FCC’s In Search of Relevance in 706 Report
May 23, 2011
The FCC’s latest arbitrary and capricious torturing of the facts, law, and common sense, in its most recent 706 report, makes it obvious that the FCC is “in search of relevance” and highly insecure about its authority and role in the broadband competition era.
- Apparently, the FCC now sees competition-driven consumer benefits as a threat to the FCC’s relevance, role and authority.
- If the bipartisan policy/law of promoting competition succeeds, then the FCC by definition has less and less to do.
- It is becoming increasingly apparent that many at the FCC don’t want competition policy to succeed, because they vainly believe that the FCC can, and should, mandate social outcomes “better” than market forces and consumer choice can produce via competition.
Thus the pro-regulation forces at the FCC are increasingly and proactively seeking to discredit competition policy wherever possible by ignoring and torturing any facts, evidence, logic and common sense that do not forward their government-centric-view that “expert” FCC regulators invariably know best.
Consider the common thread between:
- The FCC’s nonsensically-twisted 706 report…
- The FCC’s blindfold tour of wireless competition in the wireless competition report… and
- The FCC deeming itself unlimited new legal authority (over a majority of Congress’ objections) in its December Open Internet Order?
- The common thread here is an FCC desperately in search of relevance.
More specifically, the FCC’s common approach to broadband deployment, wireless competition, and net neutrality is an “ends justify the means” approach — the end is more permanent FCC-centric regulation and the means are whatever is necessary — ignoring facts and evidence and/or flouting the law, the court and Congress — in order to promote the survival of permanent FCC-centric regulation.
Given the FCC’s recent actions, apparently it is OK for the FCC to:
- Twist an obviously deregulatory provision of law, Section 706, beyond all recognition, in order to justify new price regulation…
- Point to a broadband deployment “glass” that has been filled super-fast by competitive forces to be 95% full, and then exclaim horrors the broadband deployment glass is still 5% empty and its all the fault of the fast-filling market competition…
- Ignore the overwhelming facts and evidence that the wireless market is highly competitive, to justify new wireless price regulations like data roaming…
- Preemptively mandate net neutrality regulations with miniscule evidence of the existence of a problem to be solved… and
- Flout the D.C. Court of Appeals’ Comcast decision that the FCC did not have statutory authority to regulate broadband as the FCC did in passing the Open Internet Order.
Ironically at core, the FCC’s ends justify the means approach — that ignores the rule of law, the Courts and Congress — will likely accelerate the fate that the FCC desperately seeks to avoid.
- If the FCC can’t be trusted to respect the court, Congress and the public — because it serially ignores the facts, the law, plain language and common sense in order to price regulate broadband competition — how can the Courts, Congress and the public trust the FCC?
The ultimate fate of the FCC’s search for relevance is in the hands of Congress and the Courts — the entities that the FCC is most antagonizing with its lawless ends justify the means approach to broadband price regulation.
The Net Neutrality Accountability Gauntlet
April 12, 2011
The House’s rejection of the FCC’s December Open Internet order 240-179 is just the latest in an ongoing high-profile accountability gauntlet for the FCC’s unauthorized, unwarranted and unjustified net neutrality rules.
- While the wheels of democracy, public accountability, and the rule of law can turn slowly, they do turn steadily.
- And from what we have seen so far, the FCC’s out-of-the-mainstream, over-reach effort to regulate the Internet for the first time, has been pummeled in our Government’s accountability process gauntlet to date, and it can be expected to continue to be pummeled going forward.
The Net Neutrality Accountability Gauntlet:
First, the President’s January Executive Order, “Improving Regulation and Regulatory Review” to seek the “least burdensome” regulations, was a big post-mid-term election political pivot by the Administration to be more sensitive to business, economic growth and job creation concerns.
- Through the new lens of the President’s Executive Order, the FCC’s pre-mid-term-election-mindset net neutrality rule making has been viewed as badly out-of-focus with the renewed bipartisan interest in economic growth and job creation.
Second, February and March had House hearings, Subcommittee/Committee votes, and Committee analysis on the legitimacy of the FCC’s order.
- The Energy and Commerce Committee’s Report has an excellent and devastating analysis (see pages 2-13) of why the House disapproved the FCC’s Open Internet order.
Third, April resulted in the House officially rejecting the FCC rules 240-179 for the public record.
- While opponents claimed there should be no vote, because the House could not realistically overturn a likely Presidential veto, the real accountability was the process of creating an official recorded vote for the next election, and informing the public of this serious overreach of regulating the Internet for the first time.
- Interestingly, the White House, in signaling its opposition to the House’s rejection of the FCC’s order, did not use the strongest language available to it, that the President would veto the House’s action, but only that “the President’s advisors would recommend a veto.”
- This appears to signal that the White House does not relish the prospect of vetoing this Resolution of Disapproval.
Fourth, comes net neutrality accountability in the Senate.
- Under the arcane rules of the Resolution of Disapproval process, the House vote will go to the Senate Commerce Committee, where the Chairman can decide whether or not to hold any hearings.
- When the FCC finally publishes its December Order in the Federal Register, (probably in the summer) it then triggers an unusual special process in the Senate, where if thirty Senators sign a discharge petition, there must be a majority vote on the Senate floor in twenty days, without amendments, and no filibusters allowed.
- While many have reiterated the conventional wisdom that the FCC Resolution of Disapproval will not pass the Senate, the political reality may not be as clear cut.
- If all 47 republicans voted against the FCC order, only 4 Senate Democrats would be needed to disapprove the FCC Order.
- Given that six House Democrats voted to disapprove, and so many Democratic Senators appear to face very tough reelection races in 2012, the accountability process in the Senate will be high as well.
- The accountability process here is that some Senate Democrats in tough 2012 races may not choose to defend regulating the Internet for the first time based on the FCC’s speculative harms.
- The other key aspect of this accountability process is that the White House will be pushing Democratic Senators in very tough races to go on the record with a vote that may be against their individual political interests, so that the President does not have to go on the record with a veto defending the FCC’s regulation of the Internet in the 2012 Presidential race.
- The point here, is that there could be much more to this Senate accountability gauntlet than first meets the eye.
Fifth, the Court process will add the ultimate in net neutrality accountability.
- The jockeying for where appeals of the FCC order will be heard will create yet another accountability process point before the FCC order is even judged on its merits.
- Defenders of the FCC order can be expected to perform filing gymnastics to try and increase the chances in a potential lottery that Appeals Circuit Courts known to give regulators more deference ultimately hear this case.
- The takeaway from this jockeying likely will be that the FCC decision was more political than justified on the law or merits.
- Once the Appeals Circuit Court is determined, another accountability process will play out as the trade press and analysts handicap the likely outcome (the conventional wisdom is the FCC will lose in court.)
- The accountability story here will be about whether the FCC or Congress has the authority to set new U.S. Internet policy.
- Once this accountability decision comes down, likely in 2012, the case could then be appealed to the Supreme Court for decision in 2013, and the earlier process would be played out on an ever bigger and more public accountability scale.
In sum, the FCC is just in the beginning of a rigorous 3-4 year accountability process for their preemptive economic regulation of an industry for a problem the FCC has yet to clearly define. Many important conclusions are likely to emerge from this net neutrality accountability gauntlet.
- It will be clear that the FCC’s Open Internet order is the first major change in U.S. Internet policy in 15 years that:
- Abandoned longstanding bi-partisan Internet policy consensus;
- Abandoned longstanding competition policy and law; and
- Attempted to supplant Congress’ Constitutional authority to legislate and set national Internet policy.
The net neutrality accountability gauntlet has not been kind to the FCC so far, and the next stages look to spotlight further the core flaws of the FCC order, i.e. that it is:
- Unwarranted and unjustified on the facts;
- Is the most controversial and divisive FCC rule making in the Internet era; and
- Is an illegal usurpation of Congress’ Constitutional authority.
AT&T – T-Mobile: A Solution to Many Problems
March 28, 2011
Despite Sprint and Clearwire opposing the proposed AT&T-T-Mobile acquisition, expect the DOJ and FCC to approve it, because the DOJ appreciates the facts of vibrant wireless competition and because the FCC will come to appreciate how the transaction actually helps solve many of the FCC’s highest priority problems.
As a veteran analyst, who has closely covered most all of the roughly two dozen major communications mergers since the 1996 Telecom Act, it is easy to cut through the critics’ standard, hyperbole and histrionics — that they use to attack every major communications merger — to get to the rub of this matter.
- The rub here is twofold:
- First, the market competition facts of this transaction and the DOJ’s many analogous precedents from previous similar mergers, provide no basis for the DOJ to try and block this merger; and
- Second, the communication policy facts of this transaction will help solve many of the FCC’s highest priority problems: promoting universal broadband, mitigating spectrum exhaust, accelerating broadband adoption, and promoting economic growth and competitiveness.
Like I blogged that the Comcast-NBCU merger would get approval when the hyperbole and histrionics were similarly over the top and not credible, this acquisition ultimately will gain government approval.
- It is only a matter of how long it will take and what concessions special interests will be able to extort as the transaction runs through the FCC’s outrageously long approval gauntlet.
I. Competitive Facts
In all of the previous analogous communications transactions to this one, the DOJ has analyzed them by local geographic market, not by national market as opponents suggest in their criticism. As AT&T has indicated, and the CTIA confirms in its research, there are 5+ wireless competitors in 18 of the top 20 markets and there are four in most other relevant markets.
- There may be a small percentage of markets that the DOJ believes could be problematic, but the remedies for that narrow problem have been implemented many times before — so its no deal-breaker.
Opponents’ “Ma Bell duopoly” political/PR frame of this transaction shows that opponents have already conceded defeat on the facts at the DOJ. It also shows they are already focusing most all their efforts on persuading the FCC to extort concessions under the FCC’s amorphous “public interest” test, which is basically whatever three votes at the FCC say it is at any point in time.
- However, it does not pass the antitrust laugh test when the #3 competitor in the U.S. wireless market, Sprint, the 58th largest corporation in the U.S. with ~$40b in revenues, ~50 million customers, ~40,000 employees, and the most spectrum in both absolute and per customer terms, argues politically that they are competitively irrelevant to the market or consumers.
- What is really going on is that opponents of this merger know they have to scream “opoly” in order to generate concern and get attention in Washington.
- However, opponents also know that they would have zero credibility if they tried to claim this transaction would result in a wireless monopoly, and that they would be giggled at if they tried to claim this transaction would cause a triopoly, quadopoly or a quintopoly.
The competitive facts overwhelmingly support approval of the acquisition.
- Wireless consumers enjoy fierce relentless competition for their business and benefit from dynamic multi-dimensional competition on price/value, pricing plans/models, network quality, technologies, business models, handset/device choice, and innovation.
II. A Solution to Many Problems
Universal Broadband: After the President pledged in January: “within the next five years, we’ll make it possible for businesses to deploy the next generation of high-speed wireless coverage to 98% of all Americans.” and after the FCC made universal broadband deployment the signature goal of the FCC in its National Broadband Plan to Congress in 2010, it is hard to imagine the FCC blocking a clearly legal transaction that actually fulfills with great fanfare what the President and FCC have said they most want to do in this sector.
Spectrum Exhaust: After the FCC has repeatedly stated publicly that mobility is the communications future, and that the problem of spectrum exhaust is real and imminent, it is hard to imagine the FCC blocking a legal transaction that helps mitigate the most immediate problem for consumers at risk from the consequences of spectrum exhaust, i.e. higher prices for high bandwidth usage to reduce demand and stave off spectrum exhaust.
- Simply it is more efficient, effective and timely for AT&T to buy the spectrum it needs now in the marketplace than to wait potentially years for the FCC to get and auction additional spectrum from the U.S. Government.
Accelerating Broadband Adoption: Given the FCC’s National Broadband Plan goals of accelerating broadband adoption, it is hard to imagine the FCC blocking a legal AT&T-T-Mobile transaction that would result in much faster broadband adoption with combined resources and synergies than would occur with AT&T and T-Mobile remaining separate. Moreover, the transaction would bring the iPhone to T-Mobile customers who otherwise would not gain access to it.
- Simply, blocking this transaction would not achieve accelerated broadband adoption like approving this transaction would.
Promoting Economic Growth & Competitiveness: After the President instituted a new Executive Order to promote economic growth and competitiveness via a regulatory system of “least burdensome regulation,” it is hard to imagine the FCC employing maximally burdensome regulation by blocking a legal transaction that transfers $21b in revenues and scarce spectrum resources from foreign control to U.S. control.
- Simply, it would be extremely difficult for the FCC to make the case that Deutsche Telecom, which has been trying to sell T-Mobile because it does not want to invest the resources necessary to grow T-Mobile’s broadband business, would somehow invest more in T-Mobile’s network than AT&T would.
- It is obvious that the U.S. would be more competitive and grow faster if AT&T were to invest several billion dollars more into T-Mobile’s business and network than Deutsche Telecom would.
In sum, the DOJ is not going to block this transaction because the facts don’t merit it and the DOJ has tried and true targeted remedies that can mitigate any anti-competitive effects around the edges that they may find in their review.
The FCC is also not going to block this transaction when it helps the FCC solve many of its highest priority problems.
- And as the FCC tries to determine what concessions it wants to try and politically bestow on special interests, it will find that, in part, it is negotiating against itself, as onerous conditions on AT&T could undermine expeditious solutions to the FCC’s highest priority problems of: promoting universal broadband, avoiding spectrum exhaust, accelerating broadband adoption, and promoting economic growth and competitiveness.
Google: “Thinking big with a gig” or “Doing small at a crawl?”
February 11, 2011
It has now been over a year since Google promised with great fanfare that it would “make a meaningful contribution to the shared goal of delivering faster and better Internet for everyone” by offering “ultra-high-speed broadband networks… with 1 gigabit per second fiber-to-the-home connections… at a competitive price to at least 50,000 and potentially up to 500,000 people.”
What is taking so long for Google to do this?
- How can a company that can deliver thousands of top answers to any question imaginable in less than a second — not be able to rank one community higher than another thousand communities in ten months!
- Isn’t there a Google app for that?
- How can the Federal government decide on who wins broadband grants faster than Google does?
- How is it that the FCC bureaucracy can devise an entire National Broadband Plan faster than Google (the company known for being the fastest company in releasing new products and services) can select one community for a broadband gift?
- How come such a worthy offer from Google — that has attracted the interest of over one thousand American communities, and that could make a big difference for one or a few economically distressed communities — is such a low priority to Google? Especially when Google’s acting CEO Eric Schmidt has been on the President’s Economic Advisory Board to help generate economic growth and job creation?
- Is “thinking big with a gig” just another Google publicity stunt that it never intended to deliver on?
What could be the reason for Google’s glacial pace in addressing a problem Google has told everyone is so important to solve?
- Could it be that Google figured out how operationally difficult and extremely expensive it is to offer “1 gigabit fiber-to-the-home connections… at a competitive price?” Especially when existing competitors are already offering speeds at competitive prices much faster than most all consumers want or need?
- Or could it be that Google has figured out that after lobbying so hard for the FCC Open Internet Order, that now preemptively regulates all broadband providers, that Google would become a regulated Broadband Internet Access Service (BIAS-ed) provider?
- Or could it be that becoming a broadband provider that is officially-classified by the Government as a “BIAS-ed” service, might be problematic as Google tries to convince the Department of Justice and the EU antitrust authorities that Google is not a biased business model and that Google is not guilty of abusing its monopoly power to favor its own products, services and content over competitors?
- Or could it be that Google realizes that the Level 3/Netflix effort to regulate the unregulated Internet backbone market like a CLEC (that Google has been supportive of behind the scenes) could end up capturing Google’s vast national dark fiber backbone network that it would attach to its promised 1 gigabit fiber-to-the-home network?
- Or could it be that becoming a BIAS-ed broadband provider could result in Google Voice being regulated as a VOIP provider that would subject Google to E-911 responsibilities, CALEA law enforcement wiretapping cooperation responsibilities, or universal service subsidy contributions?
- Or could it be that becoming a fiber-to-the-home boradband provider would legally classify Google-YouTube as a Multichannel Video Programming Distributor (MVPD) that is legally required to abide by Equal Employment Opportunity requirements? Especially just when Google’s headquarters is being picketed by minority groups for not hiring enough women and minorities, and when Google got an exemption from the Labor Department so that Google did not have to publicly report its minority hiring record because the diversity makeup of Google’s workforce is a “trade secret?”
In sum, Google’s over-promising “thinking big with a gig” is under-delivering by “doing small with a crawl.”
- It appears as if Google may be reconsidering its goobristic idea that becoming an increasingly regulated broadband provider was easy, a PR-winner, and what Google wants to do.
Maybe I should put a ticker up on GoogleMonitor.com to keep track of how many days/months Google is late in its public promise to make “a meaningful contribution to the shared goal of delivering faster and better Internet for everyone?”
FCC’s Net Regs in Conflict with President’s Pledges
January 26, 2011
The FCC’s Open Internet order should be ripe for review and “fixing” given President Obama’s pledge in his SOTU speech last night:
- “To reduce barriers to growth and investment, I’ve ordered a review of government regulations. When we find rules that put an unnecessary burden on business, we will fix them.”
Clearly the FCC’s preemptive bans, restrictions and economic/price regulation of competitive broadband providers based on scant and weak evidence of any real problem to solve, obviously place “an unnecessary burden on business” and the Administration should “fix them.”
As I explained in my previous detailed post: “Why FCC’s Net Regs Need Administration/Congressional Regulatory Review,” the FCC’s Open Internet order violates the President’s pledge for regulations to:
- Not be “outdated;”
- Not be “Excessive, inconsistent and redundant;”
- “Strike the right balance;” and
- Have benefits that outweigh costs.
In sum, in President Obama’s SOTU, he declared “our free enterprise system is what drives innovation.”
- The FCC’s Open Internet order is in direct conflict with that philosophy statement in that the FCC posits that FCC’s Open Internet regulations are necessary to promote innovation… and also the FCC’s new goal found nowhere in law — to promote “innovation without permission,” which alarmingly implies that the FCC condones inventors disregarding the permission of users to use their private information and the permission of property owners to use their property.
