Telecommunications

When the federal government torpedoed the AT&T/T-Mobile USA merger in December pursuant to the current administration’s commitment to “reinvigorate antitrust enforcement,” it created a new client in search of official protection and favors.
It was clear there is no way T-Mobile – which lost 802,000 contract customers in the fourth quarter – is capable of becoming a significant competitor in the near future. T-Mobile doesn’t have the capital or rights to the necessary electromagnetic spectrum to build an advanced fourth-generation wireless broadband network of its own.
T-Mobile’s parent, Deutsche Telekom AG, has been losing money in Europe and expected its American affiliate to become self-reliant. In 2008, T-Mobile sat out the last major auction for spectrum the company needs.
The company received cash and spectrum worth $4 billion from AT&T when the merger fell apart, from which T-Mobile plans to spend only $1.4 billion this year and next on the construction of a limited 4G network in the U.S. But it must acquire additional capital and spectrum to become a viable competitor.
Unfortunately, every wireless service provider requires additional spectrum. “[P]rojected growth in data traffic can be achieved only by making more spectrum available for wireless use,” according to the President’s Council of Economic Advisers. Congress recently gave the FCC new authority to auction more spectrum, but it failed – in the words of FCC Chairman Julius Genachowski – to “eliminate traditional FCC tools for setting terms for participation in auctions.”
Everyone fears it will take the FCC years to successfully conduct the next round of auctions while it fiddles “in the public interest.” That’s why Verizon Wireless is seeking to acquire airwaves from a consortium of cable companies, and why T-Mobile will do anything to stop it.

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Legislators in Kentucky are considering a bill for modernizing Chapter 278, sections 541-544 of the Kentucky Revised Statutes relating to the jurisdiction of the Public Service Commission (Senate Bill 135).
States including Alabama, Florida, Georgia, Indiana, Illinois, North Carolina, Ohio, Tennessee and Wisconsin have all recently revamped their telecommunications statutes, and Mississippi is in the process of considering similar legislation. SB 135 would put Kentucky in a strong position relative to these nearby states in terms of creating a favorable business climate for private investment in advanced networks.
Rates for basic local exchange service would be market-based and not subject to commission jurisdiction beginning 60 months after a telephone utility elects (or has already elected) to adopt price cap regulation. The requirement to file tariffs would be eliminated at that time.

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Proposed House Bill 825 would update the regulation of telecommunications services in Mississippi. Effective July 1, 2012, the Public Service Commission would no longer be authorized to regulate the rates, terms and conditions of single-line flat rate voice communication service, nor impose other regulation. The bill also clarifies that nothing in Title 77, Chapter 3 (Regulation of Public Utilities) of the Mississippi Code may be construed to apply to video services, voice over Internet protocol services (“VoIP”), commercial mobile services, Internet protocol (“IP”) enabled services, in addition to broadband services. The commission would continue to regulate intrastate switched access service, as well as arbitrate and enforce interconnection agreements between telecommunication providers. Providers of intrastate access and unbundled network elements would Read More ›

The National Telecommunications Cooperative Association (NTCA) began the process of litigating the Federal Communications Commission’s recent Connect America Fund Order on in the U.S. Court of Appeals for the Fourth Circuit Friday. NTCA, which represents over 570 “locally owned and controlled telecommunications cooperatives and commercial companies throughout rural and small-town America,” notes, among other things, that “[p]rovisions [of the Order] mandating an ultimate price of zero for all switched access and reciprocal compensation services, imposing retroactive and dynamically changing caps on USF-supported costs and blurring the lines between regulated and nonregulated operations are inconsistent with law.” What this particular dispute is ultimately about is not whether NTCA’s members are entitled to recover their reasonable costs as a matter of law Read More ›

AT&T and T-Mobile withdrew their merger application from the Federal Communications Commission Nov. 29 after it became clear that rigid ideologues at the FCC with no idea how to promote economic growth were determined to create as much trouble as possible. The companies will continue to battle the U.S. Department of Justice on behalf of their deal. They can contend with the FCC later, perhaps after the next election. The conflict with DOJ will take place in a court of law, where usually there is scrupulous regard for facts, law and procedure. By comparison, the FCC is a playground for politicians, bureaucrats and lobbyists that tends to do whatever it wants. In an unusual move, the agency released an analysis Read More ›

Federal Communications Commission Chairman Julius Genachowski’s criticism of intercarrier compensation in extensive remarks on telephone subsidies last week is a reminder for many states of the need to reform intrastate switched access rates.
Although Congress mandated the elimination of implicit subsidies embedded in the rates for both interstate and intrastate telecommunications services in the Telecommunications Act of 1996, it did not set a deadline. The FCC has substantially reduced interstate switched access rates in recent years, but a considerable amount of hidden subsidies remain in intrastate switched access fees.
In Florida, for example, one telecom service provider charges 5.64 cents per conversation minute for intrastate long distance versus only 1.65 cents for interstate long distance. The difference represents a hidden subsidy component that operates as a form of tax that only residents of Florida pay, since the lower interstate fees apply to calls which cross state lines.

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Blocking the merger between AT&T + T-Mobile is apropos of this administration’s strategy for creating jobs, according to James M. Cole, the deputy attorney general.

The view that this administration has is that through innovation and through competition, we create jobs. Mergers usually reduce jobs through the elimination of redundancies, so we see this as a move that will help protect jobs in the economy, not a move that is going in any way to reduce them.

Remarkably, someone forgot to include that in the complaint filed by the Department of Justice in the District Court for D.C. The complaint itself does not allege that the merger will cost jobs, nor does it suggest that blocking the merger would create or save jobs. As a technical matter, antitrust is not concerned with job protection, although many seek to exploit it for that and other purposes. More on why that is a bad idea in a minute.
Instead, the complaint is focused specifically on the possibility that the combined company may not longer offer T-Mobile’s lower-priced data and voice plans to new customers or current customers who upgrade their service.
Yet, the complaint concedes that from a consumer’s perspective, local areas may be considered relevant geographic markets for mobile wireless telecommunications services. On the other hand, enterprise and government customers require services that are national in scope, according to the complaint.

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Over at Technology Liberation Front, several colleagues and I recently “debated” the proposed merger between AT&T and T-Mobile from a free market perspective. For a skeptical take on the merger, see the item by Milton Mueller. The rest of us are more optimistic.
The AT&T – T-Mobile Merger: Beyond the Arithmetic, by Larry Downes (Apr. 18, 2011)
Why I fear the AT&T-T-Mobile merger, by Milton Mueller (Apr. 18, 2011)
Open minded on the AT&T/T-Mobile merger, by Hance Haney (Apr. 19, 2011)
Information Control, Market Concentration, and the AT&T/T-Mobile Deal, by Ryan Radia (Apr. 20, 2011)
For The Last Time: The Bell System Monopoly Is Not Being Rebuilt, by Steven Titch (Apr. 22, 2011)

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Julius Genachowski is in a hurry.
The chairman of the Federal Communications Commission is arguing that the commission must act quickly to “restore the longstanding deregulatory–as opposed to ‘no-regulatory’ or ‘over-regulatory’–compact” that governed broadband Internet access services prior to a recent court decision. Such an approach is urgently needed to “restore the status quo,” he claims.
If the FCC cannot regulate the Internet, it may die. The telephone and television industries are declining, whereas communications industries which the FCC monitors to some extent but does not regulate, e.g., the Internet backbone, broadband Internet access and wireless, are thriving.
Genacowski’s plan would reclassify broadband as a “telecommunications” service subject to blunt, onerous, industrial-era regulation under Title II of the Communications Act of 1934 — which governs common carriers — and then forbear from enforcing most of Title II’s heavy-handed provisions.
Broadband services haven’t been subject to Title II regulation for several years, so reclassification would not restore the status quo. It would harken back to a bygone era.

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Late last week the Federal Communications Commission voted along party lines to open a proceeding to “seek the best legal framework for broadband Internet access,” a process that could culminate in the imposition of stifling, telephone utility style regulations on America’s privately financed broadband networks pursuant to Title II of the 1934 Communications Act.
A statement by Commissioner Michael J. Copps explains in more detail than the rest why he thinks regulation is necessary for achieving this country’s “broadband hopes and dreams.”
The FCC has been deregulating communications services in response to increasing competition for years. Copps and others believe it is necessary to reverse course, although in his statement Copps doesn’t question the policy of deregulating a competitive market. He questions the facts, arguing that broadband is less competitive than it used to be. This is a misleading argument.

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