New Rules for a New Age

By Brad

In a speech before the Media Institute yesterday, Craig Silliman, Senior Voce President of Public Policy for Verizon, argued that outdated regulations risk holding back innovation and investment. It’s a similar argument other telecom providers have made recently. As Silliman told the crowd:

[W]e need to ensure is that we do not let an increasingly outdated regulatory regime for the Internet ecosystem slow innovation and investment. The 1996 Telecom Act succeeded in what it was designed to achieve, but almost two decades later it is leaving the FCC struggling to shoehorn Internet-era technologies into phone-era regulations. I am not suggesting that the answer is to abolish all regulation. But I am suggesting that we need a 21st century policy framework that is designed for 21st century technologies and marketplaces, not 19th century ones.

We need to start by asking the right questions. It has been suggested that a key question for the next FCC chairman will be how to keep the FCC relevant in the Internet era. I believe that is the wrong question. I recognize, of course, that tactical battles to secure budgets and resources are part of any organization or entity, including the federal government. But a strategic view of policymaking starts by asking what objective we are trying to achieve, and then asking whether regulation is needed, why it is needed, and who is best placed to administer it.

The full speech is worth checking out.

Video on the Go

By Brad

Via Sue Marek of Fierce Wireless comes a staggering number from Verizon:

Video accounts for 50 percent of Verizon Wireless’  network traffic today and by 2017 the carrier estimates video will make up two-thirds of all traffic over the network. Speaking at the National Association of Broadcasters conference here yesterday, Verizon Communications CEO Lowell McAdam said that the company’s investment in its LTE network is what is making the delivery of that video possible. “With 3G you have video clips but there is buffering. With 4G you can stream video,” he said.

50% of wireless traffic and counting. Wow.

Working Together

By Brad

How important is spectrum to the wireless industry? So important that normally fierce competitors are working together. As Phil Godstein of Fierce Wireless reports:

AT&T Mobility, Verizon Wireless and T-Mobile USA inked an agreement with the Department of Defense to explore the possibility of sharing 95 MHz of spectrum that is currently used by the Pentagon and other federal agencies located in the 1755 - 1850 MHz band.

The announcement comes as the FCC and National Telecommunications and Information Administration encourage spectrum sharing between commercial and government users as one way to meet Americans’ seeming insatiable demand for mobile broadband.

So far, Sprint is sitting out the agreement, though Goldstein notes they will “follow the group’s work.”

A Warning on Regulations

By Brad

With Verizon’s challenge to the FCC’s net neutrality order still making its way through the courts, John Eggerton of Broadcasting & Cable reports at least one Commissioner is worried the outcome could lead to more regulation of the Internet:

If a D.C. federal appeals court upholds the FCC’s network neutrality rules, Republican commissioner Ajit Pai expects the Democrat-led commission to expand regulation of the Internet, including into the mobile wireless space and usage-based pricing.

That came in a speech to the Phoenix Center in Washington on Thursday, according to a copy of the text.

Commissioner Pai also stated that any attempt to reclassify broadband under Title II would “dramatically slow broadband deployment.”

Regulations and Free Speech

By Brad

As Verizon continues to battle the FCC’s net-neutrality regulations in court, the company has argued the rules are a violation of first amendment rights. This, Brendan Sasso of The Hill reports, is not sitting well with some Democratic House members:

Three top Democrats on the House Energy and Commerce Committee wrote a letter to their colleagues on Friday, calling attention to a “troubling” constitutional argument Verizon has made in its bid to overturn net-neutrality regulations.

Democratic Reps. Henry Waxman (Calif.), Anna Eshoo (Calif.) and Edward Markey (Mass.) warned that Congress’s power to regulate the communications industry would be severely restricted if the court accepts Verizon’s claim that the net-neutrality regulations violate its First Amendment free speech rights.

Spectrum Deal Gets the Thumbs Up

By Brad

Last week, Verizon’s bid to purchase spectrum from cable companies got the nod from the Justice Department. Yesterday the FCC weighed in. Via Brendan Sasso of The Hill:

The Federal Communications Commission (FCC) has approved Verizon’s $3.6 billion purchase of cellular frequencies from the nation’s largest cable companies.

The five commissioners voted unanimously to approve the deal on Tuesday, and the order was publicly released on Thursday.

Approval didn’t come free from hitches, however:

FCC Chairman Julius Genachowski said the original deal “posed serious anti-competitive concerns and would not serve the public interest.” But he decided to approve it after the companies agreed to a series of concessions.

Genachowski argued that the “substantially modified transaction” will give customers access to more spectrum for mobile broadband, while preserving competition.

Approval From the DoJ

By Brad

After months and months of lobbying and negotiations, Verizon has received a nod of approval from the Justice Department for its $3.9 billion spectrum deal with cable providers. Sinead Carew and Jasmin Melvin of Reuters report:

The U.S. Department of Justice said on Thursday it would approve the spectrum sale, and the head of the Federal Communications Commission said the commission should also give the deal the go-ahead.

The spectrum purchase will give Verizon Wireless additional capacity to help it cope with rising demand for video on mobile devices and data services such as Web surfing.

Approval for the deal came with conditions, however:

The Justice Department said on Thursday that it wanted changes to Verizon Wireless’s commercial agreements with the cable companies under which they planned to market each other’s services and form a technology joint venture.

For example, the Justice Department said in a settlement proposal it filed that Verizon Wireless should not be allowed to market cable company products in areas where its parent, Verizon Communications Inc, sells FiOS television and Internet services that compete with those of cable providers.

The department also said that it would limit the duration of the proposed technology venture so that it would not “dampen the companies’ incentives to compete against one another.”

It also said that the companies should tweak their service resale agreement so that cable companies would be allowed to sell services from Verizon Wireless rivals after five years.

Rough Road to Approval

By Brad

It’s not secret that the explosive growth of mobile broadband has forced wireless providers to search for more spectrum due to looming capacity constraints. For Verizon, that search has led to a proposed deal with cable companies, but as Diane Bartz of Reuters reports, the company’s road to regulatory approval is a rocky one:

Verizon Wireless may need to agree to tough conditions to win approval for its deals to buy spectrum from cable companies and market each others’ products, according to three sources knowledgeable about the negotiations.

The Justice Department and Federal Communications Commission are reviewing plans by Verizon Wireless, the biggest U.S. mobile provider, to buy spectrum from a consortium of cable providers, including Comcast (CMCSA.O) and Time Warner Cable (TWC.N), for about $3.9 billion. The transactions were proposed in December.

While the Justice Department and FCC appear prepared to approve the spectrum portion of the deals with minor adjustments, antitrust regulators have sought strict limits on controversial side deals.

Dropping the Challenge

By Brad

When the FCC announced its net neutrality rules two years ago, major Internet provider Verizon was quick to challenge them in court, pushing for a lighter regulatory touch. On the other end of the spectrum, advocacy group Free Press was also quick to challenge the rules, long calling for the FCC to enact expanded regulations.

Now, Brendan Sasso of The Hill reports, the group has dropped its court challenge in order to “direct our resources elsewhere in the continued campaign to preserve the open Internet.”

Challenging the FCC

By Brad

Verizon is still seeking FCC approval for its proposed spectrum deal with cable companies, but that’s not stopping the wireless provider from continuing to fight the Commission’s net neutrality rules in court. As The Hill‘s Brendan Sasso reports:

In Monday’s filing, Verizon argued that instead of “proceeding with caution” in light of the Comcast ruling, the FCC adopted rules that “go even farther than its prior action and impose dramatic new restrictions on broadband Internet access service providers.”

“Here again, the FCC has acted without statutory authority to insert itself into this crucial segment of the American economy, while failing to show any factual need to do so,” Verizon wrote.

The company argued that Congress never authorized the FCC to regulate Internet access and that the agency acted without sufficient evidence to suggest the rules were necessary.

Verizon claimed that the rules violate its First Amendment free speech rights.

According to Sasso, the FCC’s legal response to the suit should arrive in September.

Spectrum Swap

By Brad

With its spectrum deal with cable companies still receiving government scrutiny, Verizon has announced a proposed swap of airwaves with competitor T-Mobile. As Brendan Sasso of The Hill reports:

The deal includes some of the spectrum that Verizon is trying to buy from a coalition of cable companies, including Comcast and Time Warner. Verizon and T-Mobile will only complete their deal if regulators first approve the Verizon-cable transaction.

By selling some spectrum to T-Mobile, the smallest national carrier, Verizon could boost its hopes of winning regulatory approval for its $3.6 billion deal with the cable companies.

A Slow Process

By Brad

Yesterday, Verizon CTO Tony Melone criticized the FCC’s pace when it comes to freeing up much-needed spectrum for wireless. As CNet’s Marquerite Reardon reports:

Melone said the FCC needs to speed up the process for approving spectrum sales and license transfers in the secondary market. He used his company’s own bid to buy wireless spectrum from a consortium of cable companies—collectively known as SpectrumCo—as an example. In December, Verizon promised to pay $3.6 billion for nearly 20 MHz of wireless spectrum in the AWS band.

The FCC and Department of Justice are reviewing the transaction, which also includes a co-marketing deal, which some critics say is anti-competitive. The agencies have been reviewing the deal since December when it was announced and are expected to finish up their inquiry by the end of July.

Melone said that he thinks the process, which is expected to take a little over six months, is too long. And he said it’s a barrier to getting unused wireless spectrum into companies that can put it into use. And he criticized the agency for taking too long to evaluate the transaction.

Given the increasing demand for mobile broadband — and the FCC’s own warnings that we will soon be hitting a “spectrum crunch” — it’s easy to see why Melone and other wireless providers are frustrated with the slow pace of the Commission’s process.

A Close Examination

By Brad

As Verizon’s $3.6 billion proposal to purchase spectrum from various cable companies continues to be examined by both the FCC and the Justice Department, The Hill‘s Andrew Feinberg reports Sen. Heb Kohl, head of the antitrust subcommittee of the Senate Banking Committee, wants the deal to be run through with a fine-toothed comb:

In a letter addressed to FCC Chairman Julius Genachowski and Attorney General Eric Holder, Kohl makes clear that he’s not prejudging the deals to be unlawful under the Communications Act or antitrust laws. But he also makes clear that he believes the transactions should be “examined closely” because they present “serious competition concerns.”

Before Testifying Before the Senate

By Brad

In anticipation of the Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights hearing on the proposed spectrum deal between Verizon and cable companies, Comcast’s Executive Vice President David Cohen has previewed his testimony on the company’s public policy blog:

The spectrum license transfers are consistent with the Communications Act, FCC rules, and the antitrust laws. They also will further the spectrum policy goals of Congress, the Administration, and the National Broadband Plan. Neither the License Assignment nor the Commercial Agreements reduce or harm competition in any product or geographic market. In fact, the agreements will offer further competition and innovation in the marketplace.

A Day Before the Senate

By Brad

Broadcasting & Cable’s John Eggerton reports  a date for a hearing on Verizon’s proposed spectrum deal with cable companies has been set:

The Senate Judiciary Committee’s antitrust subcommittee, chaired by Herb Kohl (D-Wis.), has slated its planned hearing on Verizon’s purchase of cable spectrum for March 21. The hearing title sets up the debate: “The Verizon/Cable Deals: Harmless Collaboration or a Threat to Competition and Consumers?”
According to the hearing notice, the witnesses will include top execs from Verizon and SpectrumCo principal partner, Comcast, as well as academics and public interest representatives.

Debating a Spectrum Deal

By Brad

While efforts to allocate more spectrum for wireless use are moving forward at a relatively slow pace, The Hill‘s Brendan Sasso reports one company’s efforts to bolster its amount of spectrum is facing hurdles with the FCC:

The Federal Communications Commission (FCC) announced Thursday it will probe portions of the agreement between Verizon and a coalition of cable companies to cross-sell each other’s services as part of its broader review of the companies’ spectrum deal.

“After an initial review of the proposed spectrum license transfers as well as the commercial agreements between Verizon Wireless and several cable companies, the Commission staff has concluded that portions of the commercial agreements are inseparable from the proposed license transfer and related wireless competition issues,” an FCC spokesman said. “Consequently, those portions of the commercial agreements will be examined within the license transfer proceeding.”

Earlier this week, Sasso also writes, Verizon argued the FCC “lacks the legal authority to review the commercial deals.” The commission, obviously, disagrees. Stay tuned…

Deal of the Day

By Brad

The online streaming game — currently dominated by Netflix and Hulu — is about to get more crowded, as Verizon and DVD kiosk rental service Redbox have announced a new partnership. As Sinead Carew and Yinka Adegoke of Reuters report:

The venture will combine the Redbox DVD rental kiosk business with an Internet video offering from Verizon, including mobile offerings, in the second half of the year.

Earning the Attention of Washington

By Brad

The Hill‘s Brendan Sasso reports that a proposed deal between Verizon and a group of cable companies has earned the attention of regulators:

Verizon agreed in December to buy wireless airwave licenses, or spectrum, from a group of cable companies, including Comcast and Time Warner. Under a separate deal announced simultaneously, Verizon and the cable companies agreed to cross-sell each other’s services.

Sen. Herb Kohl (D-Wis.), chairman of the Senate Judiciary subcommittee on Antitrust, Competition Policy and Consumer Rights, announced on Wednesday he plans to hold a hearing to examine how the deals will affect consumers.

The Justice Department has acknowledged it is conducting its own probe of the agreements, and the Federal Communications Commission (FCC) is gathering evidence to decide if it should block the transfer of the airwave licenses.

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.

A Report From CWA

By Brad

In response to the Department of Justice’s move to block the merger of AT&T and T-Mobile, the Communications Workers of America has released a new report on the effect blocking the merger will have. Titled, rather bluntly, “Blocking the AT&T/T-Mobile Merger will Harm Consumers, Communities & the Economy,” the report covers everything from AT&T’s commitment to expand 4G LTE, to the effect the merger will have on much-needed job creation.

The entire report is a must-read, but there are a few points made that are worth highlighting, beginning with the argument that blocking the merger will be good for preserving competition. As CWA states:

“[T]here is no long-term future for a stand-alone T-Mobile as an effective competitor: it has neither the spectrum nor the capital to create a competitive network utilizing the latest wireless technology (called 4G LTE). In January 2011 the CEO of T-Mobile’s parent company, Deutsche Telekom (DT), stated that DT would not provide the capital for T-Mobile’s 4G LTE deployment. T-Mobile also is on a downward trajectory suffering from declining revenue, eroding profit margins and increasing customers defections.”

With Verizon, AT&T, and now Sprint making the shift to 4G LTE technology, the fact that T-Mobile will soon be left behind regardless of the merger continues to be overlooked. And given that only AT&T and T-Mobile are compatible when it comes to network technology, the idea that T-Mobile could simply merge with someone else simply isn’t realistic. From the report:

There are two separate technological family trees that are not easily compatible. GSM based systems have evolved through UMTS, HSPA+, LTE and, the next step, LTE Advanced. CDMA based systems have evolved to EVDO.

• The merger between AT&T and T-Mobile creates technological synergies because each of these companies utilizes GSM and HSPA based networks.

• A merger between Sprint and T-Mobile (these companies were in merger discussions) would have experienced significant technological challenges because the two companies utilize different and incompatible technologies. T-Mobile’s systems are GSM based while Sprint’s systems are CDMA based.

As for AT&T’s ability to expand its 4G LTE network to cover nearly every corner of America — a key point, as it dovetails with President Obama’s State of the Union pledge to bring advanced mobile broadband to everyone — CWA points out such an expansion wouldn’t be feasible without the merger due to capacity and spectrum constraints:

AT&T’s other options could not remotely approach the merger in terms of increasing capacity, utilizing spectrum more efficiently, improving service and expanding 4G LTE deployment… [I]t would take AT&T eight years to obtain and activate the number of cell sites it will obtain from T-Mobile. AT&T also could not depend on a possible federal auction to reallocate spectrum because it is a multi-year process that needs Congressional approval, a FCC rule making, the actual auction and then a period for relocation of incumbent licenses and integration of existing network and equipment with the spectrum — if the bid is successful.

These are just a few of the salient points CWA makes about the merger. There’s much more to be found in the full report, including the effects blocking the merger will have on job creation and efforts to close the digital divide. You should definitely dig in.