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It has been replaced by a Gatling gun, firing repeated volleys of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 21st 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.