Category Archives: Infrastructure

Net Neutrality: High Cost, No Benefit

For Forbes this morning, I reflect on the publication late last week of the FCC’s “Open Internet” or net neutrality rules and their impact on spectrum auctions past and future. Hint: not good.

An important study last year by Prof. Faulhaber and Prof. Farber, former chief economist and chief technologist, respectively, for the FCC, found that the last-minute imposition of net neutrality limits on the 700 MHz “C” block in the FCC’s 2008 auction reduced the winning bid by 60%–a few billion dollars for the Treasury.

Yet the FCC maintained in the December Report and Order approving similar rules for all broadband providers that the cost impact of these “prophylactic” rules would be minimal, because, after all, they simply endorse practices most providers already follow. (And the need for the new rules, then, came from where?)

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Updates to the media page

We’ve added another dozen entries to the Media Page. Throughout the summer, Larry was busy with articles and press interviews on everything from pending copyright legislation, the FCC’s annual wireless competition report, and the merger of AT&T and T-Mobile. The focus, as always, was on the impact of these regulatory proceedings on Silicon Valley and the I.T. community generally. In addition to new articles for CNET and Forbes, Larry appeared in USA Today, the National Journal, and The Hill. Check them out!

iPhone and Android Devices Not Working? It's Your Fault

For CNET this morning, I have a long article reviewing the sad recent history of how local governments determine the quality of mobile services.

As it  turns out, the correlation is deeply negative.  In places with the highest level of user complaints (San Francisco, Washington, D.C.), it turns out that endless delays or outright denials for applications to add towers and other sites as well as new and upgraded equipment is also high.  Who’d have thought?

Despite a late 2009 ruling by the FCC that put a modest “shot clock” on local governments to approve or deny applications, data from CTIA and PCIA included in recent comments on the FCC’s Broadband Acceleration NOI suggests the clock has had little to no effect.  This is in part because the few courts that have been asked to enforce it have demurred or refused.

Much of the dithering by local zoning boards is unprincipled and pointless, a sign not so much of legitimate concerns over safety and aesthetics but of incompetence, corruption, and the insidious influence of  outside “consultants” whose fees are often levied against the applicant, adding insult to injury.

For example, in El Cerrito, CA, about a mile from my house, officials sat for two years an on application to site a tower disguised as a tree on a Boy Scout camp , then passed a two-year moratorium on any new facilities.  (I know that camp well–it is in the midst of a giant chain of parks that run the ridgeline of the Berkeley Hills, thick with invasive, non-native trees that have an unfortunate tendency to explode during fire season.)   In Berkeley, CA, where I live, even applications to collocate new antennae on existing towers require a full review and hearing.

Other city and county boards simply delay or deny, or introduce bizarre requirements, including that any new equipment must be shown to benefit only residents of the jurisdiction.

The “shot clock” rule also banned a common practice among many communities of denying any application for new equipment if an existing mobile provider already served the area.  Yes, that’s right.  With all the hand-wringing and crocodile tears over mobile competition and the danger of the AT&T/T-Mobile merger, many parts of the U.S. prohibit new competitors from entering.

Some communities are still enforcing that rule, and the few court cases that have interpreted the FCC ruling haven’t always embraced it.

Why does this matter?  There are two principal inputs to a cellular network that determine quality of service for customers:  spectrum and cell sites.  Both are under the thumb of government control and constraint.  (Geoff Manne’s recent rant on spectrum is well worth reviewing.)  Over the last five years, the four major providers have invested billions in new infrastructure, and would have invested more, as the FCC acknowledges, were it not for the interference of local governments.   In 2009 alone, over $20 billion was invested, representing 13% of total industry revenue.

 

Capital Expenditure by Carrier

Source:  Federal Communications Commissison

If service is poor in some parts of the country, we have only ourselves to blame. But as one commentator to my article put it, it’s so much more fun to blame the device or the carrier.

Or, not so funny, to take a “principled” stand on behalf of competition to block a merger designed to evade these increasingly dangerous roadblocks,

Why U.S. v AT&T Should Worry Silicon Valley

On Forbes this morning, I argue that the Department of Justice’s effort to block the AT&T/T-Mobile merger signals a dangerous turn in antitrust enforcement.

While President Obama promised during his campaign to “reinvigorate” antitrust, few expected the agency would turn its attention with such laser-like precision on the technology sector, one of the few bright spots in the economy. But as Comcast, Google, Intel, Oracle and now AT&T can testify, the agency seems determined to make its mark on the digital economy. If only it had the slightest idea how that economy actually worked, and why it works so well. Continue reading →

Net neutrality poisoning spectrum auctions

On CNET this morning, I argue that delay in approving FCC authority for voluntary incentive auctions is largely the fault of last year’s embarrassing net neutrality rulemaking.

While most of the public advocates and many of the industry participants have moved on to other proxy battles (which for most was all net neutrality ever was), Congress has remained steadfast in expressing its great displeasure with the Commission and how it conducted itself for most of 2010.

In the teeth of strong and often bi-partisan opposition, the Commission granted itself new jurisdiction over broadband Internet on Christmas Eve last year.  Understandably, many in Congress are outraged by Chairman Julius Genachowski’s chutzpah.

So now the equation is simple:  while the Open Internet rules remain on the books, Congress is unlikely to give the Chairman any new powers.

House Oversight Committee Chairman Darrell Issa has made the connection explicit, telling reporters in April that incentive auction authority will not come while net neutrality hangs in the air.  There’s plenty of indirect evidence as well.

The linkage came even more sharply into focus as I was writing the article.  On Tuesday, Illinois Senator Mark Kirk offered an amendment to Sen. Reid’s budget proposal, which would have prohibited the FCC from adding neutrality restrictions on VIA auctions.  On Wed., Sen. Dean Heller wrote a second letter to the Chairman, this one signed by several of his colleagues, encouraging the Commission to follow President Obama’s advice and consider the costs and benefits of the Open Internet rules before implementing them.

Yesterday, key House Committee chairmen initiated an investigation into the process of the rulemaking, raising allegations of improper collusion between the White House and the agency, and of a too-cozy relationship between some advocacy groups and members of the Commission.

All this for rules that have yet to take effect, and which face formidable legal challenges.

The Chairman needs a political solution to a problem largely of his own creation.  But up until now, there’s little indication that either the FCC or the White House understand the nature of the challenge.  This year, we’ve had a steady drumbeat of spectrum crisismongering, backed up by logical policy and economic arguments in favor of the VIAs.

While some well-respected economists aren’t convinced VIAs are the best solution to a long history of spectrum mismanagement, for the most part the business case has been made.  But the FCC keeps making it anyway.

Meanwhile, the net neutrality problem isn’t going away.  Mobile users are enjoying their endless wireless Woodstock summer, marching exuberantly toward oblivion, faster and in greater numbers all the time.

Silicon Valley better save us.  Because the FCC, good intentions aside, isn’t even working on the right problem.

 

My summer romance: the FCC's wireless competition report

I’m spending the summer curled up with a good book–or more precisely, a good 300 page printout of the FCC’s 15th Annual Mobile Wireless Competition Report. It’s massive collection of data makes compelling reading for the mobile industry geek, and the 100 or so charts and tables make the 3d special effects in “Green Lantern” look like a hand-drawn flip book. (Well, so I guess, since I haven’t seen “Green Lantern” or nearly any other summer blockbuster.)

So far, I’ve written three thumbs-up book reviews, and looking over my notes, I’ve barely scratched the surface. But for now I think I’ll take a break.  Though I’m sure I’ll have more to say before the sequel comes out next year.

Here’s what we’ve got so far, in short, longer, and longest order:

1. San Jose Mercury News (with Geoff Manne): “California PUC Should Approve Merger of AT&T and T-Mobile.”

2.  BNA Daily Report for Executives (with Geoff Manne):  “FCC Mobile Competition Report is One Green Light for AT&T/T-Mobile Deal.”

3. Forbes.com, “The iPhone, Android, and the FCC:  Obeying the Prime Directive.“