Archive for January, 2010

One of the many intriguing elements of this month’s DC Circuit argument [pdf] in Comcast v. FCC was the sheer eagerness of the judges to talk over each other about the FCC’s jurisdiction.  This is exciting stuff, I’ve always thought, and the three panelists were raring to go.  Sitting through the Comcast portion of the argument must have been torture for the FCC side.

The Comcast attorney wanted to point the panel in the direction of the administrative law issue here:  was there sufficient certainty in the rules to give Comcast fair notice?  Was the Commission’s 2005 Internet Policy Statement enforceable?  Authority isn’t the central question for Comcast – the company would rather keep that question open for the future.

Judge Tatel didn’t want to focus on notice or process:

Q. “[I]sn’t it possible that the Commission’s order could stand on the basis of its ancillary jurisdiction if it could be linked to come statutory authority the Commission has?”

Judge Tatel persisted in his questioning on this point, asking Comcast’s lawyer several times to respond on the ancillary jurisdiction issue and citing the relevant cases.

The other members of the panel chimed in on jurisdiction.  Judge Sentelle asked Comcast which question should necessarily come first for the Court’s decision – if the process was wrong, the court doesn’t have to reach the jurisdictional question; if there was no jurisdiction, the court doesn’t have to reach process.  Judge Randolph suggested that the whole idea of ancillary jurisdiction was old-fashioned.

Finally, the Comcast lawyer had to leave her process points and agree.  She agreed that if Congress had meant to delegate authority to the FCC in this area it would have said so – “But to suggest that by stitching together policy provisions, and on, and on, that Congress spoke to this. . ”

Here’s what’s going on:  During the Bush era, the FCC decided that it wanted to deregulate high-speed Internet access, and remove unbundling, interconnection, and nondiscrimination obligations imposed on providers by Title II of the Communications Act.  But it didn’t want to get rid of all possible rules for providers, and so it declared that it could re-regulate them under Title I ancillary authority – asserting that the Commission had broad authority to issue whatever rules it needed to under a general housekeeping section of that Title. The Commission also reserved the authority to re-regulate them under Title II later.

These regulatory gymnastics seemed ridiculous to Justice Scalia in BrandX:

“[W]hat the Commission hath given [deregulation], the Commission may well take away – unless it doesn’t.”

The sheer political chutzpah of (a) removing longstanding obligations for general-purpose communications transport companies in order to (b) serve the interests of high-speed Internet access providers – while (c) retaining the power to impose some obligations later under an inapplicable portion of the statute – has come back to haunt everyone concerned.  That’s the “stitching together” to which Comcast is referring.  It’s a Title I house of cards.

The FCC needs to consider going back to the basics of Title II regulation – interconnection, nondiscrimination, unbundling – while signaling that it will “forbear” with respect to ratemaking.  If it doesn’t, it’s not clear where its power to say anything with respect to high-speed Internet access comes from.  The DC Circuit is apparently not convinced that “ancillary jurisdiction” is meaningful.

This is a tumultuous moment in telecommunications policy.  Public Knowledge has filed a petition asking the FCC to reclassify high-speed Internet access under Title II.  Everyone’s talking about reclassification.  Just ask Justice Scalia – it can be done.

Secretary Clinton’s major address today on internet freedom made the connection between humanity and technology.  We’ve been waiting a long time for our political leaders to have the courage to express thoughts like this, to have a vision about the role of the internet in human history, and today the day arrived.

The speech wasn’t an isolated event, of course.  Thanks to the flexibility and political savvy of a gifted Secretary and the prior experience and skills of her staff, the State Department has been rolling out great talking points and technology-focused actions from the beginning of the administration.

Yes, Secy. Clinton had to say that she was worried about anonymous speech, about IP piracy, and about cybersecurity.  She had to point to existing committees and efforts, like the Global Internet Freedom Task Force and the Global Network Initiative, which won’t necessarily be meaningful to ordinary Americans. She didn’t announce a particular enforcement initiative.  This is all about persuasion and words, not definitive actions.

Words are important, though, and you could hear US leadership in what the Secretary had to say.

• “We stand for a single internet where all of humanity has equal access to knowledge and ideas.”
• “These actions [electronic barriers, censorship, privacy violations] contravene the Universal Declaration on Human Rights.”
• “In many cases, the internet, mobile phones, and other connection technologies can do for economic growth what the green revolution did for agriculture.  You can now generate significant yields from very modest inputs.”
• “Unfettered access to search engine technology is so important.”
• “Countries that censor news and information must recognize that, from an economic standpoint, there is no distinction between censoring political speech and commercial speech. . . . countries that restrict free access to information or violate the basic rights of internet users risk walling themselves off from the progress of the next century.”
• “The internet is a network that magnifies the power and potential of all other[ networks].”

This kind of rhetoric takes courage.  We could be deferring to China’s sovereign authority to manage its own ISPs in its very large and attractive market.  We could be thinking wistfully of our own ability to wage economic war and differentiate the treatment of information online.  We could be embarrassed about our own privacy failures and worry about the hypocrises that will continue to be revealed.

It’s better, though, to say that we stand for “internet freedom” as a country.  That’s memorable, worthwhile, actionable, and human.

The FCC today decided to give competitors the chance to argue for closing the “terrestrial loophole” on a case-by-case basis – so competitors can get access to cable content even if it’s delivered via fiber rather than satellite.

1.  This means that competitors of vertically-integrated cablecos can claim that (for example) exclusive contracts for programming regional sports networks are unfair – and they’ll be supported by the presumption that these contracts are indeed unfair.

2.  This also means that the Commission is taking a hard look at the 1992 Cable Act and making sure that the Commission’s actions are serving competition.  Section 628(b) provides that it shall be unlawful for a cable operator to “engage in unfair methods of competition or unfair or deceptive acts or practices, the purpose or effect of which is to hinder significantly or to prevent any multichannel video programming distributor from providing satellite cable programming or satellite broadcast programming to subscribers or consumers,” and the Commission is saying that this language gives it the authority to require cable operators to share terrestrially-delivered programming.

3.  This is a substantial step that has implications for the Comcast/NBCU deal – Comcast doesn’t allow DirectTV or Dish Network to have access to its exclusive Philadelphia fiber-delivered regional sports network, which has had a big impact on satellite subscriptions.  The fact that FCC is taking this on now indicates that this issue won’t be a chit that Comcast can use later.  Much more will be on the table in the months to come, and predictions are that spectrum access will be up for negotiation.

4.  Expect litigation – the statute provides for “program access” to cable programming delivered by satellite and doesn’t say anything about fiber feeds.  (But why should the medium make any difference?)

5.  It’s good to look back at the 1992 Act, which includes the idea that vertically-integrated conduits shouldn’t control content.

1.  It’s great to see a budget request to extend the Race to the Top competitive grant program.  Here’s Secretary of Education Arne Duncan:

“If a state is getting consensus [supporting its grant application] but doing it by driving the status quo, we won’t be that interested,” he said in a telebriefing. “But we’re confident that we’re going to have a set of states that are able both to push a strong reform agenda and get all the adults working together. Those are the states we’re going to invest in.”

The states (and, now, districts) that want the money have to sign up to get more of their students into college.  They also have to rationalize the evaluation of teachers, tying their pay to student progress, andmake it possible to gather standardized data about students.  The states are scrambling to participate in this competitive grant program, and that’s driving reform.  It’s a big deal that these aren’t block grants handed out evenly to each state actor.

2.  It’s also great to see the second stage of the competitive broadband grants program run by the Department of Commerce and the Department of Agriculture going public.  DOC’s NTIA will be prioritizing “projects that will deploy middle mile broadband infrastructure with a commitment to offer new or substantially upgraded service to community anchor institutions.”  This is the “comprehensive communities” emphasis.  Ag’s RUS will be focusing on funding last mile projects.  Total for this round:  $4.8 billion.

3.  Massachusetts: it’s just one seat.

Did you see this AP article from Wednesday?

It’s great news.  The Obama administration is signaling that it supports ending the antitrust exemption enjoyed by health insurers.  (Here’s a NYT blog post explaining the issue.)

Right now, only health insurance companies and Major League Baseball are protected from federal antitrust enforcement.  There’s been enormous consolidation in the health insurance industry, costs are surging four times faster than wages (more than doubling in the last nine years), and 94% of insurance markets in the United States are now highly concentrated.

So why protect these players from federal laws prohibiting collusion, bid-rigging, and market allocation?  It’s hard to come up with any sensible reason to keep this exemption in place.  Some key Senators think so too.

I’ve got some questions about content.

Growth in the use of communications networks comes from social interactions.  We saw this when the telephone was launched.  It seems to be connectivity, not content, that people crave.

But access to highly-desirable content is also extraordinarily valuable to consumers.  According to CNN, the average cable bill is now about $75/month.

We’re facing some complex questions that have important consequences for the future of connectivity:

1.  Let’s assume highly-desirable content moves solidly to cable.  Broadcast viewers have already migrated to cable in droves.  The pending Comcast/NBCU merger has implications for 1/5 of TV viewing hours in the US, and NBCU controls about a third of Hulu.com.  Even if some existing NBC broadcast programming remains available over the air, and even if some other broadcasters choose to make content available online independently of Hulu, the real content game will be subject to a cable subscription.  Instead of paying NBC directly for a la carte online material (one possible future) you’ll be paying a cable system or other network access provider (the other possible future).

2.  Let’s assume cable systems inextricably bundle high-speed Internet access connectivity with cable subscriptions – and sweeten the pot by making exclusive deals for content that is only accessible online to people who subscribe to the cable system.  See Comcast Fancast Xfinity TV.

Given these two reasonable assumptions, what happens to Internet TV?  Cable is obligated by temporary “program access” rules to allow other “multichannel video programming distributors” access to popular programming.  But municipal fiber systems providing basic connectivity, say, or other independent network access providers, aren’t necessarily “multichannel video programming distributors.”  (And the program access rules mostly apply only to programming delivered to cable systems by satellite, not by fiber.)

• Can Internet TV – let’s assume separate online distributors for which users pay for access, like iTunes – compete with the material behind the cable systems’ pay walls if the Internet TV sites don’t have access to highly-desirable content?
• If Internet TV can’t compete, and if unbundled programming isn’t available online, does that mean competition will never constrain Americans’ multi-tiered cable bills?
• If OTA TV is a thing of the past, why wouldn’t it be good for consumers for Internet TV to do well?
• If Internet TV can’t compete, does that mean high-speed Internet access becomes less desirable to the 99% of Americans with TVs?
• If high-speed Internet access isn’t desirable, and isn’t unbundled, what happens to the competitive pressure the Internet imposes on so many incumbent industries?

Drop me a line and tell me what questions you would ask.

I am still reeling from the 3D TV’s at CES, and on my way to another meeting, so this will be … concise.

1. Good FCC session at MIT’s Media Lab coming up on Wednesday 1/13 at 4:30pm:

“Innovation, Investment, and the Open Internet.”  Terrific civil servants Sharon Gillett (Chief, Wireline Competition Bureau) and Paul de Sa (Chief, Office of Policy and Planning) of the FCC are presiding; panelists include academics, investors, Tim Berners-Lee, businesspeople in gaming, caching, and mobile apps, and telecom execs. More sessions coming.

2.  Comments to the FCC about its net neutrality NPRM are due Thursday at midnight.  Make your voice heard.

3.  Common view is that the D.C. Circuit will find that Title I “ancillary jurisdiction” has been stretched too far – question is, who will act when to do what?  Seems like the moment for the FCC to open up questions for wide comment about the regulatory classification of high-speed Internet access services.

More when I reach some fixed location.

At CES, for a panel on spectrum policy.

Q:  What’s your view on the DTV transition?

Dave Donovan, MSTV:  This whole conference is about mobile television!  DTV transition would have worked better with more tuners in the marketplace earlier.

Dan Brenner, Qualcomm:  We needed the DTV transition to go faster.  Congress kept not setting a firm date.  But it was a big success in the end.  Qualcomm was able to launch MediaFlo right after DTV transition happened.  So next time – let’s not take 18 years to clear spectrum.

Joan Marsh, AT&T:  Consumers are benefiting from DTV transition.  We couldn’t be migrating to 4G without that 700 MHz spectrum.  So we’re happy that FCC is trying to figure out where the next new wireless broadband spectrum comes from.  Still problems with wireless mics in 700 MHz, by the way. International harmonization is important for spectrum policy, and we failed to harmonize adequately.

Michael Calabrese, NewAmerica:  DTC transition could have been more ambitious, faster – much larger increment of money set aside to subsidize consumers giving them their choice of a cable set-top box or a satellite dish.  We could have asked cable and satellite carriers to give channels to people for free.  We didn’t do that, didn’t do an ambitious transition, and so now we think we need another one.

Craig Moffett, Bernstein:  Interesting to remember that what kept DTV transition from working was the operation of the coupon program.  I remember Negroponte’s “Being Digital.”  We messed up in 1930s by putting TV over the air and voice over wires.  No physicist would have said that was the right answer.  Next 50 years were about reversing that mistake.  In retrospect, the opportunity we missed with the DTV transition was not asking “Does it really make sense to have all of this spectrum allocated to broadcast when we could just pay to have everyone moved to pay services?”  As Blair Levin says, do we want to be known as country with best techs for watching TV, or best techs for using broadband.

Janice Obuchowski:  DTV transition was a long way coming, but was an enormously successful end-game.  These receivers are in every home and in big numbers.  We did a massive transition and didn’t disenfranchise anyone.  Give themselves a bow rather than using information to fight the next fight.  We are ahead of Europe and the rest of the world in making this transition.  Maybe auction structure wasn’t done right, though, and we have to make sure in the future that things are fair.

Q: Next block of spectrum to be re-assigned?

Dave Donovan, MSTV:  Everyone talks about “beachfront” spectrum.  Broadcasters right now occupy only 5% of that beachfront exclusively.  We’re a small portion of it.  We want a spectrum inventory but one that goes above 3.7G.  That’s where new things will come from.  We think there’s 749 MHz available for broadband now, and a lot of that has not been deployed.  We really need a spectrum *usage* inventory.  In the past, we’ve found that a lot is not used.  How efficient are the current wireless carriers’ systems?  What’s the nexus between more spectrum and deployment of wireless broadband systems?

Joan Marsh, AT&T:  We’re already at full capacity. This is a crisis.  We need spectrum between 200 MHz and 3GHz – that’s where devices already exist.  Look at government and broadcast as spectrum holders.  We need to engage in this with facts and rational dialogue.

Michael Calabrese, NewAmerica:  Very good to have an inventory of usage.  Often less than 20% in metro areas is actually in use, although it’s all spoken for.  But it will be difficult to clear and reallocate.  CTIA is asking for 800 MHz, based on ITU study.  We need to look at white space as well as clearing bands.  We know that military may be using just 1% – perhaps there could be more spectrum sharing.  Using capacity that’s lying fallow would make sense.

Janice Obuchowski:  This is an area that requires calm and rational dialogue.  We need to be not dealing with crisis all the time.  I am crisis-ed out this year.  (Rob Pegoraro points out we are only 10 days in.)  Let’s stop talking about 800 MHz based on a three-year old ITU study generated by European wireless carriers.  Sets a bad path.  Ensign said yesterday:  “If spectrum is the oxygen of the wireless world, then the wireless world is suffocating.”  People need to cool it.  Second, there’s a great deal that can be done with sharing.  But we need to be realistic.  Military would be interested, but sharing without enforcement is just slow reassignment.  White spaces just getting off the ground – we need more knowledge about sharing.  No one wants to give up spectrum.

Dan Brenner:  Qualcomm supports calm and rational dialogue.  But there’s a pressing need for more spectrum for mobile systems.  Everyone is texting, everyone is sending big files back and forth.  Spectrum needs to be licensed, because systems require protection from interference in big areas.  We love femtocells and local gains in capacity, but there are big problems that need to be solved.  When we went analog to digital, we got 20X increase in capacity; 2G to 3G is 10X capacity.   But we need more spectrum.

Q:  If you have spectrum that’s not used, how do we take it away from them?  How should government accommodate people who have an existing stake.

Craig Moffett:  It’s not clear that broadcasters “own” spectrum.  They use it – different from auction receipts.

Dave Donovan:  Our position on “highest and best use” is that from a public policy perspective you shouldn’t look at this in Wall Street terms.  There’s a public interest and public good benefit to all Americans from having a universal service.  So Michael says push everyone on a wire and pay for consumers to retain access to local news.  Real world political problems with that, and free OTA TV allows you to reach 100% of the public with a universal service that is the core of local journalism and emergency alerts in this country.  You can’t do that with a pay system.  Unique universal reach of broadcasting is what differentiates it.  Broadcasting is the last bastion of localism – and you’ll lose that.  Fundamental public policy decision. Second, the demand quotient does boil down to ITU study.  We’re several hundred MHz short today, according to that study.  But methodology is bad.  Finally, demand comes from providing video!  And that’s what broadcasters do.  We’re provide video in the most efficient manner – point to multipoint.  Video doesn’t go over the wire – it goes over the air.  Negroponte is wrong.  Point-to-point is spectrally inefficient.

Dan Brenner:  This debate does not boil down to ITU study. It’s about the fact that wireless mobile broadband is reaching into every facet of American life.  Networks are actually overtaxed.  Qualcomm deployed the first one.  Competition is great.

Craig Moffett:  Going too far in the direction of point-to-multipoint might be inefficient, but could be a major part of the story.  If we say who wins that is based on 1930s spectrum allocations, that’s a problem – why not auction.

Dave Donovan:  Most broadcasters paid for spectrum.  We’re part of the broadband architecture.  Why take spectrum away from broadcasters?  They’re already doing it!  If we re-auction, we’ll end up with a point-to-multipoint system.  If mobile video is important, get those services out sooner rather than later.

Q:  What about a metric of number of users per MHZ of spectrum?  Watch those ham bands!

Janice Obuchowski:  That’s a valuable metric for some services, but what about aviation?  Aviation benefits all society, and that metric won’t work.  Same for many military services.

Q:  Is broadcast of a certain signal at a certain time an important service?

Janice:  Applications have been earmarked by FCC as important for US in the national broadband plan – education, health, etc. That process shouldn’t be driven by a fore-ordained idea of who would benefit or not.  I belive that government is underestimating market structures in this country.  We have lacked a forward vision, but an overly-prescriptive approach will be a real problem.

Craig Moffett:  Point-to-point has been successful because of the way it is priced.  We have to be really careful about pre-ordaining solutions.  With a slightly different pricing plan, we’d have different revealed preferences of consumers.

Dean Brenner:  This isn’t an either-or proposition.  We can have both MediaFlo and broadcast.  But mobile broadband is really crucial to this country.

Michael Calabrese:  Local news is important – but how do we achieve that?  We’re down to near 10% of households relying on OTA television.  If everyone’s using other modalities, we should be open to understanding that.  May be a better use of revenue to move it to cable.

David Donovan:  The idea that you can just move TV over to cable and pay consumers forever is a political nightmare.  And you’re assuming that local news will continue over cable.  That’s not true.  Benefits we enjoy will not survive.  Number of OTA homes is increasing. More than 50% of every cable system receives broadcast signals at its headend.  Too expensive to bring fiber there.  And 35% of homes have a digital television.

Rob P:  This is political!  Be careful what you ask for.

I’m going to CES along with 110,000+ other people.  Sometimes when I tell people I’m going they give a sort of involuntary shudder.  It’s the bigness, the crowds, the hype that makes them flinch.

2500 exhibitors, 300 of them new.

Drew Carey.

Long taxi lines and bad wi-fi (according to CNET).

Advice to eat breakfast, wear comfortable shoes, and carefully plan each day.

Lots of talk about the Google Nexus One smartphone, including a VZ/Google deal launching in the spring.  No keyboard.

Lots of talk about the three billion app downloads for the iPhone.

Plus:  lots of people from DC!