By all accounts it appeals that the D.C. Circuit Court of Appeals expressed great skepticism with the FCC’s claimed ancillary jurisdiction to sanction Comcast for meddling with peer-to-peer traffic of its subscribers. I share that concern for two reasons: 1) on administrative law grounds, the FCC should have initiated a notice and comment rulemaking before applying what sure looks like enforced rules; and 2) the FCC stretches the concept of ancillary jurisdiction in Title I of the Communications Act and then justifies the stretch primarily on Title II common carrier regulatory sections that offer a general sense that the FCC should promote access to the Internet and “advanced telecommunications capability.”
The D.C. Circuit surely has ample grounds to reverse the FCC, but if it were to do so what does such action mean in the broader context of judicial deference to the expertise of a regulatory agency and the scope of statutory interpretation accorded these agencies? Bear in mind that a majority of the Supreme Court in the Brand X case (affirming the FCC’s decision to treat cable modem Internet access as an information service) was quite willing to defer to the FCC in terms of its technical expertise and also on so-called Chevron grounds that the FCC reasonably interpreted ambiguous legislation.
So if the D.C. Circuit does not defer, does that mean that at least as to this fact pattern the FCC was unreasonable in its statutory interpretation and no degree of technical expertise can provide a cure? It also just so happens that the Supreme Court deferred to the FCC on a decision that appeared to generate a deregulatory outcome, while the D.C. Circuit’s likely non-deference applies to an expansion of the FCC’s regulatory wingspan.
Thursday, February 25, 2010
Tuesday, February 23, 2010
Measuring Competitiveness in Wireless and Broadband
The FCC, plenty of sponsored researchers, and countless industry players spread the gospel “truth” that the wireless and broadband markets are robustly competitive. But what empirical data confirms this? The usual measures of competitiveness, such as number of operators and market share, do not corroborate the competitiveness conclusion unless you make unreasonable assumptions. I would agree that my local markets are competitive using the FCC’s measure of competitors, but these calculations are totally bogus thanks to creative counting, based on single presence in a zip code and the use of a 200 kilobit per second broadband floor.
So where is the competition? I see wireless competition in advertising, handset options, and claims of superior performance. Do wireless carriers compete on price? Perhaps one way to answer that is to assess just how often these carriers reduce their prices and how many different price points exist for roughly the same service. Using these two criteria, we see that wireless carriers do not change their prices often, don’t offer sales, typically offer the same service package for the same price, and take pains to mask costs by bundling handsets and service.
In broadband we see the same parallel pricing, with few price changes. A fairly well kept secret is the triple digit margins generated by broadband. At a recent national cable television annual conference I heard a Cox Cable Vice President crow about his company’s 100+% margins in offering broadband with no apparent need to drop prices as the market matures, or in light of competition. DSL offers one fourth the bit rate of cable modem service at about one fourth the price. Broadband rates do not typically drop, but in some instances the offered bit rate does rise for the same monthly rate.
So I guess competition, or its appearance depends on the assumptions made and the agenda, sponsor or employer of the analyst.
So where is the competition? I see wireless competition in advertising, handset options, and claims of superior performance. Do wireless carriers compete on price? Perhaps one way to answer that is to assess just how often these carriers reduce their prices and how many different price points exist for roughly the same service. Using these two criteria, we see that wireless carriers do not change their prices often, don’t offer sales, typically offer the same service package for the same price, and take pains to mask costs by bundling handsets and service.
In broadband we see the same parallel pricing, with few price changes. A fairly well kept secret is the triple digit margins generated by broadband. At a recent national cable television annual conference I heard a Cox Cable Vice President crow about his company’s 100+% margins in offering broadband with no apparent need to drop prices as the market matures, or in light of competition. DSL offers one fourth the bit rate of cable modem service at about one fourth the price. Broadband rates do not typically drop, but in some instances the offered bit rate does rise for the same monthly rate.
So I guess competition, or its appearance depends on the assumptions made and the agenda, sponsor or employer of the analyst.
Monday, February 22, 2010
Something on the Op-Ed Page of the WSJ With Which I Agree
At long last an op-ed piece in the Wall Street Journal makes a statement I endorse: “In the Internet age, transparency is the foundation of trust.” You bet L. Gordon Crovitz (“Climate Change and Open Science,” WSJ 2/22/2010 at A17).
I wonder if Mr. Crovitz would expect the same sort of transparency in the network management disclosure requirements of Internet Service Providers. You see it’s easy for someone to claim that the specifics of network management constitute a trade secret, a “special sauce” for which disclosure would bring financial calamity, or at the very least rob a company of some kind of comparative advantage. Yet transparency is the very thing lacking in ISPs’ decisions whether and how to engage in price and quality of service discrimination.
I readily support many types of QOS and price discrimination provided it is offered on a transparent basis and made available to anyone on the same terms and conditions. I am okay with “better than best efforts” routing sought and paid for by end users and even by content, applications and software providers so long as this option does not guarantee congestion and unusable basic service, or provide the basis to favor ISPs’ corporate affiliates and preferred third parties.
Who would dispute that Comcast was not transparent in its claim that legitimate and lawful network management responsibilities necessitated disrupting peer-to-peer traffic, even in the absence of congestion? So if Comcast was not transparent, how am I and any other Comcast subscriber to trust that the company won’t engage in the wrong kinds of discrimination, i.e., discrimination to provide an boost for corporate affiliates, to favor certain third parties, to discipline subscribers having the temerity to take the company at its word that unmetered service is unmetered?
So Mr. Crovitz climate change advocates surely need to be transparent in their research and statistical compilations and so does the FCC, ISPs and your fellow network neutrality opponents.
I wonder if Mr. Crovitz would expect the same sort of transparency in the network management disclosure requirements of Internet Service Providers. You see it’s easy for someone to claim that the specifics of network management constitute a trade secret, a “special sauce” for which disclosure would bring financial calamity, or at the very least rob a company of some kind of comparative advantage. Yet transparency is the very thing lacking in ISPs’ decisions whether and how to engage in price and quality of service discrimination.
I readily support many types of QOS and price discrimination provided it is offered on a transparent basis and made available to anyone on the same terms and conditions. I am okay with “better than best efforts” routing sought and paid for by end users and even by content, applications and software providers so long as this option does not guarantee congestion and unusable basic service, or provide the basis to favor ISPs’ corporate affiliates and preferred third parties.
Who would dispute that Comcast was not transparent in its claim that legitimate and lawful network management responsibilities necessitated disrupting peer-to-peer traffic, even in the absence of congestion? So if Comcast was not transparent, how am I and any other Comcast subscriber to trust that the company won’t engage in the wrong kinds of discrimination, i.e., discrimination to provide an boost for corporate affiliates, to favor certain third parties, to discipline subscribers having the temerity to take the company at its word that unmetered service is unmetered?
So Mr. Crovitz climate change advocates surely need to be transparent in their research and statistical compilations and so does the FCC, ISPs and your fellow network neutrality opponents.
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