Wireless Spectrum

With due to credit to "Ripley's Believe it or Not!^®," so much odd and bizarre is happening in Washington in the "name" of "wireless innovation" and competition that the topic calls for its own collection of: "Believe it or Not!^®" oddities.

Skype co-founder Niklas Zennstom, the co-founder of illegal-music-downloading site Kazaa, who had to avoid entering the U.S. because of copyright-infringement liability... is now seeking a U.S. court injunction to shut down eBay's Skype for alleged copyright violations!

Choice, having the benefit of a selection of different alternatives to choose from, springs from the risk and opportunity of market competition  -- not from Government economic regulation.

Kudos to Steve Pociask of the American Consumer Institute for his research reminding regulators that American consumers enjoy the most competitive, useful, and innovative wireless market in the world.

In reviewing the stats that matter most, the U.S. is far ahead of the rest of the world.

• Americans use 600 more wireless minutes a month than the average OECD country, which is 2-5 times more usage to put it in perspective.
• Americans also pay 10 cents per minute less than the average European does.

We constantly hear from anti-competition forces that competition doesn't work.

• The evidence that they are dead wrong is overwhelming.
• Competition works!

   

   

   

There is a new circular logic argument being offered that in effect takes fast rural deployment of broadband hostage to the net neutrality movement's latest demands for net neutrality to be put above all other broadband or Internet goals.

• A post by Stacey Higginbotham of Gigaom effectively connects Free Press' latest demand that the FCC apply net neutrality to wireless for the first time and argues in her post that if wireless providers are allowed to apply for stimulus grants for rural broadband without mandated net neutrality, they somehow could control what a subscriber could access on the Internet.

Hopefully, the FCC, NTIA and RUS folks that are working on this won't waste time running in circles trying to make sense out of this new circular logic.

• It is not a new argument. And it is not logical.
• It's simply an assertion dressed up as an argument that net neutrality should be the supreme concern, and come before, and be above, all other broadband or other priorities, like economic growth, job creation, broadband deployment/investment etc.

How is this circular logic that doesn't make sense?

Given that eBay's announced spin-off/IPO of Skype in 2010 is a material market event, this high-profile IPO represents a potentially tectonic development in eBay-Skype's (and FreePress') push for wireless net neutrality/Carterfone regulations and applying the FCC's broadband principles to wireless providers for the first time. There are much broader implications of this market development than many appreciate.

Some brief background information is helpful to understand the broader implications:  

• Reports suggest that eBay's plans for a public IPO in 2010 is a result of eBay not being able to get a high enough private market price ($1.7b) for Skype and the fact that current market conditions are not ripe for initial public offerings. (eBay originally paid $2.6b for Skype and added an additional $500m later, then subsequently wrote down $1.4b of Skype's value.)
• eBay-Skype unsuccessfully petitioned the FCC in 2007 to apply monopoly-era Carterfone regulations to wireless. The FCC did not grant the petition.  
• The issue resurfaced again in Washington as FreePress, in a 4-2-09 letter to the FCC, argued that net neutrality should apply for the first time to wireless networks and specifically that Skype's voice application should be able to make calls over carrier's 3G networks.     

So how does eBay-Skype's pending IPO change the landscape?

AP "reporter" Peter Svensson appears to be up to his old tricks again masking his advocacy for Net neutrality as objective journalism -- in his AP article: "Cox Communications to try a new way to handle online congestion, giving priority to some traffic."  

In the first and fourth sentences of Mr. Svensson's "report" he editorializes:

• First sentence: "Cox Communications... stepped onto the battleground of the net neutrality issue Tuesday..."
• Fourth sentence: "The news is sure to revive the debate about "Net Neutrality," or the question of how much Internet service providers can interfere with subscriber traffic."

How can Mr. Svensson be so "sure" of such a thing unless he is planning personally to "revive" the net neutrality debate through his close coordination with FreePress?

How can Mr. Svensson be so "sure" that Cox' network management technique -- of prioritizing traffic based on time-sensitivity -- putting time sensitive traffic ahead of non-time sensitive traffic -- is not permissible reasonable network management, but is likely a violation of net neutrality warranting uproar -- unless...

Lost in the crush of news of late, was the latest FCC report on wireless competition, which shows that the U.S. is leading the world in mobile broadband and wireless competition.

• This is especially relevant to the net neutrality/open Internet debate because:
  • the main justification for new net regulation is that there is insufficient competition, and
  • eBay is expected to revive its previously-rejected Skype petition mandating "Carterfone" net neutrality regulations on wireless competitors.
• The FCC report not only proves the U.S. is the most competitive wireless market in the world but also that "wireless technology is increasingly being used to provide a range of mobile broadband services." (p.5) 
• The FCC report "finds that U.S. consumers continue to reap significant benefits -- including low prices, new technologies, improved service quality, and choice among providers" from wireless competition. (p.5)

On deployment/penetration:

• "Mobile Internet pentration is higher in the United States (15.6 percent of wireless sbscribers) than in Western European countries." The U.S. also passed Japan in 2007 in mobile penetration. (p.10) 
• The FCC report found ~95% of Americans enjoy at least three wireless competitors and ~60% enjoy at least five. 

On competition and prices:

Kudos to Tom Hazlett and Vernon Smith for a cogent free market stance against Google's attempt to communalize the airwaves for Google's benefit -- in a great Op Ed in the Wall Street Journal today.

The authors are dead right to challenge Google's "free the airwaves" campaign on spectrum.  Google does not use the word "free" the way most people use it. When they say "free the airwaves," Google is saying, like it does in its push for net neutrality and open access, that it seeks to turn the airwaves in to a public commons where spectrum is communalized, not owned or licensed, available to anyone at no cost to use.

• There are at least four big problems with this communal Google approach:
  • It does not ensure the spectrum is put to its "highest valued use" as Hazlett/Smith argue;
  • It fleeces the taxpayer out of billions of dollars that a public auction would generate;
  • It facilitates mass interference, ruining the utility and value of the spectrum; and
  • It is a corporate welfare and industrial policy designed to freeze in place Google's Internet dominance and protect Google from competition from spectrum owners or broadband providers.  

At core Google's model requires free inputs so it can disintermediate everyone else with its world dominant advertising model.

Brian Deagon of Investor's Business Daily interviewed me on Google and its leadership role in the lobbying for free use of the White Spaces spectrum.

• The Q&A is entitled: "Google Big Beneficiary of its 'Open' Lobbying"

Importantly, I explain that Google's definition of 'open' is very different from the traditional definition of 'open.'

• Google's definition of 'open' is "communal, meaning not privately owned, communal with no restriction, no permission required."

Tim Wu's "OPEC 2.0" Op ed in the New York Times employs an embarrassingly inane analogy/metaphor. It also happens to be a factually bankrupt piece.  

Why is Professor Wu's political analogy comparing bandwidth to energy, and a "bandwidth cartel" to OPEC -- embarrassingly inane?

• The vast majority of people understand that the price of gas has increased dramatically in part because the U.S. government has severely restricted supply by banning a variety of energy supply alternatives.
• The vast majority of people also understand that the price of bandwidth usage continues to plummet in large part because the U.S. Government has NOT restricted supply; on the contrary, it has encouraged free market competition, broadband investment and innovation that in turn -- has spurred vastly more supply of bandwidth.

In his op ed Professor Wu said:  "In an information economy, the supply and price of bandwidth matters, in the way that oil prices matter: not just for gas stations, but for the whole economy."