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Innovation

Objecting to Obsolete Obligations

The Washington Post's lead story today, "Landline Rules Frustrate Telecoms," puts a needed spotlight on obsolete communications law that: falsely assumes the telecom marketplace is still a monopoly with no consumer choice; and still mandates telecom companies subsidize below-cost, copper-line telephone service to households as if it were still a government-sanctioned monopoly.

A bit of history is warranted here. This century-old political arrangement -- the 1913 Kingsbury Commitment between the Federal Government and AT&T -- effectively established a government-sanctioned monopoly in return for universal telephone service to all Americans and utility rate of return regulation. In 1996, Congress reformed Federal communications policy by ending monopoly and promoting competition. Today, despite copper telephone networks losing half of their customer base to cable, wireless, VoIP, broadband and other Internet competitors (and losing most of their most profitable landline customers) many legacy telecom legal requirements, like subsidized below-cost telephone service, live on despite being obsolete. This means that in today's fiercely competitive voice service marketplace, mandating that only one provider must provide subsidized below-cost, copper-line service to potentially millions of households, is a classic un-funded mandate and a hidden, unfair, investment-distorting business tax on only one competitor.

Verizon-Cable Hearing Exposes Weakness of Opposition

 

The Senate Judiciary Subcommittee hearing on the proposed Verizon-Cable spectrum sale flushed out the opposition's best arguments and evidence and they proved surprisingly weak and sparse.

Behind the façade of FreePress' trademark bumper-sticker bluster of "a competition crisis," "a creeping duopoly," and "spectrum warehousing," there was very little substance to back up their pejorative assertions.

FreePress' bogus duopoly deception is the core weakness of the opposition to this commercial agreement. To believe there is a Verizon-AT&T wireless duopoly, one has to:

Verizon-Cable Senate Hearing - Competitive Reality vs. FreePress Fiction

 

Hopefully, the March 21st Senate Judiciary Subcommittee oversight hearing on the Verizon-Cable spectrum transaction will be a fair hearing based on the competitive facts and the law, and is not allowed to be hijacked politically by FreePress' signature gamesmanship.

I. FreePress Fiction

It is disturbing that two of the three hearing witnesses opposing the Verizon-Cable agreement are from FreePress: Joel Kelsey, FreePress' Policy Advisor and Tim Wu, who was FreePress' Chairman just thirteen months ago and has been a longtime FreePress board member.

It is curious and troubling that the Senate Subcommittee specializing in "competition policy" would seek testimony from two anti-profit, anti-property-rights adherents who don't believe competition policy can work.

 

Debunking the Carping over Broadband Usage-Pricing

Activist carping about the commercial Internet being commercial is revving up again, this time with the carping focused on framing new broadband usage-pricing innovations by Time Warner Cable and AT&T, as somehow a violation of the "open web."

To cut to the quick and translate what is really going on politically here, this activist carping is the latest attempt to revive and re-fight the manufactured net neutrality debate between:

Why the Verizon-Cable Agreement is in the Public Interest

 

The evidence below shows the Verizon-Cable agreement is clearly in the public interest, if the FCC fairly reviews the agreement and all of the relevant facts, in the full context of the highly competitive wireless ecosystem.

Top Reasons Why Verizon-Cable Agreement is in the Public Interest

Increases competition: The agreement increases competition because it enables:

 

Poll: Americans Not With Internet Lobby on SOPA/PIPA

A recent poll from JZ Analytics on how Americans view the problem of online piracy and online counterfeit goods – the problem that anti-piracy legislation (SOPA/PIPA) attempted to address -- indicates that Americans’ views overall are different than the several million subset of Americans that signed Google’s and other’s online petitions opposing the anti-piracy legislation as “censorship” that would “break the Internet.” The poll also indicates Americans have concerns with Google’s record and stance on piracy.

The JZ Analytics online survey of 1,001 Americans was conducted December 27-28, 2011 and has a margin of error of +/-3.2%.

I. Summary of Poll Results:

A. General Questions

Spotlighting Threat of UN Regulation of Internet at CPAC Today

I will  be on the CPAC Digital Liberty panel today with FCC Commissioner Robert McDowell, Kelly Cobb of ATR and Ryan Radia of CEI.

The very important sleeper issue I expect we will spotlight for the CPAC audience is the imminent threat to the Internet from a China/Russia-led effort to get the United Nations' International Telecommunications Union to regulate the Internet similar to the way they regulate telephony and postal service, via a renegotiation of the treaty that affects telecommunications in Dubai in December 2012.

UN regulation of the Internet would kill the proverbial goose that laid the golden egg, by locking in the past and making innovation difficult in the future.

This is a not so subtle effort to undermine and slow America's high tech innovation leadership in the world by miring U.S. Internet companies in the ITU regulatory swamp.

UN regulation of the Internet is a big, under-appreciated, looming threat to freedom and economic growth.

Spectrum: To Auction or Not to Auction?

The FCC's recent call for unbounded spectrum auction authority spotlights an important debate over whether some of this scarce and extremely valuable wireless spectrum should be auctioned or not.

  • Ironically the FCC is asking Congress to give it spectrum auction authority to not auction spectrum.
  • In other words, the FCC is asking to be unilaterally empowered to decide not to auction some spectrum so it can deem it "unlicensed spectrum," like that used for WiFi and garage door openers.

There are huge fiscal problems with the FCC's position, given our nation's severe fiscal situation: a trillion dollar Federal budget deficit and a ballooning multi-trillion dollar public debt.

First, the real world effect of the FCC's gambit here is to try and get revenue-raising legislation to not raise many billions of dollars.

Why the Verizon-Cable Agreement Increases Competition

 

Reports that the Senate Antitrust Subcommittee will hold a hearing on the Verizon Wireless-Cable agreement spotlights an old truism: What one looks for, one sees. What the Government ultimately sees here largely will depend on whether the Government looks backward through an analog competitive lens or looks forward through an Internet competitive convergence lens. In a nutshell, if they look backwards with 1996 cable-telco Silo-Vision lenses, they will see an agreement not predicted in 1996; however if they look forward with 2012 Internet-Vision lenses that see 4G LTE wireless, iPhones/Android, VoIP, DBS, video streaming, Netflix, cable modems, DSL, FIOS, Skype voice/video file-sharing, cloud-computing etc. – they will see an agreement that is not at all surprising or problematic given the competitive context of today and the future.

Where's the Market for Online Privacy?

Why are market forces so weak in protecting users’ online privacy?

The main reason is that the online marketplace is economically structured around users being a commodity, data, to be aggregated and mined, not customers to be served and protected in a competitive marketplace. That’s because the overriding economic force that created the free and open commercial Internet – the predominant Silicon Valley venture capital/IPO value creation model – was and remains largely antithetical to protecting online privacy.

The Silicon Valley venture capital/IPO driven model is laser-focused on achieving Internet audience/user scale fastest in order to gain first-mover advantage and then rapid dominance of a new product or service segment. This predominant Internet economic model is predicated on a precious few investments achieving such rapid user scale that it: warrants a buy-out at an enormous premium multiple; enables fast and exceptionally-profitable liquidity (via the new secondary derivative market for private venture shares or employee options); or broad liquidity via a public IPO.

What is the essential critical element of achieving audience/user scale fastest? Free. No direct cost to the user fuels fastest, frictionless, viral adoption. This free economic model presupposes online advertising as an eventual monetization mechanism and shuns products and services directly paid for by the user because their inherent time-to-market is too slow and their upfront sunk cost of sales and customer service is too high for this predominant value creation model.

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Q&A One Pager Debunking Net Neutrality Myths