Because every American
should have access
to broadband Internet.

The Internet Innovation Alliance is a broad-based coalition of business and non-profit organizations that aim to ensure every American, regardless of race, income or geography, has access to the critical tool that is broadband Internet. The IIA seeks to promote public policies that support equal opportunity for universal broadband availability and adoption so that everyone, everywhere can seize the benefits of the Internet - from education to health care, employment to community building, civic engagement and beyond.

The Podium

Blog posts tagged with 'Bruce Mehlman'

Monday, December 08

Broadband Ain’t Broke… And Title II Surely Won’t Fix It

By Bruce Mehlman

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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?

Why indeed.

Wednesday, November 19

The Economic Reality of Title II

By Bruce Mehlman

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“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

Why Investors Are Wary of Title II

By Bruce Mehlman

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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

Regarding Title II Reclassification

By IIA

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

Let’s Get Nerdy — Episode 4

By IIA

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

Mehlman in The Street

By Brad

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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

Mehlman on Special Access

By Brad

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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

A Step in the Right Direction

By Bruce Mehlman

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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

Mehlman on Special Access

By Brad

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

Putting the ‘Europe is Better’ Argument to Rest

By Bruce Mehlman

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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

First Do No Harm

By Bruce Mehlman

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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 [1996] 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

Playing Both Sides of the Street

By Bruce Mehlman

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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

A Busy Year for the FCC

By Brad

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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.

Wednesday, December 11

Wheeler Could Be Obama’s Best-Positioned Lieutenant

By Bruce Mehlman

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Rarely can public figures glimpse their potential legacy the day they begin service. More often, their significance is only understood decades later. Yet newly confirmed Federal Communications Commission Chairman Tom Wheeler has the rare chance to anticipate his impact at the outset as President Obama’s second-term standout, assuming he seizes the unique opportunity afforded by time, place, and fate.

Wheeler arrives at the FCC at a critical time for the agency and the nation. The FCC is an agency in transition, overseeing a communications sector in revolution, powering an evolving economy despite a dysfunctional Congress and a struggling recovery.

The government writ large, meanwhile, is playing a historically outsized role. Whether measured by taxes, spending or regulation, it is hard to find a prior period over the past 50 years when the federal government exerts greater influence in our economy. A former financial services CEO recently advised his successor that ‘‘your number one client is the government.’’ Many fear Wall Street has become addicted to Federal Reserve interventions. Taxpayers foot more than $1 trillion in annual health care bills, even before Obamacare expands coverage. More than half of all citizens are net recipients of government largess, receiving more in benefit and transfers than they pay in taxes. Over the past century, the number of pages in the tax code has ballooned 18,034 percent.

Yet one bright exception has been the high-tech economy, where the government has played a far less intrusive role. While trade policy, immigration, and federal support for basic research and STEM (science, technology, engineering and mathematics) education have been essential, the sector has seen no bailouts, no hand-outs, no too-big-to-fail-outs. Government intervention in tech has been minimal, especially relative to heavily regulated services, and energy.

Not surprisingly, tech’s freedom from command-and- control regulation has enabled breakneck innovation, furious competition and the fundamental reshaping of how Americans live, work, play, and learn. Technology is transforming education, health care, retail, and manufacturing, and creating new jobs for skilled workers. Yet this non-stop innovation is bringing our most dynamic new sector into conflict with an anachronistic regulatory framework, threatening future progress ab- sent visionary change.

Enter Chairman Wheeler.

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.

To be the chairman that our economy needs, Wheeler should reorient his agency around three primary goals:

First, the FCC should narrow its mission. Previous efforts to regulate siloed monopolies are no more needed than TV antennas. Leave competition policy to competition authorities, and focus on core FCC competencies such as public safety, consumer protection, and universal service for those most in need. Remove regulations that face backwards, such as those covering the increasingly obsolete copper TDM (time-division multiplexing) telephone networks, which fewer and fewer consumers use.

Second, Wheeler should declare ‘encouraging investment’ a core purpose of the agency. Private investment has driven fierce competition across Internet plat- forms while barriers to entry have fallen. With $17 trillion in federal debt, taxpayers cannot foot the bill for today’s 4G and fiber-to-the-home deployments or tomorrow’s even bolder new networks. Nor should we ask them to. Private investment will continue provided policy makers give some measure of regulatory certainty that the ‘‘rules of the road’’ will not change arbitrarily, and all investors will compete on level playing fields.

Finally, Wheeler must work to make the FCC the government’s most efficient, transparent, and predictable agency. Decisions should be data-based, rather than outcome-oriented, considered and delivered within reliable timeframes.

So far, Wheeler has placed a high priority on auctioning spectrum — and without preordaining winners or losers. He also has initiated long-overdue efforts to get the IP transition under way as soon as January, looking favorably towards approving real-world market trials that will help reduce inefficient investment in old technologies that siphon money away from new high speed broadband infrastructure.

In short, early signs from Wheeler’s commission are most promising.

Mehlman served as assistant secretary of commerce for technology policy from 2001 to 2004 and is founding co-chairman of the Internet Innovation Alliance and founding partner at Mehlman Vogel Castagnetti

To read the insights of Mehlman’s Internet Innovation Alliance co-chairman, Rick Boucher, visit the Telecom- munications Law Resource Center’s BNA Insights
page here.

Reproduced with permission from Telecommunications Law Resource Center, 2013 TERCN 1, 12/4/13. Copyright © 2013 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com

Tuesday, December 10

CLECs Marching Back to the Future

By Bruce Mehlman

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Last week I highlighted the “rear-view” mirror perspective of certain competitive local exchange carriers (“CLECs”) regarding the IP Transition. This week, the CLECs have taken their strategy to preserve antiquated telephone networks and technology by extending the status quo one step further.   

In 2011, FCC Chairman Wheeler headed the FCC’s Technology Advisory Council that recommended the upgrade and modernization of the nation’s telephone networks to make them high-speed broadband capable by 2018… a bold and visionary goal. Network operators responded to the challenge by committing to build out a new broadband network by 2020.

To bring this “Fourth Network Revolution” to life, however, plans, tests, and addressing operational issues must begin ASAP…now. 

The FCC has before it one of the first IP Transition implementation issues to arise. It is whether to approve AT&T’s request to allow its wholesale business customers to keep their current contracts, while it stops offering long-term contracts—greater than 36 months—for old telephone-based services. Such a reasonable step would help accelerate the transition to new IP network-based technologies that Wheeler’s TAC envisioned.

AT&T’s request should have gone into effect December 10.  Yet the CLECs, who never fail to miss an opportunity to embrace the rapid deployment of 21st century broadband services, are once again the main roadblock. The CLECs have figured out that if you successfully force incumbents to continue to offer antiquated telephone services via long-term contracts, it will essentially mean that carriers such as Verizon and AT&T will be forced to continue operating, maintaining and investing in the old copper telephone networks, rather than devoting all efforts to the IP Transition.

CLEC opposition now means that AT&T’s request is being delayed by the FCC.

This is the latest example of CLECs seeking government intervention in order to slow the IP Transition.  Pure rent-seeking, so that they can continue to use old, 20th-century TDM and copper-based networks rather than focus their efforts on investment and deployment of their own next-generation networks.

So I guess the CLECs’ executives really meant what they said at the New America Foundation last week when they spoke of wanting to use the decades-old network for “decades” more.  That’s a far cry from the TAC’s goal of 2018 or AT&T’s efforts to modernize its entire network by 2020.  All very convenient for them, but let’s call this what it is: narrow, self-interested advocacy in favor of an old business model rather advancing the national goal of a prompt IP Transition.

Last week, the participants at the NAF panel said they had “written the book” on the IP Transition. This week, it seems more they’re like writing a book on delay.

Wednesday, December 04

The CLECs’ “Rear-View” Mirror Approach to the IP Transition

By Bruce Mehlman

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Today the New America Foundation hosted an event on “Making the Network Work,” focusing on telecommunications and business markets with the nation’s leading competitive local exchange carriers (“CLECs”).

The participants claimed they have “written the book” on the IP transition, based on significant marketplace gains resulting from their investments in modern networks, deployment of thousands of miles of fiber, and the success of their high end and secure Enterprise service offerings.

Yet, while consumers, industry, Congress and the FCC have all acknowledged the need to upgrade America’s antiquated telephone networks, CLECs cling to old 20th century telephone networks and the desire to preserve the status quo.  Instead of advocating how best to accelerate the delivery of next generation high-speed broadband networks and services to the American consumer,  XO Communications’ CEO appeared to suggest that policymakers focus on the “many places where the old copper network will be in place for decades, [and that she]…doesn’t see that changing.”

The CLEC “rear-view” mirror approach also seeks to extend the rules governing outmoded telephone networks to modern competitive broadband networks, and ensure continuation of special regulatory treatment for services provided in the highly competitive business market. The CLEC effort to preserve the status quo is evident in their opposition to any effort to allow telephone companies to grandfather existing copper network contracts and prepare for new offerings once the upgrade to high-speed broadband networks is complete.   

CLECs also seek government intervention to manage how the nation’s existing and highly successful Internet networks interconnect with one another. Today, Internet providers privately negotiate “IP Peering and transit” agreements for their interconnection needs. These arrangements have existed since the creation of the Internet and have been critical to the massive growth of broadband services to the American consumer. 

Surprisingly, in their call for greater government intervention, however, not one CLEC provided evidence or offered a substantiated claim of an existing market failure. Rather than invest and compete in a vibrant and robust broadband market, CLECs seek FCC intervention to prop-up business models based on a dying copper network.

Thankfully, we heard a different message from new FCC Chairman Tom Wheeler, in his first major address, at Ohio State University this week, where he affirmed that he is “a rabid believer in the power of the marketplace” and that his focus will be to see “what, if any action (including governmental action) is needed to preserve the future of network competition” (Wheeler’s emphasis).

Wheeler said that he seeks to use the tools of government regulation “in a fact-based, data-driven manner” and that if “a market is competitive, the need for FCC intervention decreases.” That is what is happening in the marketplace.

The Chairman cited the example of cellphone unlocking — where carriers are responding to demands for consumers to be able to unlock their phones, without formal government action.

Similarly, light-touch government oversight has allowed the Internet to flourish and has brought robust competition to wireless and wired broadband markets to the benefit of the American consumer. 

With regard to interconnection arrangements, Chairman Wheeler needs to look no further than the marketplace. Just last week, competitors Verizon and Vonage provided the latest example of providers reaching mutually beneficial interconnection agreements through commercial negotiations. This follows a similar agreement that Verizon achieved with Comcast last year. 

That’s the way it has always worked, is working, and will continue to work — if only regulators don’t rush in to dictate a false “solution” where the market is working.

Thursday, November 14

Just Say No to Aggregation Limits

By Bruce Mehlman

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Today’s letter from a handful of organizations that asks the FCC to set spectrum-auction aggregation limits puts whipped cream on a mud pie. The FCC should follow Congress’ clear goals of getting more spectrum out into the marketplace for all willing investors and maximizing revenue to fix the debt, rather than siding with some competitors over others. We should be finding more spectrum for all carriers rather than barriers to hold some back. The suggested limits would reduce auction revenue, make broadcasters less likely to participate and reduce the pace of broadband investment.

Tuesday, October 29

Crazy, Techie, Cool

By Bruce Mehlman

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Today’s Wall Street Journal has a short piece that packs a big tech wallop.

Penned by Charles Townsend, “Smartphones to Monitor Insulin and Smell Flowers” argues that the devices we now carry are only at the beginning of the potential. For example, Townsend writes:

Ten years from now, you won’t need to carry your Visa or MasterCard because your cellphone will function as a credit card. You will place your phone on a scanner at a restaurant and your purchase will either be charged directly to your cellular bill or to your credit card. The phone will verify that it is you by checking your thumb print. Wireless companies will have become mobile banks.

Other highlights from Townsend’s piece: A new wireless camera being developed by Qualcomm that transmit pictures to your doctor’s smartphone(!); a smartphone that translates languages for you in real-time(!); and a phone that, as Townsend puts it, is “able to smell a strange odor in your home and tell you that tomatoes are rotting(!).”

Townsend’s article isn’t all future-cool, though, as he pivots into territory we at IIA have long tread in — having enough spectrum available to handle the coming deluge of data on wireless networks. As he writes:

If all goes as planned, the FCC may be able to come up with about half of the necessary new wireless spectrum by 2020, leaving a 250 MHz shortfall. Hopefully, the FCC can convince a number of federal agencies to give up significant additional spectrum. Otherwise, wireless engineers will have to come up with a better way to use the finite amount of spectrum they already have. If they don’t, soon enough your smartphone will remind you of the dial-up speeds of the 1990s—and it will be years, if not decades, before we realize the full potential of these devices.

Agreed on all points.

Thursday, October 10

Holman Jenkins Gets It

By Bruce Mehlman

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Once again Holman Jenkins offers terrific insight into the dynamic broadband marketplace, highlighting the true forces driving investment (competition) and the forces holding back progress (outdated regulations). Referring to Google’s much-celebrated fiber investments in key cities Jenkins observes in the Wall Street Journal:

“Google’s real innovation was to tunnel under the regulatory morass that inhibits physical broadband deployment. Why is Google introducing Google Fiber in Kansas City and not its native California? Google’s own Milo Medin has explained repeatedly that regulatory brambles make California ‘prohibitively expensive.’”

Jenkins turns to the FCC’s failure to launch reasonable proposals to allow carriers to shift investment from older technologies carrying increasingly less traffic, to newer technologies carrying an exponentially growing volume of voice, video and data. The need for modernizing our regulations becomes even more critical when one reads a study authored by Dr. Anna-Maria Kovacs, a visiting scholar at Georgetown’s Center for Business and Public Policy. Dr. Kovacs’ analysis estimated that incumbents telcos spent a total of $154 billion on their communications networks, with more than half maintaining fading legacy networks that carry less than 1 percent of all data.

While so much else is crippled by Washington paralysis, broadband deployment should be freed.

Thursday, September 26

Will Wireless Constraints Slow Auto’s Fast Lane?

By Bruce Mehlman

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At a technology conference in London this month, a BMW official gave a remarkable account of the speed at which his company is adopting wireless technologies to improve its cars’ performance. 

Last year, according to Vice President of IT Infrastructure Mario Mueller, there were about one million BMWs wirelessly connecting to the web. This year, that number has grown to 2.5 million vehicles, and by 2018 he expects 10 million vehicles wirelessly feeding and receiving data.

Here’s another way of quantifying this remarkable growth: In 2012, BMW had about the same number of wirelessly connected vehicles as are registered in Suffolk County, a leafy suburb of New York City. By 2018, the company expects to have a million more wirelessly connected vehicles than are registered in the entire state of New York.

In terms of mobile data, BMW’s vehicles currently use 40 gigabytes per day. By 2018, the company expects this will grow to a terabyte per day, which is enough data to stream 366 hours of high-definition video, according to Netflix.

BMW’s mobile transformation is one more example of the increasingly urgent need for officials at the Federal Communications Commission (FCC) to hold its upcoming spectrum incentive auction, tentatively planned for late next year. This will be the first major auction of airwaves necessary to handle Americans’ growing mobile data demands since early 2008, when Apple didn’t even have a public App Store.

With more than 20% of all adult cell phone owners doing most of their web browsing on their mobile phones and more than 750,000 jobs that depend on the mobile app economy, there’s immense pressure on the FCC to move quickly. 

This is why it is vital that the FCC structure this spectrum auction in a way that promotes the best possible use of this spectrum and generates the most revenue. Above all, the Commission should soundly reject the concept of favoring some bidders over others. An attempt to artificially favor or hinder bidders would be terribly unfair to tens of millions of wireless users who might see degraded service as a result of wireless providers not getting the spectrum they need to serve their customers.

Beyond that, artificial restrictions could cost U.S. taxpayers as much as $12 billion in lost revenue, according to a Georgetown study, much of which would go to fund a nationwide public safety system for first responders. This network will help police and other emergency response personnel to coordinate rescue efforts during emergencies.

The FCC has every reason — sustaining jobs, protecting taxpayers, fostering economic growth — to hold fair and unrestricted auctions. Such an auction is the best way to promote economic vibrancy and the benefits of our wireless marketplace.

For the FCC to do anything less would put our mobile economy on a road to nowhere.

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