Thursday, October 20
“Consumer data is inconsistently protected when it’s not allowed to be used in certain ways by some companies but is permitted to be used in the same ways by others. In line with the FTC’s model, which applies to Internet edge providers, the FCC should develop an approach to privacy for ISPs with the level of protection based on the sensitivity of the data and how it’s being used. By conforming the privacy protections across the Internet ecosystem, consumer confusion will be avoided.”
– Rick Boucher, a member of the US House for 28 years who chaired the House Energy and Commerce Committee’s Subcommittee on Communications and the Internet
Wednesday, October 19
With the FCC set to vote on its privacy order later this month, it’s worth examining how the Commission’s latest approach — which would greatly expand the definition of “sensitive data” and for the first time make web browsing “opt-in” for consumers — still risks harming the entire internet ecosystem.
Yes, the current course FCC Chairman Tom Wheeler is, on the whole, similar to the rules the Federal Trade Commission has long used when it comes to online data. But that doesn’t mean the proposed rules wouldn’t be onerous. They would also make for a decidedly uneven playing field. For example:
• The FCC’s current proposal paints an overly broad definition of “sensitive” data that could easily slow the growth of online commerce to a crawl.
• Certain obligations imposed by the proposal would only apply to ISPs, putting their businesses at a disadvantage to edge providers.
• Whereas the FTC has always used a context approach when it comes to treating web browsing as “sensitive data,” the FCC’s makes no distinction between health information and, say, online shopping.
• Making the collection of all web browsing opt-in for consumers — as some are proposing — is not just unnecessary, it’s unrealistic and would only confuse, annoy, and discourage consumers who understand that much of their online data is not sensitive.
Obviously, everyone agrees online privacy is important — especially as more and more of what we do each day is done digitally. But the FTC, providers, companies like Google, and the Obama administration know that the seamless sharing of non-sensitive data — is critical for the online economy. So rather than attempt to reinvent, or even tinker with, the longstanding framework for privacy, the FCC should follow their neighbors on Pennsylvania NW and mirror the FTC’s policies. If it ain’t broke, and all that.
By utilizing a balanced, technology-neutral approach to privacy, the FCC can back their claims of protecting consumers from bad practices while still keeping the digital economy growing. Most of all, sticking with what has already been proven to work will dispel confusion and needless hoops for consumers to jump through just to visit their favorite websites. It will also make sure every business involving the internet, from ISPs to edge providers and online companies, are all playing by the same rules. As our own Rick Boucher wrote for The Hill back in May of this year:
If and until Congress acts to require edge providers to respect consumer privacy, the only way to assure parity of treatment across the ecosystem and give consumers clear privacy expectations is to rely entirely on the FTC to lightly oversee privacy for both ISPs and edge providers.
Tuesday, October 11
The Progressive Policy Institute has released its annual “Investment Heroes” report on the top 25 companies putting dollars in America, and once again the telecom/cable sector topped the list with a combined capex investment of more than $48 billion.
That’s the good news. The not-so-good news is that investment from the telecom/cable sector was actually down compared to previous years. From the report:
AT&T and Verizon invested large sums to maintain and expand their networks again this year. However, according to our estimates, AT&T’s capital expenditure was down by 11.6 percent as compared to the previous year.
While this is undoubtedly due to a number of factors, uncertainty about the FCC’s direction — namely, Title II regulation of the internet ecosystem — surely played a big role, especially from telecom companies like AT&T and Verizon. As IIA wrote in a 2014 filing with the FCC:
The continued success — and the future innovation — of our current Internet ecosystem… is seriously threatened by the proposal to reclassify broadband Internet access services under Title II. Indeed, it is hard to think of an action that would pose a greater threat to innovation and continued growth of the Internet than the proposal to reverse existing and sound precedent by reclassifying broadband Internet access under Title II of the Act.
Given the FCC’s Title II reclassification is just over a year old, it’s too early for a full picture of its impact on continuing investment. But these numbers from the Progressive Policy Institute hint at what could certainly become a trend in the coming years. Let’s hope all of us who warned the Commission about reduced investment are proven wrong.
Friday, October 07
Earlier today, FCC Chairman Tom Wheeler released the summary of his intended regulation of Business Data Services (BDS). Here is IIA’s response:
Today, we witness, with great disappointment, the FCC Chairman’s plan to re-regulate all copper-based legacy business data services throughout the nation. We fear that American businesses and consumers will ultimately be ill-served by an expert agency that ignores record evidence of robust competition in the market and instead opts for market intervention to favor certain service providers to the disadvantage of others. We hope that a majority at the agency will recognize the potential harm of this plan and will call for a return to long-held bi-partisan policies aimed at spurring innovation and promoting greater broadband infrastructure investment.
Our Co-Chairman Bruce Mehlman has a piece in Investor’s Business Daily on Verizon, the FCC, and the current business data services discussion. An excerpt:
Trade association INCOMPAS, which represents competitive local exchange carriers (CLECs), and Verizon have been working together to “negotiate” a deal with the Federal Communications Commission. Although the terms may make perfect sense for them, they’re bad for the actual deployment and adoption of broadband infrastructure and, namely, the future of business data services (BDS).
Some are currently trying to sell this as a “compromise” plan — it’s not; a compromise typically requires there to be opposite sides at the table. Verizon is in the midst of transformation where it has sold off much of its wired telephone footprint across the nation in recent years and, as a result, now finds itself more and more a buyer of BDS in much of the country.
Good for Verizon if it thinks that this transformation benefits its company and shareholders, and quite logical for the company to lobby regulators on its new position. The FCC, however, retains the duty to investigate what’s really at stake in the purported “compromise” and to spot and call a shell game when they see one. Unsurprisingly, it all comes down to price and profit.
You can check out Mehlman’s full piece over at Investor’s Business Daily.
Tuesday, October 04
A new research paper from Anna-Maria Kovacs of the Georgetown Center for Business and Public Policy details potential damage from FCC-mandated price cuts on Business Data Services (BDS). From the paper:
We model the effect of mandatory BDS price cuts on the free cash flows of BDS providers. We conclude that BDS rate-cuts are likely to do serious damage to the financials of competitive providers, i.e. non-incumbents, as well as incumbents who provide BDS infrastructure. Because company valuations reflect multiples of cash flow, decreases in cash flow are likely to result in lower valuations. The heaviest damage is likely to be to those who are primarily facilities-based, but the free cash flows and valuations of resellers are also likely to be harmed.
Also of note in the paper:
• Since all BDS providers will be hit financially, their ability to afford the network buildout both the Obama Administration and the FCC want to see by 2020 will also be affected.
• Mandating price cuts for high-capacity Ethernet and dark fiber will have a significant impact on the free cash flow of BDS providers, making it more difficult for them to make the business case for the costly migration from 4G to 5G technology.
Since both the buildout by 2020 and the migration to 5G listed above are a focal point for the FCC, why would the Commission want to undermine their own agenda by mandating BDS price cuts? Hopefully the FCC will provide an answer to this question — or better yet, move away from mandating price cuts altogether.
Kovacs’ paper is titled “Business data services: The potential harm to competitive facilities deployment.” You can check it out for yourself here.
Tuesday, September 27
Over at The Street, our own Bruce Mehlman writes about the election and what it could mean for tech and investment. An excerpt:
[I]n this world of technological convergence, in which companies offering Internet, video, and traditional communications services are merging (some quite literally and others through expanding their business lines), investors should know that there are some critical decisions on the horizon regarding interference in these markets or light-touch regulation. Those decisions will impact whether companies invest robustly, whether distributors of content will have the right incentives to continue innovation in that space, and many other issues. Watch the returns on Election Night – but also watch those critical appointments in regulatory agencies over the coming year to get a fuller flavor of the impact of government regulation on markets.
Check out Mehlman’s full piece at The Street.
Thursday, September 22
Earlier today, Morning Consult published an op-ed from our own Rick Boucher on the FCC’s ongoing business data services proceedings. An excerpt:
Simple economics suggests that the way to promote the most rapid deployment of the fastest business data services to the enterprises that need them is to rely on competition and the market forces that drive innovation and investment. The FCC, however, seems to start from the position that only regulation can ensure that adequate services are provided to businesses. And so the agency is seeking to set prices at a level that, while convenient for some competitors, doesn’t allow for a sufficient return on investment to stimulate broadband deployment. How this approach will spur investment and deployment is anyone’s guess; the FCC doesn’t have an answer.
Now a group of seven prominent economists has just made clear their opposition to the conclusions the agency is drawing from its plethora of regressions. In short, the economists argue that, because the FCC starts from the wrong place – the mistake that correlation implies causation – the agency, therefore, ends up at the wrong place – the idea that there is not only market power in the Ethernet market but market power that justifies price regulation. As they write, “[a]s commenters across the spectrum rightly acknowledge, the rationale for ex ante rate regulation hinges entirely on protecting customers from a dominant provider’s abuse of market power; in turn, there is no plausible argument for regulating BDS providers that lack market power.”
Check out Boucher’s full op-ed over at Morning Consult.
Monday, September 19
As the FCC continues its murky — and occasionally confounding — Business Data Services (BDS) process, seven economists have penned a letter to the Commission arguing that any imposed rate regulation on what is a truly competitive market would be a mistake and counterproductive. From said letter:
As commenters across the spectrum rightly acknowledge, the rationale for ex ante rate regulation hinges entirely on protecting customers from a dominant provider’s abuse of market power; in turn, there is no plausible argument for regulation BDS providers that lack market power. No party has suggested — let alone demonstrated — that competitive BDS providers exercise significant market power. Moreover, some of the undersigned economists have examined marketplace data regarding the current state of BDS competition and have found that such data do not support claims that incumbent LECs exercise market power broadly in the provision of BDS.
Translation: The BDS market is competitive and there is no need for across the board price regulation. Again, from the letter:
To the degree there are some BDS markets with persistent monopoly power, we agree that it could be economically justified and welfare enhancing to reduce monopoly rents in such markets to a best approximation of competitive levels, to the extent such a goal can be achieved without imposing large costs on providers and disincentivizing investment. The Commission should limit any such regulation to markets characterized by monopoly power that are unlikely to become effectively competitive in the near future. To that end, the Commission should regulate BDS rates for legacy services only in geographic BDS markets where only a single facilities-based provider is present or nearby.
Translation: If regulation is necessary, it should be implemented using a scalpel, not a hacksaw.
To read the full letter from the economists to the FCC, click here.
Monday, September 12
Over at tech site Recode, our Co-Chairman Jamal Simmons and former Co-Chairman Larry Irving have penned an op-ed on virtual reality and the need for regulators to encourage private investment in the infrastructure that supports it. An excerpt:
The future of virtual reality is bright. Investors are bullish, users are excited to consume novel entertainment and educational applications, and engineers are developing new products. While innovators create exciting hardware and content, a VR future is only possible if policymakers make the right decisions today. Virtual reality will require new and upgraded broadband networks, both wired and wireless, that will be capable of satisfying future bandwidth needs of the technology, which consumes massive amounts of data.
Policymakers need to make more spectrum available, too. People are using their iPhones and Android phones for the early versions of VR, but today’s tools will not be adequate for a fully immersive, high-definition virtual reality future. Whether it is 4K, 5K, high-definition or ultra-high definition, each next-generation technology will require retrofitting our infrastructure. It’s time to rethink, rebuild and reinvest.
Check out at the full op-ed over at Recode.