Did Comcast’s Local Broadcast Retransmission Costs Rise 65% Last Year?

            Leave to Comcast management to convert a cost of doing business into a profit center.  Cable television operators have to negotiate “retransmission fees” with local broadcasters who do not elect the option of compulsory, “must carriage.”  These fees have risen significantly (but not 65% in one year) largely resulting from increased costs to broadcast networks for “must see” content such as NFL football.

            Comcast could treat retransmission fees as a cost of doing business and absorb them, or pass them through as a line item on the bill.  The company opted to create a line item, but one having no relationship to actual costs incurred.  Comcast uses a standard price for its Broadcast TV Fee meaning that the charge to subscribers has no relationship to the actual cost incurred by the company and the number of stations carried in any specific locality. 

            In a matter of a two years Comcast has converted a minor, symbolic reminder to subscribers of rising carriage costs, to a major cash cow.  Comcast started with $1.50, but now raised the rate  by 65% from the $3 to $5. 

            Very clever Comcast.  I’m sure senior management thinks most consumers are too stupid, or lazy to know that retransmission carriage rates have not risen 65% in a year.

            The only way to respond to such greed and cavalier attitude is to cut the cord.  Broadcast signals cost nothing to receive off air other than your tolerance for advertising.  Of course Comcast  penalizes cord cutters who still need its broadband service.  So called naked broadband costs more than when it’s bundled with a cable television tier.  Very clever Comcast.

Capitalism at it best!

Do Righteous Indignation and Hyperbole Persuade People?

             After writing over one hundred painstakingly researched and edited journal articles I wonder whether I’ve made a woeful error.  These days it seems that righteous indignation, bombast and stretching the truth captures attention, headlines, grant funding, status and gravity.  I feel foolish for emphasizing empiricism and full documentation.

            Yet again the Wall Street Journal reminds me of what I should be doing: identifying villains and saviors in the telecommunications policy world.  Today L. Gordon Crovitz vilifies President Obama, FCC Chairman Wheeler and the FCC.  See http://www.wsj.com/articles/the-obamanet-overreach-1451259176.  He claims that this triumvirate has so burdened and regulated the Internet that it “now [is] known as Obamanet.”

            So using Obama as a prefix provides a not subtle signal that another “curtains for the free world debacle” has occurred.  Already there’s an Obamaphone, which Mr. Crovitz and his colleague believe is available for free wireless telephone service, despite the fact that a bilateral consensus has supported universal service funding for dozens of years, and service is limited to low income applicants that can prove they qualify for subsidized (not free) service.

            Why does Mr. Crovitz resort to such hype when he could identify real flaws with the FCC’s Open Internet Order?  He would rather vilify and convert a rumor into a fact than generate arguments on the merits.  Apparently Mr. Crovitz knows the President personally directed Chairman Wheeler and the 2 other Democratic Commissioners to change legal strategies for justifying limited Internet regulation.  Of course Mr. Crovitz offers no verifiable evidence.  Instead, he implies that it is an absolute given that the President intervened.  News flash: the Executive Branch regularly participates in the FCC policy making process and an entire agency within the Department of Commerce (the National Telecommunications and Information Administration) serves as the President’s advocate.  Apparently, the President can’t issue statements and create videos favoring a desired policy for the FCC to take.  I’ll remember this the next time a Republican President tries to use his Bully Pulpit to influence decision making by an independent regulatory agency.

            I cannot help but wonder whether opponents of Messrs. Obama and Wheeler might achieve greater impact if they relied on facts and used inside voices.

One Mystery of the Universe Solved: Why Just About Every Comcast Subscriber Hates the Company

            Recently Comcast CEO Brian Roberts concluded that subscribers hate his company, because they don’t want to pay for content. http://bgr.com/2015/12/14/comcast-ceo-brian-roberts-interview/.  Simple, glib conclusion, but quite wrong. 

            Subscribers do not mind paying for content if they feel they receive fair value.  How many times have you heard someone complain about the cost of Netflix service?  People do pay for content and gladly so.  Just ask the millions of subscribers to Hulu, SiriusXM, etc.

            People don’t like getting ripped off.  People don’t like paying for something they don’t want, but can’t seem to avoid like the dozens of cable channels they never watch.

            People don’t like getting nickeled and dimed, or inconvenienced.  Comcast has done both to me in the last few weeks.  First a company technician refused to repair a set top box claiming my service tier did not qualify for access to one.  The technician seemed not to know that even lowly basic tier subscribers are entitled to a “free” set top box now needed even for viewing certain basic tier channels.

            After repeated calls and a second day waiting for a technician, the company issued a $20 credit, but of course there’s a catch.  I had to pay the full billed amount after which a credit would accrue in a subsequent bill.  So the company issues a credit only after receiving an overpayment.  Clever; too clever.

            To compound the confusion, Comcast or the U.S. Postal Service managed not to get a bill delivered.  Of course Comcast never informed me of an overdue payment, by email.  Instead they issued a $9.50 late payment fee and implied dark and negative consequences should they have to refer my debt to a collection agency.

            Mr. Roberts just about everyone hates your company, because of its obsession with squeezing every last dime it possibly can, regardless of the value proposition.  What else could explain the creation of a new line item called Broadcast TV Fee for local carriage, already paid for in the basic tier charge?  What else could explain the 65% increase in that fee summarily announced in the bill I never received?

The Regulatory Uncertainty Red Herring

            I wish I had a dollar every time I see and hear regulatory uncertainty vilified. In telecommunications regulation and policy, stakeholders involve RU as the reason for any ailment. RU prevents capital investment; RU stifles innovation; RU kills jobs; RU hurts national competitiveness.   RU causes the common cold.

            Here’s a news flash: unless one operates in a market completely free of regulation, there always will be some degree of uncertainty what the future regulatory climate will be.  Speaking of uncertainty, who knows what the cost of capital will be in a year, what law suits will confound a particular company; what technological innovation will challenge the status quo?

            Regulation constitutes one of very many variables for which a commercial venture cannot control.  Companies have to deal with it, but in this day telecom executives speak in complete opposites depending on the audience. To Congress, the FCC and the court of public opinion corporate executives trout out RU as a terrible scourge.  To buy side analysis and in commercial practice the very same executives accept RU as one of many variables in business.

            Has RU prevented wireless companies from making substantial sunk investments in next generation network spectrum and plant?  If RU is such an abomination how can AT&T CEO Randall Stephenson tell one constituency AT&T has had to curb capex investment while at the same time the company pays 45 billion dollars to acquire DirecTV and may offer its own mobile video streaming service? 

            So let me get this straight: RU curbs innovation and investment even as billions of dollars in mergers, acquisitions and new ventures continue to sprout.  

Everything You Ever Wanted to Know About Network Neutrality

            During my sabbatical from Penn State last term, I embarked on several network neutrality deep dives.  I have generated the following publications:

Conflict in the Network of Networks: How Internet Service Providers Have Shifted From Partners to Adversaries, COMMUNICATIONS & ENTERTAINMENT LAW JOURNAL (in production).

Network Neutrality and Consumer Demand for “Better Than Best Efforts” Traffic Management, FORDHAM INTELLECTUAL PROPERTY, MEDIA & ENTERTAINMENT LAW JOURNAL (in production).

Ex Ante Versus Ex Post Approaches to Network Neutrality: A Comparative Assessment, 30 BERKELEY TECHNOLOGY LAW JOURNAL, No. 2, 1562-1612 (2015).

Déjà vu All Over Again: Questions and a Few Suggestions on How the FCC Can Lawfully Regulate Internet Access, 67 FEDERAL COMMUNICATIONS LAW JOURNAL, No. 3, 325-376 (2015).

What’s New in the Network Neutrality Debate, 2015 MICHIGAN STATE LAW REVIEW 739-786.

Internet Protocol Television and the Challenge of “Mission Critical” Bits, 33 CARDOZO ARTS & ENTERTAINMENT LAW JOURNAL, No.  1, 47-87 (2015).

            I can send a copy or web link upon request.

So Why Would Verizon and Other Carriers Want to Spend Yet More Billions on Content?

            Perhaps you’ve read the relentless and false recitation of an assertion that the Wall Street Journal, American Enterprise Institute and others have treated as the gospel truth: that incumbent carriers such as Verizon and AT&T have substantially reduced capital expenditures this year solely because of the FCC’s Open Internet Order. 

            It strikes me that there has not been enough pushback against the bogus notion that would not pass muster with peer review.  First, one can detect a reduction in capex if and only if the definition of capital investment is limited only to transmission facilities.  Only with a narrow and ludicrous definition can one find a reduction of any sort. Using a widely accepted definition, incumbent carriers have continue to make sizable investments, this year particularly through mergers and acquisitions.

            Just now there is speculation that Verizon might acquire portions of Yahoo’s assets.  Why would Verizon waste billions of dollars on content, if it thought that regulation and/or regulatory uncertainty would somehow prevent it from profitably delivering the content?

            The capex false claim becomes down right fraudulent when experts, who ought to know better, attribute their calculation of reduced capex, as solely caused by a single regulatory event.  So help me out here: how did they narrow 100% of causality to a single regulatory event?  How did they eliminate other variables such as the possibility that this particular year did not require a major upgrade in wireline or wireless broadband plant?  How did they managed to ignore the billions invested in companies whose business plan assumes ample ways to deliver product to paying subscribers?

            As the hearing about the FCC’s Open Internet Order begins, I hope the court applies the rule of law and not advocacy masquerading as statistics. I have major problems with the FCC’s tactics and strategies, but I hope empiricism matters more than a clever and deceitful “outreach campaign.”

That $200,000 Degree Comes Without a Warranty

            Even with 25 years of teaching experience, I have to undergo an audition of sorts with my undergraduate students.  Increasingly, I fail in the sense that I cannot motivate many to uphold their end of the bargain by showing up, staying on task, preparing for class and mastering basic concepts.

            I face a major personal and career quandary probably solved only if I can find an alternative to teaching undergrads.  Little makes sense these days.  I remain enthusiastic, young for my age and eager to share my research, insights and experience with students who have declared telecommunications as their undergraduate major.  Topics like an Internet of Things, 5G wireless, IPTV, Internet 2.0, television everywhere, etc. keep me engaged and intellectually curious.

            Most of my students don’t have a clue.  They operate under the mistaken assumption that professors should entertain in the mode of a talk show with little expectations and demands.  Instructors lose in the court of student opinion if they are too demanding, their courses too hard and their exams too tough.  Deviate from happy talk and students perceive professorial messages as both condescending and yelling.

            How did it get so bad?  For my part, I have seen a significant and accelerating decline in students’ command of the spoken and written word, even as they have quite high opinions of themselves and an elevated sense of what entry level job is appropriate. 

            Set out below are the top ten disconnects in my world.

1)         Professors are human.  I don’t think many students appreciate how much it hurts when they don’t attend classes, fall asleep, decide not to take any notes and spend most of their time texting and interacting with the Internet cloud via their smartphones.  Most professors—apparently until their reach my age—could have generated higher earnings in the so-called real world.  They consciously chose to teach.

            On a good day, I consider student distraction, if not disinterest, as part of the gig which requires regular servings of humble pie.  On a bad day, I feel humiliation and dismay.  The educational process requires work on both sides.  I try to make my courses engaging and helpful, but I cannot make them an entertainment vehicle.

2)         We know how to teach.  Student regularly blame instructors for any performance shortcoming, but realistically most teachers have ascended the learning curve and achieved competency after 5 or so years.  The promotion and tenure process, as well as regular teaching evaluations by peers confirms that poor teachers either wash out, or understand the lack of fit in the classroom.

3)         We want students to succeed.  While I like the band Pink Floyd, I don’t see much “dark sarcasm in the classroom.”  I am self-effacing, over the top with enthusiasm and keenly aware of the trust in me placed by tuition underwriters.  I teach in a College of Communications where most students do not pursue graduate school.  I understand and embrace the mission of preparing students for immediate employment.

4)         Students cannot multi-task.  I will never convince any student that multi-tasking results in poor performance of the two or more activities attempted at the same time.  If students think they can text and drive at the same time, they surely think they can text and learn at the same time. 

5)         Few understand the unconditional need to take notes, preferably by hand.  In the last few years, many students have given up taking notes in class. They consider instructor power point slides sufficient, or they think they can do without any record.  As innervating as it can be, note taking requires students to synthesize and process the conversation.  Studies confirm note taking by hand improves student comprehension far better than typing into a laptop.

6)         Student performance follows a curve.  Students have grown to expect high grades and a curve to make their performance better than any raw test score.  We have a toxic combination of grade inflation and inflated student grade expectations.  With every Millennial student getting a medal for showing up at any competition, they expect similar accolades in class, despite the fact that performance falls along a curve.

7)         When students’ performance lags, they attribute it to external factors.  Some of the worst student performances on tests I prepare range close to random selection, i.e., 25% on a multiple choice test with four answer options.  When confronted with an absolutely awful test score, many simply attribute it to a test, or class that is “too hard.”  How then could anyone score an uncurved A in my classes?  At Penn State, where I teach, the range of student caliber ranges from kids who could not afford to go to Harvard, but got admitted, to folks simply here to pickle their livers.

8)         90% of life is showing up.  Parents and other tuition underwriters do not know how often students blow off classes.  I try to qualify the mistake in practical terms: every hour of in-class instruction at Penn State costs about 8 cases of beer.  I also offer this baseball analogy: “Life is like baseball.  You win some; you lose some; some get rained out.  But you have to dress for every game.”

9)         Professors hate it when students whine and grade grub.  Professors have had to dumb down courses and lower their expectations.  Despite these adjustments, students regularly complain when they don’t receive the grade they expected.  Gen Xers pretty much accepted a C when they didn’t make an effort in class, but today’s students often expect an A with little effort.  Should a professor impose demands and rigor, she will trigger negative comments in student evaluations which administrators may use as evidence of inferior teaching.

10)       Professors lose enthusiasm and hope when students don’t uphold their end of the bargain.  Instructors do not want to bore students, or themselves.  When a majority of the class has their heads down in rapt smartphone attention, professors wonder if teaching is nothing more than a job, as opposed to a career, or calling.

             My 25 year teaching career has arrived at a point where I wonder whether I am wasting my limited time on earth.  Dear reader, please offer advice and alternative career/job leads!

The Internet of Infallible Algorithms

            Capital One, a major credit card issuer, offers customers access to a streamlined credit report.  Upon examining my score, I found a B rating for oldest line of credit in light of having had a card only for 12 years.  One needs 15 years for an A rating.

            Hmmmm.  My Bank of America credit card states “Cardholder since 1997,” yet repeated efforts to get that company to correct its mistake have failed.  I keep getting canned responses from—get this—a collection agency that has expended its service wingspan to providing unhelpful “answers” to bank algorithm failures.

            Bank of America has violated the Fair Credit Reporting Act by refusing to correct a credit mistake within 30 days of notification.  The algorithm lists my start date as 2003 and that becomes the truth notwithstanding what my card says, or the verifiable truth of the matter.

            So the next time a credit card company has to issue you a new card due to a security breech understand that the clock starts at zero in terms of line of credit vintage.

            In other words banks and their algorithms win every time.  They are infallible and there is no way to correct a mistake.

            This should trouble you as the future promises more algorithms and things making decisions and determining “facts.”  In my case, my credit rating takes a hit based on a clearly wrong calculation of time.

            It’s a matter of time before you find yourself immersed in a dispute that you cannot win, because the algorithms knows all and serves as judge, jury and executioner.

Teaching Millennials

            Teaching mostly college juniors and seniors provides me with the opportunity to observe cutting edge early adopters of new technology.  I am mostly invisible; they regularly walk into me, not looking up from their smartphones as they walk.  I don’t even try this maneuver.

            Sadly, having to teach/entertain Millennials has a much worst aspect that probably will bring an end to my full time academic career.  It has reached a point where I am not certain even a 20% core of capable and conscientious students exist.  Only on a good day can I achieve direct eye contact with this 20% as they at least temporarily look up from their smartphones.

            But what likely will send me packing is a new deterioration in student-teacher relations regarding grades.  My Gen X and earlier students accepted a C minus knowing they really did not even deserve this grade, but were grateful to receive it..  On students’ transcripts a C minus translates into a C and eliminates the need for re-enrollment.

            Millennials largely believe they should receive something higher despite failing to take notes, participating in the discussion, or generating test performances above the already generous C minus.

            This semester, I experienced a remarkably animated and lawyerly bunch when I reviewed the first test of the semester.  The normally passive and distracted group became quite agitated when their answers did not conform to mine.  Surely their answers were as good, or better than mine.  How could I know better?  What does my 50,000 hours of experience mean in the first place?

            I cannot express to you the frustration I felt, despite regularly consuming heaping portions of humble pie as a Professor these days. On student when out of his or her way to lodge a caustic, unfair and untrue set of allegations on that special place on the web called Rate My Professor.com.  Remarkably that rating appears on the first page of a Google search using my name.  I found that out when I looked to see whether there was any press coverage of my Plenary Panel participation at a major global conference in Budapest hosted by the International Telecommunication Union. No ITU World Telecom Forum coverage, but Rate My Professor. Com has a new insight of how mean, loud, rude and unfair I am.

            For the record I cannot yell thanks to vocal cord surgery.  Of course I do have a lawyer tone which to some may come across as yelling.  The test mean was 72 and I goose scores a few points with a generous curve.  It may tell you something that the test range ran from a high of 94 to a low of 30.

            If you think college teaching and an academic career is a cake walk, think again.

It's Still the Cable Company--Part 179

            After months of regular and largely uninterrupted cable television service my home Video On Demand access suddenly evaporated.  Research on the regularly appearing error code showed that the problem occurred due to a weak upstream signal to the headend.

            As dealing with Comcast customer service rivals dental work, I tried several self-help options available on the web site, include several reset commands from the headend to my set top box.  No luck.

            Step two involved multiple calls to Comcast to make the case for a premises visit.  Understandably Comcast does not want to authorize a “truck roll” in light of the cost.  So customer service representatives—all of them in the U.S. India and possibly China—forced me to make the case repeatedly.  It got old fast, particularly having to undertake the same steps that did not work previously.

            Step three involved the first premises visit, a most unsatisfying event.  The technician arrived and noticed that I had cord shaved, downgrading my service to basic cable.  According to him, I am not entitled to on demand service, notwithstanding clear evidence to the contrary on the Comcast web page.  The technician left without replacing the set top box, or doing anything constructive. 

            This frustrated my wife and me.  Was this yet another Comcast upsell strategy, or could the technician honest believe I was not entitled to the on demand service?  How am I to order movies and add to me monthly bill?

            Step four involved yet more calls to customer service, various tweets on the 2 Comcast sites and an email nominally sent to the customer care VP of the company.  There seems to be fake, or unhelpful customer service and a real version should you make enough of a stink.

            Several days passed before Comcast agreed to send another technician with instructions to fix the problem.  The solution: removal of a defective and long unnecessary signal splitter installed by the company.

            There is not much good news to report.  Comcast still has deplorable customer service designed to prevent real people from providing a real solution.  The company still farms out customer service to individuals with limited English competency.  Nobody followed up, but a company representative did make good on her promise of a $20 bill credit based on the much touted guarantee for on time service remedies.

            Nothing much has changed and apparently the company still doesn’t really care.

           

Incumbents’ Incentives and Disincentives to Invest in Existing and Next Generation Networks

            Recently anti-network neutrality researchers and advocates have made an assertion that does not make sense to me.  First, they claim incumbent carriers have substantially curbed capital expenditures in plant.  Then they attribute the decline as largely resulting from the FCC’s Open Internet Order.

            Such work would not pass muster under peer review, nor does it pass an informal “smell test.” On the latter screen, why would both AT&T and Verizon make multi-billion dollar investments in legacy content distribution (DirecTV) and content (AOL) if they did not think they could use access to a far larger set of consumers as a way to provide more service bundles?  Put more simply: why would a legacy carrier skimp on its infrastructure after having paid handsomely for content that needs distribution to consumers?

            AT&T touts the DirecTV acquisition as making it possible to offer a “quad-play” bundle of video, wired broadband, wireless broadband and voice; see: http://www.att.com/gen/general?pid=18235#fbid=jUSgILGxbqx. Verizon sees AOL as providing a way to diversify into content and improve its web advertising service skills.

            Even as certain stakeholder want regulators, legislators and judges to think an open Internet would shut the investment tap, they also want to tout how much more plant investment we have vis a vis other nations and regions.  Who needs a universal service subsidy mechanism when we lead the world in 4G and fiber deployment?  Recently Verizon announced an expedited schedule for 5G research and development. See http://www.fiercewireless.com/tech/story/verizon-test-5g-2016/2015-09-08.

            As a professor, I have the luxury of time to review everything I possibly can.  I make an effort to maintain an open mind on each and every subject.  I pay a high premium for not having “cast my lot” with one or the other camp and for having an independent (if unreliable) point of view.

            So if you don’t care to rely on my unsponsored perspective on the matter of whether incumbents suddenly have stopped investing in the future consider this from a clearly right of center source, the Financial Times:

            “AT&T is a big spender, investing more in infrastructure in the first half of this year than any other corporation in the US. Over the past five years it has ploughed nearly $140bn into its network, and it plans to spend a further $21bn this year and more still in 2016.

           “‘I fundamentally believe if you are not a number one or two investor in this industry, you get left behind,’ Mr Stephenson recently told analysts.’”  See David Crow, Telecoms: Showtime for AT&T, FINANCIAL TIMES (October 15, 2015); available at: http://www.ft.com/intl/cms/s/0/70c15980-7321-11e5-a129-3fcc4f641d98.html#axzz3p1qj8qH3.

The Myth of Broadband Investment "Disincentivization"

            Some people, who really should know better, have combined one questionable statistic with an absolutely unreasonable inference.  Ostensibly to bolster their argument that the FCC’s Open Internet Order will either enslave or impoverish carriers, sponsored researchers and one or two easily-persuaded FCC Commissioners make this unsustainable leap of faith:

            Wireline broadband providers have reduced plant investment following the FCC’s Open Internet Order.  Therefore, the entire cause of this diminution investment results from the Order.

            Might there be alternative statistics that identify where the money is going and what, if anything, has caused this sudden conservation of capital?

            First, when considering capital expenditure by companies such as Verizon, converging markets and technologies, surely require an examination of the many places money might go.  Verizon might perceive no competitive necessity to invest in wireline broadband.  Additionally the company might prioritize investments in wireless plant, as part of a major strategy to migrate from wired to wireless content distribution technologies.  Verizon is aggressively jettisoning its wireline plant and state franchises.

            Speaking of content, didn’t Verizon recently come up with a cool $4.4. billion to buy AOL whose major assets are content-based?  Would Verizon skimp on all content distribution technology after having just made a significant investment in content?  Didn’t AT&T just get conditional approval to spend over $45 billion to acquire DirecTV, whose major asset combines access to content and broadband distribution of it?

            On the issue of incentive to invest, just today I read how Verizon already wants to commit substantial funds for next generation, 5G wireless broadband distribution technology. See http://www.verizon.com/about/news/verizon-sets-roadmap-5g-technology-us-field-trials-start-2016.  Bear in mind that Verizon Wireless operates under the Title II, common carrier, telecommunications service provider “public utility” regulatory model that some consider such an investment buzz kill.  Verizon seems to well tolerate this regulatory burden and still manage to invest billion in plant.

            It bears repeating time after time: competitive necessity constitutes the major catalyst for capital expenditures, including next generation network plant. 

            Verizon knows it has to enhance the value proposition for wireless broadband.  And it surely knows the lack of competition means it does not have to extend its FiOS plant, or rush to add funds to wireline technologies about which it does not care.

Verizon’s “Free” Mobile Streaming Service and the Many Questions About Sponsored Data

           When one of the two mega-wireless carriers in the U.S. announces a mobile streaming service, the FCC soon will have to confront head on what carriers can and cannot do by way of advertiser supported data consumption. 

           At first impression, what’s not to like about Verizon’s Go90 gambit? See http://www.nytimes.com/2015/09/08/business/media/verizon-to-offer-free-mobile-tv-with-an-eye-on-millennials.html?emc=eta1&_r=0. The smartphone surely has the capability of offering a competitive alternative to other screens in the video marketplace including television sets and PC monitors.  If a third party wants to subsidize my consumption of “must see” video, well thank you very much!  I am a classic free rider likely to consume the video content without necessarily paying for the advertised products and services. 

           In class I regularly make references to beer, one of the essential food groups for my students.  Most get the economic concept of free ridership when I explain how much I enjoy the Clydesdale advertisements for AB Inbev Budweiser, without having to buy the beer.

            Free rider opportunities notwithstanding, there is a closer question whether sponsored data constitutes permissible price discrimination.  Bear in mind that carriers like Verizon and Comcast can absorb the cost of content carriage, or receive advertising revenues making it possible for consumers to watch content without seeing their often skimpy data allocation evaporate.  Netflix has not banked on competitors having the same zero cost of content delivery.

            So would Netflix have a legitimate (and lawful) complaint about how sponsored data violates the FCC’s Open Internet Order?  In the Internet Service Provider tilting the competitive marketplace for information, communications and entertainment (“ICE”) by taking the cost of content carriage out of the consumer’s cost calculation?

            I part with my network neutrality true believers on this issue, because not all price and quality of service discrimination violates the Communications Act of 1934.  The practice has to be “unfair” and the discrimination has to be “harmful.”  I can envision plenty of instances where sponsored data enhances consumer welfare, particularly free riders distributed throughout the range of incomes.

           

 

The Impact of Regulation on Broadband Investment

           Several sponsored researchers have floated the notion that network neutrality and Title II common carrier regulation constitute the major reason why U.S. broadband carriers apparently have reduced capital expenditure in new and replacement physical plant.  Does this pass the smell test?  Is there any empirical data proving causality?  Would these allegation pass muster under appropriate peer review?

           Let’s get one principle straight: capex in most industries primarily correlates with competitive necessity and the life cycle of sunk investments.  In the U.S., wireless cellular radio companies bear the burden of streamlined Title II common carrier regulation.  Such regulation has not dissuaded these carriers from sinking billion in spectrum auctions and in plant investment.  The FCC swears that broadband access providers will encounter even less regulatory oversight than wireless carriers.

           Similarly, a year over year analysis of capex might have little to do by way of regulation impact on the incentive to invest and much more on whether and when a carrier needs to invest in new, or replacement infrastructure. Ventures with very high plant investments typically also have capacity that comes online or offline in very large increments.  For example, a satellite company like Intelsat, Dish, Sirius-XM and DirecTV will show a significantly higher plant investment in years when it has to replace an in-orbit and soon to be deactivated satellite.  Variability in capex has nothing to do with whether regulation ebbs and flows in terms of severity, or burden.

          I will concede that telecommunications management may tinker with capex as political leverage for less regulation.  AT&T CEO Randall L. Stephenson has said as much, but do you really think he would ration capex if it would render his company and its services comparatively inferior to what other wireless carriers offer?

          Telecommunications carriers and their sponsored researchers also like to trot out “regulatory uncertainty” as a capex disincentive.  In the same breath, they also like to claim regulation operates as an unconstitutional “taking” of their property and the capex they previously made.  Newsflash: regulation in telecommunications constitutes a cost of business that incumbents and prospective market entrants alike have to take into consideration.

          Bottom line: regulation and uncertainty about the future of regulation has limited impact on capex decision making.  If a carrier can make do with less investment it will do so.  Right now most airlines are replacing kerosene guzzlers with more efficient and cheaper models.  They might also “right size” inventory with smaller aircraft.  Such a reduction in overall passenger capacity and in investment responds to marketplace conditions not whether aviation regulators have become more aggressive.  The same concept applies to telecommunications.

Loving Wi-Fi to Death—Wireless Carriers Want to Commercialize Unlicensed Spectrum?

            Once upon a time, wireless carriers in the U.S. intentionally disabled handsets they sold/leased to prevent subscribers from using Wi-Fi in lieu of licensed and metered spectrum.  Time passes and demand for wireless spectrum skyrockets.  Apparently Verizon and other wireless carriers now so need more spectrum that they have unlicensed Wi-Fi spectrum in their sights.  All to better serve consumers, of course.

            Can you see the irony here?  Rather than compete on price, wireless carriers used to emphasize quality of service, availability and signal strength.  They spent millions on advertising explaining the superiority of their networks and billions in acquiring licensed spectrum.  Now they seem to have come upon a strategy that uses spectrum that they cannot control and must share with home Wi-Fi users apparently with no diminution in service, or congestion.  No “tragedy of the commons” overconsumption, because the wireless carriers will have techniques to avoid interference—apparently without having to identify vacant spectrum before using it.

            If licensed wireless carriers had their way, there would be no unlicensed spectrum for voice and Internet access.  You should read their filings over the years explaining the catastrophic consequences of noncommercial, private and unlicensed spectrum use.  These carriers wanted to charge for Wi-Fi service.  Failing that gambit, they want to expropriate unlicensed spectrum and convert it from noncommercial private use to commercial, for profit use.  What a deal!  Is this country great, or what?

            Verizon et al will try to explain how access to Wi-Fi is essential, right now!  Of course they will try to frame the Wi-Fi option as having nothing to do with saving money, or  not having to invest in more spectrum.

            Carriers no longer seem concerned about offloading traffic and free riding on the broadband and wireless spectrum of others.  This practice used to be derisively termed “hot potato routing.”  Now it’s a clever and greedy gambit to avoid paying their fair share for the bandwidth and spectrum they use.

Comcast Upselling Cable Modems

            Despite its commitment to improving its customer service, Comcast keeps writing and robocalling me  with an offer I can refuse.  In a rather alarmist tone, Comcast wants subscribers to infer that their modem soon will no longer work.

            At some future date Comcast may refuse to provide broadband service to modems using the Data Over Cable Service Interface Specification 2.0.  Right now Comcast wants to migrate “bring your own modem” subscribers to the rental camp now charged $10 a month.

            Comcast does not want you to know that the new rented modem will not provide any faster service unless you subscriber to a triple digit, high end service tier. 

            My Motorola DOCSIS 2.0 compliant modem works just fine and it cost me a princely $5 at a garage sale.  Comcast knows what modem subscribers use.  You have to call a customer service representative to activate service and he or she may try to dissuade you from using your own modem and surely will try to upsell you other services.  The company also knows that a DOCSIS 3.0 modem will not provide any faster bit transmission speed to me.

            In other words, Comcast is using a rather cheeky sales tactic.  It’s much like the current television advertisement suggesting that every adult get an expensive shingles inoculation, because the virus “is already inside you.”

            Caveat emptor.

Nokia Mapping and the In-Car Billboard

            BMW Audi AG and Daimler will pay about $3.1 billion for Nokia’s mapping assets; see http://www.wsj.com/articles/bmw-daimler-audi-agree-to-buy-nokias-here-maps-business-1438580698.  While press accounts emphasize mapping as a necessary component for self-driving cars, I see a more immediate goal: creating new revenue streams.

            In-car mapping converts the now common video screen into an ever changing billboard. 

            Well before consumers have “autonomous driving” options, the dashboard screen will convert position determination and mapping into location-specific advertising. These ads will provide new revenue streams for car manufacturers who can take a page out of Google’s playbook.

            In addition to non-revenue services, such as calculating alternative routes to avoid congestion, in-car mapping can link captive consumers keen on finding immediate commercial opportunities like finding the closest gas stations and battery chargers.

            Car manufacturers see the need to diversify and move outside their comfort zone. On many prior occasions, they haven’t fared well, or sold prematurely as occurred when GM spun off Hughes/DirecTV.

            Drivers need to keep their eyes on the road and so do car manufacturers.

Best Available Screen Challenges to the Wireless Lovefest

              With growing momentum, wireline incumbent carriers have achieved general consensus that copper-based technologies should reach end of life, the sooner the better.  The incumbents emphasize how wireless can satisfy consumers’ desire for tetherlessness, free to roam and motor without loss of voice and data connectivity.

            So far so good.  We should not dismiss clear comparative disadvantages in a wireless replacement, but who wants to stand in the way of “progress?”

 

            Nevertheless, you might want to join me in assessing the consequences of a wireless-only environment, particularly for a future marketplace that combines voice and data services.  We might welcome the added versatility of voice access via a single handset anytime and anywhere.  But what about the incumbents’ less visible campaign to make wireless the predominant and likely only option, particularly in many rural locations lacking access to fiber optic, or hybrid copper/fiber, broadband services.  If wireless voice evaporates, so would wireline Digital Subscriber Line data service and any other type of data delivery via now “abandoned” telephone company copper.

            A compulsory migration to wireless data services presents a far less attractive value proposition.  We might tolerate mobile video access via a small screen, but how would you feel if a larger, higher resolution screen was available?  Do incumbents really want to force consumers to abandon the best available screen at home, the high definition and soon to be ultra-high definition television set, so that the meter can continue to run on small screen wireless devices?

            I assume that consumers would rather watch video content on the largest screen available with the best resolution.  I also assume that wireless data subscriptions will continue to offer metered access to rather skimpy amounts of monthly data downloading and streaming at rates far in excess of wireline options on a per downloaded gigabyte basis.  One more assumption: just as wireless subscribers migrate to home Wi-Fi options to avoid running up the meter, future wireless broadband subscribers will not tolerate being bound to a wireless-only option that could result in triple digit monthly bills.

            Please correct me if I have wrongly assessed the copper retirement scenario.  I see a quite viable—if unstoppable—glide path toward a mostly wireless voice marketplace.  I’m not sure whether cable television operators really care much about offering wired voice telephony.  

            What I have problems envisioning is a wireless data marketplace that denies consumers options for using the best available video display screen, the opportunity to replace vastly more expensive wireless streaming with unlicensed options like Wi-Fi and substantial narrowing in the cost of broadband access between wired and wireless options.  Are incumbent telephone companies unintentionally bolstering the prospects for a non-mobile broadband monopoly controlled by cable television operators, or does 5G wireless make unmetered broadband a distinct possibility?

Verizon's Copper-Free Diet and the Poorly Educated Consumer

          The frustration, confusion and anger of an elderly friend showed the upcoming public relations debacle awaiting Verizon and other incumbent carriers in their expedited rush to eliminate copper-based services.  From my experience Verizon’s employees—particularly ones on the wireless side—have no clue on how to minimize the harm.

           My friend should be the kind of customer Verizon should cherish.  She’s a triple play subscriber with a triple digit monthly bill.  She accrues no benefit in subscribing to both wireline and wireless Verizon services, because the company has a bizarre policy of completely separating the business dealings of the two ventures, except for offering a single bill. She’s paying Verizon wireless for unlimited long distance even as she has plenty of anytime, anywhere wireless minutes.  She’s satisfied with Digital Subscriber Line “broadband” transmission speed.

            My friend’s satisfaction came to a quick halt when she went shopping for a new wireless handset.  She wanted to use the same shiny, cutting edge smartphone, because that’s the device her children use.  For that privilege, she had to abandon a low cost wireline/wireless service combination.  Okay so far: having access to a 4G smartphone has its costs.

            Despite repeated assertions that Verizon Wireless employees do not receive commission’s my friend’s salesperson routinely inserted a 2 Gigabyte data plan.  No examination of my friend’s data use.  To add insult to injury, the sales person convinced my friend that she should use a “wireless solution” to her in-home, voice telephone requirements. 

            Might there be a spiff, kickback or other gratuity for salespeople spearheading the migration from copper to wireless, or fiber?

            In any event, the Verizon Wireless employee conveniently failed to mention that my friend would have to buy a special version of old school cordless telephones to access a wireless router that the company would provide “free of charge.”  This router handles in-house voice calls using 2.5G cellular spectrum thereby guaranteeing that the new, allegedly cheaper voice service could not be used for data applications.

            Convenient or not, the Verizon Wireless employee also failed to mention that in migrating to the wireless solution, my friend could no longer access the Internet using her DSL connection. Of course she could use her cutting edge 4G smartphone to access the Internet cloud at speeds far in excess of wireline DSL, but get this Verizon, some people do not want an Internet experience viewed from a small, smartphone screen.  My friend still wants broadband access using a personal computer: quaint, but possibly essential for an older person with declining vision.

            To her complete dismay, my friend found out that she no longer had Internet access and that the new black box provided by Verizon Wireless did not work with any of her existing phones still plugged into the existing RG-11 jack.  Obviously this is not what she bargained.

             Verizon added insult to injury by skimping on telephone-based customer service.  Repeated called got disconnected, probably because the representative realized the call would take too long to resolve in light of severe expectations on the number of calls handled per hour.

             I got involved and accompanied my friend to the local Verizon Wireless store.  The place has an uncanny similarity to a car dealership.  The company uses multiple salespeople and a hand off process that sure looks like a way to “tenderize” the customer and beat them into submission so that the last representative can lard on insurance, extra features and accessories, of course accruing no commission, spiff, or kickback.

             Two hours later, I achieved a remedy, albeit a still costly one.  It was remarkable to see that the Verizon Wireless representative experienced the same recordings and runaround as my friend.  A wireless call triggered a wireless Verizon customer service agent even though the local Verizon Wireless employee used a wireline Verizon toll free number.  The local employee had to resort to a wireline telephone to get through to Verizon wireline.

             How ironic (copper/iron pun intended).

             The lessons learned:

 1)         Verizon is one of those “too big to fail” ventures that screws up customer care, even if arguably it invests more in the process than a company like Comcast;

 2)         Verizon is using far too aggressive tactics to nudge and push wireline customers onto wireless options, particularly in areas lacking FiOS;

 

3)         Verizon Wireless has so many walk-in customers—even in the little town of State College, Pennsylvania—that sale people forget their scripts and checklists.  The emphasis is on speeding up the transaction and not assessing the customer’s requirements, and understanding about the battery backup limitations and the need to buy new phones, etc.; and

 4)         Consumer interest in having the latest and greatest smartphone can lead of costly and unneeded service arrangements; and

 5)         Consumers surely must prepare for the high pressure, time is of the essence decision making that still locks most into a 2 year service agreement.

AT&T-DirecTV and the Benefit of Multiple Requests

            AT&T appears likely to secure all required governmental approvals of its $48.5 billion acquisition of DirecTV.  AT&T has made multiple requests for acquisition authority of late and the odds of multiple “mother may Is” seems to work here.  The company couldn’t get the needed authority to buy out TMobile and the wireless consumers are far better off in having a maverick innovator among the 4 carriers that pretty much control the nation’s wireless infrastructure.  Most analysts think a merger of AT&T and DirecTV won’t matter much.

            AT&T can make plausible arguments that the merged venture will not harm competition, or consumers even as it provides desirable diversification opportunities for both companies.  The FCC and Justice Department will have to emphasize this prospect rather than dwell of the snarky and unnecessary threats by CEO Randall Stephenson that AT&T won’t invest in next generation network infrastructure because of burdensome network neutrality obligations and general notions of regulatory uncertainty.  See Washington Post, AT&T is putting its fiber deployment on ice over net neutrality — for now (Nov. 12, 2014)

available at: https://www.washingtonpost.com/blogs/the-switch/wp/2014/11/12/att-is-putting-its-fiber-deployment-on-ice-over-net-neutrality-for-now/.

            So AT&T has ample retained earnings and borrowing options to shell out $48.5 to buy out a content competitor, but the marketplace is too risky to invest in plant?  Apparently it makes financial sense to buy market share and diversify content distribution technologies rather than extend the geographical market coverage of AT&T’s hybrid fiber optic/copper U-verse network.

            AT&T is neither a maverick, nor an innovator.  Its interest in DirecTV may evidence backward, or status-quo thinking.  In the worst case, AT&T will have bought a venture whose one service will decline in value and market share over the next few years. If cord cutting and shaving picks up momentum in the wired cable television environment, won’t subscriber churn increase for the satellite alternative to cable?  Or will exclusive rights to some NFL football games pay for the deal?

            Does it make sense to double down on an incumbent medium, rather than emphasize new media opportunities?  The managers at AT&T appear keen on hedging their bets by embracing old media even as technological and market convergence point elsewhere.

AT&T Wireless Risks Having to Pay $100 Million in Tuition on Contract Law

          The FCC has issued a Notice of Apparent Liability to AT&T Wireless with a $100 million “forfeiture” for throttling service to subscribers still having “unlimited” service plans.  See http://www.wsj.com/articles/fcc-to-fine-at-t-100-million-for-capping-unlimited-data-plans-1434557988; https://www.fcc.gov/document/att-mobility-faces-100m-fine-misleading-consumers-0.

           The FCC applies the transparency requirements contained in its 2010 and 2015 Open Internet Orders that passed muster with appellate court review. 

            Ironically, AT&T could have avoided the fine if it strategically blended service contracts with FCC filed tariffs.  Historically, tariff filing requirements have been vilified as harmful to competition, innovation and carrier flexibility.  The FCC has mandated detariffing of many services including wireline and wireless long distance services on the assumption that carriers will self-regulate in a competitive market.

           Apparently even in competitive markets, carriers can risk a bait and switch gambit.

           If only AT&T had a tariff filing option.  It could have inserted language deep in the boilerplate of a tariff to accord it near total flexibility to throttle whenever it wanted.

           The campaign of AT&T and other incumbent carriers to eliminate tariffing has an impact AT&T apparently has failed to evaluate fully. By seeking to replace tariffs with contracts, AT&T now has to comply with issues such as fair notice, proper definition of words like unlimited and congestion, consumer protection and unfair trade practices.  A very old legal precedent, known as the Filed Rate Doctrine, allows common carriers to insert language in tariffs that subvert, conflict with and change the terms and conditions of a negotiated contract.  In effect AT&T could have baited and switched if it could still file a tariff. 

            The tariff would have trumped anything offered orally, or by written agreement. Even today, under certain circumstances, incumbent carriers still like what tariffs offer.  For example, Verizon still has a web page that seems to like tariffing.  The company states that: “Tariffs have historically served as the basis for creating binding rights and obligations between carriers and their customers for telecom services.” See http://www.verizonenterprise.com/us/publications/service_guide/detariffing_f_a_q/.

           But of course who wants a fair balance of rights and obligations between carriers and consumers?  With binding arbitration clauses and major limits of the certification of class action law suits, carriers increasingly can behave poorly, dare I say cheat customers, without penalty.  Occasionally the FCC and FTC step in, and the offending carrier pays a minor fine.

           Possibly a $100 million dollar fine will motivate AT&T to appeal the FCC’s order.  If so AT&T, as the author of a “take it or leave it” contract of adhesion, will bear the burden of proving that unlimited does not mean what people commonly assume the word to mean.

TMobile-Dish--Not So Strange Bedfellows

          Another day another 64 billion dollar market consolidation.  Well at least this one has some entertainment value and I don’t refer to the video content on Dish. 

            Two of the most colorful players in the telecom industry get to make nice.  If the deal proceeds, it will be interesting to see how two difficult, others would say mercurial, players (Charlie Ergen of Dish and John Legere of TMobile) mesh.

 

            One should have skepticism about the deal, not due to regulatory and antitrust constraints.  It seems that Mr. Ergen hails from the John Malone school of negotiation where the deal doesn’t get done unless and until every less unit of value gets squeezed out.

            The big, multi-billion dollar question for the deal in whether and how the massive warehoused Dish spectrum can provide mobile, convergent services including voice, video and smartphone apps.  This issue combines spectrum propagation questions with device issues.

            How would Dish spectrum compare with far lower frequencies used for current smartphone services?  Will major wireless handset manufacturers support new product lines for use on Dish frequencies?

            Stay tuned.

FCC Chairman Tom Wheeler, the Wall Street Journal and the Secondary Meaning of Incontinent

          Today the Wall Street Journal reached a new nadir of snark and journalist irresponsibility.  In one op ed, Holman W. Jenkins, Jr. misrepresented the nature of FCC broadband oversight as “monopoly regulation,” and implied that Chairman Wheeler is a liar and Obama pawn. See http://www.wsj.com/articles/washington-makes-a-broadband-hash-1432682871.

            Additionally, Mr. Jenkins accused Chairman Wheeler of incontinence, which I now know has a secondary meaning of lacking in moderation or self-control; unceasing or unrestrained.  So Mr. Jenkins wasn’t making a medical diagnosis. Okay, but I know an (begin encryption) ick pray when I see one.

 

            This kind of op-editorial is shameful. 

 

            If the FCC is engaging in monopoly broadband regulation, how can there be multiple broadband operators who want to merge?  Bear in mind that these merging ventures will take pains to explain the robust competitiveness and non-monopolistic nature of the broadband market.  Mr. Jenkins must be referring to price, or rate of return regulation, but guess what Mr. (begin encryption) Ace in the Hole?  The FCC expressly doesn’t reserve the option of doing either.

 

            So Mr. Jenkins doesn’t believe the FCC or Mr. Wheeler.  Perhaps you should have similar skepticism about Mr. Jenkins’s verisimilitude.