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What regulators say about the internet of things

For the past two or three days the chairmen of the Federal Communications Commission and the Federal Trade Commission have been clarifying their regulatory agendas for and approaches to the Internet.  FCC chairman Tom Wheeler plans to issue net neutrality rules around 5 February with the full FCC voting on those rules on 26 February.  Media reports have Mr. Wheeler outlining what he believes the benefits consumers would enjoy from reclassifying broadband as an old school, run-of-the-mill telephone company.  For example at the Consumer Electronics Show in Las Vegas Mr. Wheeler reportedly said the following:

“So, there is a way to do Title II right, that says there are many parts of Title II that are inappropriate, and would thwart investment, but that a model has been set in the wireless business.”

CTIA-The Wireless Association has taken the position that given the level of competition for mobile broadband that net neutrality rules should be “mobile broadband specific” and that mobile broadband has never been regulated under Title II.

Mr. Wheeler, in an attempt to keep net neutrality advocates happy, appears to be willing to use Title II regulation to strike down deals between content providers and broadband operators where content providers pay to have their traffic given higher priority over other providers.  Mr. Wheeler wants the role of determining which transactions and agreements are commercially reasonable and how that traffic should be moved from content provider to broadband provider to ultimate end user.

FTC chairman Edith Ramirez’s approach appears to focus more on transparency of participants in information markets.  Her concern, as shared with CES participants, is about privacy and the Internet of Things. As more devices connect to each other via the internet, more devices become subject to hacking and a wealth of data, thought by consumers to be private, becomes subject to misuse, theft, or fraud.

Ms. Ramirez’s focus on the consumer is not surprising given the nature of her agency’s work, but it also seems the slightly, and I mean slightly, better approach to overseeing market behavior versus individual business behavior.  The internet is a platform for information exchange between information generators and information seekers.  The more information that a provider has on how her information is going to be used in the markets helps her make better decisions not only on whether she should make it available but also on its value and how best to monetize her data. Information gatherers will simply have to provide better incentives to information providers to get them to give up their data.

What kind of growth does the market see for the Internet of Things?  According to Cisco’s Internet Business Solutions Group, some 25 billion devices will be connected to the internet by the end of 2015.  That number will climb to 50 billion connected devices by the end of 2020.  That’s a lot of broadband infrastructure for the FCC to oversee and more hacking access points for the FTC to worry about in five short years.

Investors will see the biggest gains in the infrastructure space of the Internet of Things.  Leading growth in this space will be manufacturers of processor chips, wifi networks, sensors, and software.  Investors should also be concerned with factors that impact demand for devices that talk to each other and I believe the factor that has the heaviest weight is the consumer privacy factor.  Devices aren’t just talking to each other but are gathering information on consumer likes and habits and storing this data for the information gatherer’s future use.  Privacy is an immediate and long term issue because it concerns one half of the parties involved in the information market transaction: the consumer.

As for the FCC’s open access approach it is too short-sighted.  Mr. Wheeler’s focus on competition for broadband service and equal treatment of traffic may have a nice sounding populist ring, but in the internet eco-system what matters is the consumer’s choice of product obtained through broadband.  That product is content and the price the consumer pays in exchange for that content is, ironically, content in the form of personal data.  Consumers already have wireless and wireline choices for broadband access.  The value play for consumers lies in the quality of content available online and consumers are more than capable of deciding that for themselves.

What the government can do is what it does best (albeit it is not the best at it, but work with me); government should adjudicate privacy and other consumer disputes and make available to consumers information that they may not be able to gleen readily from the private sector.  The FTC’s focus on privacy and consumer protection does a better job at this than the FCC.

I’ll go out on a limb and say that the private sector is taking care of the FCC’s mandate of ensuring a nationwide communications network.  The FCC’s focus given the growth in the mobile market and the increasing need for devices to wirelessly connect should remain on allocating spectrum and assuring the reliability and safety of wired and wireless communications infrastructure.  Any other endeavor is waste.

 

 

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Banging POTS and PANS with the net neutrality posse says rules dead on arrival

A couple people in my Twitter posse shared a picture of Federal Communications Commission chairman Tom Wheeler hanging outside the FCC’s headquarters rallying net neutrality protesters in favor of rules that would codify more than two decades old policy regarding traffic flow on the Internet.  Between First Lady Michelle Obama and conservative pundit Ann Coulter holding up poster boards this week I guess Mr. Wheeler felt it was okay to join the fun.

Mr. Wheeler looks out-of-place in the picture which may be telling as to how out of place his proposed rules are with net neutrality advocates (who don’t like paid prioritization); edge providers (who complain about paying ISPs while actually paying ISPs); and broadband providers (who argue that backbone providers pay so why not edge providers.).

His out-of-place look is just as telling as to how out of place his rules are with fellow commissioners.  Commissioner Ajit Pai expressed “grave concerns” about the proposed rules and recommended that the FCC should instead focus on rules for the incentive auction.

Jessica Rosenworcel also called for a delay in issuing rules, basing her rational on the “torrent of response” to the Chairman’s proposal.

Last week in a blog post, Commissioner Mignon Clyburn reiterated her support for strong net neutrality rules but also shared her opposition to paid prioritization.

Commissioner Michael O’Rielly also sees no need for net neutrality rules, whether in the form of the rules that have been rejected by the appellate court or in the form to be issued for comment at tomorrow’s FCC open meeting.  Mr. O’Rielly is not interested in regulating what may happen in the future.

Chairman Wheeler will go ahead with a discussion on his rules tomorrow I believe because the table of expectations has been set.  The support for the rules are barley on life support and given the calls for delay by two commissioners and grave concerns on the part of one more, I would not be surprised to see the proposal pronounced either dead or to be kept on life support for some undetermined time.

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The FCC should treat municipal broadband equally under its transparency rules

Last month the Federal Communications Commission released a public notice seeking comments on how it should proceed in light of a federal appellate court decision that vacated non-discrimination and non-blocking portions of the FCC’s net neutrality rules.  In that decision, the court held that the FCC reasonably interpreted section 706 of the Telecommunications Act of 1996 as empowering the agency to “promulgate rules governing broadband providers’ treatment of Internet traffic, and its justification for the specific rules at issue here–that they will preserve and facilitate the ‘virtuous circle’ of innovation that has driven the explosive growth of the Internet–is reasonable and is supported by substantial evidence.”

The court left intact the transparency or management disclosure portion of the FCC’s net neutrality rules.  Under the transparency rules, both fixed and mobile broadband providers must publicly disclose accurate information regarding network management practices, performance, and commercial terms of their broadband internet access services.

The court was not asked to address how the FCC should ensure equitable treatment of private and municipal broadband providers regarding their obligations to provide the public with accurate network management information.  FCC chairman Tom Wheeler during the release of the agency’s public notice on going forward with new net neutrality rules transmitted his desire to enhance broadband competition by addressing legal restrictions on state and city abilities to provide broadband services to their communities.

Having worked for state and local governments I can already hear the arguments that municipalities will make when confronted by the issue of how best to share this information with the public.  Should they provide periodic updates on their websites?  Should they make freedom of information exceptions for public requests for network management information?  What impact would providing network management information on broadband have on providing say information on city provided utilities?  Within the city or state government who will have responsibility to authorize release of the information?

Equity for all broadband providers would require that municipalities receive no slack on complying with transparency rules.  The FCC should not fall for the budget constraints argument that will pervade all city and state objections to providing accurate information.  If municipalities want to play the role of competitive provider, they will have to carry the regulatory burden that comes with competition.

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Can the FCC go from regulator to facilitator?

Today, Tom Wheeler, chairman of the Federal Communications Commission, provided the House Subcommittee on Communications and Technology with three guiding principles he wants FCC policy to follow:

 

Promoting Economic Growth and National Leadership – technological innovation,
growth and national economic leadership have always been determined by our networks.

Competition drives the benefits of those networks, and we have a responsibility to see to
the expansion of those networks, including the appropriate allocation of adequate
amounts of spectrum.

Guaranteeing the Network Compact – a change in technology may occasion a review
of the rules, but it does not change the rights of users or the responsibilities of network
providers. This civil bond between network providers and users has always had three
components: access, interconnection, and the encouragement and enablement of the
public-purpose benefits of our networks (including public safety and national security).
The Commission must protect the Network Compact. For example, the right of access
also means the ability of users to access all lawful content on a network. That is why the
FCC adopted – and I support – the Open Internet Order.

Making Networks Work for Everyone – it isn’t just that high-speed expands, but also
what it enables. How networks enable a 21st century educational system, enable the
expansion of capabilities for Americans with disabilities; and assure diversity, localism
and speech are basic underpinnings of our responsibility.”

What was missing from Chairman Wheeler’s presentation was any explicit expression of the role the FCC expects to play in the knowledge and information markets.  Commissioner Jessica Rosenworcel probably came the closest to describing this role she opined that there may be too much focus on networks versus what amazing things networks are able to do.  I found this statement poignant given Chairman Wheeler’s earlier description of himself as a “network man”.  Mrs. Rosenworcel’s description of the FCC’s going forward role shed some light on what producers want to see from the communications networks but none of the Commission members actually shined the light directly into the room.

I agree with Mrs. Rosenworcel’s comments.  The FCC gets a bit too fixated with the networks carriers want to build versus finding ways to facilitate information flow across networks.  Chairman Wheeler’s network compact, which I have described before as net neutrality on steroids, is an example.  The network compact could be made applicable to knowledge and information providers by tweaking the three prongs-  access, interconnection, and the encouragement and enablement of the public-purpose benefits of our networks-upon which it is based.  I would delete the reference to encouraging and enabling public purpose benefits and replace it with facilitating the smooth and fast flow of information across the networks.  Such an amendment serves to incorporate a consumer-driven philosophy for how we look at the networks, especially given all the economic growth rhetoric from the House panel and the FCC members.

For example, my business partner and I wish to start an online institute that addresses human rights issues.  By incorporating a consumer-driven philosophy toward broadband networks, the FCC should focus on policies that help our institute exchange data with our subscribers at faster rates and greater capacity.  Just like middle mile and back bone carriers can enter into “speed lane” agreements with content providers, I should be able to partner with my Internet service provider for more capacity and greater data exchange speed with my subscribers.  The FCC should defer to the network compacts that I enter into privately with carriers so that I can provide exchange my knowledge market services quickly and efficiently.

Chairman Wheeler’s status quo plus approach to net neutrality is disconcerting and probably won’t change until after an opinion is handed down by the U.S. Court of Appeals-District of Columbia.  This might not mean an end to the debate over whether broadband services should be subject to Title II treatment, but should give opponents to net neutrality another opportunity to voice displeasure with attempts to further regulate broadband versus facilitating the information and knowledge markets.

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Tom Wheeler gets the nod from Senate sub-committee

Here’s what the Senator John Rockefeller, chairman of the U.S. Senate’s Committee on Commerce, Science, and Transportation, had to say about today’s committee vote approving Thomas E. Wheeler as chairman of the Federal Communications Commission:

“I congratulate Tom Wheeler on the strong bipartisan support he received in the Commerce Committee today. Now that the Committee completed its work on the nomination, the full Senate needs to move forward and confirm him. With all the important issues before the FCC, it’s critical that the agency has a confirmed chair and strong leader in place. I am confident, given Tom Wheeler’s extensive experience and capabilities in the communications industry, he is the right person for this job.”

Analysis from The Hill.com indicates that it may be awhile before Mr. Wheeler’s nomination is voted on by the full Senate. President Obama has yet to select a Republican to fill the seat vacated by Robert McDowell earlier this year and getting Mr. Wheeler’s vote through the full Senate may be easier if the Republican nominee’s name is also on the voting slate.