New Publication--The Mixed Blessing of a Deregulatory Endpoint for the Public Switched Telephone Network

        Telecommunications Policy soon will publish my paper entitled The Mixed Blessing of a Deregulatory Endpoint for the Public Switched Telephone Network

        Here's the abstract:

            Receiving authority from a National Regulatory Authority to dismantle the wireline public switched telephone network (“PSTN”) will deliver a mixture of financial benefits and costs to incumbent carriers.  Even if these carriers continue to provide basic telephone services via wireless facilities or the Internet, they will benefit from the likely substantial relaxation of common carriage duties, no longer having to serve as the carrier of last resort and having the opportunity to decide where and what services they will provide going forward.  On the other hand, incumbent carriers may have underestimated the substantial financial and marketplace advantages they also will lose in the deregulatory process.

            Incumbent carriers often obscure or dismiss as insignificant the substantial privileges and benefits accruing from their status as telecommunications service providers.  Common carrier responsibilities include duties to interconnect with other carriers, provide service on transparent and nondiscriminatory terms and offer some low margin services.  But this legal status also guarantees wireline local exchange carriers in many nations access to annual universal service funding, zero or low cost access to rights of way and radio spectrum, accelerated depreciation and other tax benefits, the ability to vertically integrate throughout the “food chain” of telecommunications services and dominant status in the administration of telephone numbers, standard setting and other policy issues.  Incumbents will strive to capture deregulatory benefits while retaining the many benefits previously reserved for common carriers.

        This paper will identify the potential problems resulting from the decision by the United States Federal Communications Commission (“FCC”) to grant authority for telecommunications service providers to discontinue PSTN services.  The paper also will consider whether in the absence of common carrier duties, carriers providing telephone services, including Voice over the Internet Protocol (“VoIP”), voluntarily will agree to interconnect their networks.  The paper will examine Internet peering and other types of network interconnection with an eye toward assessing whether a largely unregulated marketplace can ensure ubiquitous access to PSTN replacement services. 

        The paper concludes that private carrier interconnection models and information service regulatory oversight may not solve all disputes, or foreclose price discrimination for functionally the same type of service.   Recent Internet interconnection and television program carriage disputes involving major players such as Comcast, Level 3, Fox and Cablevision, point to the possibility of increasingly contentious negotiations that could result in balkanized telecommunications networks with reversed or reduced progress in achieving universal service goals.  The paper also concludes that rural access to VoIP and other voice communications services could end up costing significantly more than what urban residents pay, an efficient, but politically risky outcome.

The Wireless Duopoly?

   The July 9, 2012 edition of the Wall Street Journal (Winners' Circle R6) identifies some of the most successful money managers for the year so far.  Included is James Wong of Payden Value Leaders.  Mr. Wong is long on Verizon and AT&T and offers this insight:

    "The beauty of the business [of AT&T and Verizon] is that it's an oligopoly."  But a robustly competitive one for sure.

What’s Wrong With Some Types of Sponsored Research?

          
           In various blog entries and publications I have expressed or implied my disapproval of certain kinds of sponsored research.  An author of such research recently chided me for using the term in this blog, because it can create an inappropriate tone perhaps implying illegitimacy of the work on its face.  The author suggested that branding my unsponsored research as ideological would cast a similarly inappropriate and unfair tone.

            I should clarify that I understand there to be two types of sponsored research: 1) financial support granted for a research proposal with no expectation that the output will support an already established outcome; and 2) financial support granted with the expressed or implied understanding that the output will support a sponsor-desired outcome.  In the former researchers are free to find the truth, but in the latter the primary goal is to support an outcome regardless of whether the output is true.  Sponsored researchers engaged in the latter will claim that the receipt of financial support in no way influenced the outcome of their work.  It just so happens that the findings and conclusions coincide with what the sponsor had in mind.

            I consider results-driven sponsored research as questionable, because the research does not pose and try to answer research questions without preconceived, desired outcomes.  Such research would not pass must with blind peer review where an expert, unknown to the authors and not knowing who the authors are, assesses the work product.  Peer review does not challenge the author’s ideology and preconceived notions, but instead assesses whether research findings are reproducible and plausible.

            Much of the sponsored research on telecommunications and Internet issues are financed with an eye toward influencing the policy making process.  But instead of being presented as advocacy documents, they are presented as pure research perhaps because such labeling confers greater credibility to the work product.  I have no problem with stakeholders funding advocacy documents that no one would confuse with research, particularly work having no desired outcomes.

            I have great problems with stakeholders using research to support a preordained outcome, particularly when the fact finder, e.g., the FCC, may be all too willing to treat the work product as pure research and heavily rely on it when making policies. 

Consider the recent instance where the large pharmaceutical firm Glaxo submitted research to support a drug’s safety, but later acknowledged that it removed findings that called into question the drug’s efficacy and safety.  Should Glaxo have the option of sponsoring research based on the view that the FDA would have the resources to conduct its own research, or at least to identify instances where the Glaxo research would not pass muster with peer review?  Should Glaxo have the option of deleting and not submitting any part of research that would hamper its goal of securing FDA approval?

            In any event I do not want to come across as a better researcher simply because I limit the types of financial support and grants I seek. I only assert that I do not have to deliver a particular work product.  I have the freedom to challenge the conventional wisdom and to identify instances where stakeholders are misrepresenting the truth as I understand it.

  Of course reasonable people can disagree on the truth. 

Questions Sponsored Wireless Competition Researchers Don’t Ask

          The Federal Communications Law Journal recently published a comprehensive assessment of the U.S. wireless marketplace with an eye toward challenging the FCC’s qualified concerns about the adequacy of competition.  See Gerald R. Faulhaber, Robert W. Hahn and Hal. J. Singer, Assessing Competition in U.S. Wireless Markets: Review of the FCC’s Competition Reports, 64 FED. COMM. L. J. 319 (2012) available at: http://www.law.indiana.edu/fclj/pubs/v64/no2/Vol.64-2_2012-Mar_Art.-03_Faulhaber.pdf.

        The authors have produced high quality sponsored research and I appreciate their disclosure of AT&T’s financial underwriting.  You’d be surprised about the surfeit of undisclosed results driven research sponsored by a major stakeholder.  These authors go so far as to ask “Are we missing something?” 

            I’ll take it on good faith that they are sincere in wanting to confirm what they consider obvious—that the U.S. wireless marketplace is robustly competitive, innovative and not so concentrated as to warrant antitrust concerns.  So even if they are overconfident—as many economists surely are—and disinclined to consider the questions from someone like me I’ll pose five of the many I have anyway.

1)         You substantially rely on downward prices in the wireless marketplace to support your robust competition finding. How much of the decline results from competition as opposed to the nature of the wireless business which has substantial sunk costs and low incremental costs?  For good measure as the wireless marketplace has matured don’t businesses have to “sharpen their pencil” to attract late adopters?

2)         Speaking of pricing, you and others place heavy emphasis on a calculated per minute of use rate.   One can calculate for the U.S. globally lowest per minute cost based on globally highest usage.  But what about subscribers who have no need or interest in talking for even 450 minutes a month, or who don’t want to send several thousand texts per month?  Their per unit rates are much higher, especially the occasional user who does not see the need for an unlimited $20-30 a month texting plan, but who questions how a carrier can justify charging 20 cents a text for something that uses the built-in polling system carriers use to track operating handsets.

          If you are one of those snarky types, you might read the above paragraph and ask “is there a question here?” Yes; I’ll rephrase it:  Wouldn’t your evidence of declining cost be less substantial if you did not apply a single average and instead considered an average for each of several tiers of available minutes?  For example, in my unsponsored ignorance I would have tried to calculate the average actual monthly usage for subscribers in each of the tiers that currently exist, e.g., 450, 900, unlimited for AT&T Wireless.

3)      You may not have noticed this but all wireless carriers seem to have the same basic price points for the same type of service.  Your Appendix 1 shows an example of this: the 4 national carriers all offer 450-500 monthly voice minutes for $39.99 plus fees.  Are all the wireless carriers price takers having no carrier-specific efficiencies?  Antitrust specialists might infer something they call “conscious parallelism.”  How is that not happening in the U.S. wireless marketplace?

4)     Your paper shows declines in Average Revenue Per User (“ARPU”) as additional evidence of a robustly competitive market, yet you don’t acknowledge that the figures (and much higher ones I have found) range near the top globally.  I appreciate that high usage, stimulated by large baskets and by unlimited All You Can Eat plans, generate higher monthly revenues.  However you don’t separate ARPUs by type of user.  What do you think of Craig Moffett’s research that reports significantly higher ARPUs for smartphone users with minor declines in the last few years?  In a June 25, 2012 report this prominent Wall Street buy side analyst at Bernstein Research estimates AT&T’s first quarter 2012 ARPUs for 3 categories: $80.44 a month for postpaid smartphone users down 4.4% year over year, $42.34 for non-smartphone post paid users and  $64.46 average for all postpaid users.

           Do you think ARPUs will continue to decline when more subscribers add data plans?

5)        I’m confused about your views on spectrum and its impact on the wireless marketplace.  The conventional wisdom is that wireless carriers simply don’t have enough spectrum available, the product of government regulation and I’ll add the spectrum management and allocation process of the International Telecommunication Union.  But I got the sense from your paper that there is at least enough spectrum to support 5 or more facilities-based, robustly competitive carriers in most markets. So do you think there’s enough spectrum to support competition and more might promote greater competition, or would access to more spectrum simply help incumbents erect greater barriers to market entry by new competitors? 

        By the way, don’t you think you overstated the impact of the non-national carriers?  Clear’s data service is so far limited to personal computers with dongles, not smartphones.  Neither Sprint, T-Mobile or the super regionals have had much success offering an attractive alternative to the positive networking externalities that accrue when more and more subscribers pick the same network and when most developers offer their next killer app solely on the platform support by AT&T and Verizon.

         I’m sure you can easily answer and dismiss my questions, but with all due respect I see the wireless marketplace from a much different perspective.  I see the carriers basking in the limelight and exploiting the networking externalities of handset manufacturers, content creators and applications developers.  I don’t see them devoting sleepless afternoons competing.

       In the marketplace of ideas and consulting you surely win, perhaps because there doesn’t seem to be anyone interested in sponsoring research that answers the kinds of questions posed here.

           

Yale JOLT Article on Internet Access Regulation

     The Yale Journal on Law and Technology has recently published my article entitled Rationales for and Against Regulatory Involvement in Resolving Internet Interconnection Disputes (14 Yale J.L. & Tech 266 (2012); available at: http://yjolt.org/rationales-and-against-regulatory-involvement-resolving-internet-interconnection-disputes.
     Here's the abstract:

      This Article will examine the terms and conditions under which Internet Service Providers (“ISPs”) switch and route traffic for each of several links between a source of content and consumers. The Article concludes that the Federal Communications Commission (“FCC”) may lack direct statutory authority even to resolve disputes based on its determination that Internet access constitutes an unregulated information service.  Additionally the FCC may appropriately forebear from regulating, because sufficient competition favors industry self-regulation.

       Despite substantial reasons not to intervene, the FCC nevertheless might have to clarify its understanding of what subscribers of retail ISP services can expect to receive. Under truth in billing and other consumer safeguards the Commission might require ISPs to explain what an Internet subscription guarantees not only in terms of transmission speed and downloading capacity, but also what subscribers can expect their ISPs to do when receiving content requiring downstream   termination.

      The Article concludes that both customers of content services, such as Netflix, and retail ISP subscribers expect their service providers to guarantee delivery of movies and all sorts of Internet traffic respectively. For physical delivery of DVDs Netflix must pay the U.S. Postal Service and for delivery of streaming bits Netflix must pay one or more ISPs. But for Internet traffic involving two or more ISPs, the Article examines whether other retail ISPs providing last mile delivery of content violate their service commitments to subscribers by demanding additional payment from upstream carriers.

Galley Proof Available for New Law Review Article

                The Brooklyn Law Review soon will publish From Bad to Worst: Assessing the Long Term Consequences of Four Controversial FCC Decisions. Email me if you'd like a copy.

          Here's the abstract:

          Far too many major decisions of the Federal Communications Commission (“FCC”) rely on flawed assumptions about the current and future telecommunications marketplace.  If the FCC incorrectly overstates the current state of competition, it risks exacerbating its mistake going forward if actual competition proves unsustainable, or lackluster.  In many key decisions the FCC cited robust competition in current and future markets as the basis for decisions that relax restrictions on incumbents, abandon strategies for promoting competition, or apply statutory definitions of services that trigger limited government oversight.  The Commission ignores the secondary and tertiary consequences of decisions that deprive it of the jurisdiction and flexibility necessary to respond to technological and marketplace changes. 

          Rather than promote competition, the FCC has exacerbated the trend toward concentration of ownership generated by technological innovations that promote bundling of  previously stand alone services.  Ventures diversify and expand to accrue scale economies and to exploit new opportunities to serve adjacent markets. Rather than make sure that this trend does not lead to oligopolistic behavior, the FCC have removed increasingly essential regulatory safeguards designed to curb market power without robbing ventures of opportunities to operate efficiently.  Intentionally or not the FCC contributes to market concentration even as it abandons lawful techniques and policies to monitor and remedy marketplace abuses.

          The FCC’s deregulatory decisions operate in one direction—the elimination of regulatory safeguards—without any option or vehicle for reasserting safeguards should assumptions prove wrong, or circumstances change in ways necessitating public interest safeguards.  For example, the Commission’s decision to classify Internet access technologies as information services appears to eliminate entirely the ability to respond to anticompetitive practices of Internet Service Providers.  So when Comcast or other carriers deliberately disrupt subscribers’ traffic in the absence of legitimate network management needs, the FCC has no statutory authority to impose safeguards.  Worse yet the decision to treat basic bit transmission as an information service severely restricts the Commission’s ability to impose safeguards on services that combine Internet access with software, to provide the functional equivalent of a telecommunications service, e.g., Voice over the Internet Protocol (“VoIP”).  The FCC decision to apply the information service classification to all Internet access technologies means that the Commission has abandoned any direct statutory authority and must resort to questionable ancillary jurisdiction to impose even light-handed regulatory safeguards.

          Other instances of unintended consequences from overly optimistic findings and assumptions about marketplace competition include removal of caps on the total spectrum a single wireless carrier can control, premature abandonment of local loop unbundling requirements and conclusions that incumbent carriers have no duty to deal with market entrants even when the incumbent opts to offer retail rates below the so-called market-driven wholesale rate charged competitors.  For each of these decisions the FCC compounded its initial mistakes by foreclosing the option of making necessary and lawful future modifications.

            This paper will examine the consequences of the FCC’s wishful thinking about the viability of current competition and the sustainability of competition going forward.  The paper concludes that flawed fact finding and market projections have adverse initial consequences, but even worst future impact. In response to vigorous lobbying by incumbents, impatient law makers and jurists and deregulatory bias the FCC has contributed to the development of a telecommunications industry structure that appears less competitive, innovative and responsive than what occurs in many other countries.
      

Billing Line Items in Telecom and Other Industries

          In a previous blog entry, I questioned why wireless carriers allow sharing of voice minutes with no additional charge for multiple handsets, but new data sharing plans add surcharges for each additional device.  Subscribers incur no recurring fees for multiple device access to voice minutes even though carriers incur higher signaling costs when additional devices are on, even if they are not being used.  Carriers similarly incur such costs for smartphones, and I have seen no evidence that the costs are higher for data than voice.

            So why the difference?  As best I can determine the answer is that consumers have become inured to billing line item expansion.  We see it everywhere: airfares, mortgages, car purchases and even car repair.  I will not do business with auto repair facilities that tack on an additional 10% “shop fee” to the bill, but I seem to stand alone.

            What ever happened to companies having to absorb overhead?  Instead we get nickled and dimed by additional line items that make no sense: “adjusted dealer markup,” “shipping and handling,” “dealer prep,” “regulatory fee,” etc.

            Wireless carriers can charge for multiple device access, because they can praddle on about how multiple devices increase signaling and polling costs.  The carriers had to absorb such overhead for voice, perhaps because of a real or perceived need to enhance the value proposition of their service.  As the Internet diversifies and offers ever increasing options and utility, wireless carriers can capture greater profits simply by providing the essential first and last link.

            Bottom line: wireless carriers are in an increasingly better position to raise monthly subscription costs while reducing the amount of handset subsidies.

About That Second, Third and Fourth Wireless “Attachment”

            There is some good news about the decision by Verizon Wireless to offer shared monthly data plans.  But there could be a lot more if the FCC applied its Carterfone policy.  That policy gave consumers the power to decide what and how many devices to attach to a network connection.  If Carterfone applied, consumers could use multiple devices to access a network subscription, albeit perhaps not at the same time.  Because wireless handsets each have a separate identity, Verizon and soon every other carrier will offer the shared data plan option, albeit at much higher prices factoring in the surcharges for using more than one wireless device.

            Readers over the age of 40 may recall that there was a time when the wireline telephone company totally controlled what devices could connect to the network.  The Bell System had a monopoly on “authorized” handsets and prevented even a used, secondary market for Bell telephones.  Subscribers feared that the Bell System would know whether a non-Bell vintage telephone was in use, when more than one phone was attached.  Carterfone liberated the marketplace for both new and used handsets.

            It is a remarkable time that the Carterfone policy somehow can be converted into “job killing government regulation.”  The policy promotes consumer sovereignty, but in this bizarre time it gets framed as something bad because it requires government to do something.  And what does government do?  It removes the ability of companies to establish bogus regulations designed to preserve a monopoly and maximize profits.  In retrospect it appears crazy that Bell System managers could argue that anytnon-Western Electric telephone could harm the network (and something they called “systemic integrity”) as well as risk the lives of telephone company personnel.  But that strategy lasted for years and preserved incredible profit margins for AT&T.

            History repeats itself.  Verizon surely cannot make a credible argument that allowing multiple devices to share a download basket of capacity triggers greater costs for the company.  Bear in mind that every wireless carrier provides shared access to a basket of voice minutes.  So how is data any different?  It isn’t. 

The lack of Carterfone enforcement means that wireless carriers can create a bogus, new “cost element.”  Because these carriers copy each other (some would say collude), expect every wireless carrier to create a new billing line item for that second, third and fourth device sharing a single monthly throughput allowance.

The New Economics of Metering

            The old school view for metering emphasized efficiency and resource management.  Without a meter tied to variable payment, subscribers would “overconsume” and waste resources.  Carriers ignored the metering option to stimulate experimentation especially for new services.  For example, Internet access subscriptions initially were offered on an All You Can Eat (“AYCE”) basis.  Even now cable television operates offer AYCE, largely because the business model involves a broadcast function (one-to-many) and the carrier incurs no greater costs with increased consumption.

            Internet carriers have applied conventional metering economics in migrating data subscribers from AYCE to monthly download caps.  Wireless carriers never offered AYCE, but they have agreed not to debit minutes of use for on-network voice calling.  This feature promoted positive networking externalities: a network accrues greater utility for users as more subscribers join the network.

            Some wireless carriers now want to abandon metering for voice services, not because the economics of metering has changed, but because of changes in consumer behavior.  Carriers can tout a generous new unmetered voice service, even as several tiers of usage merge into one option, offered at a higher price for many.  Because consumers are spending more time and money on data plans, wireless carriers have to find ways to retain voice service revenues.  One way would be to take a page from cable television operators and require subscription to a basic (now AYCE) voice plan, as a precondition to getting a data plan.  In cable if you want access to higher-tiered content, you must first subscribe to the basic tier.

            As they eliminate baskets of minutes in exchange for an AYCE plan, wireless carriers prevent subscribers from downgrading their voice plans to cheaper and smaller usage allotments, closer to actual (and declining) usage.  Wireless carriers now can offer AYCE on the valid assumption that few subscribers will overconsume. 

Does the ITU Want to Regulate the Internet?

             Remarkably the International Telecommunication Union (“ITU”) has flown under the radar scope of critics.  This specialized United Nations agency does have a substantial impact on telecommunications, spectrum management and the Internet.  Wireless carriers in the United States can blame the FCC all they want for spectrum scarcity, but the true originator of spectrum allocation decisions typically is the ITU.  Nations usually follow the ITU consensus in their domestic allocations. While nations can take a “reservation” to the ITU consensus and make a unilateral, national decision, few do.  Pursuing an exception usually ends up costing the outlier, because equipment adhering to that specification may not have the same scale and efficiency as one adhering to a global standard.  Think first generation cellular AMPS versus GSM.

            It should come as no surprise that the ITU has turned its attention to the Internet: as we migrate more information, communications and entertainment to an IP-centric network, the ITU surely will offer its “good offices” to anticipate and resolve conflicts.

            The U.S. has disproportionately low influence in the ITU, largely because few U.S. citizens serve in senior management positions.  Such underrepresentation results from limited second and third language skills and the perception that working at the anything related to the United Nations won’t enhance one’s career.  Of course it does not help that the organization of structure and unstated philosophy of the ITU tends to favor non-Western nations, even when the matter does not involve development and bridging the digital (or analog) divide.

            The ITU has not engaged in a power grab as much as pursue its real or perceived mission.

“Toll Free” Broadband Service: Double Billing Ripoff, or a Better Than Best Efforts Premium Option?

            Representatives of both AT&T and Verizon have stated that their companies will soon offer “toll free” broadband services.  So far they have not provided much detail, but the prospect for customer and content provider surcharges should trigger concern, even outside the context of the network neutrality debate.

            First let’s consider the frame the carrier reps use: “Toll Free.”  This is an old school “Bellhead” reference to a pricing strategy where the called party pays instead of the calling party.  Lots of commercial ventures have offered consumers Wide Area Telephone Service (“WATS”) line access using the 1-800 and now 866, 877 and 888 prefixes.  So toll free historically has referred to a pricing arrangement where consumers can avoid having to pay for a long distance telephone call. 

            The toll free reference may be a red herring here, because it’s likely that the arrangement will simply mean consumers will not have minutes of use or downloaded bytes debited against a monthly usage cap.  Toll free will mean debit-free to the end user with a surcharge to the content provider. 

            The proposed arrangement appears to parallel what Amazon has secured for cellular carrier delivery of e-books with two big differences.  First Amazon is having delivered content costing $10 or more in a single transaction, while ventures like Netflix may be offered expedited delivery of content costing $8 a month for “unlimited” streaming.  Also we should appreciate that when Amazon pays the e-book downloader pays nothing and does not even have to subscribe to cellphone service.   In both the wireline and wireless environment where “toll free” data will operate, end users already are subscribing to monthly service: DSL, fiber or a hybrid fiber wireline broadband service, and/or cellphone service.  So the value a carrier offers appears to be “better than best efforts” Internet routing of possibly “mission critical” bits coupled with a end user sweetener of not debiting minutes or bytes from a monthly basket.

            Is this a fair deal, or double billing?  End users will end up paying for such premium service, so it’s fair to ask when—if ever—one would want better than best efforts routing when plain vanilla best efforts heretofore has worked just fine.  The network neutrality advocates have a legitimate concern that carriers will find a way to degrade service to content providers like Netflix and Google making the premium routing a necessity.  Bear in mind that Netflix already pays Content Distribution Networks, such as Level-3, for high quality, “toll-grade” delivery.  Recently Comcast demanded a delivery surcharge in light of the higher volume of traffic Level-3 hands off to Comcast for final delivery than the amount Comcast hands off to Level-3 for upstream delivery through the Internet cloud.  So is Netflix getting hit up for a double or triple payment: once to Comcast for last mile delivery, twice to Level-3 and other long haul Internet cloud carriers and thrice to Verizon/AT&T?  Let’s not forget that end users already are paying $30-100 monthly for their wired and wireless broadband connections.  Doesn’t that broadband subscription entitle subscribers to timely and efficient delivery of any and all traffic without surcharges?

A Shift in the Balance of Power Between Wireless Carriers and Subscribers

            Today’s Wall Street Journal reports that wireless carriers have begun to reduce the subsidies they offer wireless subscribers.  See http://online.wsj.com/article/SB10001424052702304020104577384562576617618.html.
This maneuver occurs at the very same time as carriers have raised their data plan rates resulting in an increase in the major financial metric used by the industry: Average Revenue per User.

            A fair minded person, putting the pieces together, would conclude that the industry is becoming less competitive and acts in parallel, i.e., carriers collectively engage in the same conduct as to the major terms, conditions and prices for service.   Bear in mind that no carrier has announced a reduction in service rates as a result of reduced subsidy burdens.  No carrier has to do so, including languishing Sprint and T-Mobile.

            The ubiquitous excuse for all things bad in the wireless industry—spectrum scarcity—has nothing to do with the extent carriers have to offer handset subsidies.  Moreover if one considers the wireless marketplace as nearing maturity in terms of market penetration, shouldn’t carriers have to sharpen their pencil to offer better deals and a more compelling value proposition for laggards?  Apparently not.

            The leading buy side telecom financial analyst, Craig Moffett of Berstein Research predicts “a more disciplined and more profitable future” for carriers, no doubt at the expense of consumer surplus.

Whining All the Way to the Bank

            AT&T Chairman and Chief Executive Randall Stephenson complained yesterday that the FCC’s failure to approve AT&T’s acquisition of T-Mobile has resulted in a 30% data rate increase.  He implies that AT&T would not have raised prices if it had sufficient spectrum like that available by acquiring T-Mobile.  See http://topics.wsj.com/person/s/randall-stephenson/504.

             Does this pass your smell test?  Whatever happened to charging what the market would bear?  Mr. Stephenson is no doubt smarting from his failed strategy to drive out a competitor and
“rationalize” the wireless marketplace so that the survivors (eventually AT&T and Verizon controlling over 90% of the market) could raise rates even higher.  I should note that he lost many millions in a salary reduction and lost bonuses.

            So it comes as no surprise that Mr. Stephenson would resort to voodoo economics and fuzzy math.  A fair and realistic assessment of the wireless marketplace should start with considering whether there is a real scarcity in spectrum and not something that the carriers could manage if they conscientiously used compression and other spectrum conservation techniques.  Additionally we should appreciate that the T-Mobile acquisition would not have increased the aggregate amount of available spectrum, just that available to AT&T.  As well we should know that AT&T and Verizon have yet to activate spectrum they acquired for over $16 billion when the FCC made UHF television bandwidth available in the conversion from analog to digital television.   Just now Mr. Stephenson whines about a spectrum scarcity even as companies like Clear, Sprint and T-Mobile cannot exploit their access to such a scarce commodity. If these companies fail, it will show how regulatory policies have ruined the benefits of facilities-based competition in exchange for supporting scale and “too big to fail” megacarriers.

            Mr. Stephenson appears to want to reframe economic principles to support the premise that an industry consolidation would better serve consumers than the current marketplace comprised of four major carriers.  By analogy Mr. Stephenson’s logic would support further airline consolidation which empirically has resulted in higher rates, more crowded planes, less competition, declining use of large aircraft and reduced service to many localities.   So just how does industry consolidation or “rationalization” help consumers?  

            This is all about reducing consumer surplus, such as unmetered service, low rates and declining average revenue per user and raising carrier profits.  Mr. Stephenson takes us for fools.

Reintermediation—How Cable Incumbents Close Ranks with New Media

            The Internet has empowered consumers by eliminating middlemen that no longer add value.  I use the following key words to assess when and how direct access helps me: faster, better, smarter, cheaper and more convenient.  For example, one might want to browse in a bookstore—coffee in hand—or one might want to download an e-book in the fastest time, at the lowest price and from a remote and possibly mobile location.

            Cable television operators surely must appreciate that many consumers question what value they add, particularly when their analog technologies managed to deliver a picture far worse than one a digital signal that had travelled over 44,000 miles up to and down from a satellite.  Television riding over the top of an existing broadband link was supposed to be the killer application that would disintermediate costly and not value enhancing cable.  Think again.    You cannot underestimate the ability of cable operators to close ranks with their content affiliates, especially when cable management can offer greater revenues.  Why would ESPN give up a revenue stream coming from just about every cable subscriber in exchange for one than might generate higher margins from a much smaller subscriber base?

            So perhaps it should not come as too great a surprise that content providers are abandoning advertiser-supported Internet-delivered television, such as Hulu, no doubt encouraged by their incumbent cable partners.  I call this reintermediation where an existing distribution channel gets regenerated and re-entrenched, despite the potential for technological innovations to render the channel unnecessary.

            Incumbent cable operators will provide access to content via new media, if and only if we maintain our cable subscription.  So we get conditional “television everywhere” access in exchange for maintaining our old school cable subscriptions and abandoning new Internet-delivery options that could have offered consumers faster, better, smarter, cheaper and more convenient content access options.  These new media also could have offered advertisers and content providers a better value proposition over time.

            Consider the advertiser and content providers keen on attracting a larger audience.  Historically they have feared that new technologies would fragment audiences and provide opportunities to acquire content at lower prices.  Broadcasters, movie studios and movie theater operators initially considered cable an evil—if not illegal—siphon of audiences and revenues.  Over time it became clear that cable could expand geographical reach and audience numbers, while also creating new and profitable content distribution windows.   

            Now it appears that today’s content producers are willing to deny new media access, apparently because the sure thing status quo appears less risky and possibly more rewarding than embracing a larger and more diverse set of distribution options.  Maybe, but recall that the recording industry tried to stifle ala carte, per track access to content without success.  Is it different this time, because incumbent have greater control over their “must see” content?

Network Neutrality in a Nutshell

 Congressional Quarterly has prepared a helpful primer on network neutrality (with a few quotes from yours truly).  See http://library.cqpress.com/cqresearcher/cqresrre2012041300.

Intranets and the Cloud: The Lack of Functional Difference Between Comcast’s Xbox and Regular Broadband Traffic

             Those clever folks at Comcast want us to believe that there is a functional difference between routing Netflix traffic to an Xbox 360 terminal versus conventional Internet routing via a cable modem.  See http://blog.comcast.com/2012/03/xfinity-on-demand-on-xbox-and-your-xfinity-internet-service.html.  Comcast states that routing to the Xbox 360 “will not travel over the public Internet and is delivered in much the same way as we deliver your video service to your set top box.”  Besides the company notes that only the worst of the worst bandwidth hogs would ever exceed the company’s generous 250 Gigabyte download monthly quota.

             As a threshold matter the company wants to differentiate the Internet and the Internet cloud from individual networks.  But of course we understand cloud computing and the Internet as requiring seamless connectivity between and among disparate but interconnected networks.  If we focus on the first of possibly many links from Netflix downstream to subscribers’ Xbox 360 terminals, are we to infer that Comcast owns to leases every possible segment in the complete link from content source to content end users?  If the answer is yes, does that mean that Netflix’s primary Content Distribution Network, Level 3 never handles Xbox 360 terminal traffic?

            While Comcast has a robust and broadly distributed network I seriously doubt that the company exclusively uses its own network assets to secure the complete routing of Netflix traffic to Xbox users.  Nondisclosure agreements block any transparency in understanding how carriers route traffic, but I cannot believe Comcast would give up the opportunity to continue charging Level 3 a surcharge for Netflix traffic and would gladly free Level 3 and other carriers of the long haul carriage burden.  In other words I suspect Comcast receives Netflix traffic in the same way—via Level 3 mostly—for both Netflix traffic destined for a cable modem and end user computer and Netflix traffic destined for an Xbox 360.  If anyone know this to be incorrect, please set me straight.

            I assume that the only difference in routing occurs in the so called last mile routing from the point where Comcast receives Netflix traffic.  This last link hardly qualifies for the broadsweeping pronouncement by Comcast that Xbox360 traffic is the functional equivalent of cable television content.

Pricing Power and the Lack of Competition in Broadband and Video

            Readers of this blog may have inferred that I am sick and tired of bogus claims made by many telecom operators that competition forces sleepless afternoons.  Year over year I receive biannual rate increases from my cable operator and in the last two years the notices include double digit percentage increases for broadband.  The FCC has not gotten around to noticing that broadband regularly becomes more expensive, perhaps offset by increases in bit rate.  Ironically the FCC’s assessment of video competition notes that markets with robust DBS competition actually have higher rates than areas lacking such “competition.”  Of course the FCC and the operators explain that the higher rates represent greater value in light of the many more channels available to subscribers.  Just how much greater utility does one get from having access to many channels that offer nothing of interest and certainly go unwatched?

            Moore’s Law tracks a regular reduction in cost as capacity increases.  Certainly computing power and basic telecommunications transmission costs decline consistent with Moore’s Law.  The Law never applied to content, and one can understand double digit rate increases in light of uncontrolled gouging by sports programmers and the ability of Multichannel Video Programming Operators like Disney to force bundling of must see channels with less desirable ones, e.g., ESPN and ABC versus ABC Family (formerly the Christian Broadcast Network).

            Cable operators regularly tie desirable programming with undesirable content with large program tiers.  They also compel bundling by offering “discounts.”   Until recently I could get the combination of basic cable and discounted broadband for about the same price as undiscounted, stand alone broadband.

            Now Verizon has embraced compulsory tying or bundling.  The company must have pricing power in broadband or some weird marketing strategy in thinking that it will make more money by refusing to offer standalone DSL service.  Soon prospective Verizon customers can acquire DSL service if and only if they also subscribe to the company’s wireline telephone service.  This is bundling a desired service with something many subscribers no longer want or need, just like cable service tiering.

            Incumbent ventures can force bundling or tied services only if they have pricing power, i.e., the ability to raise prices and increase revenues without suffering significant reductions in subscribership.  Verizon forces consumers to subscribe to wireline telephone service subscriptions as a precondition for a DSL subscription.  Apparently the broadband marketplace in the U.S. is so UNCOMPETIVE than carriers can force or compel subscription bundles. 

The Antitrust Remedy as a Red Herring

            With increasing frequency advocates for the most outlandish deregulatory approaches in the telecommunications sector quickly mention antitrust law enforcement as a judicial safeguard.  The problem is there is no antitrust safeguard if the FCC acts to deregulate.  Several Supreme Court cases, e.g., Trinko and Linkline clearly state that if the FCC sees no reason to intervene and impose regulatory requirements, a court should not second guess the Commission, or expect general antitrust law to impose greater safeguards than what the FCC considers necessary.

            In a nutshell this means that the FCC has got to get it right first time, every time.  While a court might defer to the Commission’s deregulatory expertise, such deference will not occur on a recalibration that imposes greater regulation.  Likewise if the FCC considers the marketplace sufficiently competitive, then no court will identify market failures necessitating an antitrust remedy. 

Cable and Telephone Giants: Embracing, Extending and Extinguishing the Competition

           You may have heard that the major cable and telecom players have entered into joint venturing agreements that appear to have the effect of eliminating cable operators as wireless telecom competitors and reducing the zeal with which telecom players, such as Verizon, will pursue video ventures.  See http://tales-of-the-sausage-factory.wetmachine.com/my-insanely-long-field-guide-to-the-verizonspectrumcocox-deal/#more-2824.

           I marvel how something so transparently anticompetitive can be framed as economically efficient and of course job creating.  I believe the big lesson here is that when incumbents face destructive new technologies, they respond with a predictable playbook: embrace, extend, extinguish.  We're in the embrace mode now.  Isn't it wonderful that the Bellheads and Cableheads are thinking out of the box and embracing new technologies?  Of course the goal is to extend market dominance and to foreclose and eventually destroy competition.

            So is there anyone out there to perform the destructive technology role?  Sprint, Clearwire, Dish?  Or are we at the "game, set and match" conclusion at least for our lifetime?  At the very least before our very eye incumbents erect even higher barriers to market entry making competition that much more difficult to achieve. 

Cable A la Carte and Economic Efficiency

  

          In preparing updates to the loose leaf treatise All About Cable and Broadband, I reviewed the FCC’s latest report on cable television prices.  See  http://hraunfoss.fcc.gov/edocs_public/attachmatch/DA-12-377A1.doc.  The Commission reports that cable operators consistently raise rates well in excess of the Consumer Price Index, a broader measure of prices.  On the other hand the per channel cost per month has declined slightly in light of expanding inventories of channels offered in each program tier.   So bundling enhances the value proposition, or does it?

         Looking at the FCC’s report and my Comcast bill, I could not help but think about a la carte pricing.  Cable operators and content suppliers hate this option and have refused to pursue it even though cable networks have the addressability and other technological features able to provide it economically. One can appreciate why: who would give up a guaranteed payment from each subscriber, regardless of their interest and viewership, in exchange for perhaps higher payments from the smaller number of viewers actually interested in watching a particular channel?  Most cable and satellite subscribers opt for a handful of program sources with little regard for most offered channels.

         Of course it would support both consumers’ specific content demand and economic efficiency to offer al a carte, but who will emphasize this point?  On the contrary sponsored economists come up with transparently bogus rationales ostensibly proving that a bundle is both cost-effective and efficient.  So cable subscription enhances my welfare and offers a better deal when the operator lards the tier with shopping channels and when proven brands, such as HBO and Discovery expand their number of channel options?  Hardly.

        A la carte would provide consumers the opportunity to customize the number and type of channels.   But just as allowing consumers to pick and pay for selected tracks in a music recording, a la carte would reduce cable operator and programmer revenues.  Pull out all the channels you never watch and then divide that number by your ever increasing monthly video bill.   That represents your true cost per channel.
         

Hot Potato Routing and Real or Imagined Congestion

            Several years ago when the Internet was beginning to grow, the matter of fair sharing of traffic loads arose.  Because ISPs did not or could closely meter traffic as they can now, the possibly arose that some ISPs could hand off traffic to other carriers without detection and penalty.  The term hot potato routing refers to the deliberate off loading of traffic onto another carrier’s network.  The burdened carriers resented such “free riding” and emphasized that the hot potato routing carrier could not guarantee quality of service having handed off traffic to other carriers.

            With the passage of time and the onset of real or claimed congestion, the hot potato resenting carriers have become hot potato routers themselves.  Wireless carriers want to sell—make that give away—femtocells ostensibly so that subscribers can get better in-building signal penetration.  This positive outcome occurs, because the carrier has had subscribers install mini-cellular radio towers on premises.  But what kind of backhauling does the femtocell use?  Some operate on cellular frequencies in effect retransmitting wireless signals.  But others inject what would have been more wireless traffic into the Internet cloud via the wireless subscriber’s DSL or cable modem broadband connection.  This is hot potato routing masquerading as signal enhancement.  In reality the wireless carrier suffers less congestion and the need to cell split and install additional towers if it can offload traffic to other carriers. 

Another example: Wireless carriers don’t mind—make that are happy when—subscribers substitute wi-fi minutes of use for cellular minutes of use.  These very same carriers used to require equipment manufacturers to disable wi-fi access via cellular phones, so that subscribers had to use network minutes.  With real or imagined congestion cellular carriers can reduce capital expenditures in more plant by offloading traffic onto another carrier’s network. 

Bear in mind that such offloading often does not trigger a charge for the hot potato routing (traffic originating) carrier.  While incumbent carriers, such a Verizon and AT&T, vigorously complain about free-riding VoIP operators, which find ways to inject traffic onto their networks without compensation, Verizon and AT&T do the same thing.  Of course they can claim the need to do so results from the FCC’s inability to reallocate spectrum, or from unanticipated data service demand.  What better way to shift the blame to the FCC or those pesky, gluttonous customers?

I appreciate that ongoing high capex harms carriers’ profits, but U.S. wireless carriers do not seem to be suffering at least in terms of Average Revenue per User (“ARPU”).  These carriers have some of the highest ARPUs globally, and the elimination of unmetered and unlimited data plans promises even higher ARPUs going forward. 

Skimping on capital expenditures accrues short term benefits, but it may foreclose longer term gains.  If wireless carriers make the investment in 4G bandwidth and switching capacity, they can encourage subscribers to treat smartphones as the functional equivalent of wired computers.  Additionally they can exploit technological and marketplace convergence that promote an IP-centric network serving an ever expanding aggregate demand for information, communications and entertainment (“ICE”) services.  But the incumbent players dither: they threaten to become innovative and aggressive competitors, but back off.  Cable operators realize the need to offer a wireless component in their bundle of services, but instead want to sell their spectrum to incumbent wireless carriers.  Wireline incumbent carriers, such as Verizon, toy with the idea of offering video content, instead of serving as the conduit for the content managed and produced by others.  But this week we hear that Verizon would rather partner with Netflix than compete.

Who wants to devote sleepless afternoons competing, investing and innovating?

Metered Broadband and the Bellhead Way

       Leave it to the telephone companies to come up with a way to defeat success.  Rather than work to make smartphones the third screen alternative to television sets and computer monitors for video and data, 3 of the 4 national wireless carriers want to strap on a meter.  Ostensively to discipline “bandwidth hogs” wireless carriers have eliminated unmetered service giving new meaning to the word unlimited  and handicapping ways for smartphones to become more than a handset for telephone calls and texting.

       Smartphones can provide users a Swiss Army knife array of features and services, provided the phone companies play along.  At first they did considering unlimited texting and data plans a way to increase revenues.  To promote use the companies offered “unlimited” “all you can eat plans” like that offered by wireline telephone companies and cable television operators.  The carriers reduced churn and had a mostly content and stable consumer base who appreciated knowing their “all in” cost of service.  Until recently both wireline and wireless broadband operators understood that additional downloading Internet content did not adversely affect revenues even as it rewarded curious “web surfers” who did not have to worry about the cost of additional use.

       Now wireless companies have to consider solutions to congestion problems largely because of successful marketing.  Consumers have embraced the wireless revolution, no doubt baited with subsidized smartphones and meterless service.  While the carriers quickly blame the FCC and a spectrum shortage, they did not fully appreciate the stimulus effect of “free” handsets and unmetered service.  Unwilling or unable to ramp up capacity, the carriers have switched to rationing by price.

       The wireless carrier are quick to trot out impressive scholars to justify metering based on a simple rationale that most resources require metering to prevent waste and subsidies flowing from low volume users to high volume users.  But if pressed these very same scholars might acknowledge that metering matters only when the risk of congestion exists: when demand for the last few kilobytes of data downloading causes the network to fail, or service to degrade.

       Wireless carriers have a congestion problem in some cities.  Rather than understand this as an embarrassment of riches, they consider high demand a nuisance.  The carriers can remedy this nuisance with the spectrum they have already acquired, but not yet activated.  As well these carriers can accrue major benefits for themselves and their subscribers by considering congestion evidence that they are making progress in achieving parity for the smartphone screen.  Don’t the wireless companies want  their subscribers to consider smartphones mobile computers and television receivers? 

       Perhaps not.  This out of the box thinking would require Bellhead telephone executives to conside ra longer term future where technological convergence makes it possible for telephone companies to serve as players in all sorts of information, communications and entertainment markets.  These companies see the revenues and profits they leave for others to capture and want their “fair share.”  But rather than work to enhance the value proposition of their wireless conduit and thereby solidify their control over what consumers may consider a preferred medium, Bellhead management thinks only about short term problems.  When wireline subscribers were “tying up” dialup lines for hours of narrowband telephone lines, the carriers did not see the solution as new and more expensive broadband services.  Now these very same companies want to shake down app creators with downloading surcharges and retail broadband subscribers with throttled service or higher fees.

       History repeats with short term thinking that frustrates consumers with ticking meters and places a premium on not having to compete and innovate until the last minute.  In the short term the wireless carriers will leverage scarcity to favor their own content and corporate affiliations, raising new questions about network neutrality.  Verizon recently announced a wireless movie streaming service that surely will work well despite the congestion problem.  Will Verizon expedite and favor its “mission critical” movie bits, leaving Netflix traffic to languish?  Will Verizon offer not to debit its movie traffic from subscribers’ monthly downloading quota, even as heavy Netflix users may soon find their habit triggers new surcharges?  Suddenly congestion and scarcity become vehicles for wireless carriers to tilt the competitive playing field in their favor and forestall the need to embrace change.

Comcast Anti-consumer Strategies

      In preparing updates to comprehensive treatise on cable television and broadband (see http://www.lawcatalog.com/product_detail.cfm?productID=15670) 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.

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.

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.

Lessons From the Deregulation and Re-regulation of Broadcast Volume

            In 2010 Congress enacted and the President signed into law the Commercial Advertisement Loudness Mitigation Act whose requirements become enforceable now.  CALM reverses the FCC’s deregulation of commercial volume resulting in ever louder ads.  Broadcasters, cable television operators and satellite broadcasters must ensure that commercials and program content sound the same.

            In this time of extreme partisanship it’s remarkable to see representatives of both parties responding to constituents fed up with loud commercials, and disinclined to make do with frequent adjustments to the volume control on their remote controls.  Seems the unregulated marketplace for commercial volume led to an upward spiral, unmitigated by any notion of marketplace self-regulation.  I guess a libertarian would suggest that consumers could and should vote with their ears by changing the channel.

            Congress reached a better solution: regulation in the face of the inability of broadcasters to resist the temptation to offer advertisers a sneaky opportunity to “cut through the clutter” by raising the volume of their spots.  Of course the advantage proved short term when more and more commercials got louder and louder.

            The message here: sometimes society needs an adult in the room to prevent childish and potentially harmful behavior.  Left to their own devices broadcasters had no problem pumping up the volume to uncomfortable levels.  Even Congress rejected cavalier suggestions that consumers should bear the burden of self-help by changing channels, or turning down the volume.

            So how many jobs were lost in this market intervention?