Recently in Telecom & Wireless Category

Here's a cautionary tale from Thomas Hazlett in the FT on the problem with central planning of the airwaves and how political decisions made by the collusion of policy makers with business special interests can severely undermine the true interests of the public. Sadly, it is a lesson that, like the analog switchoff, few have noticed. Maybe THAT is the real cautionary tale.

The whole piece is worth reading but some summary parts:

When, in 1986, cell-phone makers and public safety agencies asked the Federal Communications Commission for a shot at using scores of idle TV channels, politically powerful TV stations quashed the idea. They hurriedly hatched a reason: extra frequencies had to be reserved for "advanced television." America, then reeling from Japan's emergence as a consumer electronics powerhouse, needed to develop its own cool video application and dominate the world. ...

In extending life-support to DTV signals that hog hugely valuable frequencies, consumers lose hundreds of billions worth of wireless service. The bandwidth available to iPhones, Blackberrys and GPhones and other emerging technologies would double were TV air waves to accommodate mobile apps as requested in 1985. ...

But here is the bottom line: the most valuable air waves on God's Green Earth will continue to be occupied by digital TV signals that few watch and none need, to provide a prop for a cosy deal between policy makers and broadcasters. That is the worst way to use radio spectrum in the Information Age.

I thoroughly enjoyed this post on GigaOm, but only partly because I'm interested in the topic -- the debate over network neutrality and Google's position on it. Mostly I enjoyed it because it's a fantastic example of great blogging. First, it started with analysis and opinion on a WSJ story by my friend Om, who was one of our most talented writers at Red Herring. Second, the comment thread has it all -- endorsements of Om's position, detractors, conspiracy theorists, and useful comments on all directions, ranging from policy prescriptions to technical prognostications. One commenter analyzes the Akamai comparison, another suggests that it's naive to think that Google won't try to secure faster access for its content, and an ISP chimes in challenging Om's "duoploy" assertion. And then, the plot thickens. Google responds, Om UPDATES, and the story turns on whether WSJ was or was not confused, and a media critique enters the foray. Some suggest that Om was too quick to judge Google and not enough of the skeptical ombudsman and Om admonishes himself for not being more careful. But taken as a whole, it's great content.

When Om was working for Red Herring or Forbes or other publications in the 1990s, he was only really held accountable by his editors -- not his readers. If he pleased his bosses, all was good, and neither he nor his editors heard much from his readers. Now, Om is holding WSJ writers accountable while in the process being very responsive to his readers. It's a thing of beauty. And it's an example of blogging done right and why Om is a credit to the medium.

On the heels of a scathing Congressional report that criticizes FCC Chair Kevin Martin of mismanagement and abuse of power, Sonia Arrison makes the case that the FCC needs more transparency, and warns of the perils of regulation by vendetta:

The FCC has problems with transparency, so now is the time to open things up to greater public scrutiny. It is also questionable whether the FCC should have as much power as it does over the marketplace. At a time when bankers and automakers are lining up to surrender chunks of control to government bureaucrats, everyone should consider the potential consequences. The results of political decision-making, as opposed to market demand-based decisions, often yield disastrous results.

The Wall Street Journal ran an editorial that was extraordinarily critical of Kevin Martin's behavior in rigging spectrum auctions to the benefit of Silicon Valley VC John Doerr:

This is the second time this year that the FCC chief has attempted to secure a sweetheart deal for Mr. Doerr, who has personally petitioned FCC commissioners and Congress on behalf of the M2Z proposal. In January, the agency auctioned off coveted spectrum with conditions that favored Frontline Communications, an upstart headed by a former FCC Chairman, Reed Hundt, and also backed by Mr. Doerr.

Whether you tend favor market-based or regulatory decision making when it comes to the communications infrastructure, both sides should agree that any benefit of "experts" as regulators is severely diminished when they govern according to their personal animosities, rather than a sober analysis of the data and policy objectives. Transparency, discussion, and debate over key decisions would at least be some measure to curb regulation by vendetta.

UPDATE: more on this topic from TLF.

Andy Kessler makes the case in the WSJ that the best path to "an open and innovative Internet is not sneaky technical fixes nor more rules and regulations and bureaucracies to enforce them. The Internet will only expand based on competitive principles, not socialist diktat." Eliminate the barriers to competitive networks, and focus on a "policy to help cut a path for more competition, rather than protecting incumbents...." Nut graph:

This is the essence of the Ed Markey's (D., Mass.) Orwellian-named Internet Freedom Preservation Act of 2008, which would foist network neutrality on the wild and woolly Internet. The Federal Communications Commission is holding a public hearing today at Harvard Law School in Cambridge, Mass., to build the case for the ill-conceived idea of preventing, as Mr. Markey's bill would, network operators from using technologies that may favor one application over another.

It's a bad idea because the only thing Mr. Markey's bill will preserve is mediocrity via the lack of competition, and full employment for regulators micromanaging a business whose very innovation comes from the lack of rules. With net neutrality, there will be no new competition and no incentives for build outs. Bandwidth speeds will stagnate, and new services will wither from bandwidth starvation.

Read it here.

The lesson from South Korea's success in broadband: full deregulation works. So argues Tom Hazlett in WSJ.com who goes on to say that the US's strategy of easing into deregulation was worse than just going cold turkey would have been. Excerpt:

In the mid-1990s, Korean policy-makers set out to inject competition into local telephone service. They enacted rules allowing rivals to challenge the erstwhile state monopoly, Korea Telecom. Yet, by mid-2004, KT still accounted for 95% of local phone lines.

A failure? On the contrary, Korea's policy has proved a smashing success. Because, as an additional lure to attract phone entrants, the government ended regulation of advanced telecom applications. The result: While competitors largely avoided (regulated) voice services, they invested billions to create new (unregulated) high-speed Internet networks. The broadband technologies unleashed by telecom rivals forced KT to modernize its network, which now serves just half of the high-speed market.

Clay Shirky writes this excellent primer on the issue of spectrum as property v. spectrum as commons. It's worth reading for those interested in a useful overview. However, while Shirky makes an eloquent case for the spectrum-as-public-good side, he doesn't do a very good job of laying out or responding to the other side on this issue. When he does present the conter argument it is in the context of how and why the vested interests will object to this new regime. But there are real arguments against the commons approach (not about pretecting vested interests) that are worth more debate (remember the tragedy of the commons anyone?). Fortunately we have Tom Hazlett for that. An excerpt from Shirky:

The FCC is considering opening up additional spectrum to unlicensed uses -- the same kind of regulatory change that gave rise to Wifi. Much of the spectrum being considered for unlicensed use is currently allocated for broadcasters, however, so FCC's proposal creates tension between incumbents and groups that want to take advantage of the possibilities inherent in unlicensed spectrum.

I'm a fan of wi-fi and believe unlicense spectrum has its place, but there is a tragedy-of-the-commons issue with allocating too much spectrum to unlicensed uses, and not allowing the property rights approach to prosper. What this comes down to is the FCC trying to pick winners by backing current technologies, but they have a poor track record of doing this and often the support for current technologies has come as a much larger cost of hampering future technologies. Thomas Hazlet waves the red flag in this piece in Barron's. Excerpt:

Take the TV band, encompassing more than twice the total bandwidth now allocated to wireless phone service, yet absurdly underutilized. Rather than auction liberal use rights for unoccupied TV channels, allowing rival technologies to compete, the commission staff is drafting rules that would permit only low-power devices -- like Wi-Fi.

The regulatory rationale: "The Commission's rules for unlicensed transmitters have been a tremendous success. [The experience] shows that there could be significant benefits to the economy, businesses and the general public in making additional spectrum available for unlicensed transmitters."

Wrong. More unlicensed spectrum may have value, even though unlicensed bands made available in the past decade have largely proven a bust, but the FCC central-planning mandate is not the way to gauge this complex economic evaluation.

Numerous providers of advanced technologies, from Qualcomm to ArrayComm to IP Wireless to Navini Networks, ache to provide wireless broadband to homes and businesses via licensed frequencies. Such valuable wide-area options, excluded by unlicensed rules, could be neatly deployed on exclusively assigned spectrum. Surfing today's Wi-Fi bubble, the Commission leaves tomorrow's promising wireless technologies on the beach.

Tom Hazlett discusses "Pricing 'free' New Economy goods." Excerpt:

Satellite operators compete by offering more - and better - programmes at higher prices, and cable incumbents have been forced to respond in kind, upgrading content (including clearer pictures on digital tiers). While cable’s inflation-adjusted rates rise, consumers believe they get more value per dollar.

Nonetheless, the menace of outrageous cable rate rises screams out to policymakers. Hearings are held, cable company executives bashed, headlines written. Yet what can be done? Rate controls flunked the market test in 1992-94, when subscription fees were slashed about 10 per cent by regulators, only to see cable programming (i.e. service quality) deteriorate so dramatically that subscriber growth declined - revealing that consumers were fleeing from the "consumer protection".

So, a new plan. Senator John McCain (R-AZ) and others want to force cable systems to price networks à la carte, giving subscribers the option to select, say, the History Channel, Toon,TNT and CourtTV while passing on TBS, Lifetime and C-SPAN1. If you only pay for channels you actually want to watch, you will save lots of money.

Guess again. Because à la carte pricing prompts the operator to re-price, the customer’s quality-adjusted rate is likely to rise. ...

Information goods are tricky. The first unit often costs oodles to create, while the next billion units are free. So with video, where cost-based pricing becomes moot, and capitalists conjure ways to push their products out to mass audiences. That is a good thing. So is the competition with satellite TV, forcing cable monopolists to pump up quality. The political reaction to the illusion of higher prices offers to help customers by taking away channels. That is a bad thing. A la carte? Au contraire - prix fixe for the all-you-can-eat buffet, garçon.

This is an interesting panel sponsored by The Progress & Freedom Foundation. The crux is an important debate over whether wireless spectrum should be treated as government owned and controlled commons, as Larry Lessig argues for, or parcelled out as private property, as Duke University Law Professor Stuart Benjamin will argue on this panel and has argued in the paper linked below. Count me as an advocate for the private property approach. Excerpt from the panel gives a good overview:

WASHINGTON, D.C. - In the fast-changing world of wireless communications, a current enthusiasm of some big-name legal scholars is the creation by government of a ‘commons' through which people transmit on open radio spectrum. But Duke University Law Professor Stuart Benjamin, who is not unenthused about the prospect of umpteen wireless users communicating in self-perpetuating ‘abundant networks', thinks private control of spectrum is better. He and a panel of experts debate public versus private spectrum control at an April 15 Congressional Seminar sponsored by The Progress & Freedom Foundation.

“There has been much ferment recently in the world of wireless communications,” Benjamin writes in a paper released by the Foundation, “Does Spectrum Abundance Justify Public Control?” Commons advocates “contend that we can now have wireless networks in which each new device also creates new capacity, such that a wireless network can add users without creating interference.” Stanford Law Professor Larry Lessig and other advocates “contend that a new paradigm is now technologically possible, in which an effectively infinite number of users can communicate without interfering with one another,” he writes. In fact, they “argue that these abundant networks will not arise if private parties obtain property rights in spectrum.

“My answer is that the possibility of abundant networks calls into question one aspect of the government's allotment of spectrum – namely, the division of spectrum into small parcels – but it does not cast doubt on the efficiency of private ownership. If spectrum is allotted in large swaths, there is every reason to expect that private owners will create abundant networks (assuming of course, that these networks work as promised),” Benjamin concludes.

This piece by Thomas Hazlett, Would last TV station turn out the lights?, shows how silly FCC regulations are hurting entrepreneurialism to the benefit of vested interests. Excerpts:

Broadcast stations’ volunteering to go dark sends a clear signal. Over-the-air transmissions are becoming useless, not worth the cost of firing up the transmitter.

Yet the spectacle of digital television (DTV) is most incredible because radio spectrum — the use of which constitutes the overwhelming majority of station costs — is provided to stations free of charge. Because the government awards frequencies and bars unauthorized uses, licensees have no opportunity to divert bandwidth to new services. By protecting a video delivery system mapped out in the 1940s, regulators spike the emergence of advanced networks that could revolutionize communications. ...

Allowing the TV band to be tied up for another decade ignores the enormous social value of spectrum. Wireless networks could productively use the frequencies to expand and improve cellular service, with added airspace dramatically decreasing costs. Entrepreneurs lust for access to the rich VHF and UHF frequencies to unleash mobile Internet-based applications offering consumers a cornucopia of fresh choices for voice, data, video and applications yet to be dreamed.