Award Winning Blog

Wednesday, August 5, 2020

Walking on Egg Shells, Failing a Litmus Test and Shown the Door

FCC Commissioner Mike O’Rielly probably will leave the FCC far sooner than anyone would have anticipated a few days ago.  See https://www.wsj.com/articles/white-house-nixes-fcc-nominee-who-questioned-bid-to-regulate-social-media-11596556660. The President had nominated him for a second term with only one legislator in any way agitated.  Republican Oklahoma Senator Inhofe held up a vote in light of Commissioner O’ Rielly’s support for a 5G competitor with plans on using radio spectrum near GPS frequencies, but sufficiently separated to avoid the potential for interference.  See https://spacenews.com/inhofe-blocks-nomination-of-fcc-commissioner-over-ligado-order/.

The FCC established a 23 MHz “guardband” separating the proposed Ligado wireless service and GPS position location frequencies.  That safeguard apparently was not enough for incumbent government and private users, absent some major cash inducement.  See  https://arstechnica.com/tech-policy/2020/05/millions-of-gps-devices-at-risk-from-fcc-approved-5g-network-military-says/.

Commissioner O’Reilly and I can agree to disagree on many issues, including his antipathy directed at the International Telecommunication Union; see e.g., https://www.fcc.gov/news-events/blog/2016/01/15/2015-world-radiocommunication-conference-troubling-direction.  Nevertheless, I deplore his shabby treatment and the state of telecommunications planning in the United States.  The Wall Street Journal and I uncharacteristically agree that “[i]n saner times few on the right [or left] would dispute . . . [the] points” he made.

Commissioner O’Reilly’s cardinal sin: expressing discomfort with an initiative by President Trump and the National Telecommunications Administration (part of the Commerce Department) to make the FCC a congressionally authorized regulator of Internet content.  See  https://www.ntia.gov/fcc-filing/2020/ntia-petition-rulemaking-clarify-provisions-section-230-communications-act.  NTIA wants the FCC to interpret Sec. 230 of the Communications Decency Act as conferring direct jurisdiction to investigate whether Internet Service Providers and platform operators, such as Facebook, can lose a liability exemption for unmoderated content passing through their networks.

On a bipartisan basis, most people agree that Sec. 230 does not give the FCC any sort of jurisdiction.  Even if it did have some hook, the Commission deems Internet access off limits, as a largely unregulated information service.  Previously, few on the Right or Left would ignore the First Amendment value in depriving government of any role in adjudicating fairness and sanctioning debatable media bias.  Could NTIA and the FCC find a way to sanction anti-conservative bias, but have no grounds to punish Fox for pro-conservative bias on its web site?

Commissioner O’Reilly has to walk on eggshells lest he upset the President and Executive Branch officials.  Apparently, his appointment to an independent, regulatory agency, created by Congress, accords him little insulation from litmus tests and quick dismissal.

Sad.

Hipster and Geriatric Antitrust Doctrine

Relentless concentration in broadband and other industries, coupled with ever increasing market power, has triggered more interest in antitrust law and policy.  Predictably, this increased scrutiny generates questions about the viability of case precedent and the empirical “proof” supporting policy.  It also encourages advocates—with a political agenda—to argue for maintenance of the status quo, or substantial change.

The “stay the course” camp sees no need to change doctrine, despite the Internet’s ascendency and the significant difference between “bricks and mortar” commerce and e-commerce.  These mandarins disparage advocates for change and dismiss anything new as “hipster,” undisciplined and wrong.  They have received millions of dollars to spread their gospel, early and often.

The insurgent group plays into the hands of status quo thinkers when their progressive goals subverts, subordinates, or ignores the core mission of antitrust law: to remedy market failures generated by single companies or cartels who use market dominance, conspiracies and other bad actions to harm competition and consumers.  Insurgents also muddy their message when they combine normative goals, inherent in antitrust enforcement, with public policy objectives well outside the antitrust enforcement mission.

A pox on both houses!  The mandarins act as though Chicago School doctrine operates as unimpeachable law.  They see no need to recalibrate and modify based on changed circumstances.  They make no distinction between downward price trends in bricks and mortar markets and the perception of “free” and enhanced value proposition from broadband-mediated services that require no cash payment, but extract great and sellable value from data mining.
The insurgents play into the hands of the mandarins when they lack the discipline and intellectual rigor needed to show the wisdom in incremental adjustments based on changed circumstances.  They become easy targets by pushing normative goals, baked into the antitrust regime, into a progressive, social policy agenda.

I seethe when reading arrogant, inflexible, hubristic and condescending hipster antitrust critiques.  I dismiss as naive, undisciplined and ineffectual the insurgents’ wish list for antirust enforcement.  The incumbents may not win on points, but they appear to have won in courts, legislatures and classrooms.  They have powerful and rich incumbents underwriting their academic work.  That investment has paid handsome dividends.

For example, the FCC and Justice Department continue to approve mergers and acquisitions that trigger “Defcon4” alerts about extreme market concentration.  Somehow, basic economics about market power and concentration do not matter if sponsored researchers can show how consumers theoretically benefit.

One can easily declare a winner when judges and their clerks, well versed in Chicago School doctrine, cannot understand that “free” does not mean without significantly high  individual and social costs.

Sunday, July 26, 2020

When Economist-Created “Rules” and “Laws” Do Not Work or Are Forgotten



            Having frequently chatted with economists and read many textbooks and articles on economic subjects, I marvel at the absolute certainty in answers offered to various thorny questions.  Economists like to create rules and laws that provide certain solutions, if only the public and politicians followed their lead.

            It should come as no surprise that absolute economic gospel truth fails both in terms of practical application and even adherence by economists.  Suddenly a firm rule has exceptions, or an economist conveniently forgets the widespread acceptance of the rule.  This dismissive attitude greatly contrasts with the conventional attitude that economics is a legitimate science. And of course, economists know best.

            Several questions about economic doctrinal certainty and amnesia come to mind having read a New York Times article on sponsored briefings of foreign antitrust enforcement agency officials.  See https://www.nytimes.com/2020/07/24/technology/global-antitrust-institute-google-amazon-qualcomm.html.  In Big Tech Funds a Think Tank Pushing for Fewer Rules. For Big Tech, Daisuke Wakabayashi reports that firms, such as Amazon, Google and Qualcomm contribute six figure sums for antirust law and policy briefings organized by institutes and foundations affiliated with George Mason University’s Antonin Scalia Law School.

            Have both teacher and student forgotten one of the most fundamental rules of economics that “there is no such thing as a free lunch”? The article reports on the high quality and cost of the venues hosting the conferences and the meals served.  Such opulence juxtaposes with the conferences I pay to attend.  I am used to rubber chicken, or self-catering in places like Dallas in August and Louisville in March.  Next month, I will participate in a virtual conference and still had to pay $250 for the opportunity to present an academic paper via Zoom.  Obviously, I hang out with wrong class of people.

            Who, other than the sponsors and the sponsored organizers and participants, can ignore the no free lunch rule?  There’s a quid pro quo here, not that there’s anything illegal about it. What unnerves me is the apparent obliviousness of all involved to a straightforward rule of economics and human behavior.

            While apparently exempt from the no free lunch rule, organizers of the conferences surely do not forget to preach the gospel certainty of Chicago School antitrust policy.  This economic doctrine, now widely embraced by judges and their law clerks, proscribes sanctioning any behavior—no matter how much it concentrates a market or bolsters the market power of an incumbent—if some enhancement of consumer welfare occurs.  Chicago School devotees concentrate on consumers’ out of pocket costs and point to declining, or zero costs as proof positive that a particular market is thriving.  They conveniently ignore offsetting costs like that occurring in the broadband mediated marketplace when platform operators mine data and sell the surveillance data to advertisers and data analytics firms.  Oh, and let us not forget the costs to society when privacy, trust, belief in the rule of law and confidence in the integrity of elections become questionable.

            The Chicago School doctrine has become unimpeachable, no doubt validated and revalidated in the numerous free conferences sponsored by stakeholders who fund non-profit academic institutes that organize law and economics conferences.  Some of these events reimburse all travel expenses and pay several thousand dollar honorariums to speakers and paper presenters.  Sweet indeed.

            What is unsweet and intellectually questionable in my view is the apparent adamancy with which Chicago School acolytes embrace the doctrine, even as they ignore the free lunch rule. Anyone who dares to suggest modification or exceptions to the Chicago School rules is branded an advocate of “Hipster Antitrust,” as though their insights were nothing more than trendy, undisciplined analysis.

            I will stop with one more question about seemingly unquestionable economic rules: if demand substantially drops for a good or service and the incremental cost to serve one additional customer is tiny, then why do the airlines refrain from sizably discounting fares?


Sunday, July 19, 2020

Tolerating Hubris at the New York Times



            While I am in the tilting at windows and then giving up mood (see entry on how Instagram will not help eliminate an impostor: http://telefrieden.blogspot.com/2020/07/what-do-facebook-and-outdoor-swimming.html), let us consider my multi-decade experience notifying the New York Times of unquestionable publishing errors.

            For some unknown reason, my bucket list includes persuading the Times to acknowledge a publication error about which I informed them.  I have identified five errors, most recently a report on a United Kingdom government Covid-19 employment subsidy reported as being paid in Euros, not Pounds.  See  https://www.nytimes.com/2020/07/12/business/the-week-in-business-what-a-biden-economy-could-look-like.html and scroll down to Looking to Britain.

            Other reported errors include:

The use of interbank exchange rates minus 2% for estimating tourist costs while traveling abroad by numerous article in the Sunday Travel section;

A report in the March 1, 2020 Sketchbook that the MEV-1 satellite repair vehicle will latch onto the Intelsat 901 bird for a few day and not the anticipated five years; see https://www.northropgrumman.com/space/space-logistics-services/mission-extension-vehicle/; https://spacenews.com/northrop-grummans-mev-1-servicer-docks-with-intelsat-satellite/;  https://spacenews.com/northrop-grummans-mev-1-servicer-docks-with-intelsat-satellite/;

The failure to update national average gas prices to reflect a 30+ cent drop during the severe economic downturn as the pandemic took effect; and

The failure to update the sea water temperature chart in the weather section (a March, 2020 trip to the Outer Banks of North Carolina had temps in the 60s not 50s as reported).

            The Times never acknowledged any of the mistakes.  I did have one instance where staffer, with righteous indignation, reported the use of the “official” interbank rate as discounted 2%.  I tried to explain that private travelers never get a bank rate, much less a further 2% reduction.  But of course what would I possible know that this guy did not already know?  Some time later, the Times stopped reporting the actual exchange rate used to estimate a tourist costs. 

            Over the years I have reduced by Times bucket list goal from a published op-ed, to an official correction prompted by my notification.  This small dose of humble pie reminds me of a life lesson: Lower your expectations.  Lower them a second time and be pleasantly surprised that things turn out better than anticipated.

            Good advice.





What Do Facebook and Outdoor Swimming Pools Have in Common?



            You do not have to be a public figure for someone to hack your social network account and attempt to charm your friends into doing something foolish like financially seeding a grant proposal.  It happened to me and the odds favor an impostor targeting you regardless of the likely payout.

            My experience with Instagram all but eliminates any expectation that Facebook, Twitter and others will make any significant effort in customer care.  They operate an attractive nuisance that entices us, sometimes with quite harmful outcomes.  The “bricks and mortar” equivalent are outdoor swimming pools that, without safeguards like fencing, act as a magnet for unsuspecting kids and childish adults who cannot swim while intoxicated.

            Someone with far too much time to waste found a way to access one or more contacts lists of mine, outside of Instagram, and then contact people via Instagram masquerading as me.  Some friends noticed the substandard English and the odd reference to academic grant seeking.  Perhaps having gained their trust, the impostor would hit them up for some sort of financial underwriting.

            I am glad to see that several reported this abuse to Instagram, but they purposefully and cynically dropped the ball.  No one from Instagram contacted me, not even a bot, or scripted messenger.  I still do not know if the impostor continues to masquerade as me under an account such as rmf21211.  For my part, after more effort than it should take, I found the well hidden form to fill in, presumably to launch an investigation by Instagram.  Facebook/Instagram requires a jpeg photograph of the victim holding some form of official identification.  I dutifully send a picture of me holding my passport page containing the required information to confirm I am the one being hacked.

            Instagram eventually sent me a scripted response stating that they could not start an investigation in light of the material I sent.  I resent the phot with greater pixel resolution only to receive the same rejection from the same “person.”

            I have now learned that millions of Instagram subscribers get hacked and follow the reporting protocol only to have Facebook reject the required picture, or find some other way to do nothing.  Here’s a link outlining how it is nearly impossible to get Facebook to do something constructive:  https://www.wired.com/2016/01/what-happens-reporting-instagram-accounts/.

            Additionally, I foolishly thought I was corresponding with a real person who rejected my photo.  Of course it was a bot: Facebook lacks the personnel and commitment to employ enough people to resolve hacks and impersonations.  The surely have the financial resources, but consciously opt out. 

            Why?  Because Facebook management knows that most people will deal with the inconvenience and return to the fold quickly.  That probably would not happen if you got food poisoning at a bricks and mortar restaurant.  You would call and complain to a person.  You would post critical comments on web sites.  You would never return to that restaurant.

            In the world of social networking sites, Facebook has won the “winner take all” sweepstakes.  They do not have to commit sufficient resources to customer care.  They can program bots to reject complaints, particularly for someone like me who shut down his account.

            It was easy for me to throw in the Instagram towel.  I will miss the cute pictures of pets and the beautiful pictures of bread, etc.  However, I do not have years of pictures posted and fond memories associated with Instagram posts.

            Lucky me.

Tuesday, July 14, 2020

Racing for the Covid-19 Cure at a Leisurely 14,400 Bits Per Second

One of my recurring pet peeves lies in the continuing use of facsimile machines by medical and education professionals. See https://www.nytimes.com/2020/07/13/upshot/coronavirus-response-fax-machines.html.  To this day, patients receive a copy of a faxed document containing blood test results, because the testing company does not always have a digital connection with a doctor’s office.  Even digitally savvy Penn State still relies on faxed expense receipts in many instances.

Never underestimate the cost, hassle, delay and waste when a fax transmission is required.  This 1960s technology combines a slow speed optical scanner with a very slow speed analog modem.  At a time when we measure digital transmission speed in the millions and even billions of bits per second, most fax machines transmit at a rate of 14,400 bits per second, or less.  It can take one minute or more to transmit one page of text and diagrams even as we have grown accustomed to digital bit rates streaming 30 or more high definition video frames per second.

How can such a dichotomy in applied technologies persist?  Put another way, why do we tolerate the continuing use of analog technology that slows the transmission of essential medical data, such as covid-19 test results, to 1960s performance levels?

The answer lies in cost and inertia.  Converting to a digital, high speed data sharing network presents a major inconvenience that no one wants to handle, despite the near immediate benefits.  The possibility exists that doctors’ and universities’ offices might have to deal with days of being virtually incommunicado. The actual out of pocket cost for the conversion pales in comparison to the long term efficiency gains.

Perhaps this awful pandemic will convince decision makers to approve long overdue information processing and telecommunications upgrades.  Why compound the time needed to secure an appointment to take a covid-19 test with avoidable delays in receiving the results?

Wednesday, July 8, 2020

Buy American: From Cars to Wireless to Apps

            It’s hard for me to equate patriotism with the international trade concept of comparative advantage.  Somehow consumers should abandon the best value and quality proposition in a commercial transaction if the creator lacks U.S. citizenry.  I understand the view that domestic employment matters, but should U.S. consumers bear the possibly severe financial consequences of their government’s efforts to handicap foreign competitors? 

             Is every Walmart customer an economic traitor?

            Years ago, domestic car unions, manufacturers and politicians wanted consumers to think twice about buying foreign made vehicles.  See https://www.npr.org/2017/02/23/516787778/auto-workers-union-to-launch-buy-american-campaign  Now the patriotism litmus test applies to wireless networks, https://www.nytimes.com/2020/06/30/technology/fcc-huawei-zte-national-security.html

            I cannot understand where to draw the line between legitimate national security and foreign espionage concerns versus thinly veiled market protectionism.  The FCC hasn’t helped with its recent determination that Chinese telecommunications equipment manufacturers Huawei and ZTE pose acute national security threats:   https://www.fcc.gov/document/fcc-designates-huawei-and-zte-national-security-threats.  The FCC relies heavy on conjecture, circumstantial evidence and anecdotes.  That may suffice, but a strategy of handicapping foreign market leaders also constitutes a factor in light of the Commission’s multifaceted campaign to reclaim 5G market “leadership.”  See https://www.fcc.gov/5G.

            I suggest our government officials slow down and consider the consequences of their existing and prospective actions.  A downward spiraling trade war appears possible and rarely does anyone benefit from a “beggar thy neighbor strategy”.  See https://www.investopedia.com/terms/b/beggarthyneighbor.asp.

            Similarly, I suggest we take a deep dive on the concept of punishing Chinese government data mining and analytics made possible by U.S. consumer subscriptions to Tik-Tok.  How is this form of governmental surveillance substantially worse than similar tactics of private ventures?  Why do the governments of Russia and other adversaries get a pass if the risk to elections, civil society and trust is arguably equivalent?

            Closing the U.S. market to ventures offering a better mousetrap seems misguided, because it insulates domestic ventures from having to compete robustly and strive to enhance the value proposition of their goods and services.  I don’t support spying by foreign commercial ventures serving as agents for their governments, but I don’t want our nation to further disengage at great expense to its citizens.

Sunday, May 10, 2020

U.S. Passes a Key Resiliency Test, But Let’s Not Get Carried Away


            In the good news department, we have ample evidence that U.S. Internet Service Providers recently have accommodated peak demand exceeding 20%+ of normal highs.  Excellent. Old timers might recall that in the legacy telephony world, exceeding the “busy hour” evidences a properly sized network.

            Proper network sizing to handle peak demand provides empirical proof that, where available in the U.S., broadband carriers have not scrimped on capital expenditures in “sunk” plant.  I believe ISPs throughout the world strive to properly size their networks and to install current generation equipment.  The ability to do so depends on lines of credit, the cost of capital and revenue projections—not the existence or absence of any specific regulatory mandate.

            What troubles me greatly is the false extrapolations made from evidence of network resiliency.   Scholars and regulators—who should know better—extend the achievement of resiliency into “proof” or confirmation of various regulatory and economic doctrines.  An example: thanks to the elimination of network neutrality, capex has risen so that the U.S. can handle Covid-19 driven demand increase, but Europe cannot. Another one: U.S. widespread fiber optic cable deployment has achieved best in class network performance.  All sorts of self-congratulatory, “mission accomplished” blather.

            Network resiliency has no direct link to a single deregulatory initiative, nor does it confirm universal accessibility and affordability.  From my perch in rural Pennsylvania, neighborhood broadband speeds have declined somewhat, especially during the new busy hours when lots of neighbors have several simultaneous, full motion video streams going.  However, I am glad to endorse the conclusion that networks have held up, despite demand surge.

            Evidence of broadband network resiliency juxtaposes with an inconvenient truth: lots of people cannot access properly sized networks, because this essential, “mission critical” plant does not extend into their rural locales, or they cannot afford service even where available.  There are plenty of people in my community who drive near a school or library to access Wi-Fi, because they have no at home option beyond costly satellite service, or a quickly exhausted cellular data plan.  Many people make do exclusively with smartphone-delivered broadband, even though the handset screen provides an inferior interface compared to a personal computer or tablet with keyboard.

            It’s probably a real good idea to take down the “Mission Accomplished” banners.

Tuesday, April 7, 2020

Migration From Wireless to Wired Networks During the Pandemic--It's More Than the Squint Factor

One small silver lining in the Covid-19 virulent cloud: an unsponsored and truly unbiased empirical test whether wireless broadband networks offer a direct competitive alternative to wired broadband.  The answer is clear: No.  Not even close.  Despite all the happy talk and sponsored researcher advocacy, broadband consumers understand the financial incentive to use Wi-Fi access to wired broadband wherever available.  When homebound consumers have access to wireless broadband access via their smartphones and wired broadband access via personal computers and Wi-Fi, they opt for the latter.  It makes sense both in terms of the user experience and the pocketbook.
Since 2017, FCC Chairman Pai brazenly has asserted that wireless broadband networks constitute a direct competitive alternative to wired options.  Here’s an example:
“I think we are increasingly going to see that wireless is not this ‘imperfect substitute’ for wired connections. . . .It is going to be the dominant means, the preferable means, by which people access the Internet.” Eggerton, Pai: Wired, Wireless Appear Very Competitive To Him https://www.multichannel.com/news/pai-wired-wireless-appear-very-competitive-him-412652.
This assertion supports his longstanding goal of deregulating early and often on grounds that the marketplace forces discipline and self-regulation without the need for government involvement.  If the FCC can determine that broadband access nears ubiquity, then the need to seek a remedy for “universal access” problems no longer exists.  Section 706 of the Telecommunications Act of 1996 requires the FCC to assess broadband accessibility and remedy inadequacies.  The FCC, and Chairman Pai in particular, has stated “mission accomplished,” having concluded since 2018 “that advanced telecommunications capability is being deployed on a reasonable and timely basis.”  See 2019 Broadband Deployment Report, ¶2; available at: https://docs.fcc.gov/public/attachments/FCC-19-44A1.pdf; and the 20th Wireless Competition Report to Congress (2017); https://docs.fcc.gov/public/attachments/FCC-17-126A1.pdf (concluding that the wireless marketplace is robustly competitive).
            If the FCC has done its job fully and fairly, without bias and a preordained result in mind, it stands to reason that more hours at home would increase broadband consumption, but would not significantly shift the allocation of time between available broadband options, absent statistically significant reasons to do so. 
Today’s New York Times contains a credible analysis of broadband recent broadband consumption patterns; see https://www.nytimes.com/interactive/2020/04/07/technology/coronavirus-internet-use.html.  The Times reports both significant increases in broadband consumption and a shift from app-based access via smartphones to dot com, web site access via computers.  The authors of the article simply attribute the shift to eye squint reduction: why view Netflix on a smartphone screen when a high definition television is available?  This makes absolute sense, but there are other factors in play, particularly given the fact that smartphone users also can create a wireless broadband “hotspot” and “sling” video content to their television sets.
If you are still with me, I’ll offer several additional factors that explain the migration from wireless to wired broadband access at home and possibly help dispel recurring myths (mistruths) about the current broadband marketplace in the U.S.
Near 100% Smartphone Market Penetration Does Not Translate into Smartphone Use Anytime and Anyplace

            Most smartphone owners ration their broadband use, quite mindful that exceeding a data plan, using the device too often, or trying to log on during congestion at the closest tower will have harmful and possibly costly impacts.  Data plans establish a broadband consumption ceiling, which if exceeded will result in degraded service—so called throttling—and in some cases termination of service. A deep dive on the service terms and conditions of “unlimited” data plans typically reserves to the carrier the option of discontinuing service to so called bandwidth hogs.  Even less consumptive subscribers face the throttling if they unintentionally seek service at a time and from a tower where the carrier determines congestion exists.
            The wireless consumer response to the Covid-19 also shows that poor subscribers are reluctant to use their handsets for broadband, even for remote access to school lessons.  See, e.g.,
https://www.nytimes.com/2020/04/06/us/coronavirus-schools-attendance-absent.html.  There seems to be plenty of instances where rural access does not exist, or frequently gets congested and where families cannot afford to pay, despite the remote education opportunities available.
            Unlimited Access Does Not Mean Without Limitation and Adverse Consequences
            Wireless broadband subscribers have come to understand that carriers use the term unlimited to mean limited.  How else could AT&T, for example, offers at least three flavors of broadband access; “Unlimited Starter;” “Unlimited Extra;” and “Unlimited Elite.”  Is anyone surprised that the small print imposes limits to unlimited consumption?  See https://www.att.com/plans/unlimited-data-plans/.
            The Disconnect Between the 5G Promised Land and Now
            There may come a day when 5G offers a rising tide for all ships, thereby eliminating the need for data plan caps, network neutrality, wired broadband connections and the old school terrestrial Public Switched Telephone Network.  That time is not now.  Where the rubber meets the road right now, wireless subscribers have to make do with 4G networks that can experience congestion, especially now with rising peak demand, are metered and rationed and have serious limitations on broadband performance.
            Just now, the 5G solution appears overhyped in terms of likely performance enhancements, time to market and cost.  5G handset prototypes appear to generate more heat and deplete batteries faster than previous models and some current service trials have actual signal propagation far less than anticipated and advertised; see, e.g.,   : https://arstechnica.com/gadgets/2019/07/the-latest-barrier-to-5g-speeds-the-summer/; https://venturebeat.com/2018/07/30/huaweis-first-5g-phone-reportedly-guzzles-power-needs-big-heatsink/. McKinsey and Company, a major global consulting firm, reports that consumers cannot expect significant 5G commercial service to start until 2022 at the earliest; see https://www.mckinsey.com/industries/technology-media-and-telecommunications/our-insights/cutting-through-the-5g-hype-survey-shows-telcos-nuanced-views. Lastly, the first 5G rate plans cost more.
            Inconvenient truths.

Friday, April 3, 2020

Lies, Damn Lies and Wall Street Journal Editorials



            By way of full disclosure, I should report that I subscribe to the Wall Street Journal and benefit from its news reporting.  However, my mental and emotional wellbeing also benefits if I ignore obvious mistruths in countless editorials and columns, particularly ones about telecommunications and the Internet.   I have wasted countless hours trying to set the record straight when some ideolog misrepresents the truth to make some intellectually dishonest point.

            Imagine that: fake news and untruths from the Wall Street Journal.

            Today’s mistruth, on pA16 (Faster Internet Is on the Way): “American’s working at home would be in a much worse position in this pandemic is the Obama [Network Neutrality] rules were still in place.”

            Editorial writers at business publications know—or should know—that variation in regulatory scope and even so-called regulatory uncertainty has limited, if any, impact on the need for capital expenditures and a venture’s decision to make the inevstment.  Put another way, whether the FCC does or does not impose Network Neutrality rules has no major impact on a carrier’s incentive and need to invest in infrastructure.

            Does anyone truly and honestly believe that wireless carriers in the U.S. would take a “pass” on 5G investment if the FCC still had open access requirements?  Let me restate something obvious: carriers invest out of competitive necessity and when technological innovations provide opportunities for more revenues and consumer satisfaction.  Network Neutrality rules might motivate carriers might try to grab spectrum at auction for less money, but doing so only provides evidence that the rules possibly might dampen profitability, not investment incentives. 

By the way, any profit dampening would have little impact on the incentive and ability of U.S. wireless carriers to make necessary investment.  For years, Sprint’s major investor, Japan’s  Softbank, and TMobile’s Deutsche Telekom made necessary investments.  Failing to do so would risk ruin, including the billions of dollars in “sunk investments.”

            I’m skeptical whether Network Neutrality would reduce carrier revenues and profitability.  Even FCC Chairman Ajit Pai never got around to explaining how Network Neutrality rules would deprive carriers of robust, revenue streams.  It was all about less incentives for investment, innovation and employment.

            Ironically, the fact that U.S. wireless carriers have managed to accommodate increased demand supports my premise.  The coronavirus would have stimulated demand regardless of whether “Obama rules” or “Trump Rules” were in effect.  The Journal editorial writers surely can make no credible argument that wireless carriers somehow would be unable or unwilling to satisfy wireless network demand.  A carrier either makes a network investment, or not, based on anticipated demand and expectations of growth in that demand.  No one believes that Network Neutrality rules would have stifled consumer demand for more bandwidth and greater transmission speeds.  The opposite seems more likely.

I have never been a Network Neutrality “true believer,” but some positive outcome seem crystal clear.  Wireless carriers have maneuvered through a rising tide of demand to the benefit of everyone, not just an exclusive group whose rate plan qualifies them for preferred access to scarce network resources.

Perhaps someday the Journal editorial writers will understand the difference between public access to a service akin to a basic necessity and a surcharge to jump the queue at a Disney theme park ride.

             

Sunday, March 1, 2020

The New York Times Errs in Coverage of Satellite Life Extension


Every once in a while, I spot an error in The New York Times and dutifully report it.  I have never received confirmation, much less a correction, even when I detected woefully wrong foreign currency conversions in the Travel section.  I did get a snarky email suggesting that I could not possibly have grounds to dispute the Times’ use of the inter-bank rate plus 2%.  Call me crazy, but travelers typically receive conversion well below the inter-bank rate.  The 2% figure should have been a reduction.

Recently, the Times reporters have not done an adequate job learning and explaining how the Intelsat 901 satellite will achieve a usable life extension from the Northrop Grumman MEV-1.  While future repair satellites will replenish so-called station keeping fuel inside the tanks of the satellite targeted for repair, the current MEV-1 latches onto the satellite and stays there for five years.

As explained by the manufacturer of MEV-1 (Northrop Grumman):

"MEV is designed to dock to geostationary satellites whose fuel is nearly depleted. Once connected to its client satellite, MEV uses its own thrusters and fuel supply to extend the satellite’s lifetime. When the customer no longer desires MEV’s service, the spacecraft will undock and move on to the next client satellite." See https://www.northropgrumman.com/space/space-logistics-services/mission-extension-vehicle/

The Sketchbook on page 3 of the Sunday March 1, 2020 edition incorrectly reported that the satellites will "part" in a month.  

If the Times reporters had done their homework more thoroughly, they might have come across accounts in Space News: "MEV-1 will remain attached to Intelsat-901 and use its own thrusters to keep the satellite properly oriented in orbit." See: https://spacenews.com/northrop-grummans-mev-1-servicer-docks-with-intelsat-satellite/


The MEV-1 takes over the functions of pointing the Intelsat satellite correctly down to earth and also that the MEV-1 will use its thrusters to keep the Intelsat satellite in the proper orbital parking place:

"The next day Northrop Grumman moved MEV-1 next to Intelsat-901 and docked with the satellite using a capture mechanism that went “through the throat” of Intelsat-901’s apogee engine, Anderson said." (also from Space News: https://spacenews.com/northrop-grummans-mev-1-servicer-docks-with-intelsat-satellite/.

I am pretty sure I will not hear from a real person acknowledging and correcting mistakes in this newspaper of record.   What could I possibly know better than the Times reporters?

Friday, February 21, 2020

The Odds for New TMobile to Morph into TMobile on Steroids?



            Reading the District Court decision approving the merger of TMobile and Sprint (see https://cdn.vox-cdn.com/uploads/chorus_asset/file/19712093/show_temp__6_.pdf), I am reminded of how much antitrust law relies on informed predictions of future market performance.  Judge Victor Marrero concluded that the plaintiff state Attorneys General failed to meet their burden of proving that the merger would materially harm consumers and competition.  In effect, the Judge bought the assertion that New TMobile will more aggressively compete and innovate than what the two stand-alone companies could muster, i.e., that the whole would be greater than the sum of the parts.

            This comes across as a leap of faith, substantially challenged by a hindsight review of market consolidation in other markets.  Let’s look at commercial aviation in the United States, with attention to how Southwest refined its business plan and strategy after several mergers involving both the company and other airlines.  Put more simply, is Southwest still the maverick in the same vein as TMobile?

            The answer to this question addresses how bulked-up companies, like Southwest and New TMobile, respond to a concentrated market.   Will they continue seeking to chisel additional market share from legacy carriers, possibly at the expense of profit margin, share price, average revenue per user and year-end bonuses, or will they “take the foot off the peddle”?

            In Southwest’s case, tweaks to their business plan show a reduced value proposition for consumers--what economists call consumer welfare.  Part of the reduction, results from a maturing company, but arguably a larger part results from adjustments that enhance the company’s bottom line with “nickle and dime fees.”  While Southwest has opted to continue offering checked baggage at no additional cost, the company has joined with other airlines in charging new fees that can significantly increase consumer’s total out of pocket costs. Southwest did not initiate these “enhancements,” but a concentrated market, where all other carriers charge these fees, makes it easy for the former maverick to join the group. See, e.g., https://www.forbes.com/sites/danielreed/2019/02/21/all-grown-up-as-it-approaches-50-southwest-is-dealing-with-mature-airlines-kinds-of-problems/#7031f97f7a7e; https://www.mcall.com/news/nation-world/mc-southwest-airlines-no-longer-cheapest-0505-20150505-story.html; https://www.fool.com/investing/2018/12/01/cost-creep-at-southwest-airlines-will-help-its-riv.aspx.

            I do not share Judge Marrero’s breathless optimism that the TMobile-Sprint merger benefits competition and consumers.  Can anyone come up with examples where industry consolidation has enhanced the value proposition for consumers?  Channeling Sarah Palin, how’s that concentrated airline industry working out for you?

Tuesday, February 11, 2020

TMobile-Sprint Merger Approved and 144 Million U.S. Subscribers Will Pay Dearly


            News of a reviewing District Court’s approval of the TMobile-Sprint merger has arrived today.  See. e.g., https://www.wsj.com/articles/u-s-district-judge-expected-to-rule-in-favor-of-sprint-t-mobile-merger-11581376688.  I’m sure the decision will conclude how much the combination will enhance competition, apparently more so than what the two companies individually could offer.

            This conclusion does not pass the smell test.  The court will note what a great competitor TMobile has been and how unviable Sprint will be in the middle to longer term.  OK, that observation makes sense and I’ll go one step further to note that Sprint recently has offered some of the best deals for consumers that the company probably could not continue to offer over time.

            I part company with the likely conclusion made by Judge Victor Marrero that the combined company will have every incentive to become even more competitive and innovative than what the two unaffiliated firms have generated and even what TMobile would generate even if Sprint were to falter and eventually exit the market.

            Let us step back and answer a fundamental question no one seems willing to pose and answer: why do companies seek to merge?  Answer: to make more money, enhance value for shareholders, possibly compete and innovate less because a more concentrated marketplace does not necessitate “sleepless afternoons.”

            The merged TMobile-Sprint has far greater incentives to accept its third among equals status than to work hard to chisel at the market dominance of AT&T and Verizon.  Why bother shaving margins when AT&T and Verizon offer rates generating some of the highest Average Revenue Per User (“ARPU”) and margins in the world.  None of the U.S. carriers want us to know this, but if you travel abroad, you can easily find month-to-month service for half the U.S. average rate.

            Why would TMobile want to upset the apple cart when, post-merger, it can generate higher revenues and profits using AT&T and Verizon’s margins as an umbrella under which it can offer slightly lower rates and call it a day?  In other words, TMobile has little incentives to start a price war.

            Lastly, I am quite leery of the logic in replacing Sprint with Dish entering a mature market solely as a reseller of Sprint and TMobile pre-paid, no-contract brands, coupled with a now extended deadline to have real skin (money) in the game.  Dish has an uncanny ability to acquire spectrum, do nothing with it, secure an extended deadline to buildout a network and then seek to sell it to another company more willing to invest in plant. 

            Will Dish provide salvation for consumers in the long run?  I doubt it.  In the short run, the 144 million plus subscribers in the U.S. can expect to pay more for less “unlimited” service.

Tuesday, November 19, 2019

The $60 Billion C-Band Sweepstakes: Who Gets the Windfall for Accommodating 5G?



            The esoteric world of spectrum management and valuation made an atypical public splash yesterday, highlighted by a 40% drop in the share price of a major international satellite carrier, Intelesat, on the New York Stock Exchange.  See https://www.cnbc.com/2019/11/18/intelsat-stock-drops-as-fcc-will-auction-satellite-spectrum-for-5g.html.  Buy-side Wall Street investors responded to an announcement from FCC Chairman Ajit Pai that the U.S. would auction off C-band satellite spectrum, used by both private and government satellite operators, to accommodate ever growing terrestrial wireless spectrum demand.  See https://docs.fcc.gov/public/attachments/DOC-360855A8.pdf This announcement cast grave doubt on prospects for a private auction conducted by the three major carriers, none of whom have U.S. corporate citizenship. See https://c-bandalliance.com/about/.
            How does the valuation of a major international satellite operator substantially evaporate in one day?  There’s a simple answer and a more complicated and nuanced one, both of which I’ll offer. 
            The simple answer: A substantial portion of the value attributable to Intelsat and other satellite carriers lies in their near property-like use of radio spectrum and orbital parking places.  Like broadcasters, satellite carriers, licensed by the FCC, only pay a nominal fee for licenses to operate their facilities.  They have a “renewal expectancy” for both the orbital slots where their satellites hover, 22,300 miles above the equator, and for the frequencies used to uplink and downlink content as well as to manage satellites.  The prospect of an FCC auction substantially reduces the payout Intelsat, SES, Telesat and other C-band satellite carriers can expect to receive when they volunteer to make do with less spectrum to accommodate the ever-growing demand for terrestrial wireless services.
            The complicated answer delves into matters of spectrum propagation and value, the payoff from lobbying U.S. congressional decisionmakers, FCC jurisdiction and the non-U.S. corporate citizenship of the major C-Band satellite carriers.  Radio spectrum can have virtually no value or lots, depending on the use that can be made of it.  C-band spectrum, around 3-6 GigaHertz, offers desirable, “beach-front” access for terrestrial fifth generation (“5G”) services.   Signals at these frequencies and transmit across longer distances than the millimeter wave spectrum operating in double-digit GigaHertz frequency bands.  While U.S. wireless carriers have great expectations for 5G spectrum above 10 GigaHertz, current trials evidence serious limitations including shortened battery life, overheating and far less geographic reach than anticipated.  For example, Verizon has made a public relations splash in offering 5G service to several football stadiums, but reliable service is not available throughout.  C-band spectrum offers far greater geographical covers using existing, low cost technology, readily adaptable for 5G services.
            If 200-500 MegaHertz of C-band spectrum could be reallocated to 5G services, auction proceeds could exceed $60 billion. See  https://spacenews.com/satellite-c-band-is-worth-billions-but-how-many/.  A significant portion of Intelsat’s capitalization, an in turn its share price, accrues from the rights to occupy satellite orbital slots and to use spectrum, on an exclusive basis with protection from interfering uses.
            The C-Band Alliance has spent over $500,000 in a short amount of time trying to convince congressional decision makers that a private auction would expedite the clearing of spectrum for speedy reallocation to 5G terrestrial services.  Additionally, the Alliance made the questionable assertion that the U.S. could reclaim or enhance global 5G supremacy by allowing it to jumpstart the “repacking” of C-band spectrum. 
            Perhaps implicit in this pitch was a faulty assumption that the U.S. could only achieve expedited C-band spectrum availability if the carriers themselves had “skin in the game” and big—make that VERY BIG—financial incentives to play along.  The C-Band Alliance stakeholder may have mistakenly assumed that without their voluntary participation, the U.S. government, including the FCC, would have a difficult time dislodging three foreign carriers from their lock on spectrum.
            I believe the Alliance has misperceived the speed with which the FCC can amend satellite landing rights and operating licenses issued to foreign carriers.  No one disputes the sovereign right of a nation to determine whether and how a foreign telecommunications carrier can land submarine cables on U.S. soil, or operate earth stations that transmit and receive signals from a geostationary satellite, licensed by the FCC.  The Alliance may have banked on the assumption that the FCC could act only at the conclusion of a lengthy, already issued license period.  With the incentive of a self-administered private auction, the Alliance carriers gladly would agree to expedited spectrum clearing and repacking.  Without such a financial windfall, these carriers would litigate their right to retain the status quo for the duration of their existing licenses.
            The Alliance underestimates the lawful flexibility of the FCC to amend its rules, regulations, spectrum allocations and issued licenses.  Of course, the FCC would have to comply with administrative rules providing due process rights, even for alien licensees with corporate homes in Bermuda, Canada and Luxembourg.  It’s quite possible that a private auction would proceed faster than the FCC’s methodical process.  But with $60 billion at stake, and only a maximum one-third cut for the U.S. offered by the Alliance (see https://spacenews.com/c-band-alliance-says-it-would-send-billions-to-u-s-treasury-under-private-spectrum-auction/, FCC Chairman Pai made a smart decision.
           


Sunday, November 17, 2019

More Overstatements About the Lovefest a Merged TMobile-Sprint will Deliver


            Having received FCC approval of its merger proposal, (see https://www.fcc.gov/transaction/t-mobile-sprint), TMobile and Sprint have turbocharged their array of less than meets the eye consumer welfare enhancing promises.  See https://www.finder.com/t-mobile-to-unveil-new-t-mobile-un-carrier-1-0
The companies have targeted states joining in an antitrust law suit to block the merger.  For example, the Attorney General of Colorado, a guy I used to admire, who should know better than to take the bait, agreed to withdraw from the law suit in exchange for significant Colorado-specific employment and facility commitments. See https://www.reuters.com/article/us-sprint-m-a-t-mobile/colorado-abandons-legal-effort-to-stop-sprint-t-mobile-merger-idUSKBN1X01QC
            Today’s New York Times contains the latest reiteration of why 3 national wireless competitors are better than four.  Before I “deconstruct” and refute the value of the Uncarrier’s commitments, I return to a basic question: If TMobile and Sprint can offer such a better value proposition than what AT&T and Verizon offer, would consumers fare even better if TMobile and Sprint also had to compete with each other?  In this age of historically low interest rates and the deep pockets of two foreign owners (Softbank and Deutsche Telekom), what prevents either company from offering what they now make contingent on their merger?
            In a nutshell, TMobile and Sprint treat the 5th generation of wireless innovation as salvation for consumers, if and only if the companies merge.  If they cannot, then apparently AT&T and Verizon will capture the benefits of faster, better and more efficient technology all for themselves.  Only if Sprint and TMobile merge will the much overcharged and cheated consumer finally get a fare deal.  Again, what prevented either company from offering everything they make contingent on their merger?  At the very least, in light of far more concentrated market shouldn’t the Uncarrier explain why it can only become more competitive and innovative through consolidation, rather than competitive necessity?
            Today’s advertisement characterizes AT&T and Verizon as greedy, slow to innovate and unlikely to change.  Agreed, but doesn’t that make these two incumbents easy targets for lean and hungry competitors?  TMobile has increased its market share by offering consumers a better value proposition.  This company already has a 5G buildout plan and already offers lower prices.
            The ad offers 5G service to 99% of the U.S. population, a 50% discount for its lowest service tier, better rural 5G penetration in rural locales, fixed wireless broadband service and 11,000 more jobs by 2024. 
            I’d be wowed by these promises if I didn’t know the host of caveats, non-disclosures, misrepresentations and inability or unwillingness of the FCC to track and enforce pre-merger commitments.  In a nutshell, the Uncarrier promises far less than it could possibly deliver.
            The major BIG DECEPTION lies in the assumption the Uncarrier expects consumers to make about the nature of delivered 5G technology.  Rural locales will not now, or in the foreseeable future, have the tiny millimeter wave cell contours that will offer the promised vast improvements in transmission speed, capacity and latency.  TMobile has announced plans to use 600 MHz spectrum for rural 5G, far lower than the GigaHertz bands expected to be used in cities.  Every carrier, regardless of competitive necessity and the number of competitors will engage in the same prudent spectrum management process.  No carrier can execute a profitable 5G business plan that offers rural residents truly equivalent geographical market penetration, transmission speed, available capacity, etc.
            TMobile and Sprint will offer 5G networks that are no more or less “transformational” than what other carriers will deploy at the same time.  The Uncarrier may throw a bone to rural residents by installing more 600 MHz towers, but there is nothing I’ve seen from AT&T and Verizon indicating that these carriers will underinvest in the migration from rural 4G to rural 5G. Bear in mind that 5G is a wireless transmission, switching and routing technology, not a service.       The small print in the Uncarrier ad today underscores that 5G will not change the nearly identical technological nature of what any and all U.S. carriers will offer.  The merged company STILL will throttle video to DVD, standard definition 480 lines of resolution, despite the much touted higher capacity.
            TMobile and Sprint have expanded their charm offensive with targeted inducements now including first responders.  The companies imply that the remaining state Attorneys General need to be “educated” about the lovefest the Uncarrier will deliver.  If not, it’s curtains for the free world, American consumers and the country in general.
            Don’t buy it.

Wednesday, October 30, 2019

Lessons From Milk Price Supports


            On a trip to see the In-Laws in Ohio, I noticed milk prices at half ($1.99 for a gallon) the rate available at home. Pennsylvania law establishes a price floor ostensibly to promote family farms and a “fair” price.  In application, so-called price supports prevent grocery stores from using milk prices as a lost leader.  Additionally, a $4 price point suppresses demand as the same time oversupply has pushed wholesale prices to record lows.  Meanwhile, intermediaries in Pa. make out like bandits exploiting the wide gap between the wholesale market price and the floor price paid by retail consumers.

            Price supports probably never made sense, but they hurt family farms now.  Of course, sponsored researchers and p.r. firms tout the non-existent benefits to the small farmer. What’s $2 a gallon if it helps sustain small farms?

            The better question: Why pay $2 more when not one dime flows downstream to the small farmer?

            The lesson here lies in the manipulation of emotions and good intentions, by stakeholders able to capture all the financial benefits.  This kind of “rent seeking” occurs all the time at the FCC.  Just now, the prospect of Huawei rigging its 5G wireless equipment for espionage warrants an absolute bar on the use of $8.5 billion in annual universal service funds available to subsidize rural access to wired and wireless telecommunication technology.  No one has offered clear evidence that Huawei equipment provides China a spying opportunity.

            Forcing Huawei out of the marketplace will raise the cost of 5G and other telecommunications equipment, particularly for price sensitive rural carriers. U.S. telecommunications consumers end up subsidizing “national heroes” even if these manufacturers sell more expensive and inferior equipment.

            Clever.
           

Wednesday, October 2, 2019

What You Need to Know About the Restoring Internet Freedom Court Decision



            The D.C. Circuit Court of Appeals affirmed most of the FCC’s Restoring Internet Freedom Order [1] largely on Chevron Doctrine deference grounds.  This two-pronged judicial review model first considers whether applicable statutory language is ambiguous.  If applicable law is clear and unambiguous, the court must assess whether the FCC complied with the legislative mandate.  If the applicable law has ambiguities, the court must consider whether the FCC’s chosen course of action was reasonable under the circumstances.  Because judges lack expertise in statistics, economics, electronic engineering, accounting, corporate management, finance etc. they must rely on the expertise resident at the regulatory agency and which advocacy and sponsored research it embraces.  In this case, the court opted not to second guess the FCC’s legal and economic rational, despite the agency’s clear preference for the filings that support its deregulatory agenda. [2]
            Put another way, experts at the FCC and ones financed by stakeholders will have ulterior motives precluding an unbiased assessment, but appellate courts will not reject selective and even one-sided evaluation unless the process exceeds generous deference and a basic assessment of reasonableness.  In this case, the court opted not to question the FCC’s reclassification of broadband Internet access as an information service, wireless broadband access as a private, non-common carrier mobile service and the limited scope of new transparency requirements in lieu of prior open-ended general conduct standard and the specific rules prohibiting blocking, throttling, and paid prioritization of traffic.
            The court did reverse the FCC on four specific areas where the court determined that the agency failed to set out its legal authority or address the implications and impact of its deregulatory initiative.  The court vacated the FCC’s blanket preemption of state laws and that would impose regulatory requirements, despite the FCC’s near complete abdication of jurisdiction.  The court also remanded to the FCC the duty to address three discrete issues that the agency largely ignored:
(1) The Order failed to examine the implications of its decisions for public safety; (2) the Order does not sufficiently explain what reclassification will mean for regulation of pole attachments; and (3) the agency did not adequately address Petitioners’ concerns about the effects of broadband reclassification on the Lifeline Program. [3]

            The court fully embraced the FCC’s legal, technical and economic rationales for reclassifying broadband Internet access as a largely unregulated information service.  The decision validates the FCC’s emphasis that Internet Protocol domain name identity queries (“DNS”) and temporary storage of traffic—caching—justify an overall information service classification.  Because these two information service functions are inextricably linked with other functions, which do include a telecommunications transport function, the overall composite service cannot be functionally subdivided into separate information services and telecommunications service elements. [4]
            In making this finding, the court heavily relied on the Brand X case precedent [5] for guidance and validation.  In this prior case, the Supreme Court also relied heavily on the Chevron Doctrine to support a prior reclassification of broadband Internet access from telecommunications, common carriage to the largely unregulated information services designation.  Brand X also determined that DNS and caching were “inextricably intertwined” with high speed bit transmission that the FCC could reasonably conclude that Internet Service Providers did not offer a telecommunications service on a standalone basis, a conclusion reached by Justice Scalia in dissent. [6]
            The court also rejected the view that these two functions fit within an exception to the normal application of the information service classification for a subset of information processing functions that satisfy necessary telecommunication management requirements, rather than constitute part of an information service.  The court refers to its prior affirmance of the FCC’s common carrier reclassification decision, United States Telecommunications Ass’n. v. FCC, 825 F.3d 674 (D.C. Cir. 2016) to emphasize that the case only permitted Title II common carrier attribution to functions like domain name look ups and caching, but did not mandate it. [7]
            The court also validated the FCC’s reclassification of mobile broadband Internet access as a private, non-common carrier service, despite an amendment to the Communications Act creating a definition for Commercial Mobile Service provided by cellular companies in their provision of voice and text services accessible to and from the wireline public switched telephone network (“PSTN”). [8] The court was predisposed to side with the FCC so that the Commission would not have to confront a “statutory
contradiction” [9] of having reclassified wired broadband access an information service, but not its wireless counterpart that the FCC increasingly believes constitutes a functional and competitive alternative.  Such regulatory asymmetry could adversely impact the commercial attractiveness of wireless services, particularly if one believes any sort of government oversight imposes costs, such as reduced innovation, infrastructure investment and flexibility.
            The court addresses three areas that support the FCC’s information services reclassification.  First, the court notes that the applicable statutory language uses public switched network and not public switched telephone network.  The absence of telephone, in conjunction with the Chevron Doctrine and the Brand X case precedent, supports “leaving the door open to a different, adequately supported, reading, which the Commission has provided here.” [10] The FCC now considers the use of IP addresses, in conjunction with telephone numbers, as sufficiently uncoupling wireless broadband networks from the telecommunications service classification even though cellular telephone networks surely provide voice telephony, including access to the wired PSTN, in addition to broadband Internet access.  The court also accepts the FCC’s argument that even though Voice over the Internet Protocol services make it possible to originate and receive telephone calls, that functionality by itself does not make wireless networks fully interconnected with the PSTN, nor does it deemphasize the core, non-telecommunications nature of broadband Internet access.  In a nutshell, “blurring [of information and telecommunications services] is not erasing.” [11] Lastly, the court supports the FCC’s determination that mobile broadband does not qualify as a functional equivalent to mobile voice even though consumers use a single handset and wireless network to access both services.
            Arguably the most questionable aspect of the court’s decision lies in its endorsement of sponsored research claiming to show that network neutrality regulation had a direct and significant impact on infrastructure investment and innovation. As part of its analysis to determine whether the FCC acted reasonably and not in violation of the Administrative Procedure Act prohibition on arbitrary and capricious decision making, the court reviews the evidentiary record.  The court did not question the validity, significance, methodology, or rigor of research supporting the Commission’s view that network neutrality rules and regulations created significant disincentives for innovations and investment.  Instead it appears to downplay the scope, nature and reliance of the Commission’s reference to sponsored research supporting its views established well before the issuance of a decision.  While deeming the FCC’s references and reliance on these studies as reasonable, the court also appears to characterize the Commission’s use of the research as minor and fully apprised of the “modest probative value to studies attempting to draw links between the Title II Order and broadband investment . . ..”[12]  This characterization does not jibe with the many instances where FCC rulings [13] and statements by Chairman Pai [14] and others emphasized the disastrous impact on network neutrality regulation. The FCC and D.C. Circuit refer to Title II regulation as “utility-style regulation,” [15] even though the FCC had established rules that substantially exempted broadband Internet access providers from conventional oversight including the elimination of any regulation of rates for service, or profit margins. [16]
            The court did not entirely endorse the FCC’s world view and deregulatory agenda.
The court rejected as unlawful the FCC’s attempt to foreclose any state regulation inconsistent with the Commission’s policy including efforts to impose network neutrality regulations for over which he Commission now lacks jurisdiction. [17] In effect, the FCC cannot abandon jurisdiction over broadband Internet access and then foreclose states from asserting jurisdiction over intrastate service: “[I]n any area where the Commission
lacks the authority to regulate, it equally lacks the power to preempt state law.” [18]
We can expect some states, such as California, New York and Vermont to enact network neutrality regulations that the FCC probably will reject as unlawful despite the clear direction provided by the D.C. Circuit.
            Additionally, the court considered it arbitrary and capricious for the FCC not to have considered the implication for public safety in light of the Commission’s statutory duty to promote “safety of life and property through the use of wire and radio communications.” [19]  The court noted that Verizon had deliberately slowed the data speeded available to first responders in California as they tried to contain forest fires.  Such “throttling” is now permissible under the FCC rules, but the court required the Commission to address its impact on public safety.
            The court also recognized that the FCC left unresolved issues pertaining to pole attachments, because the FCC shares jurisdiction with states and municipalities on this matter and providers of cable, telecommunications and information services seek access to utility poles even though the directly applicable statutory mandate, 47. U.S.C. § 224(a)(4) refers only to Title II regulated telecommunications services. [20]
            The court also required the FCC to address the impact of the largely deregulated information services classification on the Lifeline Program that subsidizes low-income consumers’ access primarily to Title II regulated telephone service and handsets. [21]  The court determined that the FCC left unanswered important questions whether stand alone broadband service providers can qualify for universal service funding despite eligibility criteria limiting eligibility to Title II regulated common carriers. [22]

           



           


[1]           Mozilla Corp. v. FCC, No. 18-1051 (D.C. Cir. Oct. 1, 2019); Retrieved from: https://www.cadc.uscourts.gov/internet/opinions.nsf/FA43C305E2B9A35485258486004F6D0F/$file/18-1051-1808766.pdf [hereinafter cited as Mozilla Corp. v. FCC].

[2]           “Regulation of broadband Internet has been the subject of protracted litigation, with broadband providers subjected to and then released from common carrier regulation over the previous decade. We decline to yet again flick the on-off switch of common-carrier regulation under these circumstances.” Id. at 145-46.
[3]           Id. at 13.

[4]           “[J] just as the USTA petitioners ‘fail[ed] to provide an unambiguous answer to’ whether ‘broadband providers make a standalone offering of telecommunications,’ USTA, 825 F.3d at 702, Petitioners have not done so here. Nor have they shown the Commission’s stance to be unreasonable. We conclude, under the guidance of Brand X, that the Commission permissibly classified broadband Internet access as an ‘information service’ by virtue of the functionalities afforded by DNS and caching.” Id. at 45.

[5]              National Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967 (2005).

[6]              See Rob Frieden, What Do Pizza Delivery and Information Services Have in Common? Lessons from Recent Judicial and Regulatory Struggles with Convergence, 32 RUTGERS COMPUTER & TECH L.J., No. 2, 247-296 (2006).

[7]              “To begin with, Petitioners misconstrue USTA. As they do persistently, they gloss passages that find parts of the Title II Order to be permissible readings of the statute as mandating those readings—when the passages plainly do not do so. A case in point is the treatment of the TME. Petitioners say that ‘[t]his Court has already agreed that DNS and caching fall within the terms of the telecommunications management exception.’ Mozilla Br. 43 (emphasis added) (citing USTA, 825 F.3d at 705). Yet all we said in USTA was that we were ‘unpersuaded’ that the FCC’s ‘use of the telecommunications management exception was * * * unreasonable.’ USTA, 825 F.3d at 705. The Title II Order, in other words, adopted a permissible reading, though not a required one.”  Mozilla Corp. v. FCC at 23.

[8]           47 U.S.C. § 332, Mobile Services (2018).

[9]           See Mozilla v. FCC at 49.

[10]          Id. at 50. “Similarly in USTA we rejected a claim that 47 U.S.C. § 1422(b)(1)(ii)’s use of the term “public switched network”— in a context pretty clearly meaning only the telephone network—meant that the Commission was required to so limit its definition for purposes of Section 332.  Id. at 52.
[11]          Id. at 58.

[12]          Id. at 76.  Empirical studies are available that measure actual investment outcomes.  See, e.g., Christopher Alex Hooton, Testing the economics of the net neutrality debate, TELECOM POL’Y (Sep., 2019); retrieved from: https://doi.org/10.1016/j.telpol.2019.101869.

[13]          “[T]he record shows that the existing regulations constrain technological advances and deter broadband infrastructure investment by creating disincentives to the deployment of facilities capable of providing innovative broadband Internet access services.” Appropriate Framework for Broadband Access to the Internet Over Wireline Facilities, Report and Order and Notice of Proposed Rulemaking, 20 F.C.C. Rcd. 14853, 14865 (2005).

[14]         “These Internet regulations will work another serious harm on consumers. Their broadband speeds will be slower than they would have been without these regulations.
The record is replete with evidence that Title II regulations will slow investment and innovation in broadband networks.” Protecting and Promoting the Open Internet, Report and Order on Remand, Declaratory Ruling, and Order, Dissenting Statement of Commissioner Ajit Pai, 30 F.C..C Rcd. 5601, 5927  (2015).

[15]          See Mozilla v. FCC at 10.

[16]          The court did find troubling “the Commission’s failure to grapple with the fact that, for much of the past two decades, broadband providers were subject to some degree of open
Internet restrictions,” arguably ample time to adjust to any regulatory restrictions.  See, Id. at 86.

[17]          “The Commission ignored binding precedent by failing to ground its sweeping
Preemption Directive—which goes far beyond conflict preemption—in a lawful source of statutory authority. That failure is fatal.” Id. at 121.

[18]          Id. at 123.

[19]          Id. at 93 citing 47 U.S.C. §151.

[20]          Id. at 104. “The Commission offered, at best, scattered and unreasoned observations in response to comments on this issue. Because the Commission did not adequately address
how the reclassification of broadband would affect the regulation of pole attachments, we remand for the Commission to do so.” Id. at 104-05.

[21]          In the Telecommunications Act of 1996, Congress codified and expanded the FCC’s universal service mission to cover “an evolving level of telecommunications services that the Commission shall establish periodically * * *, taking into account advances in telecommunications and information technologies and services.” 47 U.S.C. § 254(c)(1).

[22]          “[B]roadband’s eligibility for Lifeline subsidies turns on its common-carrier status. See In re FCC 11-161, 753 F.3d 1015, 1048–1049 (10th Cir. 2014) . . . As a matter of plain statutory text, the 2018 Order’s reclassification of broadband—the decision to strip it of Title II common-carrier status—facially disqualifies broadband from inclusion in the Lifeline Program.” Mozilla v. FCC at 111.