Skype

The recent front page Washington Post article: "Japan's warp-speed ride to Internet's future" made one interesting point:

• "As a champion of Japanese-style competition through regulation, {Google's}Cerf supports "net neutrality" legislation now pending in Congress. It would mandate that phone and cable companies treat all online traffic equally, without imposing higher tolls for certain content. The proposed laws would probably save billions for companies such as Google..." [bold added]

Kudos to the Wall Street Journal editorial page for the editorial "A Wireless Bounty" highlighting that US wireless competition is robust, better than the rest of the world, and does not need government intervention to fix non-existent problems.

It is essential for the truth to be trumpeted in the mainstream media, because those who favor more government regulation of communications markets will fabricate all sorts of false notions to justify the creation of a "bureaucrat-net."

Those advocating wireless net neutrality have systematically misrepresented the state of US wireless competition and the benefits US consumers enjoy from that world leading competitive market.

The Progress and Freedom Foundation wisely hosted an outstanding and noteworthy presentation by Harvard Constitutional Law expert and scholar about how net neutrality violates the U.S. Constitution's first amendment protection of free speech.

I recommend a of blog post on this from PFF by Adam Theirer on Professor Tribe's presentation and the tour de force video is available as well.

The supreme relevance of this presentation is to debunk that net neutrality is "Internet freedom."

• Professor Tribe is a well-known and respected liberal thought leader; so it is highly noteworthy that he has not "drunk the liberal blogosphere's kool aid" that net neutrality is about "freedom."
• Professor Tribe clearly understands that corporations are afforded the constitutional right to free speech just like individuals are.
  • Professor Tribe also sees net neutrality for what it is -- the opposite of "Internet freedom" -- the infringment of network owners clear freedom of speech protected by the US constitution.

Not only is net neutrality trying to address a bogus non-existent "problem," it is a bogus policy concept, because in part it fundamentally misrepresents itself as "Internet freedom" when it is exactly the opposite.

Ted Hearn of Multichannel News has a dead on post 'Copps airbrushes role in FCC dereg binge" that I suggest anyone interested in the FCC's real bipartisan role in dealing with the "net neutrality" should read.

Ted's post exposes some serious political revisionism that is going on by the senior Democrat at the FCC in pandering to one of the most liberal. take-no-prisoners bloggers, Mr. Stoller of OpenLeft.

I wanted to commend and spotlight a critically important and completely under-reported/under-appreciated part of the FCC Chairman's statement on the 700 MHz auction released yesterday:

• "We must continue to encourage the critical investment needed to build the next generation wireless network.  Since I have been Chairman, I have advocated strongly that applying network neutrality obligations, unbundling, or mandatory wholesale requirements to networks can undermine investment incentives.  I do not support such regulations.  The Order we adopt today does not apply these regulations to this block or any other block." [bold added for emphasis]

This is very important, welcome, commendable, and strong affirmation of the FCC's broad deregulation policy -- that was completely lost in the gaggle of press coverage.

There are so many problems with the FCC's new 700 MHz auction rules that create a more regulated open access/net neutrality license -- its hard to know where to start.

• Be confident that I will get to them all over time.

Yesterday I highlighted the dirty little secret that there is very substantial risk that this will become known as the "do over auction" because it may not raise enough money to satisfy the rules and because the FCC likely overstepped its legal authority and will be overturned  in court.

Let's raise another dirty little secret behind the new rules that will increase regulatory uncertainty for broadband deployment.

A much under-reported part of the high drama behind the FCC's current 700 MHz auction rules is that there is a very substantial risk that this becomes known as the "do over" FCC auction.

First, to any outside observer, the FCC's highly-tailored auction rules appear to have a pretty obvious "set aside" for the Google camp and its proposed net neutrality/open access business model for a third of the 700 MHz spectrum.

• The FCC reportedly is "hedging its bets" on the Google set aside license -- worried that its policy experiment may fail to raise the revenue for the US Treasury that is estimated in the US Budget -- so it is imposing a "reserve price" -- in English, a price floor for this new set aside spectrum open license -- to supposedly guarantee the taxpayer 70% of what an "open" auction would deliver.
• Some could characterize this FCC-signaled minimum acceptable price for the "Google-set-aside license" as a fixed 30% discount from the price paid at the AWS auction price. However, the real discount is much larger than 30% because the AWS spectrum is no where near as robust or valuable than the 700 MHz spectrum.
• There are a lot of reasons that Google or others will not bid billions for open access spectrum.
• First, it is likely not worth it.
• It's an untested and unproven business model that offers little opportunity to earn a return on the roughly $10b it would take to build and operate such a national network.
• Most professional and independent investors will ask the blunt and pointed question: how does the 700 MHz set-aside-licensee expect to make money building a highly-capital-intensive wireless-facility model that has dramatically less business and operating flexibility than the other seven existing broadband competitors that have many years head start, and when the cost of acquiring just one new customer could easily be in the $200-400 range on average?
• What's wrong with that investment and business pitch?
• It's a money pit.
• It's dotcom bubble pixie dust.
• It's a loser.
• Net neutrality/open access, while cloaked in consumer terms, is basically an old-style industrial policy and corporate wealth transfer scheme from the risk-taking capital-intensive builders of wireless facilities to high-profit tech applications companies like Google, eBay and Amazon, companies who seek for consumers to pay for the bandwidth that they would profit the most from.
• Second Google is not getting the wholesale resale and unbundling mandates they requested, so their highly-publicized offer to bid $4.6b is moot.
• Third and most important, why would Google want to become a facilities-based, capital intensive wireless provider?
• Such a move would change their business model and virtually none of Google's existing growth shareholders would want the dilution and huge capital and operating cost spikes required for Google to become a wireless carrier.
• It's not going to happen.
• Google's promise to bid will probably go down in FCC history as one of the best "head fakes" of all time.
• In short, the FCC has chosen a new policy path that has substantial risk of not generating the revenue expected -- requiring a "do over" of the auction.

Second, there is substantial legal risk that the FCC does not have the authority to condition these licenses in a way that limits an "open" auction and substantially reduces the revenue for the US Treasury.

Please read Jim Harper's (of Cato) cogent and on-point critique of the FCC's 700 MHz auction.

Well said Jim!

"Open" is clearly in the eye of the beholder.

And "open access" is just as impossible to define as its philosophical twin: "net neutrality."  

I keep shaking my head in disbelief when the Google camp breathlessly claims that the 700 MHz is the last opportunity to create a true "third broadband pipe?"

• This is a common trick in politics -- to completely ignore reality and facts, and create ones own "alternate reality," which suits one's political and corporate agenda.

The much ballyhooed proposal in the 700 MHz auction for an "open access license" (whatever that endlessly evolving term means) claims to be all about Government creating a "third broadband pipe?"

Hello???!!!

• The marketplace is already delivering many more competitive broadband pipes now! FIVE of them -- way ahead of when this Google-camp experiment may deliver in several years time.

Let's come down to earth folks.

 It is clear that "open access" is not a true "principle" for eBay-Skype, but a self-serving scheme by eBay to cloak their obvious "private interest" behind the greater "public interest."

• If "open access" was a true "principle" to eBay-skype,they would abide by it in their own business, and lead by example, but alas they don't.
• They hypocritically do the exact opposite.

Open access to eBay-Skype is a blatant double standard where eBay wants government to regulate their competitors to eBay-Skype's commercial advantage, but do not want the principle applied to eBay-Skype.