Wednesday, June 22
Originally published at Forbes.
A Lesson From Canada For The FCC
by Bruce Mehlman
Oh, FCC: Take some notes from Canada.
Maxime Bernier, one of the candidates for leader of the Conservative Party of Canada, has just given a speech in which he set out ways to achieve real competition in the telecom sector. And one of the things he proposes is actually to phase out the role of the Canadian Radio-television and Telecommunications Commission (CRTC) as telecom regulator.
Bernier is a telecom and regulatory expert. He was Minister for Industry in Stephen Harper’s Conservative government and led the deregulation of local telephone markets after cable companies and wireless had transformed the telecom landscape. In short, Bernier recognized that there was “obviously more and more competition,” and he acted on it. In the face of opposition both from those who favored continued regulation and the Canadian regulator itself, the market was deregulated and competition flourished.
So why is Bernier so anxious to act now? It all goes back to his time in government. Ten years ago, he had set out a Policy Direction to the CRTC, which instructed, in his words, “the CRTC to rely on market forces to the maximum extent feasible within the scope of the Telecommunications Act” as a “solution” to its “control freak mindset.”
Back to old ways
What happened? “I, and many others at the time thought that it would force the CRTC to change its ways, to become more flexible and adapt to the new competitive reality. We were wrong. The CRTC seemed to take the Policy Direction seriously for a few years. And then it reverted back to its old ways.”
And from this, Bernier draws a conclusion about regulation and regulators: “Those whose task it is to regulate this industry tend to be behind the curve. They don’t want to let go of their regulatory control. Meanwhile, the industry has actually moved on, with new innovations.” That’s exactly right. And it applies just as much here as there.
Now if the CRTC can behave this way in a parliamentary system, in which it is supposed to follow the directions of Parliament, imagine the vast discretion our own Federal Communications Commission (FCC) has in a system where it is an independent regulatory body.
Implementing policies that ignore the marketplace
Why should Americans care? Because the issues that Bernier cites as examples of a regulatory mindset are the same ones we face here, notably with broadband, wireless and the nature of competition itself. In each case, the regulator opted for policies that ignored the marketplace, put its hand on the scale and favored policies that restrict investment. In auctions, restrictions on bidding intended to dictate market outcomes led to misallocation and under-utilization (as some of the spectrum sold in 2007 for public safety is still not being used and other parts took seven years to finally see service after sale in secondary markets).
So whether it’s broadband, wireless auctions or the nature of competition itself, the issues are similar on both sides of the 49th parallel. Regulators too often seek to ignore marketplace realities. In the U.S., we are witnessing it today with the FCC’s heavy-handed proposed regulations in areas such as special access, privacy and the video marketplace, among others.
Regulators only want to protect their own power
What Bernier writes of the CRTC could equally be said of the FCC: “As the industry evolves, the CRTC finds new reasons to continue to regulate it, in order to justify its existence. In doing so, it is not protecting consumers, it is only protecting its own power. The telecom industry is a mature and competitive industry, and it should be treated as such. It’s not a playground for bureaucrats.”
Both Americans and Canadians are better off with greater access to modern, fast telecommunications services, when the regulator lets the market work, encourages real competition, and investment, and keeps its hand off the scale. In fact, again quoting Bernier: “Interventionist policies that are meant to bring more competition actually do the opposite. Competitive markets don’t need government intervention to work. They only need to be free.”
Thursday, June 16
In a new article for Forbes, Fred Campbell, director of Tech Knowledge and former head of the Wireless Telecommunications Bureau at the Federal Communications Commission (FCC), brings to light yet another example of regulatory overreach, compliments of the FCC. The Commission intends to marry broadband with…batteries? In short, broadband providers would be required to redesign cable and DSL modems to have bigger backup batteries that would allow web surfing for up to 8 hours during a power outage – IF you also have backup power for your computer and/or other devices that you use to access the web.
As Campbell points out, the Commission’s thought process might as well have been born in the 20th century and doesn’t make sense for a number of reasons. Here are the top three:
First, this directive would take choice out of the hands of consumers. Forget having a say about whether or how you want to implement a backup power solution.
Second, it’s unnecessary. A power outage doesn’t prevent mobile devices from being used to connect during an emergency, from calling 911 to texting friends and family. In real-world testing, a mobile phone can run for at least 35 hours with low and mixed usage. And, as Campbell describes, if you use your broadband modem to make phone calls, the FCC’s rules already require your broadband provider to offer you a backup power battery for voice calls – that 97% of Comcast XFINITY voice service customers decline, by the way.
Third, consumers – despite demonstrating (through an extremely low take-rate) little interest in backup power for broadband – will be forced to foot the bill for this extravagance in the end…for your “protection.” Big Brother knows best?
Head on over to Forbes and read Campbell’s full piece for more details about why the FCC’s reasoning on backup battery power for broadband doesn’t add up.
Tuesday, June 14
The Internet Innovation Alliance is deeply disappointed with today’s DC Circuit decision affirming the FCC’s Open Internet Order. Unfortunately, the Court has missed a unique opportunity to continue the bipartisan policies that have spurred 21st century broadband wired and wireless infrastructure investment and brought high-speed Internet access services and applications to Americans throughout the nation. As the parties now consider their appellate strategies, we again reaffirm our call for Congress to step in and take a leadership role to adopt bipartisan legislation that ensures both an open internet and the policies necessary to expand critical private investment in next-generation broadband networks.
Wednesday, June 08
Now that Hillary Clinton and Donald Trump are the presumptive nominees for president for their respective parties, we encourage them to develop a smart digital agenda. Specifically, we suggest following these seven principles for progress:
Show preference for private sector investment. Government alone can’t build out these networks. Where would government find the tens of billions of dollars every year necessary to keep pace with technological change and demand? Cut Medicare, farm subsidies, education? Of course not. Some things are core functions of government, but there are others at which the private sector is simply better and more efficient – and building telecommunications networks is one of them. In the last two decades, the U.S. private sector has invested over $1.5 trillion in networks. Imagine what the multiplier effect has been considering the total impact of that investment – new companies, applications, platforms, services, entirely new industries that have grown up because of this investment in networks. So the first principle is to maintain the conditions under which private sector investment can flourish.
Promote competition – and recognize that it exists. The 1996 Act was about promoting competition, and that’s exactly what happened. Cross-platform competition is a reality and will only continue to become more intense if government does not interfere.
Effectively manage spectrum resources, balancing the needs of the private sector and government spectrum users, and licensed and unlicensed uses. Spectrum is the lifeblood of the mobile broadband revolution. As a finite resource, it is vital that spectrum resources be made available for mobile broadband services. We should continue efforts to make spectrum available for mobile broadband by either reallocating spectrum currently used for other purposes or making underutilized government-controlled spectrum available for commercial wireless services. Policymakers should also continue to ensure we find the right mix in making spectrum available for licensed and unlicensed services.
Maintain an open Internet, with appropriate protections for non-discrimination. Here’s the good news: you don’t need a new policy on this. The FCC already did it for you in 2010, when it published reasonable rules necessary to preserve the Open Internet and ensure non-discrimination among network providers and access to information. Don’t confuse this with the rules the FCC put out in 2015; those rules inappropriately and unwisely apply decades-old, monopoly-style regulation to vibrant, competitive broadband and wireless Internet. They deter investment, not foster it. They limit innovation, not promote it. Their impact has been small at first, but it will become more evident over time. Europe had a lead in broadband at one point, too, and then it chose the path of regulation and fell dramatically behind the United States. Don’t let that happen here. Fortunately, the courts may strike down the FCC’s new rules, perhaps even before you take office. At that point, all you have to do is to say that the FCC had it right the first time – and perhaps even encourage Congress to codify those rules in statute law.
Assure access to connectivity, irrespective of geography or income, through universal service. This is easy: everyone deserves access to broadband, which is the key to the 21st-century economy – but the trick is to do it right. We need more rural investment and more investment in schools and educational institutions (50 percent of students today don’t have the tools they need to do their schoolwork). In November 2014, the FCC put forward great ideas on universal service reform, focused on modernizing the Lifeline program, expanding it to cover broadband, closing the “homework gap,” and giving consumers more power over how they spend their Lifeline dollars – while deterring waste, fraud and abuse.
Protect the privacy and security of users. Protecting the privacy of Americans in the broadband ecosystem is vital. Today, different privacy rules apply to the same information traversing the Internet, depending on the regulatory classification of a particular service provider. Policymakers should engage in open discussions across the broadband industry, along with privacy advocacy groups, on the best way to reach agreement on future consumer protections. Cybersecurity is a hugely important issue for both business and consumers. Only by working together with network providers can we achieve the strongest possible level of defense against cyber-attacks of all kinds.
Think through a new Telecommunications Act. While the 1996 Act has been a great success, it’s time to update the Act to reflect current conditions and the competitive markets that now exist with a new regulatory model that ensures government does not slow down the pace of innovation. Support for a new Act would be a major accomplishment of your Administration and would show the public that bipartisan cooperation in Congress is still possible – no small achievement in this time of sharp partisan division.
Wednesday, May 25
With online privacy once again a hot topic inside the Beltway, our own Honorary Chairman Rick Boucher has tackled the issue in an op-ed for The Hill. An excerpt:
The Federal Communications Commission’s (FCC) asymmetric approach to internet privacy is likely to create a false sense of security among web users. Despite stringent FCC privacy regulation of internet service providers (ISPs), consumers’ information will enjoy little protection when they are interacting on social media sites, shopping online or surfing the web.
The recent Senate hearing on Internet privacy that featured FCC Chairman Tom Wheeler and Commissioner Ajit Pai, along with Federal Trade Commission (FTC) Chairwoman Edith Ramirez and Commissioner Maureen Ohlhausen, underscored that the FCC’s approach to internet privacy — singling out ISPs while leaving the privacy practices of edge providers essentially unregulated — is unbalanced.
Check out Boucher’s full op-ed over at The Hill.
Thursday, May 05
U.S. Broadband and ICT Sector Adds More than $1 Trillion in Annual Value for the American Economy under Light-Touch Regulation
Report authors Hassett and Shapiro argue that the broadband/ICT sector has grown dramatically under light regulation, and increased regulation could slow Internet ecosystem investment and impair other sectors that depend on broadband/ICT technologies
For the past decade, the broadband and information and communications technologies (ICT) sector has fueled enormous growth and development in the American economy, according to a new 20-page report from the Internet Innovation Alliance (IIA) that analyzes broad trends in the economic value, output, and employment in this key sector. The study concludes that the Federal Communications Commission’s (FCC) effort to impose Title II regulation on broadband providers could “adversely affect broadband/ICT sector investment, with potentially significant secondary costs for the other industries that depend on it and the overall American economy,” the study states.
Authored by Kevin A. Hassett and Robert J. Shapiro, “The Impact of Broadband and Related Information and Communications Technologies on the American Economy” highlights how steady demand for the broadband/ICT sector’s goods and services has helped spur U.S. employment and GDP growth over the past decade. Principal findings of the research include:
• In 2014, the U.S. broadband/ICT sector produced $1,019.2 billion in value added for the American economy, equal to 5.9 percent of U.S. GDP of $17,420.7 billion in 2014. “This substantial share of all U.S. economic value added has been roughly stable for the past decade and likely understates the sector’s full contribution by undervaluing technological improvements,” the paper explains.
• The use of U.S. broadband/ICT goods and services by U.S. private industries, and the information sector (and government), contributed an additional $692.0 billion in output in 2014, equal to 2.7 percent of their combined output and 4.0 percent of GDP. Including the government sector, the use of U.S. broadband/ICT goods and services by other industries and sectors contributed $843.3 billion in output in 2014, equal to 2.9 percent of their combined output and 4.8 percent of GDP.
• The companies that comprise the broadband/ICT sector employed 4,933,000 workers (full-time equivalents or FTE) in 2014, or 4.2 percent of all U.S. private employment and 3.5 percent of all non-farm employment. Demand by the broadband/ICT sector for goods and services produced by other industries was responsible for an additional 2,784,683 jobs (FTE) in 2014. All told, the broadband/ICT sector was responsible for 7,717,683 jobs (FTE) in 2014, or 6.4 percent of all U.S. private employment and 5.5 percent of all non-farm employment.
• The average compensation of broadband/ICT sector workers in 2014 was $104,390, 59.3 percent greater than the average compensation earned by other U.S. workers ($65,517).
“The large economic gains associated with the broadband and ICT sector have flourished in an environment of light federal regulation,” commented Hassett and Shapiro. “The FCC’s proposed regulation of broadband ISPs and their service offerings would stifle broadband/ICT sector investment, growth and employment, negatively impacting the American economy.”
“Today, high-speed Internet is the backbone for 21st century economic growth in the digital economy,” said Rick Boucher, a former Democratic congressman who chaired the Energy and Commerce Subcommittee on Communications and the Internet and now serves as honorary chairman of the IIA. “Unnecessary price regulation in competitive broadband markets will have far-reaching negative impacts on U.S. economic growth and development. Without ample investment in modern networks, consumers and the entire broadband ecosystem – from Internet Service Providers (ISPs) to edge providers – will suffer from reduced innovation and fewer cutting edge broadband services, as well as reduced jobs and economic growth in the nation’s Internet economy.”
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Wednesday, April 27
Our Co-Chairman Bruce Mehlman had a piece published in The Street yesterday highlighting the fact that data collected by the FCC shows special access services are, in fact, highly competitive. An excerpt:
[L]et’s look at the facts. Based on an analysis of the FCC’s own data, it turns out that 25% of buildings that have a connection only to an incumbent local exchange carrier’s (ILEC) special access services are only 17 feet away from the nearest competitive provider’s fiber network; 50% are 88 feet away, and 75% percent are within 456 feet. The mean distance for all relevant buildings is 364 feet.
For comparison, 364 feet is about the length of a football field with the end zones. Seventeen feet? There are canoes and snakes that long. Eighty-eight feet? That’s shorter than an NBA court and less than Yadier Molina throws every night to get a runner out at second base. What about 456 feet? Well, with the Kentucky Derby coming up, that’s more than 200 feet shorter than one furlong. And it’s the same height as a roller coaster in New Jersey.
Check out Mehlman’s full op-ed over at The Street.
Monday, April 18
Over at Multichannel News, our own Rick Boucher has written a piece examining Netflix’s admission that it has reduced video speeds for the customers of two wireless providers. An excerpt:
Netflix’s stunning admission that, for five years, it reduced the video speeds of customers of Verizon Wireless and AT&T Wireless — while not doing so for customers of Sprint and T-Mobile — is little short of breathtaking. It was an exercise in hypocrisy to claim that broadband providers were degrading the quality of its video when, in fact, Netflix — without notifying its customers — was doing precisely that.
Recall the history here to understand why Netflix’s actions were so brazen and deserving of governmental review. Traditionally, peering agreements among content networks and last-mile Internet-service providers (ISPs) were never regulated, but were always negotiated between private parties.
For Netflix, arm’s-length negotiations posed a problem, because as the share of total bandwidth taken by its content grew (up to 37% at peak hours, according to one survey in March of 2015), its position became ever more untenable. It wanted ISPs to build more bandwidth to consumers for Netflx’s use, but it didn’t want to help pay for that. It didn’t want its own business model constrained.
You can read Boucher’s full piece, titled “Netflix’s ‘House of Cards’ Collapses,” over at Multichannel News.
Friday, April 08
This week the FCC allowed parties to release some aggregate data in the broadband market collected as part of the ongoing special access proceeding. And this data, even though partial, confirms what I and others have been saying all along: virtually all businesses have access to real, facilities-based competition today. And to the degree that some individual businesses don’t have that access today, it’s because the current beneficiaries of special access regulation have an incentive not to invest to connect their business customers to the closest competitive fiber networks that are readily available in the market.
In all, 95% of Census blocks where demand for special access exists have competitive facilities available. And those Census blocks include 99% of all businesses in the country.
With grades like these, let’s give an A+ to the competitive providers that are bringing modern fiber to American businesses. This definitely includes cable companies that are rapidly expanding their services to businesses of all sizes.
On the other hand, it’s clear from the data that the CLECs have customers in many office buildings that must continue to rely on antiquated copper facilities and their slow data speeds because their CLEC provider refuses to build out fiber connections to nearby fiber networks. Apparently, it’s easier to call for FCC action than it is to build out networks even 1000 feet to compete with the competitive carriers.
As US Telecom notes, the calls for more FCC intervention are “a matter of convenience, not competition.” But a business strategy of rent-seeking-rather-than-investing is not evidence of market failure. It’s evidence instead of regulatory failure. Because so long as the FCC’s special access policies serve to protect the business models of CLECs, who decline to invest, then why invest? Why spend shareholders’ or investors’ money when the government forces others to subsidize you? Nice work if you can get it, but it does nothing to promote innovation or, for that matter, competition. Government-enabled competition isn’t really competition.
But now that at long last we have some data publicly available, the right policy is even more clear: There’s simply no reason for the FCC to intervene in this market even more than it already has. The decision by some companies not to invest in the future should not be a basis for increased regulation.
Tuesday, April 05
Yesterday, FCC Commissioner Jessica Rosenworcel and I traveled to Philadelphia to tour String Theory Charter Schools’ Vine Street Campus (5th grade through 12th grade) and make classroom visits to see the application of modern technology in a next-generation, “Apple Distinguished School” setting.
Commissioner Rosenworcel has championed changes to U.S. Internet and Wi-Fi policies to provide American students greater access to 21st century broadband technologies. She coined the term “Homework Gap” that now commonly refers to the difficulty students experience completing homework when they lack high-speed Internet access at home.
The Homework Gap is real—for one in five kids in our country, it’s a daily struggle that is standing in the way of them reaching their full potential. Affordability is a barrier to high-speed Internet access for low-income families. The FCC’s decision to add broadband to the Lifeline subsidy program last week is a significant step toward closing this digital divide.
According to Pew Research, seven in 10 teachers assign homework that requires Internet access, but five million of the 29 million U.S. households with school-aged children lack regular access to broadband. Unfortunately, a 2015 Consortium for School Networking (CoSN) survey reveals that three in four U.S. school districts report that they are not currently doing anything to address technology access outside of school.
After touring the digital accomplishments of the Vine Street Campus, Commissioner Rosenworcel and Jason Corosanite, Co-Founder & Chief Innovation Officer of String Theory Schools, joined String Theory educators, administrators, parents and local business supporters in a roundtable discussion focused on “Closing the Homework Gap: Technology Lessons Learned in Advancing Education.”
Commissioner Rosenworcel’s in-depth conversation on the Homework Gap generated thoughtful discussion and innovative ideas in response to the following issues:
• How is technology transforming education?
• Is wireless broadband sufficient for completing homework assignments?
• What are the major barriers to home broadband adoption?
• Are there any federal programs that can help bridge the divide?
• How can the public and private sectors, educators and parents, partner to help close the Homework Gap?
“Technology is pervasive in today’s world, and the educational environment should reflect that to keep kids interested and engaged, and enable them to be innovative and productive,” Corosanite stated during the panel discussion. “Rather than taking place in a vacuum, a well-rounded educational approach should train students to perform later in life. Kids without digital skills will fall behind.”
Very true. Half of all jobs now require some level of technology skills, according to the U.S. Bureau of Labor Statistics. Experts say that number will surpass three-quarters (77%) within the next decade.
Our thanks to Commissioner Rosenworcel and Jason Corosanite for taking part in the discussion. And thanks as well to all the bright students and faculty of String Theory Charter Schools’ Vine Street Campus.