The Wall Street Journal Editorial Board's Faulty Memory

             You would think the Editorial Board of the Wall Street Journal would remember what it wrote about network neutrality. In its April 24th diatribe against network neutrality regulation,

https://www.wsj.com/articles/fcc-net-neutrality-jessica-rosenworcel-biden-administration-internet-b427c825?mod=opinion_feat1_editorials_pos1; the Board appears has forgotten how it spread the gospel that classifying Internet access as telecommunications service, subject to streamlined regulation, would stifle investment, innovation, and employment in the wireless industry. No 5G, no billion-dollar acquisitions, and nothing but stagnation in an industry otherwise considered quite dynamic and robust.

             The Editorial Board joined a large cast of characters, including former FCC Chairman Ajit Pai, and gobs of “coin-operated” sponsored researchers, in ignoring a basic tenant in high tech finance: Research and development, as well as capital expenditures in next generation service, trump any regulatory initiative, no matter how misguided.

             The Editorial Board also lost track of where U.S. wireless carriers operate along a technology curve in any given year.  High investment occurs when competitive necessity requires carriers to install next generation equipment, followed by far less investment once the new plant becomes operational.

             Wireless carriers cannot afford to punish overzealous regulators with skimpy investment at the onset of next generation service, nor do they overinvest simply because a more lenient and favorable regulatory environment exists, soon after a high point in new technology deployment.

             The Editorial Board also seems to have forgotten the initiatives by much loved fellow conservatives to require content neutrality by liberal and biased Internet Service Providers.  Some of the Journal’s best buddies urged Congress to mandate common carriage regulation of the Internet.

5G Bandwidth Expansion Triggers an Avoidable Aviation Safety Alarm

 Warring U.S. government agencies continue to debate whether expanded fifth generation wireless service will interfere with aviation altitude measurements, years after the parties should have resolved this mission critical issue. See, e.g., FAA Statements on 5G (Jan. 28, 2022); https://www.faa.gov/newsroom/faa-statements-5g; Carr Statement on Biden Administration’s Failure of Leadership on 5G (Jan. 18, 2022); https://www.fcc.gov/document/carr-statement-biden-5g-delay.

In preparation for a 2019 global spectrum planning conference convened by the International Telecommunication Union, a specialized agency of the United Nations, the Federal Communications Commission, and even the President’s Executive Branch telecommunications advisory agency, summarily dismissed 5G altimeter interference concerns raised by the Federal Aviation Administration.  See Letter from Steve Dickson, Administrator, Federal Aviation Administration, to Adam Candeub, Deputy Assistant Secretary of Commerce for Communications and Information, Performing the Delegated Duties of the Assistant Secretary of Commerce for Communications and Information National Telecommunications and Information Policy, (Dec. 1, 2020); https://www.faa.gov/sites/faa.gov/files/2021-10/DOT_Letter_to_NTIA_FCC3.7_GHz_Band_Auction.pdf; John Hendel, How Washington flew into a 5G mess, POLITICO (Jan. 19, 2022); https://www.politico.com/news/2022/01/19/5g-flights-spectrum-mess-washington-527425.

Critical interference analysis should have continued, but it appears that the rejecting agencies expected the FAA to accept defeat and consider the matter closed.  Predictably, the FAA did not “speak now and forever hold your peace.”  It now has powerfully alarmed the court of public opinion with worst case scenarios of severe interference between 5G service and airline altimeter readings. See, e.g., Tom Wheeler, Did the FAA cry wolf on 5G?, TECHTANK, The Brookings Inst. (Jan. 21, 2022); https://www.brookings.edu/blog/techtank/2022/01/21/did-the-faa-cry-wolf-on-5g/; Stephen Gandel, How 5G Clashed With an Aviation Device Invented in the 1920s, THE NEW YORK TIMES (Jan. 19, 2022); https://www.nytimes.com/2022/01/19/business/5g-radio-altimeters-airlines.html; Andrew Ross Sorkin, Jason Karaian, Sarah Kessler, Stephen Gandel, Michael J. de la Merced, Lauren Hirsch and Ephrat Livni, Why Airlines Are Worried About 5G, THE NEW YORK TIMES (Jan. 20, 2022).

A serious matter, which could have been resolved through fair-minded technical assessment of interference potential and accommodation of cross cutting interests, now triggers FAA claims of calamity.   In the interim, the FCC auctioned off the newly reallocated 5G spectrum generating over $81 billion dollars for the U.S. treasury, (FCC Announces Winning Bidders in C-band Auction, (Feb. 24, 2021); https://www.fcc.gov/document/fcc-announces-winning-bidders-c-band-auction) with as much as $14.7 billion flowing to incumbent users of the C-Band satellite spectrum to defray their relocation costs.  See, FCC, Expanding Flexible Use of the 3.7 to 4.2 GHz Band, GN Docket No. 18-122, Report and Order and Order of Proposed Modification,  35 FCC Rcd. 2343 (2020); Caleb Henry, FCC sets December C-band auction, offers up to $14.7 billion for satellite operators, SPACE NEWS (Feb. 6, 2020); 

How Could This Happen?

For decades, the nations of the world have relied on an intergovernmental process designed to build trust and harmonize the use of radio spectrum and the orbits used by satellites. The ITU, has earned a reputation for lending its “good offices” to reach a global consensus, albeit one that can take years to complete.  Interference-free frequency allocations and uniform procedure for registering the orbital location of satellites enhance consumer welfare by promoting efficiency, shared access to global resources, and economies of scale. For example, a consensus on which frequencies to use for wireless services has made it possible for equipment manufacturers to offer single handsets useable in most places. https://spacenews.com/fcc-sets-december-c-band-auction-offers-up-to-14-7-billion-for-satellite-operators/.

The ITU achieves consensus by adhering to a lengthy process requiring thorough study, ventilation of viewpoints, and trust building with an eye toward anticipating, avoiding, and resolving conflicts.  Because the process often reaches “consensus by exhaustion,” some national governments and commercial stakeholders have become increasingly dissatisfied with the pace and outcomes of conference deliberations.  The prospect for early market entry, global wireless leadership, and billions of dollars in auction proceeds encouraged the FCC and the Executive Branch to fast forward 5G frequency allocations with little concern about potential harm to the ITU planning process and inadequate assessment of altimeter interference potential, even after financing the departure of incumbent users.

Government Agency Squabbling

Compounding problems with the ITU process, the United States government failed to resolve all interagency disputes before the 2019 ITU World Radio Conference.  The parties had plenty of time to work through their disputes and reach a consensus on spectrum planning initiatives at the ITU.  Instead, the FAA persists, perhaps combining a heartfelt concern for aviation safety with the desire to remedy the sting of not having had its concerns adequately considered by other government agencies having more apparent expertise, clout, and the ability to generate billions for the national treasury.

Reaching closure on a single set of initiatives for ITU spectrum planning conferences will become more difficult for many nations as the nature and type of interested parties grows.  Representatives of ventures using new spectrum-intensive technologies, such as autonomous vehicles, finance, artificial intelligence, and the Internet of Things, will need more bandwidth.  While most applications require short distance transmissions and can tolerate multiple uses of the same frequencies, the massive increase in demand can result in congestion and in turn demands for exclusive assignments to foreclose even the possibility of interference. 

FCC did anticipate the need to separate commercial 5G services from nearby incumbent altitude monitoring by aircraft.  Despite an FCC-mandated guard band of 220 Megahertz, [1] separating the two types of services the FAA vigorously asserted that the potential for harmful interference would persist, particularly during critical aircraft takeoffs and landings at airports (see Robert D. Atkinson, C-Band Spectrum Rollout for 5G and Aviation Altimeters, ITIF INNOVATION FILES (Nov. 9, 2021); https://itif.org/publications/2021/11/09/c-band-spectrum-rollout-5g-and-aviation-altimeters.

The FCC and FAA should recognize that they have limited time available to avert greater harm to the national interest in both access to the latest innovations in wireless broadband and aviation safety. Had the FCC worked with the FAA to assess the actual potential for interference, despite ample separation of frequencies used, wireless consumers would already have access to a sizeable block of spectrum ideal for ultrawideband service.

 

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[1]              “By licensing only up to 3.98 GHz as flexible-use spectrum, we are providing a 220-megahertz guard band between new services in the lower C-band and radio altimeters and Wireless Avionics Intra-Communications services operating in the 4.2-4.4 GHz band. This is double the minimum guard band requirement discussed in initial comments by Boeing and ASRC.” Expanding Flexible Use of the 3.7 to 4.2 GHz Band, Report and Order, at Para. 391.

5G Public/ Private Partnerships Versus Auctions

            A remarkable battle pits the Defense Department and the FCC/Congress on the best strategy to activate 5G wireless spectrum in the quickest time. Uncharacteristically, DoD wants to partner with the private sector in a 5G network that the private player builds and shares with Defense Department users who offer nothing more than an agreement to share previously dedicated, exclusive-use radio spectrum.  See https://www.wsj.com/articles/pentagon-opens-door-to-5g-network-shared-with-civilian-cellphones-11600686874.  AT&T cut a similar deal for a 5G network offering first responders prioritized access.  See https://www.firstnet.com/.  In both instances, private carriers secure access to spectrum on an expedited basis without having to compete in a usually much more costly and possibly more time consuming auction.  Government spectrum users get access to cutting edge telecommunications simply by agreeing to use new technologies that make sharing and prioritization of access doable.

            I cannot overemphasize the change in attitude by Defense Department spectrum managers who for generations could not tolerate the “national security risk” in having to share spectrum with other users.  The first crack in that attitude arose when launch companies succeeded in offering discounts for multiple-satellite payloads from both the private and public sectors.  Now, the DoD gladly accesses a turnkey 5G wireless network for nothing more than an agreement to share it with private users.  How progressive.

            Ironically, some federal government officials consider public/private partnerships a subversion of the marketplace, bordering on the S word: socialism.  Might their contempt result from the likelihood that less scarce 5G spectrum might fetch lower FCC auction proceeds?  Worst yet, I wonder if some stakeholders seek and benefit from an overall shortage of next generation wireless spectrum.

            If the paucity of spectrum became a glut, carriers could not longer charge above market rates.  Existing licensees, like the Dish Network, would have to “put up, or shut up,” no longer able to avoid fines for failing to install and operate the networks they touted as essential, but never got around to building.  Maybe the FCC would get serious about promoting facilities-based competition from new wireless carriers, by imposing caps on further warehousing by incumbents and by opening up new spectrum access options on an expedited basis. 

            Curiously, the FCC has no problem making public Wi-Fi spectrum available for use by private carriers, free of charge.  Would the FCC actually play it straight and honestly by promoting market entry by new carriers to match, or exceed the competitive pressure removed when TMobile acquired Sprint and lost its maverick disposition?

            Yet again, I see a massive gap between rhetoric and reality.  Libertarian free marketers appear unable to see the public interest benefit in public/private partnerships?  They would rather have the government ration and auction spectrum, no matter how long it takes?  Let’s add another p-word to the mix: pragmatism.

           

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.

             

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.

           

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 5^th 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.

Shoot First with Snark and Maybe Check the Facts Later: Mistruths and Market Misperception by WSJ Columnist Holman W. Jenkins

            I was doing well on my self-imposed moratorium from correcting the frequent intentional and unintended mistakes in Wall Street Journal articles on telecommunications and the Internet.

Then along came Holman Jenkins’ whoppers in the Wed. July 31, 2019 edition: Faster Wireless vs. the Swamp; https://www.wsj.com/articles/faster-wireless-vs-the-swamp-11564527042

            Mr. Jenkins recently lambasted the government’s antitrust challenge to AT&T’s acquisition of Time Warner and today he mocks any benefit derived from having 4 instead of 3 facilities-based, wireless broadband carriers.  Anyone who thinks consumers and wireless competition benefit from 4 carriers has a number “fetish.” He seems pleased by a Sprint exit, particularly given the low odds he calculates for a Charlie Ergen-managed venture to provide facilities-based competition.

            Mr. Jenkins certainly offered a correct characterization of Mr. Ergen’s slipperiness and inclination to elevate negotiating/complaining/delaying strategies over building networks.  Mr.  Ergen likely will try finding ways to collect a hefty markup on spectrum he hoarded and was soon to lose, having never migrated to actually installing facilities to provide service.  The Justice Department just gave him a 4-year extension and ample time to remain a wireless reseller, beholden to the remaining 3 carriers who actually operate physical (not virtual) networks.

            Mr. Jenkins enters the land of half-truths (or less) by implying that fixed and mobile wireless are just about to the point of interchangeability. He bolsters his argument with the false implication that Comcast and Charter are facilities-based carriers in their own right.  Not exactly.  Both carriers offer Wi-Fi hotspots which only offer islands of broadband access with no hand off capabilities.  Comcast and Charter mobile service relies on resold capacity from the 4—make that 3—national carriers. 

Comcast and Charter both operate as “Mobile Virtual Network Operators.” MVNOs “are essentially wholesalers of wireless spectrum — they buy bandwidth from carriers and then resell it to customers under new branding.” https://www.businessinsider.com/charter-spectrum-mobile-mvno-service-2018-7  As resellers, MVNOs survive in the marketplace if and only if a facilities-based carrier agrees to sell them bulk transmission capacity at a low enough price to squeeze out a profit margin.

We may reach a point where fixed and mobile network become interchangeable, but we are not there now even as consumers do abandon wireline phone service.  One should not conflate abandoning the wireline phone networks for abandoning any and all fixed wireline services.  Consumers switch from metered, throttled and not unlimited wireless service to Wi-Fi, because the latter is unmetered, unthrottled and far less likely to have a data cap at all, or one that affects incentives to use the service.  Bear in mind that most Wi-Fi networks use wired broadband for access to the Internet cloud.  The last 50 feet is wireless.

Mr. Jenkins has a penchant for righteous indignation generated by an alternative reality about current marketplace conditions.  I still cannot wrap my head around his view that 3 carriers are better than 4.  I don’t have a predisposition for any minimum or maximum number of facilities-based competitors in the wireless marketplace.  I can state with almost the same certainty as Mr. Jenkins that allowing further concentration of the wireless marketplace with 3 carriers holding a 95% national market share guarantees less competition, innovation and employment with higher subscriber prices, carrier revenues and deteriorating global leadership in next generation networks and services.

Muddy facts, reporting and analysis.

Five Inconvenient Facts about the Migration to 5G Wireless

            An unprecedented disinformation campaign purposefully distorts what consumers and governments understand about the upcoming fifth generation of wireless broadband technology.  A variety of company executives and their sponsored advocates want us to believe that the United States already has lost the race to 5G global market supremacy and that it can regain it only with the assistance of a compliant government and a gullible public.  Stakeholders have identified many new calamities, such as greater vulnerability to foreign government sponsored espionage carried out by equipment manufacturers, as grounds for supporting the merger of two of only four national wireless carriers and preventing U.S. telecommunications companies from buying equipment manufactured by specific, blacklisted Chinese companies.

            How do these prescriptions promote competition and help consumers?  Plain and simple, they do not, but that does not stop well-funded campaigns from convincing us that less competition is better.  Set out below, I offer five obvious, but obscured truths.
1)         Further concentration of the wireless marketplace will do nothing to maintain, or reclaim global 5G supremacy.

            It requires a remarkable suspension of disbelief to think that allowing Sprint and TMobile to merge remedies a variety of ills, rather than further depletes conditions favoring competition in an already extremely concentrated marketplace.  Advocates for the merger want us to believe that it is our patriotic duty to support the combination, because it will enhance the collective fortunes of wireless carriers and customers, help the U.S. regain 5G market leadership from the Chinese and achieve greater competition, innovation and employment than what two separate companies could achieve.

            Nothing has prevented Sprint and TMobile from acquiring funds needed for 5G investments.  Ironically, considering the rampant fear of foreign ventures doing business in the U.S. telecommunications marketplace, both companies have primary ownership by powerful foreign ventures: Softbank (Sprint) and Deutsch Telekom (TMobile).  Interest rates have rarely reached such low levels and both companies have matched AT&T and Verizon in terms of preparing for the future migration from 4G to 5G infrastructure. 

            A merger would combine the two mavericks in the marketplace responsible for just about every consumer-friendly pricing and service innovation over the last decade from “anytime” minutes, to bring your own device, to attractive bundling of “free” and “unmetered” content.  A merged venture would reduce the number of wireless towers, total radio spectrum used to provide service and incentives for enhancing the value proposition of next generation wireless technology.
2)         Carriers Cannot Expedite 5G with Labels.

            Branding handsets and service as “5G evolving” contributes to the hype without expediting the ready for service date.  An emphasis on puffery and marketing distracts the carriers and their subscribers from an emphasis on the hard work needed to make 5G a reality.  There are no short cuts in spectrum planning, network design, equipment installation and coordination between carriers and local authorities.  Even before the rollout of definitive 5G standards and equipment, FCC Chairman Ajit Pai wants to limit local regulators by establishing a “shot clock” deadline on permitting and site authorizations no matter how complicated and locality specific
3)         Ignoring or Underemphasizing International Coordination will Backfire.

            Next generation network planning typically requires years of negotiation between and among national governments.  For wireless services, the nations of the world attempt to reach consensus on which frequencies to allocate and what operational procedures and standards to recommend.  This process requires patience, study, consensus building and compromise, characteristics sadly out of vogue in the current environment newly fixated with real or perceived threats to national security, fair trade and intellectual property rights.  These important matters increase the need to coordinate with nations, rather than offer enhanced, first to market opportunities for nations acting unilaterally and independent of traditional inter-governmental forums.

           
4)         Invoking Patriotism, Trade and National Security Concerns Will Harm U.S. Ventures.

            Advisors to Sprint and TMobile probably are congratulating themselves on having come up with a creative, national security rationale for unprecedented and ill-advised merger approval and outlawing market entry by foreign equipment manufacturers.  Their short term objectives ignore the great likelihood of long term harm to efficiency, innovation, employment, nimbleness and speed in market entry.  Concentrating a market reduces competitive incentives by making it easier for dominant ventures to establish an industry-wide consensus on service rates and terms. Antitrust experts use the term “conscious parallelism” to identify the all too frequent decision by competitors not to devote sleepless afternoons competing rather than implicitly accepting a high margin path of least resistance.
 5)         Politicizing Next Generation Wireless Harms Everyone.           

            Planning for a major new generation of wireless technology did not always have a political element, divided along party lines.  The process is tedious and incremental, perhaps not well too slow to accommodate the pace of changes in technologies and markets.  However, its primary goal seeks to optimize technology for the greatest good.  Historically, when nations favored domestic standards and companies, markets fragmented and profit margins declined.

Incompatible transmission standards, like that currently in use by wireless carriers, have increased consumer cost and frustration, because an AT&T handset will not work on the Verizon network.  Incompatible standards and spectrum assignments typically harm consumers and competition by increasing the likelihood incompatible equipment and networks.

            I cannot understand how two political parties can apply the same evaluative criterion and reach total opposite outcomes.  By law, the FCC and Justice Department must consider whether the TMobile-Sprint merger would “substantially lessen” competition.  Measuring markets and assessing market impacts should not cleave along a political fulcrum, yet it does with predictably adverse consequences.  One cannot see any harm in a business initiative that concentrates a market, while the other one cannot anticipate how a merger might enhance competition, or at least cause no harm.
If politics, national industrial policy and false patriotism become dominant factors in spectrum planning and next generation network, consumers will suffer as will ventures who have become distracted and unfocused on how to make 5G enhance the wireless value proposition. 

The 5G Wireless Utopia Just 6 Months After the Obama Investment Downer

            Today’s Wall Street Journal continues the commitment to framing a fake, alternative reality in the telecom/Internet ecosystem.  See Holman W. Jenkins, Jr. Comcast vs. the 5G Frenzy; available at: https://www.wsj.com/articles/comcast-vs-the-5g-frenzy-1499188939.

            Just months after President Obama allegedly engineered an unprecedented decline in broadband infrastructure investment, Mr. Jenkins sees a “frenzy” in superfast fifth generation wireless network rollouts and a “dramatic restructuring of the cable and mobile broadband industries.”

            Wow!  Just a few months ago, the Journal and various sponsored researchers bemoaned the decline in broadband capital expenditures, solely generated by the FCC’s insistence on Mr. Jenkin’s characterized “1934-style utility regulation.” Now, wireless carriers like AT&T and Verizon have opened their pocketbooks to invest in new plant, at the same time as they spend billions to acquire content providers like AOL, DirecTV, Time-Warner and Yahoo.

            Here are some inconvenient and ignored truths: Congress mandated common carrier regulation of wireless carriers and that designation has NOT created any investment disincentive.  Broadband carriers have spent billions on content providers surely based on the assumption that ample capacity and transmission speed can accommodate ever growing video demand.  These very same carriers have spent additional billions on radio spectrum.

            So much for the FCC’s frenzy killing network neutrality regulation on investment, innovation and employment.

            Mr. Jenkins implies that the telecom/Internet marketplace will grow even more competitive, apparently not likely to suffer when additional acquisitions reduce the number of national wireless carriers to three and other mergers further concentrate other markets.  If not now in the new 4G environment, the future 5G environment will make wired and wireless networks interchangeable.

            Maybe, but Mr. Jenkins seems to ignore additional inconvenient truths.  Unlimited wireless—now and in the future—does not truly fit the term.  Unlimited plans have limits which if exceeded result in a major degradation of service to second or third generation network speeds that cannot provide video carriage. This occurs when a subscriber exceeds a cap of 20-30 Gigabytes and when the top few percentage power users take service from a congested tower. Wireless carriers also down-convert high definition video streams from 1080 lines of resolution to 480 lines.

            Currently, wireless carriers do impose hard and soft data caps while wireline carriers do not, or have a soft cap at more than 500 Gigabytes. Now, wireless carriers charge substantially more than wireline carriers on a per Gigabyte rate. We will see true intermodal competition when wireless broadband subscribers do not bother to program their smartphones to shift from their wireless carriers to available Wi-Fi options.

            So for the time being, Mr. Jenkins has lobbed yet another canard to discredit skeptics of an unregulated marketplace and to vilify network neutrality advocates.

Massive 5G Investment, Despite “Regulatory Uncertainty”

            Riding closely on the heels of substantial investment in Fourth Generation wireless infrastructure investment comes a Fifth Generation.  Wireless carriers in the United States appear to have accelerated the rollout of 5G. See, e.g., http://www.cnbc.com/2017/02/27/momentum-is-building-for-5g-rollout-ericsson-ceo.html; https://www.cnet.com/news/verizon-to-hold-worlds-first-crazy-fast-5g-wireless-field-tests-next-year/; https://www.bloomberg.com/news/articles/2017-02-27/at-t-boosts-5g-networks-rollout-as-online-video-demand-spikes

            Hang on. Aren’t we living an acutely painful world of regulatory uncertainty foisted on the marketplace by network neutrality zealots?  How can carriers invest substantially in a wireless broadband technology if regulators are hell-bent to mandate access and openness?

            It strikes me that wireless carriers in the United States and elsewhere can handle regulatory uncertain and make prudent investments in next generation network infrastructure.

            There are legitimate reasons not to support network neutrality, or to advocate reforms.  But make no mistake: removing “regulatory uncertainty” is a bogus rationale having no real impact on carrier investment strategies.