Monday, July 27
Our Co-Chairman Bruce Mehlman has a piece in Bloomberg BNA on regulation the FCC is considering as America transitions to all Internet-based networks. An excerpt:
The nation’s historic transition away from the copper wire toward a modern Internet Protocol-based (“IP”) communication system represents a critical technological leap forward. The United States aims to complete this transition by 2020; indeed, the impetus for this effort actually first came from FCC Chairman Tom Wheeler, then in his role as head of an advisory board on technology transition.
This transition will ultimately bring consumers new technology, billions of dollars in new infrastructure, and faster and better broadband services and applications. Today, test trials for the transition are underway in Alabama and Florida to work out technical issues and ensure superior service quality for consumers.
Recently, however, Chairman Wheeler publicly outlined his proposed next steps for the IP transition that include applying old monopoly-style telephone rules to favor and advance certain carriers’ business models. Applying such rules to IP-based broadband communications networks of the future would benefit companies that serve businesses, yet provide little to no benefit to the average consumer.
Specifically, in response to the supposed need to “preserve competition in the enterprise market,” the FCC plans to require that “replacement services be offered to competitive providers at rates, terms and conditions that are reasonably comparable to those of the legacy services.”
Check out Mehlman’s full piece from Bloomberg BNA
Thursday, June 25
Update: You can read Commissioner Michael O’Rielly’s full remarks here.
The Role for Regulators in an Expanding Broadband Economy
Innovation, convergence and rapid technological advances are rapidly reshaping the Internet ecosystem and how Washington’s legislators and regulators approach national broadband policymaking. Ongoing consideration of new policies will shape the future of an Open Internet for the 21st century.
The Internet Innovation Alliance invites you to join a policy discussion that will address:
• The appropriate role for regulators in an expanding broadband economy;
• The impact of different regulatory approaches toward the Internet and its meaning for the broadband economy;
• Congress’ role going forward in setting clear rules of the road for the Open Internet;
• The interrelationship between regulation and investment in broadband, and what, if any, impact it will have on potential legislative action going forward.
Commissioner, Federal Communications Commission
Followed by a panel discussion including
Stuart N. Brotman
Nonresident Senior Fellow, Center for Technology Innovation
The Brookings Institution
Randolph J. May
President, Free State Foundation
Senior Vice President of Government Affairs,
Telecommunications Industry Association (TIA)
Susan Bitter Smith
Chairman, Arizona Corporation Commission
Bruce Mehlman (Moderator)
Co-Chairman, Internet Innovation Alliance
Thursday, June 11
Earlier today, IIA sent a letter to FCC Chairman Tom Wheeler expressing our support for the Commission’s upcoming rulemaking proceeding soon to be initiated to advance Lifeline reform. From that letter, signed by IIA Chairmen Rick Boucher, Bruce Mehlman, Larry Irving, and Jamal Simmons:
“In the U.S., consumers with economic means have nearly ubiquitous access to broadband, yet almost two-thirds of our nation’s low-income community continues to seek that similar opportunity. Without broadband availability, low-income families face an uphill battle in obtaining the American dream.
“In bringing Lifeline into the 21st century, broadband should be included as an integral, more affordable offering of the program, and consumers should be empowered by providing the subsidy directly to eligible people instead of companies. Moreover, to enhance administrative efficiency, we urge the FCC to shift program eligibility verification away from companies that are not accountable to the American people, and instead allow states to verify eligibility for Lifeline at the same time they determine consumer eligibility for other federal low-income programs. Such ‘coordinated enrollment’ would benefit consumers by streamlining the eligibility process and ultimately enable subsidy recipients to receive a ‘Lifeline Benefit Card’ where consumers could apply the funds to the provider of their choosing. These reforms would make program participation for all service providers more attractive, thereby broadening consumer choice and stimulating competition for the low-income consumer purchasing power.
“IIA applauds the Commission for quickly moving forward to initiate a new proceeding aimed to advance Lifeline reform this year. The time for reform is now, the need is great, and the goal is achievable.“
You can read the full letter here. Additionally, you can download our white paper on reforming the Lifeline program that we published last November.
Monday, April 20
Our Co-Chairman Bruce Mehlman penned an op-ed for Multichannel News on how increased competition in Special Access is active proof that the free market is working. An excerpt:
[I]n a smooth functioning market, there will be many providers offering a variety of options, including different options based on speed. Not everyone wants to pay for the fastest speeds available. Though inconsistent with the Washington narrative of regulate-to-prevent-“inequality”, as we’re seeing in health care and some tax proposals, in the real world consumers and businesses prefer to choose what’s best for them.
So with cable joining the fray, incumbent telcos are now facing greater competition in special access, just as one would predict in a market that is working well – something for regulators to remember the next time competitors come knocking on their door seeking government intervention and stricter regulations as a means to help subsidize their business model. Markets work, if we will just let them.
Check out Mehlman’s full op-ed over at Multichannel News.
Tuesday, April 07
Recently I had the privilege of participating in Georgetown University’s look back at the National Broadband Plan and its impact. Although far less high-profile than many made-for-the-media-circus endeavors, the National Broadband Plan (NBBP) proved a model of creativity… efficient, effective government, your tax dollars well-spent. Much credit goes to NBBP’s fearless and far-sighted leader Blair Levin, and Blair happily enjoyed a victory lap while heaping praise upon his many able lieutenants and soldiers… both outcomes to be expected by those who know Blair well!
While others dove deep into the specific recommendations made and outcomes achieved in the report itself, I took away four core conclusions from the five-years-after look back:
1. People Matter. Being the government is not a barrier to efficiency, innovation or effectiveness… given the right team and right processes. Blair gathered a “best and brightest” of policy analysts to research and write NBBP. He neither relied on outside experts alone nor eschewed career professionals. Instead he blended a team of thoughtful go-getters such as Pew’s John Horrigan, with leading thinkers at several agencies, a “best and brightest” approach that paid dividends.
2. Process Matters. The NBBP planning efforts were highly inclusive, hearing from all sides of most issues and inviting every sector to participate. No ideological or political litmus tests applied, maximizing ideas and enthusiasm. Concurrently NBBP was highly transparent, minimizing suspicions or criticisms of the ultimate product (lessons from the failed-and-far-less-transparent 1993 “HillaryCare” and 2001 “Cheney Energy Policy”).
3. Policy Matters. Even the best process and smartest people would not have counted if they failed to ask the right questions and offer the right answers. In this case, they did both, highlighting the critical need for more spectrum for broadband services, for example, along with creative methods for finding it. NBBP likewise helped illuminate the need for and value of driving fiber deeper into networks, urging an “if you build it they will come” approach that has largely matched reality. And NBBP supplied vision of a broadband-enabled world for those many policy makers less familiar with the end-game opportunities.
4. Politics Matters. In this case, avoiding the unnecessary political morass named Net Neutrality. To have observed the President on the campaign trail, one might have concluded that the #1 broadband issue was Net Neutrality and preventing some nefarious monopolists from hijacking the “People’s Internet.” To its great credit, the NBBP recognized the difference between serious policy questions and partisan political hype in search of marketplace realities and assiduously avoided the issue. (Officially, these political appointees deferred to the FCC that wanted to take the issue head on… yet while the FCC spent a year stuck in the political mud, the NBBP charged forward). In reality the NBBP planners understood that the light-tough regulatory approach identified by President Clinton and maintained by President Bush paid extraordinary dividends, as we saw in a roaring broadband economy. Recent decisions to roll back those long-standing policies are a gamble at best, and an unnecessary one. Broadband and especially wireless has thrived in a light-touch regulatory framework, but we’ve just plucked a whole bunch of feathers from the golden goose. Maybe it won’t impact egg production, but maybe it will. Time will tell.
Friday, March 06
The need for a permanent legislative solution to guarantee an open Internet against all risks, present and hypothetical, has been greatly enhanced by the confusion and lack of clarity that Title II proponents have created, perhaps unavoidably, as we break with 20+ years of bipartisan support for light-touch regulation of the Internet and charge forward on treating the most innovative sector of our economy as if it’s among the least. Even net neutrality champions have seemed flummoxed.
For example, one of the loudest champions supporting public utility style regulation for the nation’s broadband ecosystem was Netflix. Netflix publicly pushed the White House and the FCC to embrace Title II as a means to achieve marketplace concessions and prevent assignment of higher costs for consumption of greatest bandwidth. Yet, when Netflix’s Chief Financial Officer was asked at an investment conference this week, “Were we pleased it pushed to Title II,” he replied: “Probably not. We were hoping there would be a non-regulated solution.”
Netflix’s CFO was hardly alone in expressing concern for the potential harms that could cascade from treating the most dynamic and innovative sector of our economy as the most in need of Washington’s control. CloudFlare CEO Matthew Prince eloquently shared his “deep concerns” that the use of Title II to achieve net neutrality protections could well snatch defeat from the jaws of victory – “proponents of a free and open Internet may look back on today not as a great victory, but as the first step in what may turn out to be a devastating loss”. According to reporting by the Wall Street Journal, erstwhile net neutrality champion Eric Schmidt even lobbied the White House against use of the thermonuclear Title II option.
The lack of appreciation for the harms associated with the FCC’s decision to impose public utility style regulation (Title II) on broadband has not been limited to Netflix. During a recent CNBC interview, Title II proponent David Karp, founder and CEO of Tumblr, similarly made statements regarding the proposed Net Neutrality regulations that ironically affirmed why a “light-touch” regulatory approach is superior to Title II to maintain the current open, robust, and investment-friendly Internet. Mr. Karp and others have been led down the proverbial primrose path to believe that Title II is the only solution to keep any potential abuse at bay. However, it is worth reviewing many assertions made by Mr. Karp and other Title II advocates and the realities that contradict them.
The Title II rules will not “slow down innovation.”
Not true. Innovation developed at the Internet’s ‘edge’ by companies like Tumblr depends on robust high-speed broadband wired and wireless networks to reach consumers. Innovative success stories such as Tumblr thrived precisely because Title II was not applied to the Internet ecosystem. Title II regulations that slow broadband investment by Internet service providers will ultimately harm Internet innovation by those hoping for robust and rapidly-improving service.
New rules are needed to achieve “a competitive market for carriers where they’re competing to deliver us the fastest, best Internet.”
That market exists today. It’s the very market in which Tumblr has thrived. The U.S. benefits from robust competition among both wired and wireline Internet providers – competition that exceeds that in Europe, which today maintains Title II-like regulations on Internet providers.
Concerns that Title II will restrict investment “have been disproven.”
Wrong. To the contrary, light-touch regulation promotes greater investment, as highlighted in a recent Internet Innovation Alliance study that compares broadband and telco investment in the U.S. and Europe.
There is currently “a lot of artificial throttling going on, [even though broadband providers] have the bandwidth to deliver this.”
Not really. Allegations of throttling are hypothetical. In fact, the FCC found only four instances of alleged anticompetitive throttling behavior, and all occurred before 2010. The core challenge remains: Managing the exponential explosion of content and data generated by “killer content”, such as Netflix’s popular “House of Cards.” Carriers desperately search for more spectrum for mobile broadband services, which is why wireless companies just spent $45 billion at the recent FCC spectrum auction gobbling up airwaves to provide mobile Internet services. But broadband providers, and new entrants such as Dish, may not make such desperately-needed investments in the future if they believe that Title II will inhibit their ability to recoup.
Title II will “move further in breaking down the near-monopoly situation we have right now.”
What monopolies? No broadband company has as much market share as the leading search engine or many of the leading tech players. Today’s broadband market is vibrantly competitive as consumers have multiple Internet options in markets across the U.S. Title II does not “break down” monopolies, since it was crafted to manage and regulate the one service provider that existed in the 1930s monopoly telephone market.
Despite Title II, providers will continue to build the broadband Internet at faster speeds and that the carriers are “just lying” when they claim otherwise.
Really? Public Internet service companies are responsible to their shareholders and logically invest only in markets where they have an ability to recoup their capital. Investment suffers in markets—like Europe—where a Title II-like regulatory regime prevails.
Friday, February 06
Our Co-Chairman Bruce Mehlman and Larry Irving have a column in USA Today warning that the FCC risks stunting progress on the Internet. An excerpt:
[T]he war reached new heights this week, as FCC Chairman Tom Wheeler proposed regulating our most advanced companies based on the rules designed for our oldest.
For a majority of innovators and entrepreneurs around the nation, partisan paralysis is unwelcome news, likely to spawn years of litigation, cloud investment certainty and potentially slow our economy’s most powerful engine. For objective policy analysts, the partisan intensity surrounding the net neutrality debate is unnecessary and counterproductive. Bad politics is making for bad policy.
Check out the full column over at USA Today.
Monday, December 08
As with most heated debates, the current net neutrality kerfuffle has been heavy on rhetoric and light on facts.
Sure, those of us who believe the Internet has thrived — and will continue to thrive — without the heavy mitts of regulation point to study after study after article (most recently from the Progressive Policy Institute, of all places) warning that Title II reclassification would do much more harm than good for the open Internet, but facts and research aren’t nearly as effective as facetious cries about a “two-tiered Internet!” and “They are coming for your Netflix!”
That being said, since I’m a glutton for punishment I’m going to highlight yet another article, this one penned by economist (and IIA friend) Bret Swanson for the Wall Street Journal.
Swanson’s piece has a blunt title — “The U.S. Leads the World in Broadband” — and rather than shouting about the Internet sky falling, he crunches some numbers to show that… well, just what the title says.
From his piece (which is behind a paywall):
Mr. Obama recently called on the FCC to impose “the strongest possible rules” on Internet service providers to make sure they don’t “limit your access to a website” or “decide which online stores you should shop at or which streaming services you can use.”
Neither of these rationales for regulatory intervention is true, however, and there’s a simple way to show it. An international comparison of Internet traffic can tell us about the quality of broadband networks and the vibrancy and openness of content markets. Traffic represents all the bits flowing over our networks—email, websites, texts, chats, photos, digital books and movies, video clips, social feeds, searches, transactions, cloud interactions, phone and video calls, interactive maps and apps, software downloads, and much more.
And just what did the numbers tell Swanson?
What I found was that at 18.6 exabytes (18.6 billion gigabytes) a month, the U.S. generates far more traffic per capita and per Internet user than any other major nation save South Korea, which is a vertical metropolis and thus easy to wire with fiber optics. U.S. traffic per capita is 2.1 times that of Japan and 2.7 times that of Western Europe. Several years ago, U.S. and Canadian traffic measures were similar, but today the U.S. has raced ahead by 25%.
The U.S. lead is similar in traffic per Internet user, which tends to reflect how intensely people use broadband and mobile connections. The U.S. outdoes its closest European rival, the U.K., by 57%. The U.S. outdoes all of Western Europe—the best comparison in terms of geography, population and economic development—by a factor of 2.5.
All due respect to my friends and colleagues on the other side of the Title II debate, but does that look like the U.S. broadband market is hurting? Is the Internet really in need of saving by the unelected officials at the FCC?
Perhaps the most exacerbating thing about the Title II argument is the fact that both sides want essentially the same thing — for the Internet to stay open and thriving. What we disagree on is which tool, if any, the FCC should use.
Given the very real threats of reduced private investment in, and increased prices for, broadband that Title II could usher in, the choice should be simple. As Swanson writes:
The U.S., with 4% of the world’s population, has 10% of its Internet users, 25% of its broadband investment and 32% of its consumer Internet traffic. The U.S. policy of Internet freedom has worked. Why does Washington want to intervene in a thriving market?
Wednesday, November 19
“The Impact of Title II Regulation of Internet Providers On Their Capital Investments” is a 22-page study penned by economists Kevin A. Hassett and Robert J. Shapiro. It was submitted to the FCC as part of an ex part by the US Telecom Association. If you care about the future of the Internet, you need to add it to your reading list.
For the study, Hassett and Shapiro approached the question of Title II reclassification armed with numbers. Specifically, an alarming drop in projected private investment should the FCC choose to reclassify. As the economists write:
If the status quo continues, with data services unencumbered by Title II regulation, the several ISPs in our sample are expected to spend approximately $218.8 billion in new capital investments over the next five years in their wirelines and wireless networks. In contrast, under Title II regulation of all wireline data services, these ISPs’ wirelines and wireless capital investments over the next five years would drop an estimated range of $173.4 billion to $190.7 billion. Title II regulation of ISPs thus reduces these companies’ total investments by $28.1 billion to $45.4 billion (between 12.8 percent and 20.8 percent) over the next five years. Wireline investment by these firms would be 17.8 percent to 31.7 percent lower than expected.
That’s a lot of numbers with the word billion attached, but the main focus should really be on the percentages. You don’t have to be an economist to realize that a reduction of total investment dollars of 12.8 percent to 20.8 percent (and wireline investment dollars of 17.8 percent to 31.7 percent) would have a profound effect on America’s communications infrastructure. And by profound, I mean decidedly negative — not just for network expansion and upgrades, but for innovation across the Internet board.
The blow to innovation, Hassett and Shapiro argue, would be particularly hard on wireless networks. Again, from the study:
[T]he network managements practices which Title II regulation would potentially bar enable wireless investment and innovation, because wireless networks face serious capacity constraints. Thus, regulations that discourage or bar those practices raise the risk of introducing new products and applications: Without those practices, carriers would be less able to manage unpredictable changes in network demand associated with their introduction, and so maintain the quality of network services for all of its users.
In other words, the next big app or service could cripple wireless networks, and under Title II, providers would be hamstrung by regulations to solve the problem in a timely manner. Want to launch an innovative new streaming video app? Good luck gaining users when your app meets a road block of network congestion.
Too often the debate surrounding net neutrality is one of extremes, and I freely admit the above scenario falls within that category. But also too often, the economic realities of building, upgrading, and maintaining networks are either ignored or downplayed. Net neutrality doesn’t have to be an emotional issue; we all benefit from the Internet continuing to be open. The question is, how best do we ensure that happens while at the same time encouraging the investment necessary to keep networks growing. As Hassett and Shapiro’s study makes clear, the numbers show Title II would do more damage than good.
Tuesday, November 04
Many proponents of “net neutrality” routinely declare the Internet sky is falling. That if the government — specifically, the Federal Communications Commission — doesn’t take far greater control of the Internet, then the very platform itself will all but collapse.
Such scare tactics may rile up Americans, but ironically, it’s the very solution proponents are now pushing that could deal the most devastating blow to the free and open Internet.
Title II reclassification may seem simple — just make the Internet a public utility! — but as a new paper from Anna-Maria Kovacs shows, reclassification would have far greater consequences for the Internet than its supporters let on.
Kovacs’ paper, “Regulations in Financial Translation: Investment Implications of the FCC’s Open Internet Proceeding,” is a dense 27-page read, but don’t let the length — or the dry academic title — deter you from digging in. In the paper, Kovacs takes the temperature of communication investors as the FCC continues to mull over reclassification. And while the majority of investors don’t expect the Commission to use the “nuclear option” of Title II, as it’s commonly known, that doesn’t mean they’re breathing easy. As Kovacs writes (all emphasis mine):
From the perspective of investors, Title II reclassification makes no sense. It does not solve the problem of paid prioritization that the vast majority of net neutrality advocates are demanding the FCC solve, but it carries the risk of enormous collateral damage to both infrastructure and edge providers. It would bring stultifying regulation that would choke the Internet ecosystem that has become on of the primary engines of economic growth for the U.S. and the world. It would encourage other governments to follow suit, endangering the success of American digital service — and application-providers abroad.
This stultifying regulation, Kovacs rightly argues, would be especially brutal to mobile broadband investment, where America leads the rest of the world by leaps and bounds. Kovacs again:
U.S. mobile Internet traffic is expected to grow at a compound annual rate of 50% per year between 2013 and 2018. Keeping up with that traffic will require ongoing capital investments as well as additional spectrum. During 2014-2015, mobile broadband Internet access providers (mobile BIAs) are expected to raise about $57 billion for spectrum purchases, as indicated by the FCC’s reserve price for the 2014 AWS-3 auction and the Greenhill report’s valuation of the broadcast spectrum the FCC hopes to sell in early 2016. That $57 billion is, of course, in addition to the $68 billion in capital investments that mobile BIAs will spend over those two years. Thus, for the FCC’s spectrum auctions to be successful, mobile BIAs will need to raise 84% more funding during 2014-2015 that they do in normal years. With increased price competition and a shrinking revenue base — something the wireline industry has endured for years but that is new to wireless — these companies are facing an increasingly skeptical investment community that will have little tolerance for regulatory shock, on either the fixed or mobile side.
That’s a whole lot of numbers (and acronyms) to digest, but boiled down it means a) Providers need more spectrum; b) Billions will need to be raised to purchase that spectrum; c) Investment dollars could easily dry up in the face of regulatory actions like reclassifying under Title II.
Kovacs goes on in the paper to make the case that the FCC has sufficient authority to ensure the Internet remains open under section 706, which makes it possible for the Commission to create rules specifically for this purpose. While those rules would still face judicial review, they would also keep the FCC (which, remember, is made up of appointed officials) from overreach. In contrast, Kovacs points out, Title II…
...automatically invokes price regulation, resale and interconnection obligations, customer privacy rules, and numerous other obligations, which have been implemented via many thousands of regulations at the FCC and various state commissions.
Thousands of government regulations. Does that sound like a free and open Internet?
But what about forbearance, the provision with mythical powers that Title II proponents point to as a counterpoint to the excessive regulations argument? Well, Kovacs makes plain why the idea of the FCC using forbearance powers doesn’t sit well with investors:
While the FCC is allowed to forbear from some of those obligations if it can justify the forbearance to the courts, investors who have watched the attempts of ILECs to obtain forbearance are all too aware of the difficulties of that process. For example, investors have watched ILECs lose most of their market share yet still be treated by the FCC and state commissioners as if they were dominant carriers for PSTN voice service. As a result, they have little faith that the FCC would apply Title II to BIAs but then forbear from all the regulations that come with that.
Look, when it comes down to it, we all want the Internet to remain open. It’s in the best interest of consumers and providers to keep it that way. But we also need to keep investment dollars flowing into our communications infrastructure. As Kovacs’ paper shows, Title II won’t really do either. Instead, it could have the complete opposite effect. Want the Internet sky to fall? Saddle it with regulations created when Franklin D. Roosevelt was in office.
Monday, September 15
This morning, IIA filed Reply Comments with the FCC urging the Commission to embrace its 706 Authority instead of Title II reclassification in order to preserve an open Internet. In our comments we warned that reclassification would reverser decades of Commission precedent and potentially hurt the Internet ecosystem’s continued success and future of innovation.
Section 706 has worked well to protect the open Internet that everyone wants to preserve, while minimizing harm to investment and innovation. Section 706 remains viable and effective. By contrast, Title II is an antiquated regulatory framework designed for the era of monopoly telephone service that would undermine today’s competitive broadband marketplace and disserve consumers, dissuade entrepreneurs and inject unnecessary regulatory uncertainty threatening future dynamism in the broadband ecosystem.
— IIA Co-Chairman Bruce Mehlman
Reliance on Section 706, we argue, enables proper balance between necessary regulation to advance such goals as consumer protection and the imperative of attracting new investment to broadband to ensure further deployments of ever-fast systems that will support the applications of tomorrow. It is also the only way to ensure the innovation and continued explosive growth necessary to meet the ambitious goals of the National Broadband Plan.
The FCC already has enough authority under Section 706 to keep the Internet open with high-speed access for consumers and flexibility for entrepreneurs to innovate. Reclassifying broadband as a utility is like using a sledgehammer when a screwdriver will suffice. Title II is a blunt instrument that might break the Internet’s record of innovation and investment, while Section 706 is a better tool for fixing any problems that arise.
— IIA Co-Chairman Jamal Simmons
Title II, we also note, was not the primary catalyst behind the massive investment that occurred following the enactment of the 1996 Telecommunications Act, and that if regulators wanted an example of the chilling effect Title II could have on broadband, Europe offers a good example.
European policies built on extensive, public utility-style regulation and wholesale network unbundling have depressed broadband investment and access to next-generation networks overseas, as fully 82% of U.S. consumers enjoy access to high-speed broadband networks compared to only 54% of European consumers. Section 706 fortunately offers us an alternative path that will enable the private investment necessary to deploy modern broadband networks—wireline, wireless, and cable—and continue the virtuous circle fueled by light-touch regulation of the Internet ecosystem.
— IIA Honorary Chairman Rick Boucher
To read our Reply Comments in full, visit here.
Thursday, September 04
This is the fourth installment of our “Let’s Get Nerdy!” series, where we take tech policy issues that are currently top of mind in our nation’s capital and explain how they are relevant to Americans across the map.
In this installment, our Co-Chairman Bruce Mehlman takes on big data. Ready to get nerdy? Let’s go!
Q. What are big data analytics and why do they matter?
Q. What do we need to do to ensure big data’s success?
Q. What policy notes might undermine data analytics success and growth?
Thursday, July 03
In an op-ed for The Street, our Co-Chairman Bruce Mehlman argues that applying regulations from 1934 to today’s data services is a terrible idea. An excerpt:
Reclassification would lead to extreme uncertainty.
Regulatory uncertainty is the enemy of investment and innovation. Cisco (CSCO) CEO John Chambers recently wrote the FCC that his company “...is deeply troubled by the proposals” for reclassification, warning that $60 billion a year in broadband investment could be threatened.
Chambers argues that “If Title II regulation is brought to broadband Internet access services, investment in new infrastructure will be severely hamstrung. New, innovative services may not be brought to market because entrepreneurs fear telecommunications regulation.”
Here’s the basic problem: As technology advances and as companies work ever harder to meet growing consumer demand, the old distinction between companies that focus on “transmission” and those that focus on “content” is vanishing. Each can own networks; each can (and often does) provide data and voice services. Convergence and cross-platform competition are the order of the day, yet Title II would shackle ISPs and some of the world’s most innovative companies with a regulatory regime designed for the 1930s telephone monopoly. It makes no sense.
Check out Mehlman’s full op-ed.
Tuesday, May 06
At Fierce Telecom, our Co-Chairman Bruce Mehlman has an op-ed examining complaints from competitive local exchange carriers (CLECs) about the transition to all-IP networks. An excerpt:
It never really made sense to me why special access customers—primarily business customers—would want to (or should) be stuck with decades-old technology rather than using IP-based networks to reach their customers in new ways. But the argument of some CLECs that we need to preserve the old technologies (really, preserve the CLECs’ business models) for the benefit of special access customers is starting to fall apart. And it’s falling apart without government intervention, through the use of private, market-based agreements.
Head on over to Fierce Telecom for Mehlman’s full op-ed.
Wednesday, April 02
Monday’s move by the Federal Communications Commission to open up the 5GHz band for Wi-Fi and other unlicensed uses has the potential to kickstart the expansion of new, faster Wi-Fi technology. That’s a win — for consumers, for innovation, and for America’s digital infrastructure.
But even as those of us who have long pushed for expanded high-speed Internet access pop champagne corks, it’s worth noting that the FCC’s action is just a step in what should really be a sprint by the Commission when it comes to making more spectrum available for mobile broadband. As Commissioner Ajit Pai said in his statement:
“If we’re to keep pace with consumers expectations, we need more 5GHz Wi-Fi spectrum, not just better use of existing 5GHz Wi-Fi spectrum. We must redouble our efforts on making an additional 195MHz of spectrum available for unlicensed use.”
Commissioner Pai is right on the money, but that quote only tells half the story. In order to a) keep up with consumer demand, and b) truly advance mobile broadband deployment and speeds across the country, the FCC must also make more licensed spectrum available for commercial use. Or, as Commissioner Jessica Rosenworcel succinctly put it, “Good spectrum policy requires a balance of licensed and unlicensed [spectrum].”
Again, the FCC’s 5GHz Wi-Fi move is worth celebrating. But there’s still a lot of work to be done. To quote Commissioner Mignon Clyburn, “We need to be ambitious in finding more ways to provide licensed and unlicensed spectrum for commercial services.” And with consumer demand for mobile broadband not likely to diminish anytime soon, the clock is ticking.
Monday, March 03
Over at Fierce Telecom, our Co-Chair Bruce Mehlman responds to a recent article on the Huffington Post claiming special access is a monopoly market. Here’s a taste:
I’m not quite sure what the author was trying to convey; however, I do know that special access is no secret. It’s a decades-old service that many Americans (including American businesses) have already abandoned and virtually all don’t use exclusively. It’s no secret in the marketplace: Far from being some monopoly, today’s reality is that the business market served by special access services is robustly competitive.
Don’t take my word for it—look at the companies and competitors who use special access services. In 2012, Sprint announced that it would look for other alternatives to telephone company special access service by starting an RFP for competitive bids from other companies. Thirty to 40 competitive providers were expected to offer alternative service to telephone company special access high-capacity services. In fact, at the conclusion of the RFP process, Verizon, the nation’s second largest phone company, obtained a contract to provide special access services to only 6 percent of Sprint’s cell towers in Verizon’s service area.
You can read Mehlman’s full article at Fierce Telecom.
Wednesday, February 19
There’s nothing like a little international competition to motivate action. Take Sputnik. Or JKF’s “missile gap.” Or Finland’s recent schooling of the time-to-watch-from-the-sidelines Olympic hockey team.
The battle over global broadband offers a prime example, Washington-style. Many broadband boosters here in our nation’s capital lament a Bandwidth Gap with other nations, including many in the European Union. Some have even suggested that Europe offers the best model for future American broadband policy.
It is worth observing, however, that many European experts disagree. For example, in September European Commissioner for the Digital Agenda Neelie Kroes lamented:
The world envied Europe as we pioneered the global mobile industry in the early 1990s (GSM), but our industry often has no home market to sell to (for example, 4G). Consumers miss out on latest improvements or their devices lack the networks needed to be enjoyed fully. These problems hurt all sectors and rob Europe of jobs it badly needs. EU companies are not global internet players… 4G/LTE reaches only 26% of the European population. In the US one company alone (Verizon) reaches 90%!”
This Battle of the Bandwidth is nicely highlighted in a new report from AEI’s Roslyn Layton that focuses on the important contrasts between European and American broadband policy. Those differences are profound, focusing on incentives for private investment. Only 2% of European households subscribe to Internet services offering connections faster than 100Mbps, according to the EU’s 2013 Digital Agenda Scoreboard. While Europe’s share of broadband investment is less than 20%, the U.S. attracts 25% with a smaller population — per capita investment here is double that in Europe. The EU estimates that it faces a shortfall of €110–170 billion ($150–230 billion) by 2020 if it is to reach its connectivity goals.
In America that money is being put to work, most aggressively by those facing the least legacy regulation, such as IP networks, cable networks and wireless. Such light-touch regulation has fueled robust intermodal competition in the development and deployment of next-generation broadband networks to satisfy a seemingly bottomless consumer appetite.
Those who criticize the state of broadband in our nation typically focus only on one technology, fiber to the home, and choose to ignore the vibrant intermodal competition — such as cable, wireless — that has delivered cutting edge broadband services that are available to millions of Americans, yet largely unavailable to Europeans.
Some criticize America’s delivery broadband service in comparison to the Nordic countries in Europe. Yet, a closer look reveals that the successes in these countries may actually be a result of having policies that look similar to the policies here at home. As Layton notes, Denmark, a country with high broadband penetration, has demonstrated two keys for success:
1. Technological agnosticism. No one broadband technology is favored over another.
2. Market-led broadband development. The government does not decide which technology citizens should have, nor does it give government subsidies for broadband deployment.
Layton’s right. It’s time to put the “Europe is better” argument to rest. Ultra-fast broadband for everyone sustained and serious levels of investment, enabled by policies that promote investment and competition.
Thursday, January 23
Last week, the House Subcommittee on Communications and Technology began the long march toward a new Telecommunications Act, which hasn’t been updated since 1996.
If you tuned in, you probably asked yourself why it’s taken so long to kick-start the process — a fair question given how much the Internet has changed since new episodes of Seinfeld were on the air. While the 1996 Act was certainly effective in creating America’s broadband boom, like all legislation it has quickly been eclipsed by the speed of technology. If the lawmakers who penned the Act had anticipated something like Netflix or the iPhone would arrive in less than 20 years, they probably would’ve made some edits. They would also probably be billionaires by now.
That’s not a jab at the men and women behind the 1996 Act — a roster of lawmakers that included our own Rick Boucher — but rather, a reflection of the seismic shift that has occurred in our lives since the Act was signed into law. High-speed Internet has become such a powerhouse in our daily lives that for many of us it’s hard remember life offline. And now that most of us now carry a computer disguised as a phone in our pocket — a computer that’s always connected via mobile broadband — another major shift is underway. One that will certainly help shape the next Telecom Act.
That shift is the transition from the old telephone network to high-speed broadband based networks, which the FCC has announced will begin with test trials in pockets of America. What’s interesting about the transition is it’s both a major change and a minor one. It’s major because it’s nothing less than a complete overhaul of our communications infrastructure. At the same time, it’s minor because for many of us, the transition has already happened. Get your phone service from your cable and Internet provider? You’ve made the transition. Is your home wireless only? You’ve made the transition.
While the IP Transition wasn’t the major focus of the House hearing this past week, the path that brought us to this point was well represented. The testimonies of former FCC Chairmen Richard Wiley and Michael Powell in particular highlighted how a light regulatory touch has brought about the arrival of a high-speed broadband world. As Wiley told the Subcommittee in his prepared remarks, “The  Act’s purpose was as simple in theory as it was complex in implementation: to provide for a pro-competitive, deregulatory national policy framework designed to accelerate the deployment of advanced services and open all telecom markets to competition.”
When examined that way, the 1996 Act was a smashing success. But as both Wiley and Powell pointed out in their testimony, the key to that success was avoiding the ever-present urge among policymakers to wield a heavy regulatory hammer. “Any consideration of a new Communications Act should be guided by the oath to ‘first do no harm,’” Powell told the Subcommittee, adding: “The communications infrastructure and market in this country have thrived, in stark contrast to the challenges with the power grid, or the transportation system.”
That same spirit of ‘first do no harm’ will be critical as we transition to next-generation broadband networks, particularly since the transition will mean the expansion of broadband access to millions of Americans. That’s a goal we can all get behind, and it’s one that will take billions in private investment to achieve.
Ensuring those billions flow means regulators and policymakers should do all they can to enable the private sector to invest and deploy high-speed broadband. That means moving quickly to kick off transition trials in local markets — something the FCC has already signaled its willingness to do — and revisiting existing rules that may slow the transition down.
“[T]he reality is that the government has great difficulty in writing laws or promulgating regulations that can keep pace with advancing technology,” Wiley told the Subcommittee, “especially so in a dynamic and ever-changing industry like communications.” While the former FCC Chairman was talking specifically about the Telecom Act, his words of warning also apply to the IP Transition. Whatever form the next Act ultimately takes, it will be signed into law in an all-IP world.
Here’s hoping regulators play their part in the IP Transition in a way that reflects the realities of our vibrant and competitive communications industry. More investment means better networks and increased access to broadband. And all it will take to get there is the type of light regulatory touch that got us here in the first place.
Tuesday, January 14
Wall Street and K Street are separated by a mere 225 miles, but for many companies they are worlds apart. In particular, industry observers would do well to compare everything said to policymakers with statements by the same competitors made to Wall Street investors. Defense companies, for example, warned policymakers that sequestion would spell the death of the defense industry, yet defense stocks more than doubled since the law prescribing the spending cuts was passed and defense players figured out how to deal with the changes, as they promised Wall Street they would. Telecom companies likewise present sometimes radically-divergent world views on K Street and Wall Street.
Take Sprint. In a January 7 filing at the FCC, Sprint argued that the special access market “in almost every part of the country does not support competition for core DS-1, DS-3 and similarly sized Ethernet channel termination facilities [.]” Sounds pretty dire. Unfortunately, in its conversation with the FCC, Sprint failed to include some other important facts it shared with its understandably-bullish investors. Specifically:
• Two years ago, Sprint entered the market for competitive alternatives for their back haul services to replace incumbent telephone company special access in its network – under the project name “Network Vision.”;
• Sprint initiated a competitive bidding process for its “Network Vision” project that it expected to have 25-30 “significant backhaul providers.”
• Following the competitive bid process, Sprint awarded numerous contracts for their backhaul services to competitive backhaul providers. In fact, in a filing at the FCC, Verizon confirmed that it bid for Sprint’s backhaul business in this process, yet was awarded only 6% of Sprint’s backhaul sites in Verizon’s incumbent telephone company footprint.
• Sprint recently provided details regarding its Network Vision project to the Securities and Exchange Commission, and noted in its 2013 10-K filing that “Network Vision will encompass approximately 38,000 cell sites. We have more than 13,500 sites on-air and have launched LTE in 88 cities. Further deployments of Network Vision technology, including LTE market launches and enhancements of our 3G technology, are expected to continue through the middle of 2014. We expect Network Vision to bring financial benefit to the Company through migration to one common network, which is expected to reduce network maintenance and operating costs through capital efficiencies, reduced energy costs, lower roaming expenses, backhaul savings, and reduction in total cell sites.
• In short, Sprint told the SEC not only that Network Vision was proceeding but that it expected further deployments through 2014.
Investors will reasonably conclude that the market is competitive for what Sprint terms “core DS-1, DS-3, and similarly sized Ethernet channel termination facilities.” And Sprint seems to have a reasonable competitive position and strategy that is proceeding apace. Good news for customers and investors, but tougher news for those aiming to perpetuate the perception that our highly-competitive telecommunications network lacks competition in the special access market.
Friday, January 10
At the official blog of the Federal Communications Commission, Chairman Tom Wheeler lays out the Commission’s commitment to achieving the transition to all-Internet based networks. As the Chairman writes:
Among the biggest changes the FCC must confront are the IP transitions. Note the use of the plural “transitions.” Circuit switching is being replaced by more efficient networks – made of fiber or copper or wireless. Greater efficiency in networks can translate into greater innovation and greater benefits for network operators and users alike.
The best way to speed technology transitions is to incent network investment and innovation by preserving the enduring values that consumers and businesses have come to expect. Those values: public safety, interconnection, competition, consumer protection and, of course, universal access, are not only familiar, they are fundamental.
Those very same values were highlighted by our own Honorary Chairman Rick Boucher in an op-ed for Bloomberg Government in November:
Government must play a key role throughout this process by advancing consumer interests with a transition plan guided by core principles. These basic protections will remain government’s responsibility even after the old phone system is shut down:
1. The commitment to universal service must endure. Next-generation high-speed broadband networks and their benefits must be available to every American. As we move beyond the old phone network, we cannot leave anybody behind. Without dictating specific technologies or micro-managing how communications competitors meet their public service obligations, we must push the envelope to ensure that every American can access modern broadband service and enjoy the benefits that come with it. At a minimum, post transition everybody should enjoy service at least as good as they can now receive from copper-wire phone networks.
2. Public safety must be assured. 911 emergency calls must go through—every single time—no matter what technology or services consumers adopt.
3. Services for the hearing-impaired and those with vision problems also must be retained at levels that at least match what consumers enjoy today.
4. Consumer protection must remain at the heart of communications policy. Consumers must know that government has their back; that service providers will deliver on their promises; that spotty service, fraud, or other abuses will not be tolerated. Consumers must have a place to take complaints with confidence that something will be done about them.
5. Establishing a backup plan for power failures should be part of the transition process. The rebuilding after Hurricane Sandy exposed some potential weaknesses in the way our digital technology works today. While fiber-optic-based systems tolerate water damage that can short out copper wires, they are more vulnerable when the electricity at the user’s premises goes out.
6. Special retrofitting and other creative solutions may be required to ensure that modern networks function fully with personal and business equipment such as fax machines, security systems, health monitors, and credit card readers, even though they may not currently be compatible with today’s broadband connections.
While it’s encouraging Chairman Wheeler is taking the plunge when it comes to the IP Transition, in reality it’s just one of the major issues the FCC will face under his watch. As our Co-Chairman Bruce Mehlman argued in December, outdated regulations could make many of the FCC’s work difficult:
At the FCC, Wheeler inherits a regulatory regime designed decades ago for an earlier era. Voice and video services are regulated under separate provisions of the Communications Act of 1934 (Title II and Title VI, respectively) based on assumptions of a permanent monopoly and massive barriers to entry. The Act and its subsequent amendments fundamentally fail to acknowledge the competitive alternatives created by the technological and marketplace convergence of the broadband age. Today’s FCC-enforced regulatory framework was designed for a world without Netflix Inc., Skype Communications, Google Inc., or iPhones — a world without the Internet. Thus, the agency remains stuck in the past, distinguishing among companies based on the technology they use and their legacy status under the Act. Consumers make no such distinctions.
That Chairman Wheeler and the Commissioners at the FCC are already rolling up their sleeves for the IP Transition should be applauded. But it’s just one of many issues the Commission needs to dive into in the next 12 months.