Items tagged "Spectrum Reform"

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Public Safety and the Legacy of Silos

September 21, 2006 Policy Blog , Spectrum Reform

In its meeting next week, the FCC will unveil its new Homeland Security Bureau, elevating concerns about how emergency responders communicate. The legacy of emergency responders in term of information management is a most unfortunate tale that most policy observers are all too familiar with. In short, the legacy is one of dedicating spectrum that is used only be a single agency (say, the local fire department) with specially made (and very expensive) equipment that is generally quite antiquated. The result is, quite literally, a recipe for disaster.

There is a better way. The FCC's new Homeland Security Bureau would do well to begin viewing first responders as part of a "safety enterprise" that should use an enterprise architecture. Like most enterprises, this architecture should take advantage of the power of the Internet protocol and economies of scale from using commercial, off the shelf equipment. Significantly, local agencies need not and should not abandon their old equipment, but should develop an architecture that views legacy radios as only one part of an information management network. This network can connect all sorts of entities that may be relevant to emergency response (say, electric utilities), but only authorize access on a need-to-use basis (rights management, if you will).

It remains to be seen what the FCC's agenda is for the new bureau, but one along the lines noted above is spelled out in a recent report of the Aspen Institute based on a recent conference (another one of Charlie Firestone's) and authored by yours truly. Copies are available here.

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Spectrum Season at the FCC

September 20, 2006 FCC , Policy Blog , Spectrum Reform

Although no spectrum items appeared on the FCC open meeting agenda, there appears to be considerable spectrum action happening at the FCC right now.

1) The Office of Engineering and Technology, the day before Chairman Martin's confirmation hearing, published this this proposed schedule for the FCC's white spaces proceeding to move forward. This proceeding would open the unassigned channels in the television broadcast space, called "white spaces," to unlicensed use.

The broadcast bands have physical properties that make them particularly useful for a variety of purposes. They can penetrate objects (such as wet leaves) and transmit signal significant distances for little energy cost. Because these bands are so useful for broadband, tech companies have joined with community wireless advocates to push for access to these white spaces.

Former FCC Chair Michael Powell was very enthusiastic about this proceeding as a way to get broadband competition. Martin has been a lot less excited about wireless generally than Powell was, a lot less excited than that about unlicensed generally, and even less excited that that about white spaces, since it means going toe-to-toe against the broadcasters (who oppose any use by others of "their" spectrum).

So the focus on white spaces has been in Congress, where it has had some modest success. It even made it into the otherwise wretched Stevens telecom reform bill.

So a number of us in DC are scratching our heads on why Martin has now given the o.k. to move forward on this proceeding. The timing of the notice (right before Martin's confirmation hearing) smells of politics. But the Stevens Bill isn't moving. And while many folks on the Senate Commerce Committee in both parties like the idea of opening the white spaces, the big issues for Martin were USF, media ownership, and network neutrality.

Whatever the reason, however, seeing forward movement on this proceeding is a welcome surprise.

2) The press reports that the FCC is close to resolving the dispute between Massport (which controls Logan Airport) and Continental Airlines on whether Continental can use its own wifi or must use Massport's exclusive contractor. This apparently minor proceeding has huge implications for use of wireless systems. If a landlord can block a tenant from using his or her own wireless system and require the tenant to use the system the landlord demands, then competition for fixed wireless services pretty much goes out the window.

In wireline services, incumbent wireline providers cut exclusive deals with landlords to keep out competitors. Want to subscribe to a cable overbuilder or CLEC? Too bad, says the landlord. As a condition of your lease, you have to use my provider. This is perfectly o.k., and has had huge impact on residential competition.

So it doesn't take a lot of imagination to see incumbents — including wireline incumbents — doing the same thing for wireless. Heck, Comcast and TW now have massive spectrum inventories. They can cut deals with landlords who will then turn around and say "you can use wireless, but it has to be my provider — Comcast." (Comcast, btw, is the provider Massport uses — at least according to the start up screen last time I passed through Logan.)

From what the press are saying, it looks like the FCC will come out in the right place on this one. I certainly hope so.

On the licensed side, the FCC issued three significant Notices in the last few months. The most important is the Notice for the auction rules for the 800 MHz auction (the returned DTV spectrum). That having been the subject of my last post, I won't belabor the issue here.

After a long quiessence, the FCC is once again looking at unlicensed spectrum. Hopefully, we will see some positive action soon.

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Spectrum Policy and Reply to Harold

September 19, 2006 Policy Blog , Spectrum Reform

In the prior post, Harold Feld discusses the implications of the recent AWS auction. To offer an optimistic counterpoint to Harold, let me begin with the good news of that auction for consumers–TMobile lives to fight another day. Unlike other providers, TMobile is more committed to the open Internet (in terms of its web access) and more willing to experiment (including a new wifi/cellular phone in the offing). I could go on here (they were the first to embrace the Treo, for example), but you all get the point. The good news, which Harold glosses over, is that TMobile was the big purchaser and is in a position to roll out its 3G offering and continue to be a supporter of independent innovation and, more generally, act as a maverick in this space.

Speaking of Harold and spectrum policy, I do have to correct the record based on a prior post of Harold's elsewhere. In that post, Harold expressed his disappointment that Dale Hatfield and I, in a recent paper released by Cato, did not take on the "property rights school of spectrum policy." As Harold pointed out, Dale and I had previously written on the importance and challenges of enabling a spectrum commons model to work effectively (see here). Unfortunately, Harold misread our recent paper as calling into question our position that unlicensed spectrum is an important tool to promote innovation and consumer welfare. Rather, the recent paper–and I quote–"does not focus on whether a new regime should promote spectrum as part of a commons"; instead, the paper addresses "how promoting a property rights regime in spectrum is not nearly as simple as some people suggest."

Personally, I believe that spectrum policy should embrace both a commitment to unlicensed spectrum and licensed spectrum. Each model has its benefits and can be used effectively to promote innovation. We did not intend to engage that debate, but rather began with the premise that there will be property rights in spectrum and policymakers will ultimately need to address the question of what it means to grant property-like rights in spectrum. One could even, if they were so inclined, read our paper as underscoring that implementing the property rights model is far more difficult than advertised. (It is, but we still think it is worth the candle.)

In terms of our analysis, the key point for present purposes is that spectrum property rights cannot function like land. If anything, they are more like water rights–fluid and difficult-to-define. Consequently, if policymakers attempt to impose strict property rights on spectrum licenses, they might well create strategic opportunities for firms to purchase spectrum rights with the sole purpose of engaging in hold-up-type behavior. (Spectrum trolls, if you will.) There are alternative property designs that could avoid this problem–a limitation on injunctions; safe harbor rules; and other measures, for example. We have not worked out all of the details, but our central point is that spectrum property rights advocates cannot simple argue "treat spectrum like land" and stop there. In fact, the differences between spectrum and land explain, in part, the reticence of implementing a more thorough-going commitment to property rights.

Harold, I assume that you will have a response, so take it away. . .

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AWS Auction Success Kills DBS As Viable Competitor to Cable

September 19, 2006 Broadband , FCC , Network Neutrality , Policy Blog , Spectrum Reform

Although the results were pretty clear a month ago, the FCC officially declared the AWS Auction (aka Auction No. 66) over. The auction raised about $14 billion dollars and, unsurprisingly, the folks are rushing to declare success. FCC Chairman Martin observed that 104 companies won licenses in the auction and that he fully expects to see mobile tv and other advanced services deployed. Scott Clealand, shill for telco anti-net neutrality group netcompetition.org, declares once again that the auction will produce even more competition into the already super competitive market of broadband. Even the usually sensible Blair Levin of Legg Mason is quoted in this Washington Post story saying "there's no bad news in this auction for consumers."

Well, I suppose, in the sense that we will continue to have exactly the same players locking up the wireless and broadband markets, the auction wasn't bad. We could look at it as the incumbent telcos and the cable cos paying $14 Billion to keep competitors out. I guess that's something.

Confused? I argued awhile back that letting incumbent cable operators win wireless licenses was a huge, anticompetitive mistake. If we wanted to create competition in video and broadband services, we needed to prevent the dominant incumbents from blocking new entrants by outbidding them on licenses. (A recommendation echoed by Free Press in their recent Broadband Reality II Report). For similar pro-competitive reasons, I pushed for anonymous bidding in spectrum auctions to keep incumbents from blocking potentially disruptive new entrants.

In the lead up to the auction, I predicted that DBS providers absolutely needed to win licenses to stay competitive with cable companies, and that the cable cos would therefore block (or drive up the price) of licenses the DBS providers wanted. Sure enough, "Spectrum Co." and the large incumbent wireless providers knocked out the Echostar-DIRECTV partnership in the first two weeks.

The result? DIRECTV owner Rupert Murdoch has taken to referring to DIRECTV as a "turd bird" and has reportedly offered his controlling interest in DIRECTV to Liberty Media owner John Malone in exchange for Malone's 17% interest in Murdoch's News Corp. Why is Murdoch looking to sell after he spent so much effort to block Echostar from acquiring DIRECTV and acquire it himself only 3 years ago? Because DIRECTV has no viable broadband strategy. And without a viable broadband strategy, DIRECTV cannot take customers away from incumbent cable operators.

The DBS companies hoped to stay in the game with the AWS auction. They were blocked by Spectrum Co., aka Comcast and Time Warner (the dominant cable companies). This is the wonderful world of competition that the AWS auction has given us?

Checking out the rest of the "104 companies" that one shows similar disappointments from a competition standpoint. The biggest winners in addition to Spectrum Co. were Verizon and T-Mobile, followed by a list of regional wireless companies looking to expand their footprints. The only potentially disruptive bidder was Alen Salmesi's AWS Wireless partnership. Salmesi gained fame as the man who bid outrageously in the 1994 PCS auction to get licenses for Nextwave Communiations, declared bankruptcy to avoid payment, then — thanks to a Supreme Court decision that the bankruptcy code outranked the Communications Act — sold out at a tidy profit to Nextel. This history does not inspire me to believe that Salmesi intends to rock the wireless boat.

And don't look to Spectrum Co. to get agressive in wireless by offering their own cellular service. Comcast has already made it clear they have no intention of competing in the cellular market.

On the network neutrality front, I have observed before that the incumbent wireless providers are even worse on blocking and otehrwise controlling the user's online experience than the wireline incumbents. And, given that the biggest wireless incumbents are either owned by wireline incumbents (Verizon, AT&T) or have partnerships with them to jointly provide services (Sprint/Nextel with Comcast & TW), I don't see cellular wireless/wireline competition as impacting either price or user control. EVDO and the like will provide a good supplement in the form of mobile services, or areas that can't otherwise get wireline broadband. But the idea that Verizon Wireless provides enough competition to Verizon DSL that Verizon DSL won't dare degrade rival content because I will switch seems rather ludicrous.

Again, given the rush to declare the AWS auction a success, I doubt we will see any real change in the rules governing the upcomming 800 MHz auction for the returned analog tv spectrum. Given the huge political push-back against anonymous bidding in the AWS auction, I expect the "success" of the AWS auction will provide sufficient justification to keep open bidding and allow wireline incumbents to compete. I also predict much lower bids in the 800 MHz auction, because the potentially disruptive players (like the DBS folks) will not waste their time and resources to come play in a rigged game, even if it is the only game in town.

Of course, that assumes the survival of potentially competitive bidders until the 800 MHz auction in 2008. Given our great "success" with developing a "highly competitive" broadband market and a "highly competitive" wireless market, wherein the chief cable competitor is a turd bird and the chief overbuilder competitor is looking hard at exiting the business, I'm not that confident that we will have competitive bidders left by the time the 800 MHz auction rolls around.

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Online Video Distribution Starts To Grow Up: Incumbents Get Nervous

September 15, 2006 Policy Blog , Spectrum Reform

Two announcements this week gave a glimpse of where we may be heading in the world of online video and movies, and it is making some broadcasters and movie studios very nervous (what else is new). The first was NBC's announcement that it was launching the National Broadband Company (NBBC). NBBC will be an advertiser supported on-demand broadband video service that will include a good bit of NBC network programming, as well as the programming of some local stations and other partners like the History Channel. In a very smart move, NBC has given its affiliates a 1/3 ownership stake in the venture and a share of the advertising revenues.

Sounds good to me. But what does a service like NBBC mean for those silly "distant signal" laws that protect local broadcasters from competition from stations outside of their service areas? As I have written about previously, these are the laws that have Echostar facing an injunction that would force it to terminate distant service to 800,000 customers who are currently receiving these signals legally. In a nutshell, NBBC and other services like it render distant signal laws worthless. NBBC will allow me to watch programming from a "distant" television station regardless of whether my cable (or satellite) provider is permitted to do so. Seems it is only a matter of time until the other networks follow suit. So if networks and affiliates are free to send their programming all over the contry via the Internet, why should cable and satellite providers be prohibited from negotiating with individual distant stations to provide programming to their subscribers?

The second announcement was that Apple will now be making movie downloads available through its iTunes movie store.

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CORRECTION: NO INJUNCTION IN ECHOSTAR CASE

September 1, 2006 Policy Blog , Spectrum Reform

Don't believe everything you read in the papers or online – contrary to what Reuters reported today, the District Court in Miami did not issue an injunction requiring Echostar to terminate distant network TV signal service to all its subscribers. While Fox did file a motion today asking for such an injunction, the court gave Echostar until September 12 to demonstrate why the court should not grant Fox's request. So Echostar lives to fight another day.

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Take your $100 million and …..

September 1, 2006 Policy Blog , Spectrum Reform

Reuters is reporting that a District Court in Miami has issued an order barring Echostar from retransmitting any distant signals to its customers, even those to whom it provides those signals legally. This "permanent injunction" was issued at the behest of the Fox network, which filed the request today. As I reported on Monday, the Fox network pulled out of settlement negotiations at the last minute last week, while Echostar settled with all the network affiliates (including Fox's), for $100 million and other concessions, including the cessation of service to all illegal subscribers. So what could have been a win-win situation for all involved has come down instead to this scenario – the Losers: nearly 800,000 innocent and legal subscribers to network distant signals who will no longer receive those signals; the affilliates, who are probably out $100 million and who now won't benefit from the increased local-into-local satellite service that was part of the settlement; and of course Echostar, whose previous behavior cannot be condoned, but who has done everything possible to ensure continued service to legal subscribers. The Winner: Fox and its parent company News Corporation, which owns Echostar's only direct competitor, DIRECTV. What possible motive could Fox have other than to kick its competitor while it was down, hoping that subscribers who lose their service will switch satellite providers? Sigh. I suppose now its time for Congress to get involved to protect consumers and competition.

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Spectrum and Net Neutrality Lessons from the FCC’s Recent Spectrum Auction

August 29, 2006 FCC , Network Neutrality , Policy Blog , Spectrum Reform

As reported in yesterday's New York Times, although the AWS spectrum auction will not formally close for another month or so, the likely winners of the licenses will be the incumbent wireless companies and "SpectrumCo LLC," a joint partnership with Comcast, Time Warner, and Sprint-Nextel (albeit with Comcast and Time Warner the dominant partners). The much ballyhooed hope that the AWS auction would produce a new, disruptive competitor for either mobile phone service or broadband service died when the DBS partnership of DIRECTV and Echostar exited the auction after getting systemically outbid by the incumbents and Spectrum Co.

Of course, this outcome was entirely predictable to anyone who (a) actually looks at the economics of bidding in open, ascending spectrum auctions and (b) has not drunk the intermodal competition cool-aid. Which is why I pushed the FCC for anonymous bidding rules back in the spring and have argued that we should not allow incumbent cable operators to bid on spectrum if we want competition.

The FCC has a chance to learn some lessons here for the upcomming auction of returned analog television spectrum, the so called "700 MHz Auction." The FCC issued a Notice of Proposed Rulemaking soliciting comment on service rules and auction considerations. Unfortunately, it will be hard to convince the FCC that an auction with almost 170 bidders raising close to the maximum anticipated $15 Billion in revenue was a failure because it further entrenched the incumbents and failed to produce a meaningful new competitor. For those devoted to the dogma of the perfection of "the market" as the ultimate arbiter, the failure of a new competitor to emerge indicates that there is no need for another competitor or that another competitor is not economically viable (the notion of strategic behavior to preserve market dominance apparently being a heresy to be firmly rejected by orthodox free market theologians). Heaven forfend the government should "interfere with the market" by structuring an auction more likely to produce the emergence of new entrants.

It is also worth noting in passing that the triumph of the incumbents likewise has implications for the network neutrality debate. At the start of the AWS auction, the Wall St. Journal and other opponents of network neutrality as an evil government mandate and attempt to "socialize the internet" pointed to the AWS auction as proof that (a) we have more than enough competition in broadband to eliminate any need for "net neutrality" and (b)if tech companies like Google or Microsoft want to build their own pipe, they can get spectrum to do so.

Instead, as predicted by Greg Rose and Mark Lloyd in a paper for the Center for American Progress, the incumbents (including the incumbent residential broadband providers Comcast and Time Warner) acted to block potentially disruptive new entrants from getting licenses. As a result, we have exactly the same competitors and potential competitors in the broadband market today as we had before the auction started.

Sure, AWS licenses acquired by the wireless incumbents may eliminate some capacity constraints that wireless providers claim have hampered their deployment and required them to impose limits on users. But the fact that three of the four largest national mobile phone companies are owned or affiliated with incumbent wireline providers (Cingular with AT&T & Bell South, Verizon Wireless with Verizon, and SprintNextel with Comcast & Time Warner via their affiliation and resale agreements) makes it a lot less likely that these "competitors" will prove sufficiently aggressive and disruptive that the incmbents will not dare degrade user choice of where to go online or what applications to run over the network.

Worse, consider this exchange between Tod Cohen of Ebay and Carolyn Brandon of the Cellular Telecomunications and Internet Association (CTIA, the primary trade group for the incumbent wireless carriers). Apparently, the dominant wireless companies that won the AWS licenses and offer our best hope of broadband competition see no problem at all with exercising control over the user's choice of content and application, regardless of network capacity.

[Tod] Cohen [deputy general counsel for Ebay] said the wireless Internet in the U.S. is already operating in a non-net neutrality environment when it comes to EBay, an online auction service.

He said Cingular customers are not able to use text messages to make a payment through eBay's online subsidiary, PayPal, because Cingular won't agree to give PayPal access to necessary wireless codes on its network. PayPal is available to customers of other wireless services.

Carolyn Brandon, vice president of policy for industry trade group Cellular Telecommunications & Internet Association, responded that under a capitalistic market Cingular has the right to strike a contract with another online payment company and shouldn't be required to a cut a deal with PayPal.

"What's the market failure?" she asked.

Recent remarks by AT&T's Ed Whitacre show that the Bells have not given up their hopes of cutting such deals themselves.

Which, of course, is exactly the concern of folks who see positive social and economic benefit in an open internet. Absent regulation to the contrary, it makes perfect economic sense for the few broadband providers in the market to exploit their market position and extract additional rents from suppliers of content and services on one end and captive customers on the other. I just happen to think that allowing these providers to exercise their market power would be a disaster for democracy and a disaster for our economy.

Reasonable minds can differ, of course, on my economic analysis and whether network neutrality is a cure worse than the disease. Nor do I expect the paid shills and true believers to look at the AWS auction results and proclaim "how wrong we were to assume that competition exists or is likely to emerge absent some form of government intervention, given the power of incumbents to block new entrants!" But I do point to the recent AWS auction as proof of two central tenants in my analysis: the behavior of profit seeking firms is predictable using undergraduate level economics and a willingness to embrace empirical data over theory, incumbents will do what they can to block the emergence of potentially disruptive new entrants, and — absent some form of government action — they will succeed.

You may still decide this produces a better world than "government intervention in the market" does. But don't kid yourself about the world you're going to get as a result.

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A Reprieve for Echostar (Sort of)

August 28, 2006 Policy Blog , Spectrum Reform

Last week I wrote about an 11th Circuit Court of Appeals decision that would have required Echostar Communications (or Dish TV, as most people know it) to stop sending distant network TV signals to all of its customers, regardless of whether those customers were receiving those signals illegally. The Court was required by law to issue that penalty because it had found that Echostar had engaged in a "pattern or practice" of providing illegal signals.

Today, Echostar and all the network affiliates groups (ABC, CBS, NBC and Fox) announced that the parties had settled. Under the terms of settlement, Echostar agreed to expand its "local-into-local" TV service from 165 to 175 markets by the end of the year and agreed to pay the affiliates' trade association $100 million. Of course, Echostar also agreed to no longer send distant signals to those who do not qualify for them.

So Echostar and its legal customers are ok now, right? Well, not so fast. The ABC, CBS and NBC "owned and operated" TV stations settled with Echostar a long time ago, but the Fox network "O&Os" pulled out from the settlement at the last minute last week. Not surprisingly, Fox's parent company, News Corporation, owns Echostar's closest competitor, DIRECTV. While of late there has been some talk about a thaw between Echostar's CEO Charles Ergen and NewsCorp Chair Rupert Murdoch – they recently teamed up in an unsuccessful bid to obtain spectrum at an FCC auction – this will certainly send a chill back into the relationship. Some may recall that Murdoch successfully blocked Echostar's attempt to buy DirecTV in 2002, which permitted News Corp to waltz in an buy it instead.

Even if Fox ends its holdout, the settlement must still be approved by a Federal District Court in Florida. But chances for the court approving that settlement, and preserving service for legal customers, would be helped enormously should Fox come into the fold. It is hard to fathom why Fox refuses to settle, other than its desire to punish its closest competitor. I, for one, hope the court sees this maneuver for what it is, and accepts the settlement. But here is the silver lining in the cloud – by keeping the issue alive, Fox is opening the door for Congress to reconsider whether the "distant signal" law is anticompetitive and an anachronism in the Internet age.

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