployment of and access to broadband so discouraging her purchase is not a policy option.

In my view, the consumer has created a negative externality by providing property, in this case her personal information, for free. The rate the consumer pays for broadband access overcompensates the service provider given the value the broadband service provider receives. What the Commission should encourage is a pricing regime where consumers can charge for the use of their proprietary information. This way, the prices paid for access provide a better reflection of what is actually being exchanged.

The Commission may find that with this market solution concerns of privacy will be abated as the consumer exercises more control over her market relationship with the broadband service provider. Allowing for consumers compensation for providing data may create a ripple effect in the internet eco-system. Go onto Facebook and you see consumers sharing a lot of personal information for free. Advocates for consumer empowerment should like this approach but these so called advocates would lose too much control of the consumer protection debate if consumers were to enjoy this type of market freedom over compensation for their data.

Bottom line, if the Commission is truly concerned about protecting proprietary consumer information, it should give the consumer the front line tools to protect her data and in a market system, that front line tool is the ability to be compensated for one’s property.

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Caribbean creatives can benefit from zero rating services

Posted October 13th, 2016 in Broadband, capital, content providers, data plans and tagged , , , by Alton Drew

As a native of the Caribbean, my attention has been turning toward global trade in telecommunications markets, primarily between the United States and the Caribbean. While I have a bias toward the English-speaking nations in the Eastern Caribbean having family in that sub-region, and I was born and raised in St.Thomas, it doesn’t mean that I don’t have love for the Spanish, French, and Dutch speaking islands. I just haven’t learned the languages yet. So, paciente, por favor.

Caribbean Export recently published an outlook on Caribbean trade in 2016 and 2017. It takes $500,000 to $2,000,000 for an artist to break into mainstream music markets. Population sizes on smaller island nations force Caribbean music artists to attempt expansion into North American, Asian, and European markets. The survey points out that online streaming is one approach used by artists to sell back catalogs and new music, with 25% of revenues accounted for online. According to Caribbean Export:

“The move to online consumption of music has some significant benefits for emerging artistes.  Online streaming and sales allow the artiste to understand what types of music and artistes are popular in which markets.  This can demonstrate which market may be most relevant for them to target with their music … The Information Technology revolution of the 1990s and the advent of social media have presented a wider reach to artistes today than has ever been possible.  In the age of the Internet, success is possible where an artiste with a quality product can inspire people to share their product, thereby creating millions of impressions. In other words, the sheer accessibility provided by the Internet means that an artiste can release content directly to a global audience, but it is important to stand out.”

The global Caribbean Diaspora numbers approximately 10.7 million with four million of those immigrants living in the United States. Mobile broadband, online streaming and social media can get an artist’s content in front of this audience quickly as discussed before. I believe what can also help is a free data approach combined with other strategic partnership initiatives. For example, where a carrier like Verizon can offer free access to a Caribbean artist website without a subscriber incurring a charge against their data cap, the consumer enjoys the benefit of exposure to new music which may lead to additional sales for the artist. The subscriber is also incentivized to explore other offerings via her smartphones, offerings she hopefully will be willing to pay for.

Another benefit from this type of global trade is the creation of demand for more infrastructure deployment. Increased content and new content delivery systems will need additional fixed line and wireless platforms to run on.

The Caribbean Diaspora should look at advocating for and investing in the development of online streaming for Caribbean artists as a type of remittance program. Greater support for these artists results in greater revenues eventually returning to our homelands with the benefits of infrastructure development both in the Caribbean and here in the United States.

 

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FCC does not recognize the value cable creates for content

Recently the Federal Communications Commission released a plan for increasing the number of ways consumers can navigate video content. The Commission wants cable companies to provide pay television subscribers with a free app that allows the subscriber to access their video content. The Commission believes that at an annual amount of approximately $231 for set top boxes, households are getting hosed and that additional choice is needed in order to reduce this financial burden.

The Commission appears to be ignoring the capital side of set top box equation. No where in his plan does Commission chairman acknowledge the billions cable companies spend on obtaining licensing to programming or creating their own content.  To extract value from this content, cable companies charge consumers a positive premium for using platforms necessary for accessing the content including set top boxes. The Commission is blatantly circumventing the ability of cable companies to extract the value of the content by requiring that cable companies provide consumers with apps that allow the consumer to avoid monthly fees altogether.

The Commission believes it is correcting some type of market failure by providing consumers access to content at a reduced cost, but by interfering with a market transaction, the Commission is creating an environment that sends a false signal to content providers and navigation technology providers. Device makers may think twice about investing resources into developing hardware where the use of free apps freezes the hardware provider out of the market. Small, non-cable affiliated app developers may have second thoughts as well, especially going up against deeper pocketed cable companies or internet portal companies such as Google who can leverage its advertising revenue to provide video navigation apps for free.

In addition, with the requirement that cable companies provide free apps and the expectation that established internet portals will enter the video navigation application market, smaller entrepreneurs will have a harder time accessing capital as investors view their business model as a source of lower returns.

Sending skewed market signals and reducing small app developer access to capital doesn’t make for good video marketplace policy.

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Ted Cruz’s voice on broadband

Posted July 25th, 2016 in Broadband and tagged , by Alton Drew

Ted Cruz caught a little media heat for not endorsing Donald Trump for president of the United States. His snub may provide additional ammo to a party establishment that have never really cared for the U.S. senator from Texas. Mr. Cruz, however, has been a consistent voice against additional or onerous regulation of broadband services. He reiterated his opposition to more regulation during his convention speech which was refreshing to hear given that neither Hillary Clinton or Donald Trump have spoken at any length on the importance of broadband, especially for economic development.

I don’t pretend to be a Ted Cruz fan, but if the Democrats were to take the Senate and the Republican establishment continues its snub, then an important voice in opposition to more broadband regulation would be made even less relevant.

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How Congress and the FCC can avoid future Section 257 proceedings

On 25 March 2016, the Federal Communications Commission circulated an item regarding a Section 257 market entry barriers proceeding. The purpose of the proceeding is to prepare and distribute a report to Congress detailing regulatory barriers to entry faced by telecommunications and information service providers. The Commission is also expected to promote policies that favor diversity of media voices, vigorous economic competition, and technological advancement.

I think the biggest barrier to information services providers is not a bunch of rules or the Communications Act itself. It is the philosophy behind describing information services; a philosophy that is still silo-based; that separates broadband access providers from websites, information portals, and search engines. All these platforms have the exchange, gathering, repackaging, and sale of data or information in common and it is time that the Commission recognize this basic characteristic of the digital jungle.

The anti-ISP posse will argue that firms like Verizon and AT&T should not be viewed as mere information service providers because they also sell access services; that content providers and consumers rely on these gateways to access information. The anti-ISP posse have a very limited point when they distinguish Verizon or AT&T from other information services based on their access services. The New York Times, an online digital content provider, may be able to hire delivery boys but it won’t shell out billions for deploying networks just to deliver one publication to their subscribers. Paying last mile, mid-mile, or content delivery networks is more economically feasible for them to get their content out. But if we treated the information markets as an exchange, I believe there is an opportunity to create a model that increases opportunities for smaller content providers while getting the Commission and probably Congress out of the business of trying to make the information markets efficient.

Congress and the Commission should explore a blended exchange/independent system operator model for internet service providers. ISPs trade on information. The information markets in this blended model would be coordinated by a “central ISP”, similar to the regional transmission or independent system operators found in the electricity markets. Carriers, such as AT&T or Verizon, would voluntarily turn over functional control of their networks to this central ISP. In order to trade on this central ISP platform, information service providers such as Facebook, Hulu, Amazon, Google, etc., would buy seats on the central ISP’s exchange, similar to a stock market exchange. As a member, the information service provider would have a say in how the exchange is managed. As long as the information service provider has the annual fee to get a seat or membership, they must be allowed to join.

Yes, I hear your next question. “But what about the lone blogger who wants to get his content out there or the start-up information service provider who can’t afford a seat?” My first response would be “value.”  My second response would be, “tough nookies.”

ISPs are looking for content of great value. Smaller content providers will have to step up their game and demonstrate to ISPs that their content should be added to the ISPs portfolio of video and text goodies. And if a content provider cannot demonstrate this value, then tough. The content provider will have to either find another way to distribute content digitally or accept that the digital content world isn’t ready for her…yet.