You are here

Corporate Welfare

The New U.S. Spectrum Policy Has Big Problems – Part 9 -- Government Spectrum Waste Fraud & Abuse Series

Please see my latest Daily Caller op-ed: "The New U.S. Spectrum Policy Has Big Problems” -- here.

  • It critiques the new Presidential Memorandum: “Expanding America’s Leadership in Wireless Innovation.”
  • It is also Part 9 of my Government Spectrum Waste, Fraud & Abuse Research Series.

* * * * *

The FCC/DOJ’s One Gigahertz Spectrum Charade – My Daily Caller Op-ed & Part 8 of Government Spectrum Waste, Fraud & Abuse Series

Please see my latest Daily Caller op-ed: "FCC/DOJ’s One Gigahertz Spectrum Charade" -- here.

  • It is Part 8 of my Government Spectrum Waste, Fraud & Abuse Research Series.

* * * * *

Government Spectrum Waste Fraud and Abuse Research Series

Obsolete Analysis Will Doom DOJ's Antitrust Probe of Cable -- My Daily Caller Op-ed

Please read my latest Daily Caller Op-ed: "Obsolete Analysis Will Doom DOJ's Antitrust Probe of Cable" here.

*****
Obsolete Communications Law Op-ed Series:

Part 1: Obsolete communications law stifles innovation, harms consumers

Part 2: "The FCC's Public Interest Test Problem"

Part 3: "FCC Special Access: Communications Obsolete-ism vs. Modernism"

*****
Broadband Usage Pricing Research Series:

Part 7: "Broadband Pricing is Naturally Evolving to Usage Tiers"

Part 6: "Leaf Vision & Broadband Usage Caps"

Part 5: "Consumer Group's Advocacy Hypocrisy"

FCC Special Access: Communications Obsolete-ism vs Modernism -- My Daily Caller Op-ed (Part 3 in Series)

Please read my latest Daily Caller Op-ed: "FCC Special Access: Communications Obsolete-ism vs. Modernism" here.

***

Obsolete Communications Law Op-ed Series:

Part 1: "Obsolete communications law stifles innovation, harms consumers"

Part 2: "The FCC's Public Interest Test Problem"

***

Precursor Special Access Research Series:

Part 5: "FCC: Forced Access Economics & Selective Math"

Part 4: "Special Access Facts Show More Not Less Competition"

Part 3: "What's the Broadband Plan Implementation Vision? Affirming Competition Policy? Or the Retro-genda?

Part 2: "Special Access Nostalgia for Telecom's Bronze Age is No Path to 21st Century Broadband Leadership"

Netflix' Net Neutrality Corporate Welfare Plan (Part 10 of a Series)

Apparently Netflix is angling to become Silicon Valley's king of corporate welfare. We learn from a New York Times economics column advocating for an Internet industrial policy that "Netflix is trying to build a coalition of businesses to make the case for… net neutrality." And that the "online video powerhouse Netflix started a political action committee to complement a budding lobbying effort in support of the idea that all content must be allowed to travel through the Internet on equal terms" -- translation: always at no cost to Netflix.

But Netflix isn't in need of public assistance; it is America's video subscription leader with 23 million subscribers. Netflix has $3.3b in annual revenues, $1.2b in gross profits, $800m in cash, a 34% return on equity, and a market valuation multiple over twice the market's. And Netflix flexed its exceptional pricing power last year in raising its prices 60% without losing many subscribers.

T-Mobile to FCC: Give us a Do-Over and Verizon's Cable Spectrum Too

T-Mobile demanded last week that the FCC deny the Verizon-Cable spectrum license transfer, apparently so Deutsche Telecom/T-Mobile could get it at a deep FCC managed-market discount.

The FCC is not Deutsche Telecom/T-Mobile's personal do-over button that they can push and magically reset the marketplace to an earlier time more to their liking. All other players have made market-driven decisions and have to live with them, and so should Deutsche Telecom/T-Mobile. That's the essence of free-market competition, companies move forward or backward based on their own market-driven choices. It's not competition or a market, if those who don't like the outcome of their own market decisions, run to government for a do over and quasi-international bail-out.

Let's review how T-Mobile got to this point.

For years T-Mobile has been a seller of its spectrum; because its parent Deutsche Telecom has long wanted to exit the U.S. market because it requires more capital investment than they are willing or financially able to expend.

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.

FCC Seeks Unbounded Spectrum Auction Authority

At CES, the FCC signaled that it opposed any effort by Congress to give the FCC policy direction or to establish any checks and balances on the FCC in authorizing incentive auctions of prime TV broadcast spectrum.

See my Forbes Tech Capitalist post "FCC Seeks Unbounded Spectrum Auction Authority" to see why the the FCC's lack of regulatory humility here is so stunning.

Netflix' Uneconomics

Netflix' continues to exhibit serious difficulties grasping basic economics, competition and value.

First, Netflix is lowering its value to customers.

  • Netflix now charges its subscribers' 60% more in September in return for lots less premium content available for subscribers in February, as Netflix just lost Starz,its top premium content provider, which supplies 22 of Netflix' top 100 movies.

 

Second, Netflix is shifting its costs to its customers.

  • Netflix used its abrupt and controversial 60% price hike to force many of its core users away from the DVD model that many prefer and have the viewing technology for (but costs Netflix more), to the streaming model, (which Netflix prefers because it costs them less) even if it costs many of their DVD customers to spend lots more to upgrade their viewing technology to view the streamed content in the way they can currently view DVDs.

 

Third, Netflix is chasing away the premium content its subscribers demand.

Netflix' Glass House Temper Tantrum over Broadband Usage Fees

Netflix continues to throw stones at the common economic practice of usage-based pricing, to which broadband carriers are naturally migrating, all while Netflix stands inside a glass house filled with mis-managed usage pricing practices. 

Netflix as Stone Thrower:

In a concerted campaign for net neutrality regulation that would ban broadband usage caps or pricing, Netflix has generated a:

Netflix as Glass House:

Pages

Q&A One Pager Debunking Net Neutrality Myths