Telecom Sense

A House Divided? The Broadband Plan vs. Net Neutrality

[Note: Yesterday, the Department of Justice, Antitrust Division ("DoJ") filed an ex parte presentation in the National Broadband Plan proceeding, which focused on ways to increase the number of broadband service offerings and broadband competitors.  Most public attention has been focused on the DoJ's spectrum recommendations, which are largely designed to promote further spectrum availability.  One controversial recommendation, which was heavily caveated by the Department, was that there may be situations where the highest bidder for spectrum may not provide the most valuable use for the spectrum.  In other words, in an auction model for scarce, but essential, inputs, the hypothetical monopolist is always willing to pay the highest price in order to keep supply off the market.  The facts that would support such a theory as a basis for foreclosing carriers from spectrum auctions are not present now, or even imminent.  For example, the largest spectrum holder in the country is a new entrant, Clearwire, and the biggest "winner" in the 700 MHz auction--Verizon--spent almost $10 billion on spectrum that it knew would be subject to an "open access" requirement. Therefore, given the attention that this one aspect of the DoJ filing has attracted, this post will not discuss the Department's spectrum recommendations.]

For a long time, opponents of "Net Neutrality" (however they chose to interpret the concept at the time) have argued that, conceptually, Net Neutrality was at odds with the national policy goal of increasing broadband deployment and penetration.  The typical argument against Net Neutrality was as general, and loosely-defined, as the concept of Net Neutrality.  A good example of the Net-Neutrality-Broadband Policy tradeoff is this 2004 paper by Professor Christopher Yoo for the Progress and Freedom Foundation.   This is old news, and not surprising coming from a pro-business group like PFF.  So, why bring up an old argument?

Well, because "Net Neutrality" is no longer an amorphous, generalized, mean-what-you-want-it-to-mean, concept.  No, the FCC has now given Net Neutrality a very specific meaning in its NPRM and proposed rules.   This is what makes yesterday's ex parte filing by the Antitrust Division of the Department of Justice ("the DoJ") in the FCC's Broadband Plan proceeding so interesting. The DoJ's ex parte is interesting for several reasons, but the main one is that it highlights the tension between the goals of the Broadband Plan (as seen through the "consumer welfare" eyes of the DoJ) and the policy and proposed rules set forth in the Net Neutrality NPRM. 


Continue reading A House Divided? The Broadband Plan vs. Net Neutrality

A Funny Thing Happened . . . Part 2

Meanwhile, . . . back at the ranch . . . given the potential for inter-governmental "enforcement competition", it is helpful to look at what the FCC's existing longitudinal data sets are showing regarding the performance of markets that, unlike the wireless applications market, are firmly under the jurisdiction of the Commission.  Does the FCC have information that could lead a "fact-driven" agency competitor (like the Antitrust Division or the FTC) to believe that the Commission has any "infra-marginal" markets that might look like good "acquisition targets?"

The following slide was presented by the Media Bureau to the FCC at the Commission's first open meeting at the beginning of this year.  This slide graphically illustrates the price performance of several different communications services from 1995 through 2008 vs. the Consumer Price Index ("CPI").  In the relevant time period, the CPI for all products and services (including food and energy) increased by about 38%.  During this period, the price of most major communications services--including mobile wireless service--declined in absolute terms, not just relative to the CPI.  Every service, that is, except cable television service--which increased by about three times the rate of inflation (122% vs. 38% for the CPI).   The Commission attributed this poor performance to a lack of competition in the market for subscription TV services.  Below is "Slide 5" of the Media Bureau's presentation on January 15th, and was based on data presented in the Commission's Report on Cable Industry Prices ("Cable Price Report"), which was released on the following day.
 
 So, could the FTC and/or the Antitrust Division sense an opportunity to expand their own jurisdiction?  Well, since the FCC's wireless focus seems to be on vertical integration between handset providers, wireless data applications providers (or at least one provider), and wireless service providers, does the Commission's cable data tell us anything about the effect that vertical integration (with set-top box providers and programmers) has had on the relative poor performance of cable prices?  As a matter of fact, the Commission's data does shed some light on the degree to which vertical integration is responsible for the poor performance of the cable market.
Continue reading A Funny Thing Happened . . . Part 2

The FCC's Inscrutable "Screwtape" Letters

Last Friday, it was reported that the FCC sent a series of letters to Apple, AT&T, and Google reacting to an item reported in the New York Times that Apple, through its iPhone Apps Store, had refused to carry "Google Voice" (a call management application).  "Google Voice" (GV) is still available to iPhone customers by using the Google search engine on their iPhones, so I'm not completely sure what the disadvantage is to Google by not being allowed to "retail/give away" this application in the Apple "Apps Store" (but we'll assume there is some disadvantage because Google asked for "retail" placement, and was denied).  Nonetheless, as TeleComSense noted only a few weeks ago, in the unregulated world, the Supreme Court has only reluctantly found a duty to deal, even by dominant firms. 

Each letter asked different questions, depending on the firm being asked, about the episode in question--Apple's refusal to carry the GV application, AT&T's relationship to Apple and the decision to not carry the application, and Google's efforts to get its GV application placed in the iPhone Apps Store.  Now for the context that makes me "complexed" (so completely perplexed that I have an inferiority complex) about the FCC's letters--the explanation of why they are so inscrutable (we'll get to the Screwtape reference later).

Continue reading The FCC's Inscrutable "Screwtape" Letters

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?