Wireless Spectrum

I wanted to follow up and build upon my post of last week: "The logic of Internet Pricing Diversity and the Fantasy of free limitless bandwidth."

•  I keep hearing this backward-looking refrain from net neutrality proponents that because some people characterize dial-up and early broadband bandwidth as unlimited or as an all-you-can-eat usage model -- that that model should never evolve or change.
  • Balderdash! This is some people's wishes being presented as analysis.

I believe U.S. Internet access consumers have come to understand at least two truths: 

I had to chuckle when I saw the headline: "Google CEO: Get Ready for Cellphone Ads" on the US News and World Report Blog.

• Google can't help but salivate over how valuable "targeted" ads could be on the most personal of devices -- the cell phone.

While Google's standard line is that Google is all about the "user" -- stories like this shed light on the truth -- it's really all about Google.

Google's self-centered, megalomaniacal mission to organize the world's information to be accessible and useful to Google -- blind Google to the very different privacy reality of the cellphone world:

Net neutrality proponents who argue broadband competition doesn't work and see a "duopoly" in every shadow, were confronted with powerful market evidence recently that their take on the broadband competitive facts is flat wrong. 

The big Wimax consortium announcement this week by Clearwire, Sprint, Google, Intel, Comcast, Time Warner Cable and Bright House, is obvious evidence that:

• National broadband competition and consumer choice continues to increase; and
• Congress' and the FCC's rejection of net neutrality legislation and regulation encourages investment in broadband deployment to all Americans most quickly.

This free-market, innovative business model development, which Google has embraced with a $500m investment, takes even more wind out of the sails of the net neutrality movement.

The more we learn about Google's behavior in the FCC's 700 Mhz auction the more clear it is Google acted improperly and "gamed" the auction and Fleeced the American taxpayer as I explained in my original post on this subject.

The Hill has a good article highlighting the growing "battle" over "White Spaces", or the potential for use of the buffer spectrum bands in-between TV channels to ensure that there is no interference with TV signals.

I want to thank Mike Masnick for his good comment to my blog post. This post is part of a string responding to Mr. Masnick's criticism of my original blog post entitled: "Google unabashed about gaming FCC auction process to fleece the American taxpayer of $7 billion."

I accept his gracious apology for starting his original critique with an ad hominem attack and I in turn want to apologize to Mr. Masnick for incorrectly assuming that he was on Google's side when he says he has no side -- I take him at his word.

Martin Geddes of Circle ID challenged my estimation methodology in reaching that Google fleeced the American taxpayer for $7 billion.  

With all due respect to Mr. Geddes, first his analogy of taking "a tasty apple, a yummy banana and a mouldy pear, is simply not analogous here. One doesn't pay $4.7b for a "mouldy pear." The regulations did not make the spectrum itself bad to eat, but simply restricted the use of the spectrum or in Mr. Geddes example how someone would be allowed to eat a good pear. People will pay less for a fruit if they are restricted on when and how they can eat it. 

Second, Mr. Geddes suggests I am confusing the American taxpayer with the American public. I most certainly am not. I am recognizing that there is a very specific law, the 1993 Budget Act, which effectively defines that the American public is the American taxpayer because the purpose of these spectrum auctions are to reduce budget deficits. One may not agree with how the law defines the American public in this instance, but that opinion doesn't change that it is the operative law here.  

My estimate in my blog was trasparent and simple so everyone could see how I got my figure.

• The important point here is that Google fleeced the American taxpayer of several billion dollars, was it $7b? $5?b $9b? $3b? -- it depends on the estimating method.
• My estimating method was straightforward, transparent, logical, simple and easy to understand. 
• I stand by it until someone else comes up with a more defensible estimate.    

Many have broadly swallowed Google's "spin" that Google really "won" by losing the 700Mhz auction -- without digesting the serious implications of Google's public admission.   

• So needy to convince everyone that Googlers, yet again, proved themselves to be the smartest people alive, Google hasn't realized that they have unabashedly admitted to de facto gaming and manipulating an official Government auction statutorily-created to fully reward taxpayers for commercial use of public airwaves. 
• Miguel Helft of The New York Times has the best coverage of Google's actions in the auction in his article: "An Auction That Google Was Content to Lose." 
  • “Our primary goal was to trigger the openness conditions,” said Richard Whitt, Google’s Washington telecommunications and media counsel."
  • The article goes on to explain its nonsensical bidding strategy of bidding against itself: "For much of the first week, Google gradually topped its own bids. With no competitors emerging, anxiety grew."  

So what's wrong with what Google did?  

First and foremost, Google's flagrant manipulation of the auction rules and process fleeced the American taxpayer out of at least $7 billion, by my estimate.

It was very welcome, but not surprising news, that FCC Chairman Martin and a majority of the FCC plan to deny eBay-Skype's petition to apply 1960's "Carterfone" monopoly regulations on today's wireless competitors.

This was not a close call. Carterfone regulations were appropriate forty years ago with a monopoly and no competition. However, dusting off ancient regulations for a bygone monopoly era have no business or relevance today. 

The facts are that Americans enjoy more wireless competition than most any country in the world, enjoy the lowest or near lowest wireless prices in the world, and use about four times more wireless minutes than our european counterparts, because of the dramatically lower prices -- all per the American Consumer Institute. 

• The market is serving consumers excellently, and vastly better than regulators could ever hope to.

The Skype petition is an excellent evidence that the net neutrality movement does not believe in competition policy or a free market Internet, but believe in a government managed Internet.

• The FCC majority rightfully understands that government control and regulation of the Internet would be an unmitigated disaster for all concerned.  

Professor Tim Wu, who coined the term "net neutrality" is reportedly now advocating "law breaking" to advance the "information commons" agenda, which believes Internet infrastrructure, spectrum and content should be publicly owned and not privately owned.  

• Communications Daily quoted Professor Wu on March 11, 2008:
  • "To move things along, unlicensed users should start occupying unused spectrum for wireless broadband, Wu said: "You gotta start somewhere, and it always starts with law-breaking.""
• My experience is that Comm Daily is careful to accurately quote people and if Professor Wu did not to clarify his remarks, we can assume them to be accurate. I also have not seen a clarification of this after two more publications. 
• I would also like to extend the courtesy to Professor Wu to be able to qualify his remarks that they were meant to be flippant, or a joke, or that he really didn't mean to call to publicly encourage people to break the law.
  • He could resolve this issue with a simple blog post.  

That said, it is very troubling to any public civility minded person who believes in the rule of law and respect for property, that such a prominent person as Professor Wu (who coined the term net neutrality, and who proposed Caterfone open access rules for the 700 MHz auction) would advocate "law-breaking" to advance his political agenda.