Friday, February 10, 2012

Comcast Anti-consumer Strategies

      In preparing updates to comprehensive treatise on cable television and broadband (see I have the opportunity to dig deep into current business and regulatory activity.  Recently I saw that the FCC has sanctioned Comcast for favoring two affiliated sports networks (The Golf Channel and Versus) and disfavoring an unaffiliated sport network (The Tennis Channel).  The Comcast affiliates appear on a cheaper and lower programming tier than the unaffiliated network.  The FCC did not buy that Comcast and its subscribers just happen to like golf more than tennis.

       So along comes another Comcast action that may not fully pass the smell test.  Comcast wants the FCC to allow cable television operators to encrypt all service tiers including the cheapest basic service tier containing only a few channels.  Ostensibly to make bandwidth available for new services, Comcast wants to eliminate all analog channels that just about all subscribers can receive without a set top box. Comcast also benefits by not having to send a technician to activate, terminate and change service.  But it also gets to force every subscriber to install a Comcast device that might just prevent subscribers from doing lawful things the company does not want done, e.g., using non-Comcast equipment to record, distribute and receive content.

      I suspect there is more than meets the eye on Comcast’s digital strategy. On the matter of bandwidth conservation Comcast only offers a small number of channels in the basic tier, so the newly available bandwidth is insignificant.  In most systems Comcast has ample bandwidth available and already offers HDTV options. 

      So the issue focuses on the new mini-set top box subscribers have to install.  First, channel switching will take longer.  Remarkably analog channel switching occurs instantly while digital changes take a few milliseconds.  Second, most subscribers will leave the box on 24/7 surely offsetting the carbon and cost savings Comcast accrues by not having to send as many technicians across town.  Third, Comcast now has a company-owned device standing between its network and subscribers’ televisions.  Maybe this device simply better protects Comcast from program theft.  But knowing Comcast I suspect they have created more upside benefits that will result in less opportunities for subscribers to use the content for which they have paid.

Tuesday, February 7, 2012

The Law and Policy of Telecommunications and Plumbing

      I used to revel in the interdisciplinarity of my chosen research, teaching and outreach agenda.  Throughout my career I thought it a blessing to work with and generally understand the lexicon of economics, engineering, law, business etc.  At various times I have felt blessed to work across disciplines rather than bore deep into one—possible narrow and constraining—subject area.

      I grow increasingly worried that I have made a major career blunder by not fitting into one of the traditional academic or applied units.  Just now the American Association of Law Schools seems to wonder whether I qualify as a law school educator.  I have two academic appointments at Penn State—in the College of Communications and the Dickinson School of Law.  Rather than evidence a wider and laudable wingspan, I run the risk of being branded an impostor!

      Just what have I done in 32 years of professional and academic work in telecommunications?  To some I bore down in the tedium of plumbing.  My College of Communications affiliation leads some to think I teach most of the football team at Penn State.  At weak moments I characterize my career as one-third adult day care provider, one-third talk show host and one-third educator.

     Apparently the educator part appears woefully inferior to the stature accorded pure bred professors, particularly ones at law and business schools. Regrettably when I sought to make the move from practicing law to teaching it, few schools had fellowships and other ways to make the transition.  I jumped at the chance to teach at a College of Communications.  In this forum I had to convince the mandarins that a law review publication was every bit as rigorous as a peer-reviewed publication in the communications field.

    So in achieving legitimacy in communications, I apparently am illegitimate in law.  I hope readers of my work don’t feel this way,  but I’ll understand.

Monday, February 6, 2012

New pub: Assessing the need for More Incentives to Stimulate Next Generation Investment

    I loath the conversion of nouns into verbs, such as party and incentivize.  Perhaps this  picadillo prompted my latest publication in Vol. 7 of I/S: A Journal of Law and Policy for the Information Society.

    Here's the abstract:

     Incumbent carriers often vilify the regulatory process as a drain on efficiency and an unnecessary burden in light of robust marketplace competition.  Some claim that regulation creates disincentives for investing in expensive next generation networks (“NGNs”), and even accepting subsidies for broadband development if the carrier must provide access to competitors. Without fully assessing the necessity to do so legislators, regulators and judges have accepted the premise that government must create incentives for NGN investment. Incumbent carriers in particular have seized upon the concept of uncertainty as a justification for refraining from making necessary infrastructure investments, despite the onset of declining revenues and market shares in core services. 

     In the worst case scenario, incumbent carriers secure unwarranted and premature deregulation, despite an ongoing need for governments to guard against anticompetitive practices and to promote sustainable competition.  Governments also risk providing direct financial subsidies, or creating a regulatory mechanism for indirect subsidies, to stimulate infrastructure investment when no such catalyst is necessary in light of competitive necessity.  Once a subsidy mechanism is in place, government may not easily “wean” carriers off such artificial compensation.  In rare instances government may find some key carriers unwilling to accept subsidies and in turn disinclined to pursue expedited NGN development, as is currently occurring in the U.S., because incumbent carriers do not want to provide interconnection and access to competitors, a legal duty these carriers must bear when operating as common carrier providers of telecommunications networks, but which does not apply when these carriers offer information services which include broadband.

     This paper will examine how incumbent carriers in the United States have gamed the incentive creation process for maximum market distortion and competitive advantage.  The paper suggests that the U.S. government has rewarded incumbents with artificially lower risk, insulation from competition, and partial underwriting of technology projects that these carriers would have to undertake unilaterally.   The paper also examines the FCC’s recently released National Broadband Plan with an eye toward assessing whether the Commission has properly balanced incentive creation with competitive necessity.  The paper provides recommendations on how governments can calibrate the incentive creation process for maximum consumer benefit instead of individual carrier gain.