Updated on August 15th, 2011
Captain, Road Prison 36: What we got here is… failure to communicate. Cool Hand Luke (1967).
“People love to categorize.” Categorization helps us make sense of a complicated world. But, when categorization doesn’t reflect substantial similarities, it obfuscates as much as it illuminates. So it is with communications policy, which is categorized primarily by the technologies used to deliver communications services (“stovepipes”) rather than their impact on consumers. This approach to categorization obfuscates the relevant question – whether a particular regulatory approach maximizes consumer welfare (rather than the prospects of particular competitors).
If the government subsidizes universal broadband, it would render government subsidization of over the air broadcast duplicative.
The ongoing debates about broadcast incentive auctions and universal service reform offer a poignant example of such obfuscation. Because the services that are the subjects of these debates use different technologies, and are thus categorized separately, these debates are being conducted independently. When viewed from the perspective of consumer welfare, however, these debates are inherently interrelated. They both involve regulations that are intended to address the same concern – the widespread dissemination of information to consumers from a multiplicity of sources.
The core question in both debates is to what extent the government should subsidize consumer access to information. Because broadband service provides access to far more information than is possible through over the air broadcast, answering this question in the universal service debate informs the incentive auction debate: If the government subsidizes universal broadband, it would render government subsidization of over the air broadcast duplicative.
Read the rest of this entry »
No Comments |
TAGS:
broadband mobile spectrum Universal Service Fund USF wireless
Updated on May 27th, 2011
The web lit up this week with stories about the FCC’s Seventh Report on the availability of broadband capability to Americans. (A pdf of the report is available here. See Ars Technica here for a typical story.) Commenters have repeated the same old complaints about slow speeds and slow deployment. It reminds me of commenters in the FCC’s national broadband plan proceeding who demanded minimum broadband throughput of 100 mbps. Some commenters imply that broadband service providers are “evil” for not deploying fiber-to-the-premises (FTTP). Other commenters think government should build fiber networks. Neither is very realistic.
The performance of Verizon’s FIOS service demonstrates that the business case for deploying FTTP just isn’t very attractive. Verizon apparently invested $23 billion in FIOS. Unfortunately for Verizon, it appears it’s losing money on that investment. Although Verizon denies losing money on FIOS, it has stopped investing in it. Despite its very high throughput and reliability, consumers aren’t subscribing to FIOS in large numbers, and only a small portion of Verizon’s revenue comes from FIOS. The vast majority of Verizon’s revenue and subscribers come from Verizon’s wireless business. Let’s take a look at the numbers from Verizon’s Q1 2011 earnings results. Read the rest of this entry »
1 Comment |
TAGS:
broadband spectrum Universal Service Fund Verizon
Updated on May 10th, 2011
Mahad: Okay, you go and create a distraction.
Mila: Then what?
Mahad: By then I should have the second half of the plan figured out.
Skyland (2005)
Two weeks ago NAB released a paper claiming there is no spectrum crisis (pdf here). Even though the paper lacks any relevant, quantifiable analysis, it somehow continues to get cited in articles and in Congress. Yesterday even an IEEE publication stooped to parroting NAB’s unsupported claims (see article here). According to the IEEE blog, the crux of NAB’s argument is the lack of a “spectrum inventory.” Waiting to make more spectrum available while conducting a lengthy “spectrum inventory” is a distraction, not a plan.
Broadcasters are keen to focus on the spectrum use of others to distract Congress from the broadcasters’ own Achilles heel: broadcasters use the largest amount of the most valuable spectrum to serve only about ten percent of the population. As I’ve blogged before, broadcasters primarily use their spectrum to take advantage of government subsidized must carry rights. Without must carry rights, most broadcasters would quickly be out of business and would no longer have any use for their spectrum at all. Using spectrum to access a government subsidy is hardly an efficient use of spectrum.
It’s not surprising that the broadcasters would rather have the government look at the spectrum use of others rather than the broadcasters’ own. The problem for NAB is that we already have more than enough information to know that the broadcast spectrum must be made available for mobile use if America is serious about satisfying consumer demand for mobile services. Here’s what we know already:
- The broadcast spectrum is the only large, contiguous block of spectrum in the prime frequencies for mobile use.
- Mobile use is exploding now and will exhaust currently available mobile spectrum.
- Broadcasters can be repacked at the expense of mobile providers without harm to the services broadcasters already offer (especially given that the vast majority of their profits are the result of must carry rights rather than spectrum use).
- The broadcasters’ current services are a paragon of inefficient spectrum use.
Given what we know already, we don’t need any additional information from a spectrum inventory to move forward on incentive auctions now. No matter how inefficient other spectrum users may be, we already know they don’t have a large, contiguous block of spectrum in prime mobile frequencies that can be made available quickly and at no cost to consumers. The broadcasters do. That’s why Congress should focus on incentive auction legislation now rather than NAB’s groundless distractions.
No Comments |
TAGS:
auction mobile spectrum
Updated on April 26th, 2011
It’s ironic that the FCC is planning on giving the industry a failing grade again this year on broadband rollout (see Electronista article here). While the FCC points its finger at industry, the FCC has been busy adopting policies that discourage broadband deployment. Let’s take a look.
Net Neutrality: Last December, the FCC adopted net neutrality regulations (see order available here). These rules shift potential Internet revenue from service providers – the companies that actually deploy broadband infrastructure – to software companies and device manufacturers. The obvious result is to discourage investment in costly broadband infrastructure.
Incentive Auction Authority: Making more spectrum available through incentive auctions would promote significant broadband deployment. The FCC is now working toward this goal, but in 2010, the FCC made net neutrality its top priority rather than incentive auctions. Had the FCC focused on the need for more spectrum in 2010, the FCC might have obtained incentive auction authority already by striking a deal with Congressional Republicans opposed to net neutrality. Instead, the FCC is fighting with broadcasters over incentive auctions in 2011, with the election cycle looming ahead.
Universal Service: Universal service reform is one of the most important regulatory actions the FCC could take to promote broadband deployment. But, while the FCC was busy working on net neutrality regulations last year, universal service reform languished, and another opportunity to promote broadband deployment now was lost.
Roaming: The FCC found in 2007 (see order here), that mobile wireless roaming regulation discourages infrastructure-based broadband deployment if roaming is required in markets in which the requesting service provider holds spectrum licenses. In 2010, however, the FCC changed its mind (see order here), and in 2011 (see order here), it imposed new roaming requirements on broadband service providers. It’s difficult to see how allowing one provider to use another provider’s infrastructure rather than build its own network will promote more infrastructure deployment.
If broadband deployment is lagging, the FCC should point the finger at itself. The FCC needs to get back to the task of implementing policies that promote broadband deployment rather than imposing heavy handed regulation. For starters, the FCC can focus on making more spectrum available and reforming the Universal Service Fund. That would go a long way toward reversing the FCC’s troubling trend of discouraging broadband deployment.
No Comments |
TAGS:
auction broadband data roaming net neutrality spectrum
Updated on April 20th, 2011
I’ve previously written about the FCC’s intent to use (or misuse) its mobile wireless competition report to impose additional regulation on the mobile wireless industry. I’ve noted that the FCC’s 14th mobile wireless competition report lacked the necessary technical data to support its hypothesis that access to low frequency spectrum provides a competitive advantage. And I’ve written about the FCC’s refusal to define “effective competition” in accordance with the guidance Congress has already provided in the cable television context. I haven’t addressed in detail the deficiencies in the FCC’s economic analysis in the 14th report. But, in a blog post published by the Harvard Business Review, professors Gerald R. Faulhaber and Hal J. Singer have.
They note that the FCC’s analysis eschews direct evidence of the state of competition based on consumer behavior in favor of reliance on indirect evidence. The FCC ignored the direct evidence it collected in favor of market share measures, even though the FCC itself admitted that measures of market share are not synonymous with market power. Messrs. Faulhaber and Singer generally reached the same conclusion I did in my previous posts: the FCC intends to rely its mobile wireless competition reports to further regulate the wireless industry.
They take particular issue with the FCC’s implied intent to limit the ability of larger mobile wireless service providers to acquire spectrum via auction. They then note that, in this circumstance, the only viable solution for larger service providers is to acquire additional spectrum in the secondary markets. If the FCC wants to have a competitive mobile wireless industry, it can’t have its cake and eat it too. The FCC needs to release more spectrum immediately and allow larger mobile service providers to access it, or the FCC needs to speed its review of secondary markets transactions. If the FCC instead does neither, the mobile wireless industry and consumers both will suffer.
No Comments |
TAGS:
mobile spectrum wireless wireless competition