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Wheeler, Franken, and Wyden show a naivete about today’s internet

In an opinion piece published yesterday in The Washington Post, Senator Al Franken, Democrat of Minnesota, Senator Ron Wyden, Democrat of Oregon, and former Federal Communications Commission chairman Tom Wheeler made the argument that planned attempts by current FCC chair Ajit Pai to remove Title II net neutrality rules would have a negative impact on consumers. The three argue that deep pocketed broadband access providers such as AT&T, Comcast, and Verizon want to take away the consumer protections that Title II of the Communications Act provides. Since broadband was reclassified as a telecommunications service by a Democratic weighted FCC under Mr Wheeler’s tenure, the privacy protections afforded to customer proprietary information connected to telecommunications customers would be lost to broadband consumers. The three go as far as to argue that net neutrality has created jobs because smaller retailers and other consumer services providers are able to get their products and services in front of the eyeballs of the everyday consumer because their traffic is now being treated fairly.

Given that there are two lawmakers authoring this piece I figured that they would at least offer an amendment to the Communications Act that defines net neutrality thus giving policy makers some firm platform from which to proceed and make good policy. The piece conveniently lacked that. Instead, Messrs Wheeler, Franken, and Wyden stuck with the lofty, airy definition of net neutrality that gives the impression that democracy is under attack. This is how the Democrats were able to scare four million consumers into putting their concerns onto postcards while blocking Mr Wheeler’s driveway.

What the opinion piece fails to explain is that net neutrality has to be defined in the context of commercialism, not as an assault on democracy. The internet has been commercialized for a quarter of a century. It provides the platform for gathering, processing, and selling information. Broadband companies are seeking out other revenue streams including processing and leveraging data for the purpose of generating advertisement revenues. Internet portals such as Google, Yahoo, and Facebook have been using customer information to attract advertisers. I sometimes refer to these sights as “legal hackers.” They get consumers to give up personal information for free and craft advertisements based on the personal information they garner. Ironically, Messrs Wheeler, Wyden and Franklin don’t discuss this disparity in treatment; that broadband providers who collect less personal information than these portals should find themselves under more statutory scrutiny than Facebook.

So dismissive of the market aspect of the internet that Messrs Wyden, Franken, and Wheeler could not even offer up a market solution for protecting consumer privacy. One solution I recommend is allowing consumers to sell their proprietary information, allowing them to trade on their info for cash or some other in-kind offering. Instead, Messrs Wheeler, Wyden, and Franken prefer stick with the “Government is a benevolent God” business model of consumer protection, usurping the individual’s power to use the markets to satisfy their own self interests.

Democracy is about the freedom of residents to choose leaders. That term has been tossed about too much by the net neutrality posse to the point where it is near meaningless. Net neutrality is not about democracy. Ron Wyden, Al Franken, and Tom Wheeler should do better than just stirring up the pot.

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Nothing in Wheeler’s Aspen Institute Remarks sparked my investment juices

Posted August 16th, 2016 in Broadband, Federal Communications Commission and tagged , by Alton Drew

Yesterday, Federal Communications Commission chairman Tom Wheeler made remarks to the Aspen Institute. He focused on the evolution and importance of networks as conduits for social and economic growth. As usual his analysis was more consumer-centered than producer centered with no specific discussion of how the Commission would facilitate signals for domestic or foreign direct investment in the telecommunications sector. There was not much to note here at all other than subtle a couple swipes at the GOP mantra of “making America great again.” Mr. Wheeler reminded the audience that America’s greatness didn’t have to be rebooted but was going through continuous evolution.

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The FCC to explore the Spectrum Frontiers

Yesterday Federal Communications Commission chairman Tom Wheeler channeled President John F. Kennedy in his announcement that the Commission will be issuing rules that release additional spectrum for use by 5 G devices and services. The release will also include 14 GHz of unlicensed spectrum. Mr. Wheeler wants to make 5 G a national priority given the role it plays as a platform for the internet of things. Mr. Wheeler did not come to this point overnight or by himself.

Working groups in the private sector have been making regulators aware of the spectrum requirements necessary for deploying effective 5 G networks. For example in August 2015, 4 G Americas, a wireless trade association, released a whitepaper identifying the best spectrum bands for 5 G. The paper makes the following key points:

  • “Mobile spectrum bands below 6 GHz will be valuable to allow the smooth integration of 4 G and 5 G systems.
  • Spectrum bands in the range above 6 GHz will offer technical challenges; however, capabilities for mobile services are possible in the higher band ranges with new radio solutions.
  • A variety of bands are needed to address both coverage and capacity needs of evolved 4G and 5G systems.
    • Lower frequencies have better propagation characteristics for better coverage and thus can support both macro and small cell deployments.
    • Frequencies beyond those traditionally used for cellular systems, especially those above 6 GHz are important to consider.
    • Higher frequencies can support wider bandwidth carriers due to large spectrum availability at millimeter-wave bands for providing very high peak data rates in specific areas where traffic demands are very high.
  • Action is needed by regulators to ensure that new spectrum needs are addressed for the evolution of 4 G and additionally to address the timely introduction of 5 G by identifying new spectrum ranges to be studied in the ITU- Radiocommunication Sector (ITU-R).” (Source: Yahoo! Finance)

The telecommunications services sector was in the positive this morning along with other sectors in the economy so saying that Mr. Wheeler’s announcement moved mountains much less the telecom sector would be a reach.Acting as a monopoly licensor of spectrum, I suspect that wireless companies will be seeking licenses at a premium given the scarcity of the resource. Mr. Wheeler admits that the emerging technology should be driving demand for spectrum. Fortunately in this case he appears willing not to hinder deployment but issuing new rules.

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No, Mr. Wheeler. Your net neutrality rules haven’t been kind to the communications sector

Posted March 18th, 2015 in Federal Communications Commission, net neutrality, Title II and tagged , , by Alton Drew

During testimony before the U.S. Senate Committee on Science, Commerce and Transportation, Federal Communications Commission chairman Tom Wheeler argued that the Commission’s net neutrality rules would have a positive impact on investment, citing an uptick in the market the day after the Commission issued its broadband reclassification order.  Mr. Wheeler is correct that the market enjoyed a sweet ride upwards on February 27.  CNN reported that the Nasdaq increased 7% while the Dow rose 5.6%.  The S&P 500 gained 5.5%.

But were these returns the result of the Commission’s decision to take us back to 1995?  No, they were not.  The jump in stock market values were likely due to signals from central bankers around the globe, including insights shared by Federal Reserve Board of Governors chairman Janet Yellen.  Dr. Yellen opined before Congress that the economic outlook for the United States in 2015 was good.  Also adding to the positive outlook on that day were actions taken on the part of a number of European central banks.  For example, the European Union approved another stimulus package for the Euro Zone with particular emphasis on Greece’s struggling economy.  That type of positive news out of Europe could only signal to investors that an important market for American business was thawing.

If we go back to the day of the Commission’s issue of its rules, February 26th, the news was gloomier for the markets overall.  According to Zacks.com the market took a downturn, with the Dow Jones Industrial Average falling .1% and the S&P 500 falling .2%.  The Nasdaq, which weighs heavily toward tech stocks, did see an increase of .4%.  This increase was led, however, by Google, Adobe Systems, and Facebook.  Ironically, Google and Facebook have been proponents to some degree of net neutrality so maybe Mr. Wheeler was doing the happy dance for these guys.

Overall the past four weeks have not been good for the media and telecommunications.  Over the last four weeks, the New York Times Technology Media and Telecommunications index has been down .62%.  For the past 52 weeks, a time period that for the very most part did not include any net neutrality rules, the New York Times TMT increased  9.37%.  With that type of growth the industry didn’t need any rules to spur innovation.

Bottomline, Mr. Wheeler hasn’t shown me any evidence that his latest version of net neutrality rules is having any positive impact on the markets.

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Broadband and Title II: It’s starting to feel like 1995

Federal Communications Commission chairman earlier today decided to take us back to 1995 and announced that he will issue new net neutrality rules that would bring wireline and wireless broadband providers under Title II regulation.  According to The Financial Times, investor fears were subdued when Mr. Wheeler assured the public that there would be no rate regulation on the part of the FCC.  Okay.  But that doesn’t mean that there will not be new rates implemented by broadband providers.  Mr. Wheeler in his opinion piece did not rule that possibility out.

Additional rates on the part of broadband providers wouldn’t be a bad thing either for investors, the operators, or consumers.  For investors and operators they can be assured that additional compliance costs under a new Title II regime are being recovered if operators charge additional fees.  For example, electric utilities charge different rates for different classes of ratepayer.  The typical ratepayer classes include residential, commercial, and industrial, with larger ratepayers paying a lower per unit rate because of the greater volume they consume and the decreasing marginal costs involved in generating electricity for larger consumers.  Residential consumers may pay less in total because they consume a smaller gross amounts of electricity but pay a larger per unit cost for their electricity.

Broadband providers may decide to dust off their regulatory playbooks from the period before the 1996 rewrite of the Communications Act and start charging tiered rates or even per minute rates for certain low-use packages.  Since broadband operators and content providers would be banned from entering paid prioritization agreements, what better way to manage congestion than to design packages where consumers in effect determine the speeds at which they get data based on the dollar value of the data.  It may also give wannabe broadband providers like Google and Facebook an excuse to charge for some of their services.

Yes, it’s starting to feel like 1995.