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Regulation

Opposing "The Verge" of Socialism -- My latest Forbes Tech Capitalist post

Please see my Forbes Tech Capitalist blog "Opposing "The Verge" of Socialism" here, which rebuts Joshua Topolsky's Washington Post column: "Want better wireless service in America? Socialize it."

Netflix' Uneconomics

Netflix' continues to exhibit serious difficulties grasping basic economics, competition and value.

First, Netflix is lowering its value to customers.

  • Netflix now charges its subscribers' 60% more in September in return for lots less premium content available for subscribers in February, as Netflix just lost Starz,its top premium content provider, which supplies 22 of Netflix' top 100 movies.

 

Second, Netflix is shifting its costs to its customers.

  • Netflix used its abrupt and controversial 60% price hike to force many of its core users away from the DVD model that many prefer and have the viewing technology for (but costs Netflix more), to the streaming model, (which Netflix prefers because it costs them less) even if it costs many of their DVD customers to spend lots more to upgrade their viewing technology to view the streamed content in the way they can currently view DVDs.

 

Third, Netflix is chasing away the premium content its subscribers demand.

FCC Needs to Update Sect. 652 to Conform with Market Reality & Congress' Intent

An easy way for the FCC to show respect for the President's Executive Order to eliminate "outmoded" and "excessively burdensome" regulations would be to grant the NCTA's petition for a declaratory ruling, that Section 652 of the 1996 Telecom Act, (intended to encourage incumbent local telcos and cable companies to compete in telephony and video) was not meant to prohibit pro-competitive mergers between cable companies and new entrant CLECs that didn't exist in 1996 and thus have no market power.

The FCC Sect. 652 status quo is counterproductive in perversely thwarting a central competition policy goal of the 1996 Telecom Act: i.e. promotion of cable-telco competition.

  • By creating unnecessary regulatory uncertainty around actual and potential cable-CLEC mergers, at both the FCC and with local franchising authorities, the FCC effectively has created a regulatory barrier to more cable-telco competition.
  • We cannot "win the future" with a broadband Internet "excessively burdened" with anachronistic analog anchors like the FCC's current interpretation of Sect. 652.

 

Specifically, the NCTA's petition exposes a dysfunctional local franchising authority review process that has no standards or time limits, which makes the overall regulatory review process for cable-CLEC mergers uncertain, arbitrary, and "excessively burdensome."

FreePress Cries Wolf -- Yet Again

FreePress with its "all complaints all the time" approach to advocacy has been caught once again "crying wolf" when there was no real problem or threat.

A new FCC study that shows ISPs are effectively delivering on the broadband speeds they advertise, exposes FreePress for crying wolf -- yet again.

  • FreePress has to acknowledge Verizon's FIOs far exceeds advertised speeds, Comcast and Charter exceed advertised speeds, and other ISPs are more than close enough to advertised speeds to show that there is not a problem here for the FCC to be concerned about.

FreePress also continues to cry wolf about its spurious tethering" complaint against Verizon because users are prevented from unauthorized tethering of additional devices trying to bypass users' terms of service agreement.

New America MacKinnon's Ridiculous Net Neutrality Revisionism -- Radical Fringe Series Part II

The latest strategic demonization of private enterprise by the radical information commons movement to promote net neutrality comes from Ms. Rebecca Mackinnon of the New America Foundation, who recently charged that private corporations have too much power over the Internet and effectively should be regulated as common carriers, when she previewed her upcoming book "The Consent of the Governed" at the TEDGlobal conference in Edinburgh, which was covered by the New York Times.

Ms. MacKinnon in her talk, employed a ridiculously bad and outrageous analogy that Internet users should fight against Internet companies' Internet tyranny like the barons in England fought King John's tyranny in 1215 by writing the Magna Carta.

  • Ms. MacKinnon charged: "The sovereigns [corporations]of the Internet are acting like they have a divine right to govern."
  • Obviously desperate to associate with, and legitimize her radical cause with the historical spark and bedrock event of today's freedom and democracy, the Magna Carta, Ms. MacKinnon trivializes the grand importance and relevance of the Magna Carta by misleading her audience that today's situation is somehow analogous -- when her analogy could not be further than the truth.

Consider how the 1215 Magna Carta baseline could not be less analogous with today's Internet baseline.

FCC's Net Neutrality Rationale Crumbling in US & EU -- Dead Regs Walking?

The fundamental rationale undergirding the FCC's net neutrality regulations in the December Open Internet Order appears to be crumbling before our eyes in both the U.S. and the EU -- enough so to raise the question -- could they be "dead regs walking?"

In the U.S., a new White House Executive Order calls on independent agencies like the FCC to revisit "regulations already on the books to reduce outdated, unjustified regulations that stifle job creation and make our economy less competitive."


Fact-Checking NetFlix' Net Neutrality WSJ Op-ed

Netflix's General Counsel, David Hyman, hypocritically and deceptively blasted the broadband industry for its natural migration to usage-based bandwidth pricing in his fact-challenged WSJ op-ed: "Why Bandwidth Pricing is Anti-competitive."

First, it is both ironic and hypocritical that the largest subscription video provider in the United States by subscribers, Netflix,  criticizes the normal economic practice of usage-based pricing as anti-competitive when other companies do it, when Netflix has long priced and capped its business offering based on consumer usage.

Mr. Hyman must have known Netflix would look self-serving and hypocritical if people knew:

Why an Exception for the FCC's "Unjustified" and "Pointless Red Tape?"

In a Washington Post op-ed entitled "A smarter approach to cutting red tape," Cass Sunstein, the White House's Regulatory czar, laid out a laudatory plan for Federal executive agencies "to eliminate burdensome requirements that hinder economic growth and job creation," with a big loophole problem -- the plan does not apply to "independent" agencies like the FCC and its burdensome net neutrality regulations in the Open Internet order.

It makes no sense that the FCC's net neutrality regulations, the veritable poster child of "unjustified burdens and pointless red tape," have escaped:

 

  • The fact that the President directed: "all executive agencies to cut costs, to promote predictability, to streamline paperwork requirements, to choose the least burdensome approach, to listen to those affected by the rules and, through our 'regulatory look-back' process, to eliminate rules that just don't make sense."
    • There was no net neutrality problem to fix before the FCC order, and there is still no net neutrality problem the FCC needs to address now.
    • So the FCC's Open Internet order is the worst of all worlds -- it is basically all cost and no benefit.

 

More problematic is that independent agencies, like the FCC, supposedly are "creatures of Congress," but this FCC ignored a majority of Congress last year that asked the FCC to defer to Congress on net neutrality.

Net Neutrality Proponents are Hearing Footsteps

Four recent developments signal that net neutrality proponents of the FCC's December Open Internet Order are hearing footsteps and looking over their shoulder, increasingly concerned about the ultimate legal and political survivability of the net neutrality regulations/order.

First, professor Susan Crawford, one of the most ardent proponents of net neutrality rules and Title II reclassification, penned a telling and surprisingly candid analysis of how the Supreme Court's recent decision to overturn a California ban on the sale/rental of violent video games to minors, on First Amendment free speech grounds, very likely helps broadband providers' free speech argument to overturn the FCC's net neutrality rules.

 

  • Professor Crawford concludes: "Today's news is that the absolutist approach of the current Supreme Court to protection of speakers of all kinds -- including distributors of speech -- signals that the carriers will be likely to find a sympathetic ear there."

 

The irony here is that a net neutrality proponent thought leader is implicitly acknowledging that the main slogan of FreePress/Save The Internet and others -- that "net neutrality is the First Amendment of the Internet" -- is a totally bogus.

 

FCC Denies the Effective Wireless Competition Staring it in the Face -- Internet Competition Series Part III

In another blow to its competition policy credibility and objectivity, the FCC's 308 page, 15th Wireless Competition Report, amazingly reached no conclusion about whether the wireless market was effectively competitive, despite overwhelming evidence of effective competition throughout the report and a dearth of evidence in the report of any discernible anti-competitive issues that would suggest the wireless market was somehow not effectively competitive.

 

  • The stark incongruity between the overwhelming evidence in the report, and the absence of what should have been an easy report conclusion that the wireless market is effectively competitive, is certainly not "data-driven policy making at work.
  • It appears to be politics at work to support and provide political cover for the FCC's maverick policy desire to promote de-competition policy and more expansive FCC economic regulation and common carrier-like duties a la net neutrality and data roaming -- in the face of strong opposition from Congress and the Courts that the FCC is over-reaching its statutory authority.

 

If only the FCC absorbed the significance of the data compiled in their own report, the FCC would conclude that the wireless market was effectively competitive.

 

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Q&A One Pager Debunking Net Neutrality Myths