Telecommunications

Reforming the system of heavy subsidies for rural telephone service, which dates back to the Great Depression, has long been a topic of discussion for telecom policy wonks. The Universal Service program is proof-positive that subsidies grow like weeds. Universal Service has spawned a constituency of more than 1,000 small telephone companies who’ve waged a Jihad to preserve their entitlement. Politicians have always found it expedient to look the other way. This may be changing. In recent years, wireless companies have set up shop in rural areas. Although their costs are generally far less than those of the incumbent wireline providers, one of the FCC’s brilliant “pro-competitive” policies bestows a subsidy for wireless service which is identical to the subsidy Read More ›

Bret Swanson and George Gilder predict that the U.S. Internet of 2015 will be at least 50 times larger than it was in 2006. Their report, “Estimating the Exaflood: The Impact of Video and Rich Media on the Internet — A ‘zettabyte’ by 2015?,” estimates that annual totals for various categories of U.S. IP traffic in the year 2015. It projects: Movie downloads and P2P file sharing of 100 exabytes Internet video, gaming and virtual worlds of 200 exabytes Non-internet IPTV of 100 exabytes, and possibly much more Business IP Traffic of 100 exabytes Gilder notes that an exabyte is equal to one billion gigabytes, or approximately 50,000 times the contents of the U.S. Library of Congress. This report expands Read More ›

Rep. John D. Dingell (D-MI), the House Energy & Commerce committee chairman, is complaining that the FCC isn’t fair, open or transparent. Exasperated political partisans frequently complain about process out of frustration when there is insufficient popular support for their point of view to prevail on the merits. That’s what’s happening here. Overlooking the many unfortunate attempts lately to re-regulate the cable industry and a few other lapses, the FCC has been extraordinarily successful in terms of removing unnecessary regulation, and Martin deserves much of the credit. In the telecom space, network operators Verizon and AT&T are investing billions upgrading their networks to provide competitive video services as a result of the fact the Bush FCC allowed the Regional Bell Read More ›

The FCC has settled on an inappropriate definition of what constitutes a competitive market. A memorandum explaining why the FCC denied the Verizon’s forbearance petition seeking deregulation in Boston, New York, Philadelphia, Pittsburgh, Providence and Virginia Beach suggested it’s because Verizon’s market share has to be less than 50% AND Verizon’s competitors must have ubiquitous overlapping networks with significant excess capacity. While there is some evidence in the record here regarding cable operators’ competitive facilities deployment used in the provision of mass market telephone service in the 6 MSAs at issue, we find that it does not approach the extensive evidence of competitive networks with significant excess capacity relied upon in the AT&T Nondominance Orders … where the Commission has Read More ›

Two commentators tried to argue that FCC Chairman Kevin J. Martin has held true to conservative principles nowithstanding recent attempts to re-regulate the cable industry. Cesar V. Conda and Lawrence J. Spiwak posited that a “pro-entry/pro-consumer-welfare mandate” is the very “hallmark of economic conservatism.” This is a bizarre statement. “Pro-entry” is a euphemism for competitor welfare, the antithesis of consumer welfare. Competitor welfare used to be the guiding principle of antitrust law — a legacy of the populist movement. The idea was that more competitors equaled stronger competition. It’s intuitively appealing, but it confuses quantity with quality and is wrong if the competitors are inefficient. Protection of inefficient competitors is a form of subsidy. For example, the Clinton FCC tried Read More ›

One of the very few positive things in the Telecommunication Act of 1996 is Section 401 (codified as Sec. 10 of the Communications Act of 1934, as amended), which requires the Federal Communications Commission to forbear from applying unnecessary regulation to telecommunications carriers or services. Congress tucked the provision into the 1996 act to improve the chances that pro-competition regulation would be eliminated once fully implemented and no longer necessary to ensure competition. On Friday the FCC issued a notice of proposed rulemaking requesting public comment on whether the forbearance procedure needs more procedure. Commissioner Michael J. Copps issued a statement indicating dissatisfaction with the whole forbearance concept: Too often forbearance has resulted in industry driving the FCC’s agenda rather Read More ›

Kevin J. Martin, politically-savvy and a highly effective chairman of the Federal Communications Commission, has a strong free-market orientation. So why would the New York Times report that the FCC may be on the verge of enacting new regulation which would: Force the largest cable networks to be offered to the rivals of the big cable companies on an individual, rather than packaged, basis; Make it easier for independent programmers, which are often small operations, to lease access to cable channels; and Set a cap on the size of the nation’s largest cable companies so that no company could control more than 30 percent of the market? Martin believes “[i]t is important that we continue to do all we can Read More ›

I want to comment on Adam Thierer’s recent paper, “Unplugging Plug-and-Play Regulation,” which makes several excellent points. Adam briefly summarized his thesis (i.e., there is no need for government “assist” in private standard-setting) here a couple days ago and generated a couple comments. The cable industry and consumer electronics manufacturers are touting competing standards initiatives. The pros and cons of each approach, from a technology perspective, are somewhat bewildering to a non-engineer like myself. But there appears to be one clear difference that matters a lot. Adam points out that under the initiative sponsored by the consumer electronics industry, the FCC would be empowered to play a more active role in establishing interoperability standards for cable platforms in the future. Read More ›

This week the Federal Communications Commission failed to muster 3 votes to deregulate the broadband access services of Qwest Communications, as it has already done for Verizon in early 2006. The nature of the relief we’re talking about is analogous to the commission’s reclassification of DSL as an “information” service rather than a “telecommunications” service in 2005. In both cases, the effect is to free broadband providers from onerous common carrier regulation, allow them to tailor their offerings to customer needs and not be forced to offer their services to competitors at regulated, cost-based rates for resale. To be fair, the relief Verizon got didn’t garner 3 of 5 votes. Verizon’s petition was filed pursuant to Sec. 10 of the Read More ›

Rep. Ed Markey Rep. Ed Markey (D-MA), chairman of the House subcommittee on telecommunications, wants the Federal Communications Commission to re-regulate “dedicated special access” services (the telephone services provided to businesses and institutions, as opposed to residential customers). He recently sent a letter to the five commissioners, which said: My concern is that significant concentration in the special access market through mergers and bankruptcies, combined with the [FCC’s] deregulatory pricing regime, has resulted in higher prices and little competitive choice for special access connections. These are also the conclusions of a November 2006 Report by the General [sic] Accountability Office (“GAO”) …. I respectfully request each of you to respond to me by close of business on June 11, 2007, Read More ›