July 2009 Archives

July 28, 2009 1:37 PM

The Tao of Consumer Welfare and Handset Exclusivity

Why the "Tao" of consumer welfare and handset exclusivity?  Why not the "Zen" of consumer welfare and the art of handset exclusivity?  Well, here's why:  Bruce Lee (no relation) entitled his book "The Tao of Jeet Kune Do" ("Jeet Kune Do was the name Bruce Lee gave to his sui generis martial art), and Bruce Lee was voted by Time Magazine as one of the most influential people of the 20th century. Plus, I also saw a show a few months back on the History Channel called "How Bruce Lee Changed the World."  Enough said. So, who am I to pick a different term to describe seeking to distill the essence of a subject to its fundamental, essential, definitive principles? 

Said differently, in this particular post we want to focus on the under-appreciated, misunderstood, is of how "exclusive" agreements between wireless handset manufacturers and wireless service providers affect consumer welfare. But, to do so, we must properly consider the question, and what is not the question. The chief complaint of the chief complainers is that not every consumer has access to the "exclusive" of their choice.  This is just another way of saying that not every consumer has access to the service provider of their choice. This is not a trivial concern, or a concern to be brushed off and ignored by policymakers; however, contrary to how this issue has been characterized, this is a spectrum scarcity issue, and NOT a competition issue.

So, to clarify, this post is about the tao of the practice of wireless "exclusives" and how this practice relates to consumer welfare.  I explained it in a previous post, but, alas, the tao was buried in an ineffective attempt at a comedy monologue.

So, what is the answer?  What is the fundamental "is" of how "exclusives" affect consumer welfare?  Well, if you missed it, here it is: each party to the "exclusive" arrangement has an incentive to bargain hard to get the other firm to offer prices at lower than competitive prices, because each party is selling a complementary product (service or handset)--the profit on which is maximized by getting the other partner to offer its piece of the package at an inefficiently low price. 

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July 28, 2009 1:26 PM

Ex Parte Rules Reform: Making the Process "Transparently" Translucent?

Recently (July 15th), Communications Daily ("Comm Daily") reported that on June 12th, Commissioner Copps, as Acting Chairman, had circulated to the other Commissioners a draft Notice of Proposed Rulemaking ("NPRM") that would propose new rules for reporting "ex partes".  The existing ex parte rules require parties who have private, "one-on-one" meetings with Commissioners, or Commission staff, to file a notice by the end of the next business day explaining who from the FCC and who from the interested party attended the meeting, as well as a short summary of what was discussed.  Moreover, if a written presentation was used, the filing party must include a copy of the materials used in the meeting. 

The proposed new rules would require parties that have one-on-one meetings with Commissioners, and Commission staff, to provide more detailed information about the meetings in the subsequent notice filing.  The theory behind the proposed rules is that they will help to "fix" the FCC by imposing more "transparency" and "openness" on the Commission's process.

I wish the FCC the best of luck, should it decide to "reform" the ex parte reporting process, but I have to concede that I am a little skeptical as to whether these proposed changes will have the desired effect.  Why?  Well, it's like that old expression that you can't be just "a little" pregnant.

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July 14, 2009 3:36 PM

The Blizzard of Yaahhhs: Is Aspen Skiing A Lift Ticket To Fair Programming Terms?

Competitive subscription TV providers are, most often, confronted with a blizzard of "no"s, or, even worse, a blizzard of "nose" when they ask if they can buy sports programming in a "high definition" format from the vertically-integrated owner of that local sports programming.  Most regional sports programming (most college sports, and all professional sports except football) is owned by a regional programming company that is usually affiliated with a large cable TV company.  The vertically-integrated sports programmers (big cable) are always fighting with competitive subscription TV providers (telco--ILEC and CLEC, competitive cable overbuilders, and satellite).  The major source of contention is access to the "feeds" of local sports content (both "regular" and "high def").  Incumbent cable operators, who do not compete with one another, routinely make all proprietary programming available to other cable incumbents.

A good example of how vertically-integrated video providers can use their programming market power to reduce consumer welfare is described in the FCC complaint filed last week by Verizon against Madison Square Garden L.P. ("MSG"), and Cablevision.  MSG is owned by Cablevision, and MSG owns the exclusive rights to produce and exhibit games of important local sports teams, such as the NY Knicks, NY Rangers, NY Islanders , NJ Devils, and the Buffalo Sabres.   Providers of subscription TV in the NY metro area, and upstate and western New York, believe that the high definition feeds of these events are competitively significant.  Every provider of subscription TV services that is offered the "high-def" format purchases it, and every other provider of subscription TV services wants to buy it.

In its complaint, Verizon claims that MSG is violating Section 628 of the Communications Act, which prohibits vertically-integrated distributors of satellite programming from acting in an unfair, or anticompetitive manner.  Verizon contends that Cablevision is in violation of the Act because it refuses to sell Verizon its "high def" feed for sporting events, for which MSG owns the rights.  Cablevision's response is that, because it transmits the "high def" feed to its distribution points via fiber (vs. satellite) transmission, it is not required to deal at all (much less, fairly) with any other programming distributor.  This post is NOT about Verizon's complaint at the FCC.


Continue reading The Blizzard of Yaahhhs: Is Aspen Skiing A Lift Ticket To Fair Programming Terms?
July 13, 2009 9:25 PM

Broadband Mapping NOFA: "NOFA" Enough, But Not "BADFA" A First Try

After reading the NTIA Broadband Mapping Notice of Funding Availability ("NOFA"), it's clear that the "treasure map" I was hoping for isn't going to materialize.  However, I'm not destroyed, because--relative to my expectations, the NTIA--with one really weird exception, and another, more minor, nit--didn't do so bad at all, especially for having a limited amount of time and no confirmed leader until less than a week prior to the NOFA being released.

OK, to get us all on the same page, Congress told the NTIA to come up with a broadband inventory map when it passed the American Reinvestment and Recovery Act ("Recovery Act") earlier this year.  Prior to passage of the Recovery Act, though, Congress also instructed the Commerce Department (NTIA) to collect very similar data, and instructed other federal agencies to collect different, relevant broadband-related data, in the 2008 Broadband Data Improvement Act ("BDIA").  

Both laws, essentially, seek the same thing--a static inventory of broadband availability in America.  The NOFA requires periodic updates, so "static" isn't an entirely fair characterization, but it's not that far away.  "Backward-looking" is probably a more accurate characterization.  The ultimate "purpose" of the map can be as obvious (and useful) as just letting policymakers know who still needs access to broadband service.  Another good use of the map/data is to provide feedback on whether policies are working.  More importantly, though, the mapping data can be even more helpful to broadband penetration and deployment if it helps to eliminate information gaps/inefficiencies that prevent forces of supply and demand from working as they should.  A broadband map that helped to facilitate this intermediation function would easily pay for the $350 million allocated for the map. 

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July 5, 2009 11:42 PM

TeleComSense Salutes Rep. Anna Eshoo

It's the weekend of the Fourth of July, so it seems appropriate to take time out and put the spotlight on a Member of Congress that really seems like she's trying to do right by the public.  For this inaugural salutation, TeleComSense selects Representative Anna G. Eshoo (D-CA).  Is she the only public servant worthy of recognition?  Of course not, but a lot of more famous people get sucked-up-to all the time.  If you want to know why I'm spreading the love, I'll give you two reasons why Rep. Eshoo deserves a little recognition.  One can be appreciated by every American.  The other, should, be supported by every American, but can be best appreciated by the TV junkies--especially, those with more "low-brow" viewing tastes (i.e., men).

First, let me explain that I'm not a "BFF" of Rep. Eshoo (though I do sing a pretty righteous parody of Billy Paul's "Me and Mrs. Jones" with me substituting "Eshoo" for "Jones").  Anyway, though I'm not a "BFF", I have met Rep. Eshoo a few times. In a previous job, I was a registered lobbyist as part of my overall responsibilities (although we also had a "real" legislative guy as part of our team, who had worked for a Member of Congress on the House Energy and Commerce Committee). 

After the Dems took control of both houses of Congress in the '06 elections, the first day of Congress, in January of '07, was a nice day for that time of year, and the atmosphere on the Hill was really exciting.  An old friend of mine had just accepted a temporary engagement with the office of new House Majority Whip, Congressman James E. ("Jim") Clyburn, and invited me over for their open house, and I brought along Pete, our legislative lobbyist.

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