One of my favorite episodes of the TV comedy series "Seinfeld" is called "The Opposite," in which George Costanza reflects on his life, and realizes it is the opposite of what he hoped it would be. At the diner, George tells his friends "that every decision I've ever made, in my entire life, has been wrong." His best friend, Jerry, suggests "[i]f every instinct you have is wrong, then the opposite would have to be right." (quotes from IMDB, episode 5.21) By the end of the episode, after consistently "doing the opposite" of what he would normally do, George's life has corrected itself: he is dating a beautiful woman, has his dream job with the New York Yankees, and is able to move out of his parents' house.
Verizon Training Video
The episode starts with the universal human emotion of regret, and then humorously illustrates common logical fallacies, which are presented as both problem ("every decision I've ever made has been wrong") and solution ("the opposite would have to be right"). And, even though both problem and solution are products of fallacious reasoning . . . hijinks ensue--and problems resolve. But, certainly, no one would actually take this seriously--especially not one of the largest companies in the country--would they?
If its Public Policy Blog is reflective of its corporate mindset, Verizon--based on a couple of recent posts--appears to be willing to give George's zany solution a try. But, are they really "doing the opposite," or have they just changed--as competition forces all firms to do?
A Net-Neutrality Flip?
First, on March 21st, Verizon in the context of net neutrality decides to "make clear what Verizon stands for and what kind of policies we support, regardless of the outcome of [the pending Open Internet Order appeal]." And, as it turns out, the rules/policies that Verizon thinks "are fair, even-handed, good for consumers and essential for us and others to thrive going forward" . . . are pretty much the same rules the Commission adopted in its first Open Internet Order in 2010. In other words, Verizon now endorses the very rules that were vacated as the result of the D.C. Circuit's decision in . . . Verizon v. FCC.
Clearly, Verizon was seized with regret over an appeal it now realizes it could have lived with, but traded for worse rules, and is now "doing the opposite," right? At first glance, it would seem to be the case, but, the blog is quick to explain that this is not a simple case of human regret (or any other human emotion) finding its way into Verizon's corporate offices.
Rather, according to Verizon, it is not the same company it was five years ago, when it appealed the FCC's 2010 Open Internet Order. In the intervening time period, Verizon notes, it has "invested billions in businesses that depend on the ability to reach customers over the networks and platforms of others." Indeed, since 2013, Verizon has built its Digital Media, content and ad delivery, business through the acquisitions of EdgeCast, upLynk, Intel's OnCue ad delivery platform, and AOL.
Thus, Verizon's net neutrality position is not really an example of it doing "the opposite" (though, of course, it would have saved itself and everyone else a lot of hassle and expense had it just recognized this before it appealed the 2010 Open Internet Order). But this isn't Verizon's only, or even best, example of "doing the opposite" in the last month alone.
Verizon's Special Access "Compromise"
Last week Verizon decided to "up" the "opposite," and suggested--along with Chip Pickering, head of INCOMPAS (the rival carrier association formerly known as CompTel)--that the FCC should probably go ahead and regulate "new networks" along with the old special access circuits still subject to FCC regulation. Verizon has long fought against any regulation of its data transmission services and has already received FCC forbearance and been selling its packet, Ethernet, and SONET optical services without regulation for almost 10 years, so this is a clear Costanza-esque flip-flop, right?
Let's take a closer look at the letter that Verizon and INCOMPAS jointly sent the FCC. The letter asks the FCC to: 1) immediately, make all dedicated services--regardless of technology--"subject to Title II of the Communications Act, including Sections 201 and 202;" 2) seek comment on a permanent regulatory framework, which would include ex ante price regulation in "relevant markets" where competition is "insufficient."
When looking at whether Verizon is really "doing the opposite," it helps to keep in mind the "not the same Verizon" caveat. In addition to Verizon's recent digital media investments, the company has been divesting itself of its wireline (telephone + ISP + TV) properties for years, and at an accelerating pace in the wake of the FCC's reclassification of Internet access services.Similarly, based on Verizon's pending XO Communications acquisition, and its reported interest in Yahoo!, Verizon may well see INCOMPAS as more of a future trade association, and less of a regulatory opponent, these days.
Until the terms "relevant market" and "insufficient competition" are defined, it's difficult to say how much of Verizon's future revenues are likely to be affected. Given the Chairman's immediate endorsement of the "compromise," it's doubtful that Verizon is worried about having too much of its future revenues tied up by the regulation it's endorsing. On the other hand, if you are a cable company--or a telecom carrier with some unique routes--Verizon's "compromise" seems more like the good, old-fashioned, Washington-style compromise . . . of someone else's opportunities.
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In his more lucid, less politically-driven, first days on the job, Chairman Wheeler noted that every previous "network revolution" changed the world dramatically, and counseled that "we should not, therefore, be surprised when today's network revolution hurls new realities at us with an ever-increasing velocity." When the velocity of new realities forces a rational economic actor to change positions as dramatically as a TV sitcom actor, it's safe to assume that the industry forcing those new realities is not subject to anything but competitive market forces. So, why is it so hard for Chairman Wheeler to accept that the last thing a dynamically evolving "revolution" needs is more regulation?
Earlier this week, the Internet Innovation Alliance released a study on old networks, new networks, wireless networks, red networks, blue networks; who's using them, and how much they cost. Coming in at 45 pages, including numerous pictures (each worth ~1000 words), the IIA had more to say than Sen. Ted Cruz on bath salts. Luckily, you've got me to unpack this baby for you.
In short, the IIA report dramatically shows what every FCC commenter has ever said in support of their comments: and that is that if FCC adopts the regulatory (vs. de-regulatory) policies advocated, then these policies will promote investment above and beyond the level necessary to deliver the regulated service. To be clear--FCC regulations (they have to be affirmative burdens on regulated firms) promote investment.
Let's take a closer look. According to IIA, only 5% of households depend on "POTS" (plain old telephone service), and the switched telephone network handles only about 1% of the voice traffic handled by IP networks (wireline + wireless + cable + CLEC). Yet, and here's the kicker, from 2006 through 2011 more than half of incumbent LEC investment was used to support the POTS network in order to comply with . . . wait for it . . . FCC regulations!
This investment--which was clearly not necessary to deliver voice service to consumers--amounted to over $13.5 billion dollars/year. This is investment that can only be attributed to successful regulation. I'd say former Chairman Julius Genachowski has something else to crow about . . . as if he needed another feather in his cap.
The impact of this report cannot be understated. The Commission has scarcely seen such vindication of its efforts. While the IIA tries to shy away from its pro-regulatory conclusions by saying that but for the FCC's legacy rules, more resources would have been diverted to providing advanced IP services that consumers want to use, this is idle speculation from self-interested parties. The IIA knows full well that maintenance of this "museum network" is critical to our country's economic recovery.
Interestingly, the IIA study confirms what the left has been saying for years: cable needs to be regulated. Why? Well regulation certainly won't make them better companies--apathy is in their DNA--but regulation will make them pay their fair share. Take, for example, Comcast's customer service rating: a resounding "disappointing", but only a step away from "terrible." Verizon comes in almost even (the result you would expect in a competitive market).
The only difference between the two companies? Verizon is contributing to the economy, and Comcast is getting a free ride--regulation-wise. If Comcast were regulated, would they all of a sudden improve by providing "mediocre" or "somewhat acceptable" customer service? No! Of course, not--they would in all likelihood remain competitive with Verizon, but they would be contributing to US economic development.
Perhaps the party that comes off looking the worst out of this study is US Telecom. US Telecom, in case you don't know, is the trade association of the incumbent LECs, and US Telecom has repeatedly fought the Commission's efforts to preserve these pro-recovery, pro-investment regulations.
US Telecom filed an extensive petition last year explaining why a ton of legacy regulations no longer serve any useful purpose. In fact, US Telecom has another petition pending with the Commission right now, seeking to remove some of these regulations by having its members declared "non-dominant" in the provision of wireline telecommunications services.
In its arguments, US Telecom conveniently fails to list "investment" [for the sake of regulation] as a useful purpose of regulation. This omission, of course, makes the US Telecom requests look deceptively reasonable.
Hopefully, the Commission will see through this shameless ploy and do what's right for the economy. Frankly, it matters little whether 5% or .0005% of consumers use incumbent LEC wireline services: dominant is dominant, and dominant = regulations, dammit. You know who "gets it?" The competitors of the US Telecom members, that's who.
Because of the government shutdown (costing countless jobs from regulations that are simply not being adopted), I couldn't check the FCC website to see who else had the foresight to oppose the US Telecom petition, but I did manage to find these opposition comments from CompTelhere and here. Thank goodness someone cares about preserving the investment burdens incentives of their competitors.
The panelists will be discussing interesting and diverse projects, so each will provide something new for attendees to learn. For example, we have what I might call an "ultra" wholesale project--completely carrier/user agnostic dark fiber--being implemented by Maine's GWI. A more traditional, carrier-class, lit fiber wholesale network, primarily in upstate New York, being implemented by ION Holdings, and, finally, last mile broadband projects serving a number of communities in Arkansas, by Windstream.
This is an opportunity to get beyond the D.C. "policy" circles, and find out what's really involved in implementing shovel-ready broadband deployment projects, and what kind of jobs different kinds of broadband deployment--dark and lit fiber (primarily regional and local wholesale transport), and last mile, end-user broadband--can add to a previously-unserved area.
If you won't be attending, but have some questions you'd like asked, email me and I'll see what I can do. Alternatively, if you'll be at the show, please attend and introduce yourself. I'd love to meet you.