Helping, Not Hurting Consumers

By Brad

In an op-ed for the Huffington Post, American Consumer Institute for Citizen Research President Steve Pociask worries the FCC may end up hurting consumers with its upcoming spectrum incentive auctions:

A basic principle of any well-designed auction process is that it is open and competitive. However, there are some unsettling news reports that this basic principle may be in jeopardy. For one, there has been some recent coaxing by the Department of Justice that the FCC may want to consider favoring its auction to benefit some small wireless providers over larger ones. Along the same lines, there have been suggestions that the FCC may consider rules to prevent the largest two wireless providers, AT&T and Verizon, from participating in the upcoming auctions. If recent headlines and comments from the FCC Chairman are any indication, Sprint and T-Mobile are “getting stronger” and the reality remains: “Every mobile operator out there, including the largest ones, needs more spectrum.”

Here is the problem—protecting competitors does not help competition, and that hurts consumers. Any action by the FCC that would intentionally benefit some competitors at the expense of others runs counter to the intent of Congress to constrain the FCC’s ability to limit participation in the upcoming spectrum auctions. When it comes to picking favorites in the market, that choice should stay with consumers, not regulators.

Back in February, our own Honorary Chairman Rick Boucher had similar thoughts on the FCC’s auctions:

History has shown that when the FCC has tried to pick winners and losers in the wireless market, American consumers have lost. Past attempts by the Commission to favor certain bidders and/or impose rigid regulations on auction winners have drastically diminished auction proceeds, left major blocks of spectrum unused, and led to what FCC Chairman Julius Genachowski himself has labeled “America’s looming spectrum crisis.”

What Competition Means

By Brad

Over on his blog Maximum Entropy, Bret Swanson (who is one of our Broadband Ambassadors) digs in to the FCC’s latest Wireless Competition Report:

Each year the Federal Communications Commission is required to report on competition in the mobile phone market. Following Congress’s mandate to determine the level of industry competition, the FCC, for many years, labeled the industry “effectively competitive.” Then, starting a few years ago, the FCC declined to make such a determination. Yes, there had been some consolidation, it was acknowledged, yet the industry was healthier than ever — more subscribers, more devices, more services, lots of innovation. The failure to achieve the “effectively competitive” label was thus a point of contention.

This year’s “CMRS” — commercial mobile radio services — report again fails to make a designation, one way or the other. Yet whatever the report lacks in official labels, it more than makes up in impressive data.

For example, it shows that as of October 2012, 97.2% of Americans have access to three or more mobile providers, and 92.8% have access to four or more. As for mobile broadband data services, 97.8% have access to two or more providers, and 91.6% have access to three or more.

Swanson goes on to point out that the problem with the FCC not taking a stance on whether the wireless industry is competitive may have more to do with the definition of competitive:

The industry has grown so large, with so many interconnected and dynamic players, it may have outgrown Congress’s request for a specific label.

The Greatest Value in the World

By Bruce Mehlman

In a smart piece for Fierce Wireless, Anna-Maria Kovacs, Visiting Senior Policy Scholar at Georgetown University, looks at the FCC’s latest Wireless Competition report:

Of course, consumers have myriad other choices with regard to their wireless experience. They choose among various types of service plans:  paid v. prepaid, individual v. family, limited v. unlimited, various mixes of voice/text/data. They also choose among hundreds of devices, a few operating systems, and millions of applications. By the time a consumer has chosen a carrier, a service plan, a device, and operating system, that individual has chosen among literally hundreds of possibilities. It is not surprising that this intense competition at various levels of the wireless ecosystem has provided Americans with the lowest prices and the greatest value in the world.

Kovacs’ analysis echoes our own take on the FCC’s report.

The FCC Fails to Acknowledge the Success of the Wireless Market

By IIA

Today, the FCC released its 2013 Wireless Competition Report. Rather predictably, the Commission has once again avoided concluding that the wireless market is competitive — despite the fact that four out of five consumers have a choice of five or more wireless service providers. In 2010, the Commission reversed the findings of six successive reports that acknowledged the mobile market’s success.

More Americans are choosing smartphones when they purchase a new phone (67 percent in 2012), and more are using them to go online (104 million in 2011). And according to today’s FCC report, “It is estimated that U.S. mobile data traffic increased 270 percent from 2010 to 2011, and that it has more than doubled each year for the past four years.”

The Commission is painting a picture of the market with this shade of gray to leave room for justification of future wireless regulation. But interestingly enough, FCC Chairman Julius Genachowski this morning stated: “Today, the U.S. broadband economy is thriving. The United States has regained global leadership in key areas of broadband innovation and infrastructure. Thanks to innovative American companies and entrepreneurs — and smart government policies — the U.S. is now the envy of the world in advanced wireless networks, devices, applications, among other areas.”

When measured by availability of consumer choices, options for consumer plans, device alternatives, apps or services, the American wireless market is extraordinarily competitive, far more so than practically any other sector of our economy. Failing to find “effective competition,” as the FCC has again done in this report, is not reflective of market realities.

Federal policy makers should redouble their efforts to make additional spectrum available for auction to commercial broadband providers by quickly conducting incentive auctions, approving secondary market transactions, enacting spectrum sharing arrangements and initiating a process to repurpose additional federal spectrum.

A New Look at Competition

By Brad

Speaking of the FCC, one point of contention between wireless providers and the Commission has been how competition — specifically, spectrum holdings — has been measured. Now, Brendan Sasso of The Hill reports, the way the FCC looks at the wireless marketplace could receive an overhaul:

A senior FCC official told The Hill that Chairman Julius Genachowski plans to circulate an order with the other commissioners next week that would launch a review of the FCC’s rules for analyzing whether any one company has accumulated too much spectrum — the radio frequencies that all wireless devices use to transmit signals.

The commission is expected to vote on the proposal at its September meeting.

Sasso reports wireless providers big and small, and even consumer groups, are happy with the potential overhaul — a rare occurrence, to say the least.

Competition and Misconceptions

By Brad

Bret Swanson of Maximum Entropy (he’s also one of our Broadband Ambassadors) has written a blog post on wireless competition and misconceptions about America’s mobile ecosystem:

Mobile communications and computing are among the most innovative and competitive markets in the world. They have created a new world of software and offer dramatic opportunities to improve productivity and creativity across the industrial spectrum.

Last week we published a tech note documenting the rapid growth of mobile and the importance of expanding wireless spectrum availability. More clean spectrum is necessary both to accommodate fast-rising demand and drive future innovations. Expanding spectrum availability might seem uncontroversial. In the report, however, we noted that one obstacle to expanding spectrum availability has been a cramped notion of what constitutes competition in the Internet era.

Swanson’s full post is very much worth the read.

Investment, the Stars, and Connecting America

By Brad

Earlier today, a privately funded spacecraft docked with the International Space Station for the first time. As Bloomberg’s Brendan McGarry reports:

Closely held SpaceX, controlled by billionaire Elon Musk, connected its unmanned Dragon capsule to the station at 12:02 p.m. New York time, according to Kyle Herring, a spokesman for the National Aeronautics and Space Administration. It is the first company to accomplish the feat.

“This is truly a momentous accomplishment for SpaceX and for the industry,” Michael Lopez-Alegria, president of the Washington-based Commercial Spaceflight Federation, said in a statement. The country is on its way to having a cost-effective space transportation system, he said, and SpaceX should be thanked for “restoring U.S. access to the space station.”

That’s pretty awesome, and shines a light on just how powerful private investment can be when it comes to innovation and moving America forward — a message not lost on the White House. As the Associated Press reports (via FoxNews):

The White House quickly offered congratulations.

“Every launch into space is a thrilling event, but this one is especially exciting,” said John Holdren, President Barack Obama’s chief science adviser. “This expanded role for the private sector will free up more of NASA’s resources to do what NASA does best — tackle the most demanding technological challenges in space, including those of human space flight beyond low Earth orbit.”

As competition between private companies helps further America’s reach into the stars, it’s worth remembering competition and private investment are having an equally important effect here on the ground. With broadband — especially mobile broadband — driving our new digital economy, ensuring private companies continue to compete and invest to build out increasingly powerful networks will be critical.

Remember, President Obama has set the goal of connecting everyone to mobile broadband. Just as the private sector will make it possible for NASA to set their sites on Mars, private companies can achieve the President’s goal and allow the government to focus its attentions and resources on other matters critical for America’s future.

Looking at Dish’s Plans

By Brad

Via Andy Vuong of the Denver Post, the FCC is set to tackle Dish’s plans to enter the mobile broadband market this week:

The federal rulemaking process that will determine when or whether Dish Network can use its recently acquired spectrum for a competitive mobile broadband network is expected to kick off Wednesday and could be completed by summer’s end, according to Dish executives.

The Douglas County-based company also estimates that building a new network could cost $5 billion and take three years or longer, though a joint project with a wireless carrier could significantly trim both.

Questioning the “Spectrum Screen”

By Brad

In its Staff Memo against the AT&T/T-Mobile merger, the FCC repeatedly referenced its so-called “spectrum screen,” which the Commission uses to calculate local market concentration for wireless. But as John Eggerton of Broadcasting & Cable reports, changes to the screen have raised the eyebrows of two key members of the House:

In a letter to FCC Chairman Julius Genachowski, House Energy & Commerce Committee Chairman Fred Upton (R-Mich.) and Communications Subcommittee Chairman Greg Walden (R-Ore.), asked for info on how the FCC uses the screen in mergers.
The FCC formerly used a set cap to determine whether a merger would concentrate too much spectrum in one geographic area, the legislators pointed out in their letter. That cap was changed in 2003 to a spectrum screen that triggered a more “granular” review. But because that was not adopted in a formal rule, they argue it is uncertain how and why the FCC uses it.
Since the commission apparently changed that screen to reduce the amount of spectrum holding that raises red flags, also without adopting formal rules, and appeared to be treating it less like screen and more like a de facto lack of competition, they had lots of questions they needed answered.

The Lay of the Wireless Land

By Brad

In a piece for the Wall Street Journal, Holman Jenkins looks at the recent spectrum deal between Verizon and Comcast and what it reveals about the current state of competition in the wireless industry:

How many wireless competitors are too many?
The Federal Communications Commissions thinks we have too few, though most Americans have a choice of five, and that’s one or two more than most advanced countries find they need.
In reality, the problem isn’t too little competition, but not enough revenue to pay for the rapidly growing amounts of bandwidth customers are using. Raising prices and throttling users isn’t working, so the only solution is to cram more and more paying customers onto the network. Even AT&T and Verizon are desperate for more customers, never mind congestion, because that’s the only way they can generate revenues to cover the needed investment.

Later in the article, Jenkins tackles the FCC’s efforts to stop the AT&T and T-Mobile merger:

The FCC opposes a proposed tie-up of AT&T and T-Mobile precisely because agency seers and planners prefer an alternative scenario in which T-Mobile and cable join to build their own 4G network. That’s not gonna happen, for all the reasons Shaw suggests.

Comcast and friends didn’t sell their 4G spectrum to Verizon because they think running a 4G network is a license to print oligopoly profits, as the FCC apparently does. In blocking the T-Mobile acquisition, Washington cites a looming Verizon-AT&T duopoly. The truth is, with its own deal, Verizon leaps so far ahead that it’s becoming Verizon versus a distantly trailing pack.

Competition & Spectrum

By Brad

At the Wall Street Journal, L. Gordon Crovitz has a must-read piece on wireless competition, the AT&T/T-Mobile merger, and the real threat to a healthy wireless ecosystem:

The great threat to competition for wireless data and mobile phones is not mergers—it’s government failure to free enough spectrum to meet demand. Deutsche Telekom agreed to sell T-Mobile, the fourth-largest wireless provider in the U.S., because it couldn’t get enough spectrum to compete and wanted out of the U.S. market. For AT&T, the $39 billion purchase price was the best way to get the spectrum and local cell towers it needs to serve 97% of U.S. consumers with a new 4G LTE network—a technology currently provided only by Verizon. In other words, this merger would mean more competition, not less.

The entire piece is worth checking out.

The Dish on DISH’s Plans

By Brad

Over at Politico, Eliza Krigman has an interesting piece on rumored wireless plans from the DISH network:

DISH, it said in a filing with the FCC last week, wants to “deploy the most advanced wireless broadband service using the LTE Advanced standard.”

The satellite TV firm requested permission to combine its $1.375 billion bid for TerreStar with an earlier $1 billion purchase of DBSD North America. That, and a host of alterations to its spectrum requirements, would allow DISH to emerge as a major player in the wireless space, the company claims.

“We’re doing exactly what FCC Chairman Julius Genachowski and what President Obama wants: Get spectrum used that is currently going unused,” a DISH executive said.

Responding to the DoJ’s Suit

By Brad

From an editorial in the Wall Street Journal responding to this week’s announcement that the Department of Justice is suing to block the merger of AT&T and T-Mobile:

The real threat to wireless competition is the lack of available spectrum for companies to use to meet public demand. The crunch has become acute as consumers snap up new smartphones, which enable them to watch videos, download data and more. The last auction was held in 2008 and there aren’t any new ones on the calendar. If companies can’t get the spectrum they need, they’ll restrict usage through higher pricing—exactly what the Justice Department says it doesn’t want.
The political interpretation of Justice’s actions was borne out yesterday when acting antitrust chief Sharis Pozen said that “our door is open” to AT&T if the company wants to resolve the government’s “concerns.” In other words, do our bidding on some regulatory or political business, and you can still get your merger. Meantime, Ms. Pozen and Justice are putting a legal damper on investment and innovation in one of America’s few dynamic industries, and that will do economic damage far beyond AT&T.

The Wall Street Journal‘s complaints about the DoJ’s actions are echoed by Geoffrey Manne of Forbes, who wrote shortly after the lawsuit was announced:

[E]ven on a national level, the blithe dismissal of a whole range of competitors is untenable. MetroPCS, Cell South and many other companies have broad regional coverage (MetroPCS even has next-gen LTE service in something like 17 cities) and roaming agreements with each other and with the larger carriers that give them national coverage. Why they should be excluded from consideration is baffling. Moreover, Dish has just announced plans to build a national 4G network (take that, DOJ claim that entry is just impossible here!). And perhaps most important the real competition here is not for mobile telephone service. The merger is about broadband. Mobile is one way of getting broadband. So is cable and DSL and WiMax, etc. That market includes such insignificant competitors as Time Warner, Comcast and Cox. Calling this a 4 to 3 merger strains credulity, particularly under the new merger guidelines.

Our response to this week’s announcement is here.

Talking About Clearwire

By Brad

Olga Kharif and Alex Sherman of Bloomberg report that Sprint is in talks with cable giant Comcast to increase Sprint’s ownership of Clearwire in order to keep plans afloat to build out next-generation LTE mobile broadband:

Sprint and Comcast, which are already investors in Clearwire along with Time Warner Cable Inc. and Bright House Networks LLC, are discussing ways to provide funding to the money-losing Kirkland, Washington-based company so it can build out its high-speed wireless network. Clearwire plans to spend about $600 million to upgrade its network to so-called long-term evolution, or LTE, technology, to compete against AT&T Inc. and Verizon Wireless, the company said this month.

State of the Market

By Brad

Over at Verizon’s PolicyBlog, the company has posted a short video on the many changes that have occurred in the telecommunications industry in the past 15 years. Check it out.

Bruce Mehlman on the Air

By Brad

Our Co-Chairman Bruce Mehlman appeared on WGTK’s “Joe Elliott Show” in Kentucky to talk about broadband access and the merger of AT&T and T-Mobile. Here’s audio of the show.

Partnering for the Next Generation

By Brad

With Verizon currently rolling out its advanced 4G LTE network, and AT&T pledging to greatly expand the reach of its 4G LTE network after its proposed merger with T-Mobile, Roger Cheng of CNet reports another big player in America’s wireless industry is working to stoke competition for the next generation of wireless:

Sprint Nextel will confirm its network-sharing agreement with LightSquared in conjunction with its earnings announcement on July 28, according to people familiar with the situation.

The agreement, in which Sprint’s network will be used as the infrastructure backbone to LightSquared’s upcoming 4G Long-Term Evolution network, will shed some light on where Sprint wants to head with its own 4G ambitions.

State of Wireless

By Brad

The FCC has released its annual “Wireless Competition” report, which includes data up to 2009, and just like last year’s report the commission has hedged on whether America’s wireless industry remains competitive. As Amy Schatz of the Wall Street Journal reports:

The FCC stayed neutral on whether the industry is competitive. Before 2010, the FCC found that the wireless phone market was “effectively competitive” for several years.

The agency said that it found that “the mobile wireless ecosystem is sufficiently complex and multi-faceted that it would not be meaningful to try to make a single, all inclusive finding regarding effective competition that adequately encompasses the level of competition in the various interrelated segments, types of services, and vast geographic areas of the mobile wireless industry.”

Schatz also quotes a statement from Verizon, who felt the FCC “took a too narrow view of competition”:

“Our competitors aren’t just other wireless-network providers, as this report seems to indicate. Today wireless competition comes from cable companies; Wi-Fi and satellite service providers; handset, tablet and laptop manufacturers; operating system and application designers, and many others,” Verizon said.

The report’s findings also prompted a response from CTIA President and CEO Steve Largent:

Even though I haven’t had a chance to read the entire FCC’s 15th Annual Mobile Wireless Competition Report that was released late this afternoon, from a cursory review, it appears it reflects the tremendous innovation and investment that occurred in the wireless ecosystem in 2009. While CTIA again wishes they would have concluded effective competition existed in 2009, consumers clearly enjoyed more advanced handsets, an ever-expanding range of services and applications and more robust networks, even as the Bureau of Labor Statistics reported that prices decreased. Additionally, the mobile ecosystem expanded into other areas including mHealth, mobile education, intelligent transportation and smart grids. The report showed a multitude of facts and figures that proved the wireless ecosystem continues to work for America and Americans.

The full report (PDF) is available on the FCC website.

Today in Legalities

By Brad

Looks like two tech giants may soon have (new) legal hurdles ahead of them. First up, Google, which Thomas Catan of the Wall Street Journal reports, is about to receive more government attention:

The U.S. Federal Trade Commission is poised to serve Google Inc. with civil subpoenas, according to people familiar with the matter, signaling the start of a wide-ranging, formal antitrust investigation into whether the search giant has abused its dominance on the Web.

The five-member commission is preparing to send Google the formal demands for information within days, the people said. Other companies are also likely receive official requests for information about their dealings with Google at a later stage, they said.

Meanwhile, Apple could soon be facing government scrutiny of its own — only not here in the States. Via John Ribeiro at PC World:

Apple may face scrutiny from an Indian regulator for alleged anticompetitive behavior in connection with iPhone 4 sales in India.

A Competition Commission of India official said on Wednesday that a case was filed against Apple about a month ago. The complaint alleges that the company violated competition law by selling the iPhone 4 through only two mobile operators, Bharti Airtel and Aircel.

A Chat with the Hill

By Brad

The Hill‘s Gautham Nagesh recently sat down with our Honorary Chairman Rick Boucher to talk about re-vamping the Universal Service Fund for the broadband age and the effect the proposed AT&T/T-Mobile merger would have on competition. Check it out.