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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'

Wednesday, June 22

Lessons From Canada

By IIA

Originally published at Forbes.

A Lesson From Canada For The FCC

by Bruce Mehlman

Oh, FCC: Take some notes from Canada.

Maxime Bernier, one of the candidates for leader of the Conservative Party of Canada, has just given a speech in which he set out ways to achieve real competition in the telecom sector. And one of the things he proposes is actually to phase out the role of the Canadian Radio-television and Telecommunications Commission (CRTC) as telecom regulator.

Bernier is a telecom and regulatory expert. He was Minister for Industry in Stephen Harper’s Conservative government and led the deregulation of local telephone markets after cable companies and wireless had transformed the telecom landscape. In short, Bernier recognized that there was “obviously more and more competition,” and he acted on it. In the face of opposition both from those who favored continued regulation and the Canadian regulator itself, the market was deregulated and competition flourished.

So why is Bernier so anxious to act now? It all goes back to his time in government. Ten years ago, he had set out a Policy Direction to the CRTC, which instructed, in his words, “the CRTC to rely on market forces to the maximum extent feasible within the scope of the Telecommunications Act” as a “solution” to its “control freak mindset.”

Back to old ways

What happened? “I, and many others at the time thought that it would force the CRTC to change its ways, to become more flexible and adapt to the new competitive reality. We were wrong. The CRTC seemed to take the Policy Direction seriously for a few years. And then it reverted back to its old ways.”

And from this, Bernier draws a conclusion about regulation and regulators: “Those whose task it is to regulate this industry tend to be behind the curve. They don’t want to let go of their regulatory control. Meanwhile, the industry has actually moved on, with new innovations.” That’s exactly right. And it applies just as much here as there.

Now if the CRTC can behave this way in a parliamentary system, in which it is supposed to follow the directions of Parliament, imagine the vast discretion our own Federal Communications Commission (FCC) has in a system where it is an independent regulatory body.

Implementing policies that ignore the marketplace

Why should Americans care? Because the issues that Bernier cites as examples of a regulatory mindset are the same ones we face here, notably with broadband, wireless and the nature of competition itself. In each case, the regulator opted for policies that ignored the marketplace, put its hand on the scale and favored policies that restrict investment. In auctions, restrictions on bidding intended to dictate market outcomes led to misallocation and under-utilization (as some of the spectrum sold in 2007 for public safety is still not being used and other parts took seven years to finally see service after sale in secondary markets).

So whether it’s broadband, wireless auctions or the nature of competition itself, the issues are similar on both sides of the 49th parallel. Regulators too often seek to ignore marketplace realities. In the U.S., we are witnessing it today with the FCC’s heavy-handed proposed regulations in areas such as special access, privacy and the video marketplace, among others.

Regulators only want to protect their own power

What Bernier writes of the CRTC could equally be said of the FCC: “As the industry evolves, the CRTC finds new reasons to continue to regulate it, in order to justify its existence. In doing so, it is not protecting consumers, it is only protecting its own power. The telecom industry is a mature and competitive industry, and it should be treated as such. It’s not a playground for bureaucrats.”

Both Americans and Canadians are better off with greater access to modern, fast telecommunications services, when the regulator lets the market work, encourages real competition, and investment, and keeps its hand off the scale. In fact, again quoting Bernier: “Interventionist policies that are meant to bring more competition actually do the opposite. Competitive markets don’t need government intervention to work. They only need to be free.”

Friday, April 08

The Data on Special Access

By Bruce Mehlman

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This week the FCC allowed parties to release some aggregate data in the broadband market collected as part of the ongoing special access proceeding.  And this data, even though partial, confirms what I and others have been saying all along: virtually all businesses have access to real, facilities-based competition today. And to the degree that some individual businesses don’t have that access today, it’s because the current beneficiaries of special access regulation have an incentive not to invest to connect their business customers to the closest competitive fiber networks that are readily available in the market.

In all, 95% of Census blocks where demand for special access exists have competitive facilities available.  And those Census blocks include 99% of all businesses in the country.

With grades like these, let’s give an A+ to the competitive providers that are bringing modern fiber to American businesses.  This definitely includes cable companies that are rapidly expanding their services to businesses of all sizes.

On the other hand, it’s clear from the data that the CLECs have customers in many office buildings that must continue to rely on antiquated copper facilities and their slow data speeds because their CLEC provider refuses to build out fiber connections to nearby fiber networks.  Apparently, it’s easier to call for FCC action than it is to build out networks even 1000 feet to compete with the competitive carriers.

As US Telecom notes, the calls for more FCC intervention are “a matter of convenience, not competition.”  But a business strategy of rent-seeking-rather-than-investing is not evidence of market failure.  It’s evidence instead of regulatory failure.  Because so long as the FCC’s special access policies serve to protect the business models of CLECs, who decline to invest, then why invest?  Why spend shareholders’ or investors’ money when the government forces others to subsidize you?  Nice work if you can get it, but it does nothing to promote innovation or, for that matter, competition.  Government-enabled competition isn’t really competition.

But now that at long last we have some data publicly available, the right policy is even more clear:  There’s simply no reason for the FCC to intervene in this market even more than it already has.  The decision by some companies not to invest in the future should not be a basis for increased regulation.

Tuesday, March 15

Anna-Maria Kovacs on Special Access

By Brad

A new paper from Anna-Maria Kovacs, Visiting Senior Policy Scholar at the Georgetown Center for Business and Public Policy, takes a deep dive into the current state of “special access” services, particularly whether there is a case for re-regulation. You can download a copy of the full report here, but here’s some findings from the executive summary to chew over:

Both the traditional U.S. CLECs and the cable companies who have entered the business broadband market are in good financial health and are generating higher free cash flow than the wireline segments of the largest ILECs. The CLECs and cable operators also have higher stock valuations, indicating that investors expect them to grow revenues and cash flow more rapidly.

Traditional CLECs have focused on the business market exclusively and built out only in areas where high-density makes construction-cost relatively low and attainable-revenue relatively high. In other words, they build only where they can expect penetration levels high enough to ensure high free cashflow. The CLECs’ metro fiber networks have brought them into or close to most buildings that house potential business broadband customers.

The data provided publicly by U.S. CLECs and cable operators confirms the few facts that have so far emerged from the FCC’s special access data collection, i.e. that there is extensive facilities-based competition in the business broadband market.

The enterprise market’s migration from legacy TDM facilities to Ethernet over fiber or coax facilities provides the CLECs and cable operators with the opportunity to compete on equal terms with the ILECs in the fast-growing portion of the market, while decimating the legacy revenues of the ILECs.

For more on special access and regulations, check out our Co-Chairman Bruce Mehlman’s recent piece in The Hill as well as three white papers on the subject released by US Telecom.

Friday, March 11

A Conversation About Special Access

By IIA

On Wednesday, IIA Founding Co-Chair Bruce Mehlman moderated a panel at the TIA Spring Policy Summit, titled “Special Access Re-Regulation.” The robust discussion explored the FCC’s regulation of the business data services market. Below are a handful of highlights:

Berge Ayvazian, Wireless 20/20: We have seen significant competition in the special access field between companies. This competition has shaped the underlying infrastructure on which wireless exists. We must take advantage of this opportunity to apply what we have learned in the last 10 years to allow the market to evolve around the competition already happening in the marketplace. In most markets, the quality of service being delivered by an ILEC and a CLEC is the same. We need to change the way we impose regulations on the business broadband market.

Patrick Brogan, USTelecom: Competition policy has been evolving since 1996 in the business broadband marketplace. The special access market has been competitive in telecom for a very long time. The guiding policy over the past fifteen years has been to encourage facilities-based competition and this should continue to be our goal.

Fred Campbell, Tech Knowledge: I find it difficult to believe that price regulation is needed when we have seen healthy competition. During the net neutrality proceeding, Chairman Wheeler was certain that there would be no price regulation. Business services is where competition started. Consumers do not need price regulation. Something is not right about this proceeding.

Hal Singer, PPI: If you push prices down from competitive levels you will see inefficiencies at all levels. If you are going to seize someone’s property, though, you are smart to wait until they have upgraded their network. You do not want to join the old copper network; you want them to already be upgraded to fiber. Prices are not at monopoly levels. By 2014, 42% of commercial buildings were outfitted with fiber. In 2009, it was just 23%. If you step in now and impose price regulations you could do some bad things. The notion that people are competing on a non-level playing field does not make sense.

Ayvazian: We all agree there is no basis on which to introduce price regulations.

Campbell: In my view, price regulation is the last option and worst possible way to address market issues.

Singer: Before Gigi Sohn was at the FCC, she was at Public Knowledge. One of Public Knowledge’s ultimate objectives is increased regulation and unbundling. There are a lot of forces at play here that are pushing them towards the CLEC agenda.

Brogan: There is a group in the CLEC industry that benefits from price regulation and increased access to network facilities. It is easier to lease these from the incumbents than it is to build their own facilities.
Campbell: Their complaint is that, to get a certain discount, you need to commit to a 7-year term. I do not see how that is inherently problematic when facilities must be built. These contracts are long-term for a reason.

Brogan: I would continue to not regulate carrier Ethernet and rationalize regulation. Do not lower prices. This will discourage investment. That is the source of innovation within the broadband industry. Facilities-based competition is more self-sustaining.

Campbell: We need to stop moving to the left of Europe on communications policy. Many of the same consumer groups supporting price unbundling loved to point to Europe as an example of how broadband policy in the United States policy should move. In 2013, the EU’s version of the FCC drafted a lengthy report with data on developments in the EU markets and concluded that investment in the EU is lower due to unbundling. The reason is that unbundling discourages investment. If an entity has regulated access at government regulated rates, they have profit without the risk of losing investment dollars. Their conclusion was that, beyond where cable was, there was no increased investment. Now Chairman Wheeler wants to do it anyways.

Singer: If you want to maximize broadband deployment, we should be free of regulations.

Campbell: Chairman Wheler uses the word “competition” a lot, but when he uses it, he means something completely different than I do when I say competition.

Singer: When you say competition three times, it is static and not dynamic. Chairman Wheeler’s competition does not mean anything.

Campbell: Our FCC just makes up competition in market segments as if it is a new thing. Europe has imposed standards on how to impose these regulations. This has given them enormous power to do unhealthy things for a viable and competitive communications market.

Singer: We are not going to get to a Communications Act rewrite until we solve the net neutrality problem. The idea is to figure out a way to give the FCC authority to regulate allegations of discrimination on a case-by-case basis. Republicans should go forward on a broadband subsidy so we do not have to raise taxes on the back of broadband users.

Campbell: If we want to talk about politicized decision-making, let’s look at net neutrality. One of the arguments raised in favor of Title II regulations were the number of comments received in favor of it. It did not matter who these were from, but simply the volume of responses. The question we all asked was the relevance of each of these comments. There are arguments about the FCC’s political form of decision-making.

Thursday, March 10

Mehlman on Sprint’s Conflicting Stories

By Brad

Yesterday, our Co-Chairman Bruce Mehlman had an op-ed published in The Street on Sprint wanting it both ways when it comes to special access services. An excerpt:

Every year American employers spend far more money than they should on a blizzard of government filings. Some are mandatory like tax returns and Securities and Exchange Commission (SEC) filings. Some are critical for public safety or record-keeping like prescription drug studies or the Census. Some are purely voluntary—like engaging in federal regulatory agency proceedings.

However, problems arise when these filings fail to add up. For instance, what if a company tells the SEC one thing to try to win favor on Wall Street but then tells another government agency something different to get special regulatory treatment? Which one should the government believe? For that matter, what should investors believe?

Sprint provides an excellent example of this type of behavior, offering investors a bullish spin for growth based on innovation while pleading with policy makers to pity its relative weakness through ongoing regulatory intervention. In the age of heightened transparency, however, policy makers should see through the smoke and recognize the competitive market that truly is. And, unfortunately for Sprint and its investors, the story it’s telling regulators is much closer to the truth.

You can check out the full op-ed over at The Street.

Tuesday, February 23

The Data Dead End

By Brad

Earlier today, the Phoenix Center released a new paper titled “The Road to Nowhere: Regulatory Implications of the FCC’s Special Access Data Request.” Penned by Chief Economist George S. Ford, the paper predicts that the FCC’s data collection efforts will not serve those who want more regulations on Special Access services. In fact, Ford argues that the “FCC’s Special Access data will likely show that regulation is unnecessary in many geographic areas and already adequate, if not too strict, in others.”

Ford also reports that comments so far received at the Commission aren’t helping the process either. As he writes:

The first round of comments based on the data have been submitted to the Commission, but the comments and reports aren’t terribly helpful to the general public; the Commission, perhaps concerned the data would not support its pro-regulatory agenda, has not only restricted access to the data but those with access are required to redact from their comments and reports even the most summary of statistics indicating the extent of competition and other facts.

The Phoenix Center’s concerns about the FCC’s Special Access data gathering are shared by our own Bruce Mehlman, who penned an op-ed for The Street back in December that argued:

The commission’s new investigation into special access rates gives short shrift to these aggressive competitors and relies on an old vision of the marketplace to protect the business models of a few companies, even as it is supposed to be promoting deployment of ever-faster broadband. Those hardworking crews you see from the road, and that rumbling sound you can feel, represent investment taking place. Competition works and is working in the real world—but it apparently remains unseen and unfelt at the FCC.

You can download the Phoenix Center’s “The Road to Nowhere: Regulatory Implications of the FCC’s Special Access Data Request” at their website.

Wednesday, February 17

The Special Access Dance

By Bruce Mehlman

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As the nation turns its eyes to political primary seasons, one of the things voters most dislike is politicians saying one thing to one group and then saying something else to others.

All politicians inevitably pander, and the smart voter needs to review the full body of a candidate’s comments to appreciate where they really stand.

The same challenge often exists with companies. For businesses also try to tell one audience, such as government regulators, one thing and Wall Street another.

Take Sprint. Sprint tells Wall Street it is incredibly well-positioned to thrive in a competitive marketplace, while begging the government to maintain regulations protecting and advantaging it against other competitors.

Start with what Sprint is telling the government: last September, Sprint told the FCC that it needs regulated access (“special access”) to business data lines: “Every one of these sites will require additional backhaul and Sprint and other competitors will depend on both TDM and Ethernet special access more than ever to be able to compete.”  Sprint said essentially the same thing in 2013 in the same docket (yes, the “05” in the FCC’s proceeding refers to “2005” – this one has been going on for an absurd length of time).

But to Wall Street, Sprint sings a very different tune: it claims to save money by not relying on FCC-mandated business data circuits and writes, in its filings to the SEC, that it is purchasing alternative, more modern Ethernet circuits in the competitive marketplace. Sprint said that every year from 2011 to 2015, repeating the message that “We are also modifying our existing backhaul architecture to enable increased capacity to our network at a lower cost by utilizing Ethernet as opposed to our existing time division multiplexing (TDM) technology.”

Sprint said that it’s using Ethernet to save money; it’s apparently applying the technology for use as wireless backhaul to reduce its network costs – an effort that BITG analyst Walter Piecyk estimated “could save between $600 million to $1.2 billion a year of network expense.”

Sprint has been offering Ethernet to businesses since 2007. It’s spending money to modernize its own network, selling newer lines to customers, and talking up its technology to both Wall Street and customers. Those are all great things to do in a competitive market (and, in fact, hard evidence of a competitive market), but Sprint still wants the government to keep its hand on the scale.

So Sprint wants to sell service on those newer lines to business data customers, use others for wireless backhaul to save money, and still force its competitors to pay for regulated “special access” lines that rely on outdated technology.

There’s no reason the FCC should fall for such double speak. Sprint does not need special access regulation; it’s merely using this as a tool to increase its competitors’ costs while reducing its own.

Wall Street accepts (and has for several years) that Sprint has made the investments (a 53% increase in 2012, for instance) to make it a competitor in a competitive Ethernet market.  It doesn’t need “special access” regulations or special protection from the refs (in this case, the FCC).

Like sophisticated voters, government regulators should consider all of the candidates’ statements, not merely those pandering to a single audience.

For more, check out our report “Sprint’s Tale of Two Stories on FCC Special Access Regulation.”

Tuesday, January 26

No Free Rides

By Bruce Mehlman

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In 1973, the Edgar Winter Group scored a Top 20 hit with “Free Ride.” In 2016, Competitive Local Exchange Carriers (CLECs) are trying to score a free ride from the FCC via heavy regulation of special access rates.

While the CLECs like to claim there is a monopoly in the business broadband market, investment numbers say otherwise. Hundreds of billions are being invested in broadband networks, and all that money is not coming from CLECs. No wonder they want the FCC to impose heavy regulations on special access. The CLEC business model is to rely on the regulatory hammer to give them access to networks others have built, and as networks across the nation are upgraded to run on all-IP — and businesses require ever-faster broadband — the CLECs are quickly finding their business model is on thin ice — with spring around the corner.

Still, they continue to bend the FCC’s ear, which is why I continue to write about special access. It’s also why the organization US Telecom has launched a new initiative called “Innovate With Us” to remind policymakers that the broadband market in America is thriving across the board, and in order to keep the good times — and investment dollars — rolling, sensible regulations need to be in place. Or, as US Telecom succinctly put it in the intro to the initiative:

[T]he FCC should champion pro-investment policies that work for business customers, not specific companies, and look beyond yesterday’s technologies toward the networks of the future.

Check out what else the smart folks at US Telecom have to say about special access at the Innovate With Us website. You can also download and share a handy infographic they’ve put together on competition in the special access market and how regulators can continue encouraging private investment in networks.

Thursday, January 14

Asymmetric Regulations

By Bruce Mehlman

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“Competition” is one of those words that make policymakers tingle. And yet, time and time again, private industry finds itself wrestling with regulations that not only harm competition but — in the most extreme cases — actively benefit one party over another.

Case in point: wireline broadband competition. Providers have invested billions to expand the reach and speed of their networks, and yet recent actions taken by the FCC are threatening to stifle ongoing investment. But don’t just take my word for it. Check out this latest study from the American Consumer Institute titled “Concentration by Regulation: How the FCC’s Imposition of Asymmetric Regulations Are Hindering Wireline Broadband Competition in America.”

Yes, that title is quite the mouthful (as most study titles are), and to be honest, unless you’re someone who enjoys diving into studies (with charts) on regulations, investment, and the economy, you might find the report’s 18 pages a bit of a slog. But those of us who do read through ACI’s study will find a convincing — and rather damning — case that the FCC is mistepping rather badly as it continues to amass more and more power over broadband. For example, here’s what the report has to say about one of the biggest regulatory marks the Commission made in 2015:

Title II regulations are preserving and maintaining duplicative and costly copper networks. That cost is an impediment to fiber deployment that keeps ILECs more reliant on older copper-based DSL technologies. Instead of the FCC relieving non-dominant ILECs of Title II regulations in more competitive markets, the FCC has recently chosen to make broadband service providers subject to Title II regulations.

Unless there is action soon, the shift in concentration is likely to be permanent. A decade ago, the rollback of asymmetric regulations permitted modest rebound in broadband services for ILECs, because there was brisk growth in subscribers. Today, because the broadband market is so widespread, growing slower and more mature, asymmetric broadband regulation will likely have longer term consequences that could permanently displace and weaken wireline competition. Even if a rebound is possible, ILECs will face a major cost to win back customers. Regulations are costly and delays in lifting these regulations will be even more costly.

Translation: Old regulations that effect some providers and not others are forcing companies like Verizon and AT&T to invest billions in the copper networks of old. Meanwhile, other providers don’t face such regulatory roadblocks, even as they aim to invest in the very same thing legacy providers are investing in — fiber-backed, high-speed broadband networks. Not exactly the spirit of competition, is it?

The ACI study isn’t all doom and gloom for America’s communications infrastructure, though, for the group has thoughtfully included a three bullet points that can help level the playing field:

• Policymakers need to end Title II regulations for all providers.
• There needs to be less emphasis on regulation of wholesale services. Less regulation will encourage more facility-based investments, which will lead to the natural development of a healthy, wholesale market; and
• If regulators truly believe that some regulation of wholesale services is necessary – and that may be the case in some rural markets – then regulators need to apply these regulations on a symmetrical and competitively neutral basis.

In short, get rid of the bad regulations, be careful when imposing new ones, and make sure everyone is playing under the same rules. Wise words, but the question is: Will the FCC listen?

Thursday, December 03

Mehlman on Special Access in The Street

By Brad

In an op-ed originally published by The Street, our Co-Chairman Bruce Mehlman warns that the FCC’s is taking the wrong approach when it comes to encouraging broadband competition. An excerpt:

Federal Communications Commission (FCC) regulators, purportedly eager to promote competition, keep stifling the investment needed to advance it meaningfully. Case in point, the Commission recently opened a tariff investigation on “special access” rates in the business data services market. For many observers, this political inquiry is unwarranted by the facts on the ground, driven instead by companies whose business models are dependent on government protection for “rent-seeking,” or ongoing access to the networks that others built.

You can read Mehlman’s full op-ed over at The Street.

Monday, November 23

Let’s Get Nerdy — Extra

By IIA

In this bonus edition of Let’s Get Nerdy, our Co-Chairman Bruce Mehlman breaks down how the business special access marketplace has changed since the 1990s, and discusses whether FCC special access rules are still necessary.

Thursday, November 05

Let’s Get Nerdy — Season 2, Episodes 5 and 6

By IIA

In today’s installments, our Co-Chairman Bruce Mehlman continues to focus on Special Access and regulations. Here he talks about what the U.S. can learn from a decade of empirical data collected by the European Union on wholesale access regulation.


Rounding out the discussion, Mehlman talks about the likely impacts of the FCC requiring that IP services replacing copper be offered to CLECs at wholesale rates.

Wednesday, November 04

Let’s Get Nerdy — Season 2, Episodes 3 and 4

By IIA

In the latest installments of our Let’s Get Nerdy video series, IIA Co-Chairman Bruce Mehlman discusses Special Access. First up: Some background on the issue.


In this next video, Mehlman breaks down what the two sides in the current Special Access debate are asking for when it comes to wholesale access regulation and IP Services.


Tune in tomorrow for more from Bruce Mehlman on the topic of Special Access.

Monday, October 05

Look at the Data Before Deciding

By Brad

Late last week, our Co-Chairman Bruce Mehlman penned an op-ed for Morning Consult on the need for the FCC to rely on data as it reforms special access. An excerpt:

For a decade, the FCC has had an effective policy of “new wires, new rules.” Relying on that policy, the Incumbent Local Exchange Carriers – even though forced by the special access rules to subsidize a second network of non-competitive older technology – eagerly invested billions to roll out the faster broadband network people want to compete with cable, wireless and fiber networks. Now, some CLECs want to toss deregulation out the window, changing the rules in midstream without a formal data analysis and imperiling that needed investment.

That’s just wrong. Why would the FCC want to re-impose regulation on a competitive environment without understanding the marketplace? And what about the ILECs’ reliance on the FCC’s regulatory promise of “new rules” for new wires – does that just get washed away?

You can read Mehlman’s full piece over at Morning Consult.

Thursday, September 24

Problems with the FCC’s Pricing Rules

By Brad

Recently, our Co-Chairman Bruce Mehlman talked with Amir Nasr of the Morning Consult about the problems with the FCC’s pricing rules for high-grade network lines. An excerpt:

FCC Chairman Tom Wheeler said the rule “preserves competitive choices as the technology transitions move forward… Competitive providers rely on these inputs to serve hundreds of thousands of businesses and other enterprise customers at competitive rates, often offering customized services not offered by incumbents.”

Mehlman said some in the industry are frustrated at the FCC’s apparent shift in thinking after the agency left the matter alone for over a decade. “They promised no regulation for over 10 years, and now they’re proposing to fundamentally change the game,” he said.

FCC Commissioner Ajit Pai, a Republican and outspoken adversary to the agency’s Democractic majority, decried the pricing proposal in a recent speech at the center-right American Enterprise Institute. “These regulatory roadblocks are bad for consumers, bad for infrastructure investment, and bad for our nation’s economic competitiveness,” he said.

Mehlman concurred. “As long as you have regulations on some providers, forcing them to help their competitors at regulated rates, you will have less investment because there is a meaningfully lower return,” he said.

Check out the full piece over at the Morning Consult.

 

Wednesday, September 16

Comcast Agrees: Broadband Business Market Thriving

By Bruce Mehlman

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Exciting news for those who appreciate how vibrant and competitive today’s telecommunications market is… and perhaps even bigger news for those who don’t yet believe it.

According to this morning’s Wall Street Journal, Comcast has set up a new unit to sell data services to large businesses across the country, including (and this is the important part) outside Comcast’s regular footprint, by negotiating wholesale agreements with other cable providers to sell Comcast data services. In short, the cable guys are taking on the telco guys and setting up a new national provider to offer meaningful competition, so that national businesses would be able to choose cable as an alternative where they have been reluctant to do so before.

As the Journal notes, the new arrangement “threaten[s] the longtime status quo in the cable industry, where operators historically haven’t competed with each other for customers in the same geographic area.”

Some industry observers anticipated this move. As I wrote in the spring, an article in FierceWireless commented that cable is entering the special access market, claiming that “[t]he presence of cable operators could potentially shake up the wholesale special access space where incumbent telcos… have enjoyed a monopoly position for decades.”

Actually, I was wrong — I thought that cable might seek a more mid-market position rather than going after the largest customers, but now cable is doing just that, even more proof of the competitive nature of the market.

So the question naturally arises: if Comcast can do this, why can’t the CLECs who are pleading for continued “special access” regulation? Why can’t the CLECs challenge their own “status quo” as well? CLECs still maintain that they want to continue their current business model, forcing network providers to subsidize their antiquated, copper-based technology, for “decades” more (even though the transition to an all IP-network is supposed to happen this decade).  Even worse, they now seek to expand their price regulated access to new fiber facilities built by investment not traditionally subject to regulation.

Comcast estimates the potential size of this new market at $40 billion. By any standard, that’s real money. It’s another nail in the coffin of an old uneconomic business model that is being propped up only by regulation. Why wouldn’t the CLECs want to go for that market rather than relying on a protected business model selling antiquated technology?

And isn’t it time for the FCC to note what’s happening in the marketplace?

Monday, August 24

A Step Backwards

By Brad

Over at Fierce Telecom, Sean Buckley chatted with our own Bruce Mehlman about the FCC’s current stance on legacy copper and TDM-based networks. An excerpt:

Bruce Mehlman, co-chairman of the Internet Innovation Alliance, told FierceTelecom in an interview that what’s troublesome about the regulator’s proposals is that it’s a step backwards.

He said that competitive carriers should focus more of their attention on building their own network infrastructure versus trying to leverage existing facilities built by incumbent telcos.

There are folks that have had a decade of notice that if they wanted more advanced structure they needed to be part of the solution of building network infrastructure, but they chose business models that were based on riding investments that were made by other folks,” said Mehlman. “Everybody’s has been notice for over a decade.”

Citing the move by Google Fiber to build out a new FTTH network infrastructure supporting 1 Gbps broadband and video services, Melhman added that “it seems like a mistake to offer a ‘new wire, new rule’ incentive to get all the investment you thought you would and then to say we’re considering going to ‘new wire, old rules.’”

You can check out Buckley’s full piece over at Fierce Telecom. And for more from Mehlman on this issue, check out his recent op-ed for Bloomberg BNA.

Monday, July 27

“FCC Should Not Import Monopoly Rules for a Competitive Future”

By Brad

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

IIA Video: The Role for Regulators in an Expanding Broadband Economy

By IIA

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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.

Featuring

Michael O’Rielly
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

James Reid
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

IIA Letter to FCC Regarding Lifeline

By Jamal Simmons

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.

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