AT&T A Broadband Booster--Who Knew?

AT&T apparently has embraced broadband so much so that it wants out of the dial up, circuit switched telephone business. On it's face we could endorse this belated acknowledgement of a digital future. But no one seems to examine AT&T's motivations which surely lack altruism.

Let's remember that AT&T declined to submit applications for access to some of the $7.2 billion in broadband stimulus funds. To conserve capital, AT&T relies heavily on the copper twisted wire pair to support its current broadband U-Verse service. Now it wants to abandon the local loop---or mabe it's just wants Congress and the FCC to abandon regulation of the local loop.

I see AT&T's well publicized pitch as a gambit for deregulation, no longer based on easily disputed "statistics" about how competitive the telecommunications marketplace is, but now based on the need to expedite the migration from Plain Old Telephone Service ("POTS") to a completely digital broadband infrastructure. The company that won't seek broadband financial support--lest it have to commit to operating a neutral and open network--wants to rid itself of pesky government regulation which apparently has forced it by "regulatory takings," until now, to skim on broadband investment.

Let's briefly consider this deregulatory end game and the apparent lack of residual value in POTS. AT&T wants us to forget the current state of the marketplace, one that has both competitive and uncompetitive segments. But only with a forward looking, deregulatory approach can this nation acclerate the transition to our "digital destiny." How ironic that AT&T would prefer non monetary regulatory "reform" in lieu of direct subsidies.

Speaking of subsidies, recall that the U.S. government so worried about access to free to air broadcast television by 9% of the population that it offered two $40 vouchers for digital to analog converters and launched an aggressive and successful campaign to educate the masses on the DTV conversion. Dial up voice may have declined in both market penetration and revenues, but it won't drop to a 9% penetration any time soon.

So I'll reframe AT&T's ostensibly noble and futuristic campaign as nothing more than a new strand of a familiar gambit to remove government oversight while retaining government conferred benefits. If AT&T abandons its core public utility mission than it should relinquish all of the rights of way it got at below cost or zero expense. AT&T might also check with its tax counsel for advice on what it might lose when it exits the Title II common carrier safe harbor.

New Pub: Lock Down on the Third Screen: How Wireless Carriers Evade Regulation of Their Video Services

The latest Berkeley Technology Law Journal (Vol. 24, No. 2 819-849 Spring, 2009) has published my work on wireless video regulatory issues.

Here's the abstract:

Wireless handsets increasingly offer subscribers a new option for accessing the Internet and video programming. The converging technologies and markets that make this possible present a major regulatory quandary, because the Federal Communications Commission (“FCC” or “Commission”) seeks to maintain mutual exclusivity between regulated telecommunications services and largely unregulated information services.

Many existing and emerging services do not easily fit into one or the other regulatory classification, nor can the FCC determine the appropriate classification by extrapolating from the regulatory model applied to existing or discontinued services. By failing to specify what model applies to services appearing on cellphone screens, the FCC has failed to remove regulatory uncertainty. Cellular telephone service providers may infer from the Commission’s inaction that any convergent service eventually will qualify for the unregulated information service “safe harbor” despite plausible arguments that government oversight remains essential to achieve consumer protection, national security, fair trade practice, and other safeguards.

This article will examine the regulatory status of wireless carrier-delivered video content with an eye toward determining the necessary scope and nature of government oversight. The article reports on instances where the FCC deemed it necessary to promote video programming competition and subscriber access to wired cable television content, and concludes that wireless subscribers deserve similar efforts in light of wireless carriers’ incentives and abilities to blunt competition. The article concludes that the FCC must balance the carriers’ interests in finding new revenue centers to pay for next generation network upgrades with subscribers’ interests in maximizing their freedom to use handsets they own.

The Regulatory Arbitrage Lovefest

My day job, which includes finishing a book, updating a broadband law treatise, and trying to engage undergraduate students in the challenges of telecommunication and Internet policy, prevents me from weighing in each time I see yet another outrageous claim on such issues as network neutrality, broadband market penetration, and the competitiveness of U.S. telecoms markets. But I have to make time for this one.

As I understand from its letter to the FCC, AT&T objects to Google’s interpretation of law, regulation, and policy that qualifies Google Voice as an information service instead of lightly regulated long distance telephone service. This peach from AT&T—dare I say this—conflicts with the company’s previous claims that its wireless text messaging and wireline video services similarly qualify for limited regulation as information services.

So let me get this straight: in AT&T’s self-serving world (it is not a charity after all), the FCC should agree with it that text messaging is not a regulated common carrier, telecommunications service, akin to paging, and the company’s U-verse video program delivery is not a regulated cable service under Title VI of the Communications Act. Yet Google’s software-generated telephone calling service is a common carrier, telecommunications service even though it is not offered on a retail basis and rides on top of DSL, cable modem or other types of Internet access that the FCC and the Supreme Court already have deemed information services.

It is painfully clear to me that companies such as AT&T have a strategy of generating as much dissonance and nonsense as possible, regardless whether the positions pass a simple smell test. AT&T wants to ramp up the Fear, Uncertainty and Doubt level to prevent the FCC from making any definitive ruling on network neutrality.

AT&T has come up with an objection to an unregulated service that can provide something of a competitive alternative to its lightly regulated long distance telephone services. As consumers we want competitive alternatives and there are instances where inconsistent regulation may tilt the competitive playing filed in favor of an insurgent over an incumbent. But this regulatory arbitrage opportunity is both narrow, of limited value, and often short-lived. First AT&T overstates the degree of regulatory burdens it incurs in having to offer its long distance telephone service under regulation. The company does not have much paper work with the FCC and the Commission has forborne from regulating interexchange telephone services. So the scope of burden—financial and logistical-- is limited. Additionally AT&T conveniently forgets that it could have disputed the high call termination charges imposed by rural carriers. Neither AT&T nor Google want to pay extortionate access fees imposed by rural telephone companies when these companies exploit a regulatory arbitrage opportunity: the ability to generate lots of inbound traffic by offering free conference calling while paying carriers like AT&T much lower access charges when AT&T terminates calls originated by customers of the rural carriers.

The bottom line is that AT&T has had plenty of opportunities to avoid regulation based on the gigantic deregulatory safe harbor offered by the information service classification. Now AT&T has the nerve to object to Google’s use of the same opportunity. Now that's "the kettle calling the pot black."

Another Work in Progress--Lock Down on the Third Screen: How Wireless Carriers Evade Regulation of Their Video Services

Set out below is the abstract for another work in progress that considers whether wireless carriers should evade regulation of their "third screen" video services. The paper will appear in a future edition of the Berkeley Technology Law Journal; a darft version is available at: http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=102928

Wireless handsets increasingly offer subscribers a new optionfor accessing the Internet and video programming. The converging technologies and markets that make this possible present a major regulatory quandary, because the Federal Communications Commission (“FCC” or “Commission”) seeks to maintain mutual exclusivity between regulated telecommunications services and largely unregulated information services.

Many existing and emerging services do not easily fit into one or the other regulatory classification, nor can the FCC determine the appropriate classification by extrapolating from the regulatory model applied to existing or discontinued services. By failing to specify what model applies to services appearing on cellphone screens, the FCC has failed to remove regulatory uncertainty. Cellular telephone service providers may infer from the Commission’s inaction that any convergent service eventually will qualify for the unregulated information service “safe harbor” despite plausible arguments that government oversight remains essential to achieve consumer protection, national security, fair trade practice, and other safeguards.

This article will examine the regulatory status of wireless carrier-delivered video content with an eye toward determining the necessary scope and nature of government oversight. The article reports on instances where the FCC deemed it necessary to promote video programming competition and subscriber access to wired cable television content, and concludes that wireless subscribers deserve similar efforts in light of wireless carriers’ incentives and abilities to blunt competition. The article concludes that the FCC must balance the carriers’ interests in finding new revenue centers to pay for next generation network upgrades with subscribers’ interests in maximizing their freedom to use handsets they own.