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The Department of Justice on "bid rigging"

Given the issue of whether or not the 700 Mhz auction is being run for the benefit of the American taxpayer, there is a very interesting quote from a Justice Department official today on their view of "bid rigging" in a competitive government auction, in this case concerning a defense contractor.

  • "The antitrust division is committed to protecting the competitive market for Americans," said Assistant Attorney General Thomas O. Barnett, who heads the department's antitrust division. "We will continue to bring to justice those who rig bids and thereby deprive the public of the benefits afforded by a competitive bidding process."

It is interesting to juxtapose this Justice Department quote of today with another quote from today in the Dow Jones article on the 700 MHz auction, which quoted the position of Gigi Sohn of Public Knowledge on "bid rigging":

  • She acknowledged that effectively Google and public interest groups were asking the FCC to "rig the auction" to facilitate a third national broadband competitor to the incumbents - AT&T Inc. (T), Verizon Communications Inc. (VZ) and the cable companies.

The ends don’t justify the means.

FCC pulling the rug out from under the Administration's broadband policy?

Kudos to the Wall Street Journal today for their twin great editorials on net neutrality and the 700 MHz auction: "Reed Hundt's Spectrum Play" by the Jounal editorial writers and "Telecom Time Warp" by Robert Crandall and Hal Singer.

  • The Journal editorial accurately hits on the Google/Hundt cabal to rig the auction rules so they can win the Nation's most valuable spectrum at a deep discount.
    • Google is laughing all the way to the bank that they could sucker a Republican Chairman of the FCC to carry their water and stand heavily on the competitive scales to pick them as winner before the bidding commences.
    • It will be interesting to see how Chairman Martin "squares this circle" and explains why market participants should ever trust what he says going forward on competition and regulation given that up to now he has discussed no market failure or consumer problem that requires regulation to solve up to now.
  • My favorite point of many in Robert and Hal's great editorial is reminding everyone the outrageousness of the FCC mandating "unbundling" (a drastic action reserved for entrenched monopolies) when the wireless industry is so obviously competitive that the price of a wireless minute has fallen by 84% over the last decade!
  • Amazing! Chairman Martin apparently finds market failure when prices are plummeting, consumer choice has exploded, subscribership and usage has skyrocketed and investment boomed. Huh?
    • What's wrong with this picture? 
      • The only apparent explanation is that Chairman Martin now believes more in the regulatory hand of Big Government than the "invisible hand" of market forces.
    • Wireless is the single biggest competitive success story in communications!
      • And Mr. Martin's reward for all those market players that invested billions of dollars of risk capital to buildout the world's most competitive facilities-based wireless marketplace -- is heavy handed and unnecessary "separations" and unbundling monopoly regulation!

Bottomline:  The Bush Adminstration's sole policy goal in telecommunications has been to promote broadband investment and deployment to all Americans.

FCC Martin proposes corporate welfare for Google in 700 MHz auction

According to DowJones, FCC Chairman Kevin Martin is proposing some of the net neutrality/open access regulation that Google requested for 22 of the 60 MHz of prime 700 MHz of spectrum to be auctioned off by the FCC in early 2008 for use in about 2010.

I have three points to make about Chairman Martin's reported net neutrality/open access proposal.

Frontline wants competition through "zoning regulations?"

The Washington Post gave a lot of "free" ink to former FCC Chairman Reed Hundt today to push for his Frontline Wireless corporate welfare scheme. The article also provides a "bay window view" of Mr. Hundt's perverted view of "competition."

  • Mr. Hundt said: "We're asking the FCC to place conditions on the sale of the license, just like zoning on real estate."
  • Competition through zoning regulations!
  • This captures the essence of Mr Hundt's "market" views. He has always thought "competition" was much too important to be left to the marketplace.
    • Mr. Hundt's entire tenure as FCC Chairman was characterized with a deep distrust of free market forces and a fondness for writing very detailed regulations that heavily tilted the playing field to guarantee his desired outcomes.

Now that his company has $3b in capital and is prepared to raise up to $10b in the next five years, according to the Post, why is he so afraid to compete in the auction like everyone else?

Frontline's proposal is so disingenuous: Let me count the ways

Frontline's Reed Hundt is mounting a furious eleventh hour effort to finagle a backroom sweetheart deal for his company from the FCC, in the 700 MHz auction. He attacked the outstanding op ed in the Washington Post by Robert Hahn and Hal Singer in both the Post and in RCR.  Our former Big Government FCC Chairman, Mr. Hundt also apparently has lost his cool and perpsective in railing against the rollout of the new, innovative and already successful iPhone as somehow a market failure that only his company can cure.

The mounting evidence that the US is NOT falling behind on Broadband

Given the ongoing reporting of claims by net neutrality proponents that US broadband deployment is falling behind our international competitors (like the USA Today article in this link suggests), it is helpful to pull together some of the best analyses I have seen that debunk these claims by the OECD/CWA.  

For those who care to more substantively review the facts, evidence and merits of this very important public policy question, I highly recommend reading the following four sources linked in this blog, which all effectively and differently debunk the claim the US is falling behind on broadband:

"Earmarked Airwaves" -- a 700 MHz auction "UNE-P" deja vu?

Kudos to Robert Hahn and Hal Singer for their outstanding op ed in the Washington Post "Earmarked Airwaves."

  • The editorial cogently presents the fork in the road that faces any major FCC decision: to follow law, which promotes competition and market-driven outcomes, or to freelance and try and "manage" competition and pick winners and losers in advance through "spectrum earmarking."
  • FCC history is littered with freelance "managed competition" failures, but two are particularly ignominious and highly relevant to this 700 MHz auction:
    • the illegal UNE-P scheme to rig telecom competitive outcomes following the 1996 Telecom Act; and
    • the Nextwave auction scandal that kept 30 MHz of prime spectrum fallow and tied up in court for almost a decade.

At its core a spectrum auction is the quintessential type of competition. The auction law's purpose in 1993 was to use market forces, competition, to allocate the public's asset most appropriately, largely because previous FCC spectrum allocation processes were so ineffective, unfair and prone to serious abuse and graft.

  • While no process is perfect, a clean competitive auction process has proven highly effective in rewarding US taxpayers and fostering a growing and highly competitive wireless marketplace that greatly benefits consumers.

This 700 MHz auction may be shaping up to be FCC Chairman Kevin Martin's legacy moment: will it be marked by promoting competition and market-based outcomes or will it be marked by standing on the auction scales to ensure the spectrum is "earmarked" to the predetermined, chosen "winner" -- in this case former Clinton-Gore FCC Chairman Reed Hundt's Frontline Wireless company.  

"Earmarked Airwaves" -- a 700 MHz auction "UNE-P" deja vu?

Kudos to Robert Hahn and Hal Singer for their outstanding op ed in the Washington Post "Earmarked Airwaves."

  • The editorial cogently presents the fork in the road that faces any major FCC decision: to follow law, which promotes competition and market-driven outcomes, or to freelance and try and "manage" competition and pick winners and losers in advance through "spectrum earmarking."
  • FCC history is littered with freelance "managed competition" failures, but two are particularly ignominious and highly relevant to this 700 MHz auction:
    • the illegal UNE-P scheme to rig telecom competitive outcomes following the 1996 Telecom Act; and
    • the Nextwave auction scandal that kept 30 MHz of prime spectrum fallow and tied up in court for almost a decade.

At its core a spectrum auction is the quintessential type of competition. The auction law's purpose in 1993 was to use market forces, competition, to allocate the public's asset most appropriately, largely because previous FCC spectrum allocation processes were so ineffective, unfair and prone to serious abuse and graft.

  • While no process is perfect, a clean competitive auction process has proven highly effective in rewarding US taxpayers and fostering a growing and highly competitive wireless marketplace that greatly benefits consumers.

This 700 MHz auction may be shaping up to be FCC Chairman Kevin Martin's legacy moment: will it be marked by promoting competition and market-based outcomes or will it be marked by standing on the auction scales to ensure the spectrum is "earmarked" to the predetermined, chosen "winner" -- in this case former Clinton-Gore FCC Chairman Reed Hundt's Frontline Wireless company.  

How net filtering is ok for misdemeanors, but not for felonies?

I have been watching with some amusement all of the SaveTheInternet-launched blogilantes ranting about the prospect of Internet backbone networks like AT&T or others, becoming a filtering technology solution to Hollywood's problem of rampant content piracy on the Internet.

Why am I amused?

  • Because net neutrality proponents are so predictably knee jerk in their reaction to anything that they see as a threat to their datatopian ideal of a net free of any broadband competition, differentiation or diversity of choice.
  • Net neutrality proponents have such a bad case of "myneutralopia" that they can't see the proverbial forest for the trees.
    • Over the last year, net neutrality proponents have had to make an increasing number of big concessions about what "bit discrimination" is acceptable in order to remain credible on Capitol Hill.
    • They have had to concede and support network management "discrimination" of bits:
      • To filter out viruses, filtering which is essential to protect the Internet and users from Net blackouts or shutdowns;
      • To filter out illegal spam, so the Internet and email remains unclogged and useful; and
      • To allow for law enforcement under CALEA, the ability to surveil criminal and terrorist activity on the Internet.
    • If all that network managment "discrimination of bits" is OK,
      • Then why isn't it OK for these same network managers to filter traffic for pirated content, i.e. trafficking in stolen goods?
    • In other words, if it is OK to filter the Internet for the misdemeanors and felonies of spreading viruses and spam, and it is longstanding law for the Goverment to be able to surveil the Internet to detect criminal behavior, how is new network filtering for illegal pirated content any different or any less necessary?

Once again, the net neutrality crowd's kneejerk reaction is to side with lawbreakers rather than with every day citizens and users of the Internet who are all ultimately harmed by allowing Internet-enabled crimes to go undetected and unnpunished.

Despite puffery over 700 MHz "3rd pipe" -- the market is solving it

You gotta love how the free market works when left alone by the Government!

Just as Frontline and others are demanding that the government has to intervene in the 700 MHz auction to "create" a third broadband pipe, the free market finds another way to solve these market problems without the Government.

One of the most significant developments in the spectrum world today was not the hot air at the Senate Commerce Committee hearing, but what happened in the free market -- DirecTV and Echostar signing agreements with Clearwire to sell their WiMax broadband service.

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Q&A One Pager Debunking Net Neutrality Myths