Telecom Sense

Rust Never Sleeps . . .

"Another flaw in the human character is that everybody wants to build and nobody wants to do maintenance."  Kurt Vonnegut, Hocus Pocus, 1990.

With respect to the Hocus Pocus quote above, the late Kurt Vonnegut could just have easily said the same thing about what humans want to read and write about.  No one wants to read about maintenance, but everyone wants to read about big events and big plans [like Mike Shanahan coming to town, or the National Broadband Plan].  Maintenance is only interesting when it doesn't get done, and the failure to do maintenance causes something bad to happen. 

As a result of this quirk of human nature, when it comes to speculation/predictions/pontification on the National Broadband Plan, the Plan is the thing.  The maintenance on the rusting-for-too-long Universal Service Fund and the related intercarrier compensation system are afterthoughts, and haven't received a ton of attention among FCC watchers, and reporters.  The shame is that the FCC's publicly-stated intent to do this maintenance is a REALLY BIG DEAL. 

To my mind, the Commission deserves more credit for tackling the maintenance (if this is, in fact part of the Plan) than any--forgive the characterization--"pie in the sky" plans. Why, you may ask?  Because--to me--these are the boring-but-thankless (not to mention impossibly complex and politically contentious) chores that the Commission must succeed in addressing as a predicate to creating a regulatory climate that will stimulate investment by carriers (regardless of technology), customers, content, and applications service providers. 

Moreover, this Commission can really clear away a lot of rust in the next two years, and the rest will take care of itself.  Any part of the plan that can be accomplished, in a self-executing way, by mid-2013 is realistic, parts that become effective by 2017 extend into the "optimistic", but still possible.  Anything that's supposed to happen past 2017 should probably be taken out of the Broadband Plan, and put into a special "Broadband Prophecy" section, and phrased in Nostradamus-style quatrains.

Back to the point, though, let's look at one really overlooked area of "rust removal"--Universal Service Contribution Reform--and see why it's so important to a plan designed to increase broadband deployment.

The "Broadband Gap" Will Only Widen Without USF Contribution Reform.  I've heard some pretty reliable sources speculate that the "Contribution Factor" (the percent of the interstate telecom services revenue that consumers must pay to the Fund) for the second quarter will exceed 15%.  This number should be announced this week or next week (I would guess the night of Friday, the 12th).  If true, this would represent an almost 40% increase over last year's second quarter figure of 11.3%.  Moreover, at the current rate of increase, it would not be surprising to see the factor approach 20% by the end of the year. What does this mean? 

Well, let's say you want a "bundled" local/long-distance plan with unlimited long-distance calling.  You live in a big-city suburb, and you want to use a facilities-based competitor to the incumbent LEC.  Here is a typical price schedule for "phone only" for the VA suburbs of DC.  Thus, a 15% contribution factor means that the customer is paying an additional $54 to $72 per year (depending on whether the customer commits to a 1 year contract) over and above the charges it pays to the carrier.  Either way, the telephone service customer is paying well over $400/ year simply for phone service.

On the other hand, if the customer had access to broadband, the customer could purchase the lowest speed broadband service for only a little more, and then pay about $20 per year for VoIP service using magicJack®.  If the broadband customer has no privacy concerns, they could get service for next to nothing with Google Voice. 

Nonetheless, according to the Commission, those customers that are least likely to purchase broadband will continue to be subject to increasing monthly costs for basic telephone service.  These customers are those least likely to buy broadband--the poor, the elderly, and the uneducated. (See, p. 82).

It's difficult to conceptualize that the lack of doing USF "maintenance" on the contribution side--to take account of the many, relatively affluent, customers that have already adopted broadband service--can act as a regressive "tax" on those least capable of shouldering this burden.  Yet, increasingly, without contribution reform (without "maintenance") this is what those buying POTS ("plain old telephone service") every month are facing. 

Contribution reform can be completely accomplished within Chairman Genachowski's tenure, and, if he plans it and follows through, it will be one of the most successful, and (probably) most under-appreciated, things he can do as a Chairman.  If contribution reform is announced as part of the plan--and part of the plan that gets implemented most quickly--the Chairman and the Commission staff deserve a lot more gratitude than they will get in the popular press.  But, if it helps, I'll grant permission to "crack open a cold Bud Light" to the righteous razors of rust . . . . 

Ich Bin Ein "Googleiner"

With sincere apologies to the members of the Google Nation, let me be clear about my last post.  I was not "hating on" Google.  My only point was to try to mollify some of the "irrational exuberance" that emerged on the Net (and in the press) as a result of Google's understated "announcement" of its plans for a broadband experiment.  For those that didn't read my last post, one week ago (Wednesday, February 10th), Google stated on their corporate blog that they would like to build a fiber network to deliver 1 Gigabit speeds to anywhere from 50,000 to 500,000 homes.  Most ensuing stories on the Net and in the press reported on/reacted to this announcement as if the project was already under construction.  

For those who want to believe in the existence of a "Google-Claus", I strongly recommend the dose of reality that you can get from reading Harold Feld's post from yesterday, where he does an excellent job of providing a detailed account about Google's success through the years of "bluffing" and "slow-playing" regulators and network operators in order to get network operators and their end-users to front the cap-ex to support the transmission speeds that will enable Google to offer more services with which to economically advance their business.  There is little reason to believe that this announced "experiment" will bring Google any closer to being a broadband ISP than any of their previous rhetoric.  

On the other hand, Google has been quite straightforward about their business plan, which is to create applications that allow them to capture more and more customer information that they then "monetize" through (essentially) resale to advertisers. Therefore, I come not to bury Google, but to praise them . . . for their honesty in dealing with users of all their services, including Google "Buzz" (which coincidentally was really launched on the same day that their broadband network plans were announced).  In a reaction that is surpassing strange, the outrage on the Net and in the "blogosphere" over Google Buzz is comparable to the enthusiasm surrounding Google's 1 Gig "broadband network."

But why do I say the outrage about the Google "Buzz" product is as perplexing as the enthusiasm over the non-existant, broadband network?  Well, it's simple.  Google has never been in the business of being a telecom network operator.  In fact, if Google has read the newspapers over the last 10 years--and it's clear they have--we can assume Google knows that entering the retail broadband Internet access market (even at efficient scale) is very often a good way to make a small fortune (out of their current large fortune).  To the contrary, though, Google is in the business of obtaining and selling Internet user information.  

On this point, Google could not have been more clear with users of its products.  Only two months ago, Google's CEO, Eric Schmidt, told Americans--on a national cable network--in a statement that was widely repeated, something to the effect that if consumers don't want people to know what they're doing online, then they shouldn't be doing it [at least not using Google services] in the first place.  To underline a point, shortly thereafter, one of the founders of Google's major search partner--Mozilla Firefox--encouraged users to switch to Microsoft Bing for privacy reasons. 

In short, if consumers decided to continue to avail themselves of Google's "free" services (like Gmail or Google Search), even after Google's December clarification that consumer privacy concerns take a back seat to Google's policy of using consumer information generated by use of its products for its commercial purposes, then it's a little difficult to understand all the "outrage" surrounding Google's Buzz product.  When one considers that many of these same critics are also arguing for rules to keep the Internet "open", the complaints are even more difficult to indulge.  Do these outraged privacy watchdogs really want an "open" Internet, or just an extension of the "Nanny-state" that relieves them of any personal responsibility with respect to how they use the Internet?  

On this controversy, Google is in the right.  They've given consumers enough information to make up their own minds.  If consumers choose not to use this information, then what is the point of an "open" Internet?  What is Google's incentive to continue to innovate and provide "free" services to those customers that have nothing to hide, and are happy to trade information for applications?  

If we regulate Google's online behavior, next thing you know, we're regulating the ability of legitimate Nigerian businessmen to use the Internet to raise capital--just to get at the few fraudsters that abuse the gullibility of some Internet users.  But how does this "outrage" do anything to promote commerce, jobs, innovation and openness?  It doesn't, and it's about time for the "Internet police" to dial back the schadenfreude, and lay off the last guardian of the open Internet.

Google's "Think Big Gig": What Is And What Should [Will] Never Be

And if you say to me tomorrow
Oh, what fun it all would be
then what's to stop us, pretty baby
but what is and what should never be -Led Zeppelin, "What Is And What Should Never Be"

With profuse apologies to Led Zeppelin for blaspheming their iconic song title to do a telecom policy blog, this is essentially what Google announced to DC policy makers, via its corporate/policy blog, on Wednesday--except that the policymakers and the press didn't hear the last line.  But, boy, did they eat up the first few . . . you can tell that Valentine's is in the air.

I say the "announcement" was targeted toward policy makers, because absolutely no relevant business information was provided in the announcement--you know . . .  costs, prices, projected revenues, technology to be used, etc.  No vendors, competitors, or even Google's Clearwire partners (a venture from which--according to news reports--Google has been backing away) were interviewed or consulted.  No, but that's OK, because this wasn't a business "announcement."

What the "announcement" really says is how much political clout Google carries in Washington.  On a day when the Gub'ment is closed for a fourth consecutive day, some of the most important Government officials involved in technology policy were intrigued enough to very quickly issue "statements" in reaction to Google's blog post.

For example, the New York Times story actually contains a "statement" from Chairman Genachowski reacting to the Google blog post, and the statement reacts to Google's announcement like it were an "official" announcement--like a firm commitment to enter a market in a specific way, explaining product terms and prices, entry timing, costs, and projected revenues.  The Hill even contains a statement from Senator John Kerry, Chairman of the Senate Commerce Committee's Subcommittee on Communications, Technology, and the Internet.  Moreover, just about every story you'll read really "drank the Kool-Aid."  From the articles I saw on line, only Computerworld got it right.   

But what gives me the right to question Google's ambitiously-admirable, but vaguely-defined, "experiment", the belief of the bulk of the press, and some of the most important officials in Washington?  Well . . . there's this small problem of the facts and the logic.  First, Google's blog never says exactly how they plan to offer this 1 gigabit/sec (1,000 megabit/sec) broadband service at a "competitive price."  Second, the whole theory seems to contain a pretty glaring logical flaw: wouldn't Google deciding to become a broadband ISP allow other Broadand ISPs into Google's monopoly business?


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Before the Net Neutrality Deluge . . . Broadband Still Counts

I couldn't come up with a catchy title, but, before we get totally fixated on Net Neutrality for a big news cycle, I really wanted to draw attention to a very thoughtful, very comprehensive, broadband policy post, entitled "A Sensible Broadband Policy" written by the CEO of a competitive fiber provider--Dave Rusin, CEO of American Fiber Systems ("AFS").  Dave writes the blog TelecomStraightShooter that is linked to on the right hand side of my home page.  Obviously, if you read this post--and you should--you'll see that I'm mentioning it because parts of it sound a lot like some of the things I've said.

While the post is titled "a sensible broadband policy", that's a little misleading, because the description "broadband policy" is a lot broader than it sounds.  If you want to face the facts--as Dave does--"broadband policy" means the FCC's telecom agenda; and that is not an understatement.  

I don't agree with all of Dave's policy prescriptions, and some would probably need the law to change in order to be implemented, even if they are good ideas.  On the other hand, other ideas probably seem like good regulations for "other guys."  But, hey, show me a market participant in an FCC policy proceeding that hasn't advocated regulating someone else's rates to lower their own costs, or stimulate demand for their own product, and I'll show you my untouched Yeti/Loch Ness Monster/UFO photo collection.  Self-interest is not a sin, among FCC commenters, which is why I sincerely believe Dave Rusin's ideas should get as much "air time" as any inside-the-beltway "policy wonk", or "academic expert" (is that an oxymoron?).  Why?

Well, for starters, AFS is based in Rochester, NY--that's where the whole competitive telecom experiment started.  Another factor in Dave's favor is that he's obviously seen both sides of the various telecom skirmishes over the years, but, as a wholesale transmission guy, he doesn't have a dog in a lot of the fights, but he does understand the issues really well.  Finally, he's got to live under his own rules, sleep in his own bed, eat what he cooks . . . the metaphors just don't stop.  

But, before I canonize Dave, keep in mind that--as I said before--like an executive with any other carrier, they sometimes equate (conflate?) their self-interest with the public interest.  On the other hand, the self-interest of a wholesale carrier on the subject of broadband is interesting, because of their overriding incentive to stimulate output and fill the pipes.  That said, the reader must also keep in mind that these insights are not from a telecom regulatory attorney, so they are a little "raw" (e.g., the FCC had four, not five, original net neutrality principles), and some of the USF reform ideas need a little work, but, this is being too picky.

It isn't often that a carrier without attorneys and/or lobbyists on staff (or on retainer) even bothers to offer thoughtful, comprehensive policy ideas, and we don't listen enough to these parties.  This post, "raw" as it is, is also--from a policy perspective--broader, and more thoughtful, than most that I've seen from telecom executives on the operating side.  To be clear, I don't endorse all parts of it, but I don't think it should be ignored either.

Comcast Isn't the Only One Afraid of a Big Win

Last Friday, the 8th, I did a post on the reports about the Comcast v. FCC oral argument that was held before a skeptical D.C. Circuit that morning.  The point of my post was that the Net Neutrality NPRM (comments are due tomorrow!) might be a "rainout", because most reports suggested the court was less than encouraging about the Commission having authority to enforce its Broadband Policy Statement, based on the two main statutory provisions the Commission relied upon in both defending the Comcast decision, and supporting the current NPRM and proposed rules.  If the court did vacate the Commission's authority to enforce its Policy Statement, or any similar Title I rules, then--my post noted--the Commission would have to start again with new rules based on different statutory authority.   

I also noted that, when asked if it would rather lose on "narrow" (did Comcast have adequate notice?) or "broad" (do the statues the Commission relies upon, really provide the authority to regulate specific Internet practices?) grounds, the FCC said it would prefer a narrowly-written loss.  I failed to note that Comcast agreed.  While I figured a "broad" loss for the FCC would be bad for cable, it seemed kind of speculative and I really didn't want to get into it.

On Monday (the 11th), though, Harold Feld waded into the topic with an excellent post, entitled Does Comcast Fear To Win Too Much? In this post, Harold confirms Comcast's fears by citing a back-pedaling post that appeared on Comcast's policy blog Monday.  The post was an excessive "clarification" of Comcast's "true position" that the FCC does have the authority to regulate Internet practices under Title I.  Now a Shakespeare aficionado might observe, "[Comcast] doth protest too much, methinks."  But, really, who cares what Comcast thinks?  The court's interpretation of the scope of the Commission's authority is going to come out sooner or later, anyway.


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