The Gig Is Up!

Are current proposed regulations a multi-faceted strategy
to eliminate competition and control the Internet?

When one steps back and looks at various legislative and regulatory changes, either in the pipeline or have already been passed, certain dilemmas become evident.  It appears the lobbying forces and supporting think tanks are on the verge of a legal Internet takeover in cooperation with the US government.  While many people, associations and companies support or criticize individual bills and regulatory actions, most seem to be ignoring the bigger picture.  Well, the gig is up!  In this post, I will feature multiple regulatory or legislative vehicles.  Individually, these actions may seem harmless and/or for the benefit of consumers, however, when taken multi-laterally in context, it is evident the impacts on consumers and competition are dramatically compounded.  

If we look back in the last 25 years of the Internet evolution, one can see numerous volleys by large corporations and the government to eliminate small ISPs.  Thankfully, these attempts tended to be one shot at a time and the smaller more nimble providers were able to adapt to the changing environment rather quickly.  It now appears a new strategy to eliminate competition has emerged.  Gone is the single shot musket.  It has been replaced by a Gatling gun, firing repeated volleys of regulation and legislation until only the strongest and best financed broadband incumbents remain.

Am I fear-mongering?  Maybe.  Creating a mountain from a mole hill?  Maybe.  I just can’t allow myself to observe the current regulatory environment and what I foresee as a critical junction in the evolution of the Internet, competition and our future free market economy and remain silent.

Below, I will highlight some of the important national policy issues I see at this time.  Are these shots from the Gatling gun related?  Are they just a coincidence? Or a strategic ruse developed deep in a dark conference room of an industry think tank?  Maybe I’m crazy or maybe I’m just observant.  Hopefully, I make suggestions below that strike a chord with influential people who define our nation’s future telecom and spectrum policy.

The issues include NetNeutrality, USF/CAF transitioning, Stalling the update of the Communications Acts of 1934 and 1996, Redefining Definition of Broadband, Unlicensed Spectrum, Spectrum Auctions, and Increasing Competition by Eliminating Public Broadband Laws.

NetNeutrality:

                Selling Point:  Insure content providers enjoy a free unlimited highway to consumers by instituting Title II regulation on ISPs.

                Reality 1:  After years of a government “hands off” approach to the Internet, the United States government is set to become the Internet’s regulatory monarchy.  The free, unregulated Internet marketplace, where innovation has flourished; will begin to disintegrate as we know it. 

        Reality 2:  Regulatory burdens created by Title II regulation are predicted to inhibit future investment.  ILECs, accustomed to this regulatory regime, will fare better than smaller providers which have not been previously burdened by Title II encumbrances.  Competition will decrease.

        Reality 3:  Title II regulation will increase consumer Internet cost once Phase II CAF (Connect America Fund) taxes are added to everyone’s bill. 

        Reality 4:  Legal challenges to NetNeutrality and Title II rules will create a windfall for telecom attorneys. 

        Reality 5:  With the increase litigation risks brought on by NetNeutrality, comprehensive Internet insurance will become mandatory for nearly all companies with a presence on the Internet, ISP or not.  This will increase insurance expenses and force companies to raise prices to survive.

        Reality 6:  As with most over-burdensome government regulations, corporations will seek less restrictive environments to conduct business.  This will cause exporting of many US jobs.

        Reality 7:  Decreased competition will result, slowing innovation, increasing consumer cost and decreasing provider motivation to provide higher grade services to consumers.

        Solution:  Protect consumers by outlawing paid prioritization and blocking websites by ISPs by amending Section 706 to do so.  This should be a first step.  Step 2 should be modernizing the Communication Act. Do not regulate the Internet under Title II.  Title II is a sled hammer solution for a rubber mallet problem.  We cannot afford to be so reckless. 

        Risk Summary:  Over regulation will decrease competition and this slow broadband deployment and service improvement.  Consumer demand for an open Internet will be inhibited by lack of competition and slow adoption of network improvements due to burdensome and costly regulations and thus will compound litigation risks.

USF/CAF:

                Selling Point:  The dramatic rise of IP (Internet Protocol) and the decline of POTS based infrastructure (phone lines), have caused USF (Universal Service Fee) tax revenues to decline.  It is evident; revenues created by USF taxes should be shifted to broadband Internet users in the form of CAF (Connect America Fund) taxes in order for the program to survive.  The National Broadband Plan outlined a three step plan to accomplish this transition.  Phase 1, accomplished in 2011, created funding opportunities to expand broadband access to unserved rural Americans.  A Mobility Fund was also established to stimulate mobile broadband service to unserved areas.  Phase II, yet to be accomplished shifts the revenue base to broadband connections.

                Reality 1:  Funds collected from the outgoing USF program provided funding for Phase 1 CAF programs.  To qualify for funding, providers need to be an ILEC or an ETC (Enhanced Telecommunications Corporation).  ILECs therefore have dominated CAF and Mobility Fund disbursements thus far.

                Reality 2:  Antiquated statutory policy created in the Communication Acts of 1934 and 1996 badly needs to be amended or completely rewritten.  Incentives need to be created to reward all telecommunication entrepreneurs investing in advanced broadband infrastructure regardless of the transport medium. 

                Reality 3:  Telephone companies have enjoyed a distinct financial advantage from government subsidies over other forms of ISPs.

                Reality 4:  With the dawn of Internet Protocol, telecommunications is no longer limited to phone companies.  IP networks can and are built by nearly anyone.  Services such as voice, video, teleconferencing and many, many new services created every year are nothing more than applications running on IP networks and should be treated as such.

                Reality 5:  Goals outlined in the Telecommunication Act of 1996 are still valid and just.  The funding mechanism is changing.  

                Solution:   One of the previous goals of Universal Service stated, “Provide equitable and non-discriminatory contributions from all providers of telecommunication services to the fund supporting universal service programs”.  This should be amended to read as a goal of the Connect America Fund, “Provide equitable and non-discriminatory contributions from all providers of broadband services (at the current definition of broadband) to fund supporting Connect America Fund programs.  Provider disbursements shall be made in an equitable and non-discriminatory method on a tiered schedule based on Internet speed capability and capacity.”  In other words, create incentives for providers to advance Internet infrastructure reach, speed and capacity.

                Risk Summary:  Discriminatory financial incentives will increase competitive disparity.  IP technology, as previously stated has opened the doors to competition and competition should not be ignored financially by our government.

Stalling the update of the Communications Acts of 1934 and 1996:

                Selling Point:  Updating the Communication Act is not as high of a priority as NetNeutrality.

                Reality 1:  It seems the government would rather create new regulation on top of old rules than exacerbate disruptive forces which impact incumbent status quo relationships and their future.

                Reality 2:  Complex legal policy in outdated Communication Acts, allow plenty of room for legal disputes and maneuvering. 

                Reality 3:  Internet technologies are so dynamic; new government policy is outdated before the sausage is even made.

                Reality 4:  Relying on outdated Communication Act doctrine has slowed down broadband deployment and adoption by limiting subsidies to one segment of the telecom industry. 

                Solution:  As previously stated; amend Section 706 with necessary measures to satisfy current consumer protection needs and then get to work updating the Communication Act.  Leave Title II Internet regulation alone!

                Risk Summary:  Face it, the Communication Act is ancient.  A world class Internet infrastructure regulatory environment cannot be based on laws created 80 years ago.  Not updating the Communication Act would be a discredit to our nation’s future.

Redefining Definition of Broadband:

                Selling Point:  (Chairman Wheeler) “A 25 Mbps connection is fast becoming “table stakes” in 21^st century communications”

                Reality 1:  Raising the broadband speed threshold stimulates innovation by raising the bar.

                Reality 2:  Advanced wireless technologies, cable and fiber can currently reach these goals given proper network deployments.

                Reality 3:  Limited access to current and alternative funding incentives, slow progress in the quest to increase broadband speeds.

                Reality 4:  Lack of tiered speed level incentive programs open to ALL ISPs.  If we want 25 Mbps, 100 Mbps or 1 Gbps networks, we need to create funding incentives to reach these goals. 

                Reality 5:  Infrastructure obstacles such as pole attachment rights, tower approval timelines, right-of-ways access, local zoning issues and limited access to affordable contiguous spectrum; are all factors which aggravate providers’ quest to reach broadband speed goals for their customers.

                Reality 6:  Content demand and technology are outpacing broadband infrastructure delivery potentials.  Broadband improvements are frustrated by build-out limitations, financing opportunities and regulatory uncertainty.

                Reality 7: Rural demographics differ dramatically from urban demographics.  These differences change return on investment time frames immensely.  Rural areas have primarily been served by entrepreneurial WISPs, due to the low cost of entrance and associated technology.  These WISPs are now incorporating fiber technologies into their hybrid networks at an increasing rate. 

                Solution:  Create carrier neutral construction and infrastructure improvement incentives which will enhance competition, embrace entrepreneurship, speed up network improvements, lower deployment costs and ease investment risk.  Also, maintain a light regulatory touch to encourage investment in the ISP industry.

        Risk Summary:  We need to move from the historic elitist subsidy handout program to one based on performance incentives.  Money talks when incentives to receive it are specified up front.  Past broken promises should not be rewarded any longer.

Unlicensed Spectrum:

                Selling Point:  Once considered useless and interference prone, these slivers of unlicensed spectrum primarily were used for in-building Wifi and WISP entrepreneurs. Recently cable and cellular companies have embraced these limited unlicensed spectrum assets for data offloading. 

                Reality 1:  Unlicensed spectrum is the most efficiently used spectrum available when it comes to number of devices per MHz.

                Reality 2:  Unlicensed spectrum spawned great innovations due to its free availability to innovators and entrepreneurs.

                Reality 3:  Advanced wireless technologies proven to deal with interference and spectrum reuse in unlicensed spectrum have discredited licensed spectrum holders erroneous myths.

                Reality 4:  While unlicensed spectrum does not contribute auction revenue to the nation’s treasury, it contributes to the nation’s economy and daily lifestyle in many other ways that are too intangible to calculate.

                Reality 5:  A large portion of rural America is served by the WISP industry using unlicensed spectrum and has been beginning in the mid-1990s.

                Reality 6:  School systems, electric cooperatives, oil/gas companies and many other industries have lowered telecommunication expenses by using unlicensed wireless backhaul between facilities.

        Solution: Legislation is needed to reserve 10% of all spectrum allocated for auction to unlicensed use.  As a nation, we should leverage our limited spectrum resources efficiently and not put all of our eggs in one basket.

        Risk Summary:  It is often said that the people own our nation’s spectrum resources, which are managed by the government.  Therefore, a portion of the spectrum should remain a public resource. It should not entirely be auctioned to the few companies that can afford to purchase lease rights to the limited resource.  Doing so will stifle innovation and competition.

Spectrum Auctions:

                Selling Point:  Spectrum auctions creating licensed spectrum opportunities produce windfall revenue for the nation’s treasury.  Case in Point: Recent AWS-3 auction has reached nearly 45 billion in revenue.

                Reality 1:  Cellular Market Areas and Economic Areas are geographic tracts generally too large for many potential bidders to afford.  Case in Point: AWS-3 Auction has only 80 qualified bidders.

                Reality 2:  FCC has historically avoided auctioning smaller geographic areas due to “auction complexity reasons”.

                Reality 3:  By eliminating potential bidders, potential auction revenue may be left on the table.  In other words, if a CMA were divided into census tracts, the sum total of winning bids may be larger than one large CMA with fewer bidders.

                Solution:  After 10% of a spectrum band to be auctioned has been reserved for unlicensed use (previous suggestion), 20% of the remaining spectrum should be laid out in census tracts, 40% in CMAs and 40% in EAs.  This will create entrepreneurial opportunity, competition, increase revenue and will promote efficient use of all spectrum nationwide.

                Alternatively, proposals such as the three tier access approach in the CBRS 3.5 GHz band proceeding, which incorporates Incumbent Access, Priority Access and General Authorized Access should be considered for all new spectrum allotments to be auctioned.

                Risk Summary:  A major duopoly stage has already been set by previous auctions, monopolistic ILEC profit making and evident spectrum warehousing to eliminate competitive threats.  We must be efficient with the little spectrum we have left. The American consumers should not be held hostage to a couple dominate mobile providers.

Increasing Competition by Eliminating Public Broadband Laws:

                Selling Point:  President Obama recently promoted the elimination of state laws prohibiting publicly owned broadband networks. He states his goal is to enhance competition and give communities and consumers more choice.

                Reality 1:  Government owned competition in a free market economy is disruptive.

                Reality 2:  Government owned competition is taxpayer funded.

                Reality 3:  Government owned competition is often too slow to adapt in a dynamic industry such as broadband.

                Solution:  Government owned networks, if created, should be open to wholesale private operators in an equitable fashion at a reasonable cost.

                Risk Summary:  Improved Internet infrastructure should be a goal of every community, but community owned networks should not compete against private enterprise.  Community owned networks should enhance competition between private enterprises who lease the right to ride on community network infrastructure.  Public/Private relationships can be so much more effective, profitable and current from a technology perspective than any community owned network itself.

Well there you have it.  Can you see the devastating effects these issues may have on small businesses, competition, consumer choice, consumer Internet costs, network improvements, etc?  We must embrace the changing IP environment.  We must stimulate competition.  We must use our spectrum resources wisely. We must limit regulation of the Internet.  We must create incentives rather than corporate welfare at the tax-payer expense.  Not doing so is only robbing the American consumer.

You're stuck on hold! Waiting and Waiting and Waiting

President Obama gave a speech today in Cedar Falls, Iowa on Broadband Competition. He talked about giving opportunities to entrepreneurs and small businesses throughout America. He talked about getting rid of unnecessary regulations that hinder broadband deployment and clearing the red tape. I found the following quote quite humorous though.

"What happens when there's no competition? Your stuck on hold, you're watching the loading icon spin, you're waiting and waiting and waiting, and meanwhile you're wondering how come your rates keep getting jacked up, when the service doesn't seem to improve."

Although I may be taking this statement a bit out of context, I couldn't help comparing it to the US Government and its lack of competition. As American taxpayers, we are stuck on hold, waiting and waiting and waiting. Watching our political manifestations tug the rope one way or the other, has been like an eternal pendulum lately. Our taxes keep getting jacked up and our services do not improve.

Meanwhile, our nation continues to fall behind many other nations in broadband deployment and speed. The federal government's ability to govern has been stalemated by political parties beholden to the large corporate telecommunication lobbyists, who have effectively prevented competition from blooming. Much of this dilemma can be blamed on the Telecommunication Act of 1996, which enabled a handful of corporations to dominate the airwaves and wireline infrastructure. If President Obama really wants to stimulate competition, a total rewrite of the Telecommunication Act is in order.

On one hand, Mr. President, you are correct to observe how over-regulation and legislative barriers have subdued competition and slowed improvements in broadband deployments, pricing and speed. On the other hand, you conveniently miss a factual point. Lack of competition has been caused by the lack of federal support provided to entrepreneurial and small business broadband providers in the private sector for the last decade.

WAIT A MINUTE, HOLD THE BOAT, didn't you just say and I quote, "I’m on the side of competition, and I’m on the side of small business owners". Now you are ready to give up on the private sector and begin funding government owned and operated municipal networks? You want to create competition for existing privately owned ISPs (large and small) by funding municipal broadband projects with taxpayer revenues? Why not try some of the ideas below.

There are many ways improved broadband infrastructure can be accomplished much more efficiently. We need to provide better tools which private industry can leverage quickly to improve and deploy broadband networks. These tools consist of (1) including broadband providers in pole attachment right legislation, (2) mandating 10-20% of all spectrum auctioned to be designated as unlicensed spectrum, (3) auctioning spectrum by census tracts, (4) removing voice component funding criteria from federal funding programs, (5) creating incentives to speed broadband deployment, foster competition and meet speed criteria and deployment time frames, (6) providing carrier neutral fiber access locations across the country and finally (7) creating tax incentives for capital expenditures spent on privately funded broadband networks.

1. Legislation is badly needed allowing broadband providers easier pole attachment rights and access to public easements and conduits. Historically, access to these facilities has been granted primarily to telephone, cable, and utility companies. Voice and video services are quickly becoming standard apps on broadband networks; therefore all broadband providers should have access to these facilities.
2. The majority of spectrum is auctioned to the highest bidder. While these one-time revenues are substantial, I feel it is philosophically unwise to forfeit control of one of our nation's precious resources to a few corporate giants. Haven't we already learned this lesson? While some unlicensed spectrum has been allocated, it has not been nearly enough to keep up with demand. Dramatic advances in technologies have increased wireless broadband speeds and capacities in the last few years. We are quickly approaching a time when wireless technologies rival fiber like speeds at a much lower cost of deployment. Much of this rapid advancement of wireless technology can be attributed to unlicensed spectrum, which became a low cost testing ground for wireless manufacturers and operators. It is my opinion that 10-20% of all spectrum approved for auction should be reserved as unlicensed and in the public domain. This will foster competition and innovation.
3. Spectrum is normally auctioned in relatively large geographic areas. Because of the size of these areas, smaller broadband providers are prevented from participating in auctions because they cannot financially compete with corporate giants such as AT&T, Verizon and Dish Networks. Proposed FCC rules in the 3.5 GHz spectrum will be a good start if adopted, as the spectrum is slated to be auctioned by census tract. These proposed rules at least, give smaller operators a chance to acquire licensed spectrum.
4. Many federal funding programs have required operators to offer voice services to qualify to be considered. As I said above, voice service is now an application of broadband and this requirement severely limits to potential awardees of these funding programs to telephone companies. Antiquated rules like this unfairly limit competition and thus slow broadband deployment progress.
5. Experimental funding programs should be considered. Funding programs should create incentives for broadband providers to deploy in unserved or underserved areas quickly. One such idea which has gained little traction at the FCC is that of providing vouchers to consumers. These vouchers could be used to buy broadband service from the provider of choice. In the case where no providers exist (unserved areas), it would create a race to deploy to these areas in order to receive the voucher payments. According to President Obama, 98% of America is served. Therefore, a similar program could be created to increase broadband speeds. Additionally a low interest loan program should be set up to fund small broadband providers. Historically, loans for broadband networks have been difficult to acquire through typical funding mechanisms provided by private industry.
6. There is a need for carrier neutral fiber access huts across the entire United States. Too often, access to fiber access facilities is very difficult or cost prohibitive to obtain. If the government wants to facilitate better broadband in the United States, it would be a wise investment to build, operate and maintain facilities such as these. Security concerns would need to be taken into consideration.
7. Tax abatements and incentives are other tools to promote capital expenditures on broadband infrastructure. Broadband technologies are extremely dynamic. In order to keep up with the latest technologies and consumer demand, providers often replace equipment every few years at great expense. It would be prudent to reward continual capital reinvestment.

I am particularly dismayed that President Obama stated, "I'm directing the federal agencies to get rid of unnecessary regulations that slow the expansion of broadband or limit competition". Really Mr. President, how can you say that, when you are planning to impose Title II regulation on the broadband industry. Excessive regulatory burdens such as Title II will decrease investment in broadband infrastructure. Are you saying that federal regulation is ok, but state regulation is not? A bit hypocritical don't you think?

Finally, you stated in closing your speech today, "We are going to clear away red tape, we're going to foster competition, we're going to help communities connect and help communities succeed in our digital economy." I say "Let's clear away the red tape, let's foster fair competition, let's help private industry connect our communities so we can ALL succeed in our digital economy, the American way!"

Meanwhile, we the American people are still waiting and waiting and waiting.​

Our Empty Nest

Our Empty Nest

​​Today, our youngest daughter Emily spread her wings and left our home.  She begins her journey to Chicago and an exciting new career.  I have spent the day reflecting on each of our girls and it prompted me to write the following poem.

I would like to give credit to a Donna O'Briant, whose poem "The Empty Nest" became the foundation for my personal adaptation of her original words.

Our Empty Nest

Atop a high branch, in a proud old tree,

Lay a nest of babies, no one could see.

Beside the nest stood Mother, with her loving heart,

And Father looking on, proudly guarding the start.

The babies grew quickly, lives filled with delight,

While a great world laid, just beyond their sight.

They attempted to try, their wings unfold,

And enter ​life's journey, ever so bold.

Their parents reluctant, and all so knowing,

How quickly their babies, had ​finished growing.

But knew their little ones, were called to a freedom,

With love and support, let their pretty​ girls​ leave them.

The first little Haley, so eager her wings,
Dreams of a new world, readily shed her strings,

She bravely jumped, to the great unknown,

Took flight to the sky, proudly all on her own.

The next little Kelsey, so ready and willing,​

To enter the world, which looked so appealing

She eagerly leapt, to the side of the nest,

Flew to the next branch, and then passed her test.

The last, little Emily, the youngest of three,​

Looked round at her parents, then forward to see,

A new world awaited, oh what would it teach.​

By extending her wings, twas all within reach,

The warm wind lifted, her wings at last,

She flew through the air, to a world so vast,

Leaving behind, the home she had known,

She took off to the world, to go it alone.

The parents looked on, as all of the three,

Earned respect, happiness and a loving family.

They were proud of their girls, and the  choices they made,

Their love for their babies, will never fade.

​
Their empty nest, will always be there,

Welcome to homecoming visits, to a love filled lair,

From the empty nest,​ shines a guiding light,​

To a home of family, and cozy good night. ​

Mom and Dad, now become grandparents,

They are eager to welcome, a flock of ​descendants,

For this is just part of a great migration,

And return trips will rouse, rich celebration.